Cargill

Cargill, Inc. is a colossal, privately held American corporation and a true titan of the global agribusiness industry. While its name might not be on the food packages in your pantry, Cargill is one of the most powerful and pervasive forces in the world's food supply chain. Headquartered in Minnesota, it is the largest private company in the United States by revenue, with operations spanning nearly every corner of the globe. The company's business is breathtakingly diverse, including the trading, processing, and distribution of agricultural commodities like grain, oilseeds, sugar, and livestock. It also produces animal feed, food ingredients (such as starches and sweeteners used in countless processed foods), and provides risk management and financial services to agricultural producers. As it is not listed on any stock exchange, its shares are not available to the public, making it a subject of fascination and a case study in long-term, private ownership for many investors.

Think of Cargill as the ultimate “man behind the curtain” in the food world. Its influence is so vast and integrated that you almost certainly interact with its products daily without ever realizing it. The grain in your morning cereal, the beef in your burger, the cocoa in your chocolate bar, and the vegetable oil you cook with may have all passed through Cargill's complex network of farms, processing plants, and shipping lanes. This “invisible” nature is a core part of Cargill's business model. It operates primarily in the business-to-business (B2B) space, supplying the raw materials and ingredients to the famous consumer brands you know and love. By controlling crucial links in the supply chain—from sourcing grain from farmers to shipping it across oceans—Cargill has built an incredibly durable and powerful market position.

This is the million-dollar question for many aspiring investors who hear about the company's scale and success. The answer is simple: Cargill is a private company, and a fiercely private one at that. Since its founding in 1865, ownership has remained in the hands of the founding Cargill and MacMillan families. Unlike a public company, which sells shares to the public via an initial public offering (IPO) to raise capital, Cargill has chosen to stay private. This decision offers several key advantages that align closely with a value investing philosophy:

• Long-Term Focus: Private companies are shielded from the relentless pressure of quarterly earnings reports demanded by Wall Street. This allows Cargill's management to make decisions with a multi-decade horizon, investing in massive infrastructure projects and weathering industry cycles without worrying about short-term stock price fluctuations.
• Confidentiality: As a private entity, Cargill is not required to disclose its financial performance or strategic plans to the public. This secrecy can be a significant competitive advantage in the cutthroat commodities trading world.
• Family Control: The family ownership structure ensures that the company's long-standing values and culture are preserved across generations.

Even though you can't invest in Cargill directly, it serves as a powerful model of what a world-class business looks like. For value investors, Cargill is the embodiment of several key principles.

Warren Buffett loves businesses with a wide economic moat—a sustainable competitive advantage that protects a company from competitors. Cargill's moat is arguably one of the widest in the world. It is built on:

• Unmatched Scale: Its sheer size creates enormous economies of scale, allowing it to operate more cheaply than smaller rivals.
• Logistical Dominance: It owns and operates a global network of ports, ships, railcars, and processing facilities that would be nearly impossible for a competitor to replicate.
• Diversification: Its business spans dozens of different commodities and industries, from salt to steel, making it resilient to downturns in any single market.

If Cargill is the ideal, how can an ordinary investor apply its lessons? The key is to look for publicly traded companies that share some of its core characteristics. When analyzing companies in the agribusiness and food production sectors, ask yourself:

• Does this company have a dominant position in its niche?
• Is its business diversified across products or geographies?
• Does it benefit from scale and logistical advantages?
• Does management think and act with a long-term perspective?

While no public company is a perfect substitute, you can find businesses in similar industries that are available for investment. Consider looking at some of Cargill's publicly traded competitors and major players in the food chain, such as:

• Archer-Daniels-Midland (ADM)
• Bunge Global SA
• Tyson Foods

By studying the un-investable ideal that is Cargill, you can sharpen your ability to spot truly great, durable businesses that are available to buy on the open market.