Grain merchant’s legacy is clouded by ADM accounting probe

When Juan Luciano took the helm of Archer Daniels Midland in 2015, he joined a company still known in the popular mind for outsized clout in Washington, old adverts touting its role as ‘supermarket to the world’ and grain silos from the Mississippi River to the Black Sea.

Luciano aimed to increase ADM’s return on invested capital and to modernise and professionalise the old-school agribusiness. It appeared he had largely succeeded: he has poured billions into building a higher-margin nutrition arm to offset the wild volatility of commodity markets, instilling ADM with greater discipline. 

Then on Sunday night the company issued a statement saying its chief financial officer had been put on leave with immediate effect pending an investigation into the accounting practices and procedures of its nutrition business. The probe was instigated following a request from the US Securities and Exchange Commission. ADM’s shares suffered their largest one-day drop since 1929 when markets reopened on Monday. 

ADM is part of the “ABCD” quartet of global agricultural traders — along with Bunge, Cargill and Louis Dreyfus Company — that dominate the flow of agricultural commodities around the world. It is also a massive processor, transforming crops such as corn and soyabeans into food ingredients, animal feed, biofuels and industrial products.

The company was also at the centre of a high-profile corporate scandal in the 1990s, when it pleaded guilty to rigging the $650mn-a-year lysine market. In 2013 ADM paid $54.3mn to resolve charges that a subsidiary bribed officials in Ukraine.

For a chief executive who has made priorities of diversification and doing things by the book, the turmoil surrounding the nutrition business puts Luciano’s legacy at risk. 

“This is what you never want as a CEO,” said a former ADM employee who worked in the nutrition division. “This is so disastrous. It’s already difficult to get the investor confidence and confidence from the outside world.” Chicago-based ADM declined to comment.

Born in San Nicolas, Argentina, in 1962, Luciano was six when his father, a lawyer, was killed in a car accident and the family went to live with his maternal grandparents on their farm.

“My grandfather, with his brothers, used to own an elevator, and people would come and unload grain, and they would buy fertiliser, seeds and all those things. I spent a lot of time playing around in the mountains of seed bags,” he said in a 2016 interview with trade publication World Grain.

He left behind his rural roots to study industrial engineering in the capital at the Buenos Aires Institute of Technology. This ushered him into a 25-year career at Dow Chemical, first in Argentina and then in the US, where he rose within the company to become president of the performance products and systems division. 

Luciano was a favourite to succeed the then Dow chief executive Andrew Liveris, said a former colleague there, so it came as some surprise when in 2011 he instead joined ADM as chief operating officer.

“What I think initially brought ADM to me was that they wanted to pick a person that had industrial roots — at the end of the day, ADM is a manufacturing company — but also someone who could understand risk management,” Luciano told the Harvard Business Review in December 2022.

The engineer was an outsider and ADM was still a traditional agricultural company. Founded in 1902 and listed on the New York Stock Exchange in 1924. Dwayne Andreas, a politically connected advocate of international grain exports, built it into a global agribusiness beginning in the 1960s.

“With all respect, basically [the Andreas family] were farmers purely focused on commodities, and of course if you want to create a value-added business, you need a different mindset,” said the former ADM employee. “For that it is sometimes good to have a fresh pair of eyes and someone who comes from a different industry, and that’s what happened with Luciano.”

Luciano recognised times were changing, said Gonzalo Ramírez Martiarena, who was CEO of rival agribusiness Louis Dreyfus Company from 2015-18. The market transparency introduced by the internet and mobile phones meant big agricultural traders no longer had an information edge. Meanwhile, concerns about agriculture’s impact on climate change and around sustainability and land use were growing, said Ramirez. 

“The way he pushes modernisation, I like it, I like it a lot,” said Ramírez. Speaking of his time as LDC CEO, he added that of all the ABCD companies, “if I had to choose one to emulate . . . it was ADM”.

The early years of Luciano’s time at the head of ADM were also tough for the trading businesses. Volatility that had driven up profits from 2008 to early 2012 “had disappeared, the margins were all compressed”, Ramírez said.

Luciano’s strategy since then has been to expand ADM’s value chain downstream, towards consumers. The company has made acquisitions to build the nutrition and ingredients business, which supplies flavours, probiotics and other ingredients to other sectors including animal feed and alternative protein.

After years of moving sideways, ADM’s shares began to climb in 2021. Reflecting on the changes at the company, Luciano told investors that year: “It’s actually incredible to see the transformation that has occurred across our global organisation over the past decade.”

On Thursday, ADM’s shares closed at $51.38, their lowest price since early 2021.

“I think he certainly views the buildout of the nutrition [division] as an important part of what could be his legacy at the company,” said Adam Samuelson, an analyst at Goldman Sachs who has been covering ADM since 2013.

After this week’s news, people may now start to ask: “What is the plan for succession?” Samuelson said. “Ten years as a CEO is a pretty good run.”