OH, HOW THE MONEY GROWS AT ADM Dwayne Andreas -- the king of corn, beans, and clout -- cultivates friends in high places and reaps record profits for Archer Daniels Midland.
By Ronald Henkoff REPORTER ASSOCIATE Sara Hammes

(FORTUNE Magazine) – DWAYNE ANDREAS sometimes gets by with a little help from his friends. Three years ago the chairman and chief executive of Archer Daniels Midland Co. was arranging a conference of senior business and government officials for a Soviet-American trade organization he headed. Hours before the meeting in New York City's Waldorf Towers was due to start, two key speakers from the State Department canceled. So Andreas phoned his old buddy Dick Nixon, who agreed to address the group -- as long as the press wasn't told of his presence. After the conference, Nixon, Andreas, and Mikhail Gorbachev's Trade Minister adjourned to an apartment that ADM leases at the Waldorf. There the Soviet official pumped the former President for advice in breaking the impasse on arms control. Nixon counseled the Russians to announce sizable unilateral cuts and then wait for the Americans to respond. Perhaps it was a coincidence, but that's precisely what Gorbachev did several months later. Dwayne Andreas, 72, farmer's son, college dropout, and multimillionaire, thrives on this stuff -- tete-a-tetes with world leaders, breakfasts with Cabinet Secretaries, winter weekends in Florida with ambassadors and Prime Ministers. And so does his $7.9-billion-a-year company, the country's largest processor of agricultural commodities. While impromptu disarmament talks in a Manhattan apartment may seem a long way from the messy business of crushing soybeans, refining corn, and milling wheat, Andreas, a 52-year veteran of the trade, knows the value -- nay, the necessity -- of cultivating contacts in high places. Agriculture is the most manipulated industry on the planet. After Mother Nature, it is politicians -- not farmers, traders, or processors -- who hold the most sway over which crops are planted, where they will be sold, and what prices they will fetch. Last year industrialized countries poured $245 billion into price supports, import quotas, acreage set-asides, export subsidies, and other arcane agripolicies. Says Andreas, a diminutive and animated man who bears a corporeal resemblance to James Cagney: ''How the hell could you run a business like mine if you didn't have communications with the people who make the big decisions?'' But Andreas is not only well connected and well informed; he is also an exceptionally adroit manager. Says one longtime business associate: ''You can't separate Dwayne Andreas's style from his technique, his capacity for ingratiating himself with political leaders from his skill in running ADM.'' The company, based in Decatur, Illinois, is a lean and nimble giant. Efficient, innovative, and cash rich, ADM recently reported its fifth straight year of record profits, despite a slight sales decline caused by falling oilseed prices. In Minneapolis, ADM's original home base, some business leaders still refer to Andreas as the ''rainmaker'' -- and lately the forecasts for the political climate all seem to be running in his favor. Iraq's invasion of Kuwait has boosted the price of gasoline and spurred demand for ethanol, a clean-burning but costly motor fuel ADM distills from cornstarch. The ethanol business owes its very existence to federal tax breaks, and ADM's market share in the U.S. is nearly 70%, seven times that of its nearest competitor. If Congress this fall imposes tough new restrictions on carbon monoxide emissions in the Clean Air Act, as expected, ethanol could get an even bigger lift. Andreas also is emerging as America's preeminent businessman in Moscow, successor to Armand Hammer, the nonagenarian chairman of Occidental Petroleum. ^ With bread lines in the Soviet Union, Gorbachev is under new pressure to modernize his country's decrepit food processing and distribution systems -- an effort ADM is poised to assist. According to Robert Back, a security analyst and Soviet expert with J.E. Liss & Co. in Milwaukee, Andreas, who has made some 75 trips to Moscow since 1952, is the kind of ''quintessential American'' the Russians are most comfortable dealing with. ''He's rich, but he doesn't look rich,'' says Back. ''He's an honest-to-God 19th-century businessman, unencumbered by ideology.'' His approach to domestic politics is equally pragmatic. Since 1979 the chairman, his relatives, and the company's political-action committee have donated more than $1 million to Republican and Democratic congressional and presidential candidates. A leading beneficiary of this largess is Senate Minority Leader Robert Dole, a friend of Andreas's and an ardent ethanol booster. Dole and his Campaign America PAC have received some $80,000 in Andreas and ADM donations. In addition, the Andreas Foundation has contributed $185,000 to Dole's foundation for disabled Americans. The arch-Republican from Kansas, who says the only reason he supports ethanol is because it is good for farmers, succeeds the late Hubert Humphrey as Andreas's closest friend in Washington. Humphrey, a Minnesota Democrat and a tireless promoter of American farm exports, took Andreas on nearly every foreign trip he made as Lyndon Johnson's Vice President. He was also godfather to Michael Andreas, Dwayne's son. (Michael, who is known as Mick, is ADM's executive vice president and heir apparent.) In his autobiography, Humphrey recalled that Andreas contributed ''hundreds of thousands of dollars'' to his political campaigns and more than $250,000 to other candidates whom he recommended. While Humphrey was Vice President, he placed his assets in a blind trust managed by Andreas. The ADM chairman is also a longstanding golfing partner of former House Speaker Tip O'Neill. When O'Neill retired as Speaker in 1986, Andreas helped organize a gala testimonial dinner. Says O'Neill of his friend: ''He's a real gentleman, although he's not much of a golfer. He's one of the most knowledgeable men on foreign affairs, especially Russia, that I know of.'' FIVE OF NINE postwar U.S. Presidents, beginning with Harry Truman, have asked Andreas for help on international trade issues. For many years Thomas Dewey (the Republican who didn't beat Truman) was one of ADM's lawyers. In 1962 another former presidential candidate, Democrat Adlai Stevenson, tipped Andreas off to a vacant apartment in the Waldorf, next door to the official residence of the U.S. ambassador to the United Nations. ADM leased the 42nd- floor unit, which has afforded him the opportunity to befriend every emissary since Stevenson, including, of course, George Bush. Robert Strauss, who was chairman of the Democratic National Committee and then U.S. Trade Representative under Jimmy Carter, is another of ADM's lawyers. He is also a member of the company's board, as is Happy Rockefeller, Nelson's widow. Paul R. Thatcher, former manager of the Andreas family's private holding company, recalls a Sunday afternoon two winters ago in Bal Harbour, Florida, at the Sea View Hotel, where Andreas owns two apartments: ''There was Dwayne in his cabana, holding court. Surrounding him were David Brinkley ((whose Sunday-morning TV show ADM regularly sponsors)) and Mrs. Brinkley, Ambassador Strauss and Mrs. Strauss, Ambassador ((Allan)) Gotlieb ((former Canadian envoy to Washington)) and Mrs. Gotlieb, Speaker O'Neill and Mrs. O'Neill, and Senator Dole and Mrs. Dole ((now Secretary of Labor)).'' Andreas has particularly strong ties to Gorbachev, whose country is the world's third-largest consumer of imported food. ADM, which did some $250 million of business with the Soviet Union last year, is negotiating to build an oilseed plant, a vegetable-oil refinery, and a network of storage depots. Andreas met Gorbachev in December 1984 while the Russian was still Minister of Agriculture. Soon afterward Andreas told Tip O'Neill that Gorbachev, whom the Speaker had never heard of, would be the next General Secretary of the Communist Party -- a prediction that came true three months later. When Gorbachev visited Minneapolis last spring, it was Andreas who sat next to him on the dais. The ADM chairman was fresh from a visit to Ottawa, where he had briefed Canadian Prime Minister Brian Mulroney on Gorbachev's impending trip to that country. Like any good commodities trader, however, Andreas has also hedged his bet by courting Boris Yeltsin, the new Premier of the Russian republic and Gorbachev's radical-minded rival. After Yeltsin called on the White House last year, Andreas whisked him off to Sea View as his guest for a weekend in the sun. An inveterate traveler with a year-round tan, Andreas seems to gets a kick out of swimming against the current -- sometimes literally. His Decatur-area ( home has a 20-foot-long swimming pool equipped with extra-powerful water jets. Andreas rises every morning at 5:30, dives in, and swims against the jet stream for 20 minutes. ''If you don't swim hard enough, you get slammed back against the wall,'' he says with a slight grin. THE FOURTH SON of a Mennonite farmer, Andreas grew up in Lisbon, Iowa, in a house with no indoor plumbing. The young Dwayne planned to be a minister but quit college after 1 1/2 years to help his father, Reuben, manage Honeymead Products, the family's fledgling grain elevator business. In 1945, Dwayne, who was then head of Honeymead, sold most of its assets to Cargill, the Minneapolis commodities giant. He thus became both a millionaire and a Cargill executive at 27. Seven years later Andreas returned to Honeymead, which had remained in business under his younger brother, Lowell. He rebuilt it and eventually sold it to Grain Terminal Association, an agricultural cooperative. In 1966 the Archer and Daniels families of Minnesota invited the Andreas brothers to buy into their company and run it. During Dwayne Andreas's 24-year tenure at ADM, the company has grown from a barely profitable, medium-size operator of mills and grain elevators into a multinational colossus with 146 plants, 139 elevators, 2,000 barges, 9,000 railcars, and 100 chartered ships on the high seas. Despite spending much of his time on long-range strategy -- ''filling in the pieces of the puzzle,'' as he puts it -- Andreas maintains a close watch over day-to-day operations. Wall Street gives him credit for ADM's quick decision-making, lack of bureaucracy, and rigorous cost control. The company's balance sheet is so strong that it seems to belong to another era. Long-term debt is just 16% of total capital, and its cash and cash equivalents amount to $1.6 billion. Exclaims Donald Zwyer, a security analyst at Kidder Peabody: ''Archer Daniels should be viewed as one of the best companies in the world.'' What's particularly impressive is the efficiency with which ADM squeezes an ever-expanding variety of products out of corn, wheat, and oilseeds. These include ethanol, vegetable oil, animal feed, vodka, flour, caramel coloring, sorbitol (a corn derivative used in making vitamin C), and corn syrup. ADM generates its own steam and electricity from high-sulfur coal, using a clean- burning, cogeneration technology imported from Scandinavia. Last year the company's British subsidiary sold 60 million Veggie Burgers, high-protein, no- ! cholesterol meat substitutes made from soybeans. ADM, along with its 50%- owned German affiliate, Alfred C. Toepfer International, also handled 45% of the export commodity business of Eastern Europe -- more than any other agricultural commodity company. Sums up Bonnie Wittenburg, an analyst at Dain Bosworth in Minneapolis: ''ADM has good management and good technology. They're well positioned internationally. They're just slick.'' Perhaps a little too slick. ADM's critics -- and there are many -- accuse the company of teaming up with Washington's powerful farm lobby to milk the federal budget and maul the American consumer. Says Frederick Potter, a Washington consultant on motor fuels and former Department of Energy official: ''There is an agricultural mafia in this town, and Dwayne Andreas is its kingpin.'' The Wall Street Journal, New York Times, and Washington Post have written scathingly about ADM's role in ethanol politics. The liberal New Republic has denounced ADM as a recipient of ''corporate welfare.'' The conservative National Review has branded Andreas a ''robber baron.''

Andreas, whose spacious Decatur office contains mementos of his meetings with Bush, Mulroney, Gorbachev, Ronald Reagan, Pope John Paul II, and Mother Teresa, emphatically denies that he uses his connections to campaign for ethanol subsidies or anything else. Two years ago he even felt compelled to publish a disclaimer in the company's annual report: ''ADM does not have a lobbyist in Washington and has a policy that discourages officers and employees from discussing issues concerning the company with people in public life.'' ADM, he maintains with ferocious modesty, is ''one of the three most impotent political animals in the world.'' (The others, in Andreas's estimation, are big oil companies and big banks.) This is, of course, nonsense. Like those other supposedly impotent giants -- as well as most other big American companies -- ADM does push and prod behind the scenes in Washington, though not as pervasively or as successfully as its detractors believe. The company's real talent is its skill in adapting swiftly to changes in policy -- regardless of who precipitates them. IN FACT, the only thing unusual about ADM's lobbying -- an activity, after all, that is no crime -- is that Andreas so adamantly denies it occurs. Partly that's just good politics. But it may also reflect his sensitivity to several past episodes that were embarrassing to him and his company. In 1974, Andreas + was acquitted of charges that he had made improper campaign contributions -- totaling $100,000 -- to the 1968 presidential campaign of Hubert Humphrey. A $25,000 donation he made to Nixon's 1972 reelection campaign turned up -- unbeknown to Andreas -- in the bank account of one of the Watergate burglars. In 1976, ADM pleaded no contest to federal charges that it had systematically short-weighted and misgraded grain destined for export, although neither Andreas nor any other senior executive of the company was implicated. Two years later, ADM and two other companies were convicted of conspiring to fix the prices of foodstuffs they sold to the Food for Peace program, the federal food-aid program for less developed countries. A furor erupted in Washington in 1978 when it emerged that Andreas and his daughter, Sandra McMurtrie, had given $72,000 in ADM stock to a trust fund set up to benefit the children of David Gartner, who was appointed a member that year of the Commodities Futures Trading Commission. The CFTC regulates many of ADM's market operations. Andreas and McMurtrie (who had once worked as Senator Humphrey's appointments secretary) donated the stock from 1975 to 1977 while Gartner was Humphrey's chief administrative aid and an adviser to him on legislation affecting ADM. At the heart of the latest political ruckus is ADM's dominance of the federally subsidized ethanol industry. Ethanol sounds like a wonder fuel. When blended with gasoline to form a solution known as gasohol, this alcohol fuel boosts octane, curbs carbon monoxide emissions, and lessens America's dependence on foreign oil. Unfortunately, it's expensive. Only if the price of crude climbs to $40 a barrel -- and stays there -- will unsubsidized ethanol be competitive with gasoline. So to make it worth producing now, the government exempts gasohol, which is 90% gasoline and 10% ethanol, from 6 cents of the 9.1-cents-per-gallon excise tax on motor fuels. In 1989 that tax break deprived the Highway Trust Fund of $450 million in revenues. Even with this subsidy, Andreas claims that ADM earns only a 6% return on its investment in ethanol. ''There's not any great reason for us to be in this business,'' he adds, ''except that the government is very eager to have an ethanol business, and so are the farmers. We are providing a service.'' But ethanol also provides a service to ADM. While the alcohol fuel is not a high-margin business, the company has deftly married it with one that is ^ -- high-fructose corn syrup. ADM controls about one-third of the market for this caloric alternative to sugar, making it the country's largest producer. HFCS, like ethanol, derives from cornstarch, and like ethanol, it benefits from government subsidies. HFCS's share of the sweetener market has grown explosively, from 14.5% in 1980 to 36.6% last year. It has largely displaced sugar, which is more expensive, as the sweetener of choice in the American soft drink industry. HFCS producers can undercut sugar -- and still make a tidy profit -- because American sugar prices are artificially propped up by import quotas. The Department of Agriculture estimates that consumers of HFCS and other types of corn syrup paid a premium of $1.3 billion from 1987 to 1989 because of the federal sugar program. Most ethanol producers use dry milling plants, which are capable of making only that one product. But ADM relies on wet milling plants (where the air reeks from the sulfur dioxide used to retard bacteria growth). These can readily switch back and forth between HFCS and ethanol production, using the same corn and the same equipment, and thus run at full capacity year-round. In the spring and summer, soft drink consumption rises, so ADM makes more HFCS. In the fall and winter, the company makes more ethanol. Demand for ethanol rises in the colder months because atmospheric inversion worsens carbon monoxide emissions in cities like Denver, Phoenix, and Las Vegas, which already require the wintertime use of ethanol and other clean fuels in automobiles. The Clean Air Act, which is being debated in a House-Senate conference committee, could increase demand for ethanol at just the time of the year when ADM is most able to supply it. Both versions of the bill set tough emission standards that could be met only by expanding wintertime use of ethanol or other so-called oxygenated fuels. ETHANOL'S opponents (primarily big oil companies and non-farm state politicians) concede that the alcohol fuel cuts pollution, but most insist that the problem is best addressed by catalytic converters. These critics also claim that ethanol actually aggravates another environmental problem -- ozone formation. ADM does little overt lobbying on its own behalf, preferring to work instead through trade groups, such as the pro-ethanol Renewable Fuels Association, the National Corn Growers Association, and the National Oilseed Producers Association. Privately, some ADM executives refer to this tactic as following the ''whale theory'' -- combining a low profile above the surface with a hulking presence that looms beneath. Andreas, however, claims that ADM representatives in these groups play a passive role: ''We do not throw our weight around in any organization. Our people go there and shut up.'' ADM supports -- and benefits from -- federal policies that encourage farmers to overproduce corn, thereby depressing prices. Four years ago, ADM paid the ultimate low price for corn -- nothing. In a bid to help an ethanol industry strapped by high corn prices, the Commodity Credit Corp. gave $53.8 million in free corn to 37 ethanol producers. Richard E. Lyng, who was then Secretary of Agriculture, held an unusual clearance sale: For every 2 1/2 bushels that the ethanol producers bought at the old prices, they would get one free. ADM received $29.2 million in free corn from the sale, which Lyng announced shortly after he had a breakfast meeting with Andreas. Lyng and Andreas each maintain that they never discussed the corn giveaway. It seems clear that ADM has played a role in ethanol policy right from the beginning. In 1980, by one account, Robert Strauss, who was then chairman of President Carter's reelection campaign and not yet a member of ADM's board, called the White House to present ADM's case for slapping a tariff on ethanol imported from Brazil. (Brazil, the world's leading producer of ethanol, makes the fuel from sugar cane.) Strauss reached Stuart Eizenstat, Carter's chief domestic policy adviser. Eizenstat, who is now a Washington lawyer, says that his telephone notes from October 29, 1980, indicate that Strauss had received a pledge from ADM that it would build a new ethanol plant in Iowa if Carter would reverse his stand and support the tariff. Carter, trailing in the polls, agreed to the tariff, presumably figuring that the announcement of a new plant in a closely contested electoral state could help his campaign. ADM formally announced plans for the plant but never built it, citing a change in the economics of the industry. (Strauss does not recall the incident.) On August 20, 1981, Andreas himself wrote a letter to James Stearns, who was then director of the Office of Alcohol Fuels at the Department of Energy, in which he complained about alleged dumping of subsidized Brazilian ethanol. In the four-page letter Andreas also urged the government not to go through with loan guarantees it had announced for 11 small ethanol producers: ''It is very < clear to me that your program to finance totally inexperienced individuals in their investments mostly as tax shelters is counterproductive in that it has discouraged the flow of private capital into new facilities.''

Andreas now insists that he welcomes competition from smaller domestic producers. ''It's hard for us to get more than a 30% share of any market we are in,'' says the man who controls three-fourths of America's ethanol capacity. ''We've offered our technology to anyone who wants it.'' As for imports from Brazil, there are none anymore. In an ironic turnabout, ADM has been exporting ethanol to Brazil. How did that happen? Well, the price of sugar is so high on the world market that Brazilian cane growers are selling their produce there instead of to domestic ethanol refiners. The agribusiness is like that. Governments shrug, and the pattern of world trade changes. But ADM, as usual, is poised to take advantage of every shift in the political weather. Under the leadership of its politically astute chairman, the Decatur company can safely bet on another good year. The American corn crop is likely to be the best since 1986, meaning abundant supplies and cheap prices. The farm bloc in Congress has beaten back a strong challenge to federal sugar supports, which is good news for corn syrup producers. Thanks to Saddam Hussein, Americans are once again bemoaning their dependence on foreign crude, welcome news for the makers of ethanol. Says Bonnie Wittenburg of Dain Bosworth: ''Things are really going their way.'' And that can't be a bad feeling, even for a man who sometimes likes to swim against the current.