America's largest private company- Cargill- reboots a 153-year-old strategy

William Wallace Cargill pioneered the modern agricultural trading industry in 1865 when he established a string of grain warehouses across the American Midwest. Having a deep-pocketed buyer that could take delivery locally gave farmers an easy way to quickly get cash for their crops, lest they rot in the field waiting on a sale or transport to a faraway market. The ability to store huge amounts of grain also gave Cargill the flexibility to time his own sales to maximize the spread between what he paid farmers and what he could get from distant food processors or exporters. That business model of playing the middleman between farmers and their ultimate customers has enjoyed a lucrative 153-year run, turning Cargill Inc. into the largest privately held company in the U.S. It had revenue of $109.7 billion in 2017 and employed about 155,000 workers—more than the population of Dayton—in offices across 70 countries. And the roughly 100 members of the founding Cargill and MacMillan families who still own the company have become fabulously wealthy, with 14 billionaires among the ruling clan, one of the largest concentrations of wealth in any family-controlled business anywhere in the world. Yet Minnesota-based Cargill’s business is falling victim to a scourge that’s already upended media, retailing, and other venerable industries: digital disruption. Cargill long made fat profits by having far more information about global commodity prices than the local farmers it negotiated with or the food companies it sold to. But today, even a small Iowa farmer with a smartphone or a tablet can get real-time data about weather conditions and prices facing his Brazilian counterparts. This change has decreased farmers’ dependence on the middlemen and lowered the spread that Cargill and other big buyers used to make on such deals. American farmers have also expanded their in-house storage by almost 25 percent over the past 15 years, according to U.S. Department of Agriculture data, giving them some of the timing flexibility that only middlemen previously had. “The days of ‘Hey, we’re going to buy your crops, we’re going to store it, we’re going to play the carry’—you know, sell it at a profit—it’s over,” says Cargill Chief Executive Officer David MacLennan.  That’s pushing MacLennan to remake Cargill into less of a trading operation and more of an integrated food company betting on growing global demand for proteins. Already the world’s No. 1 supplier of ground beef and the second-largest beef packer in the U.S., trailing only Tyson Foods Inc., Cargill is expanding aggressively into aquaculture. The company is also spending heavily on technology services that will tie today’s internet-connected farmers more closely to Cargill’s slimmed-down trading business or the new farm productivity apps it’s rolling out.