Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial Statements			Page No.
Consolidated Statements of Earnings			58
Consolidated Statements of Comprehensive Income (Loss)			59
Consolidated Balance Sheets			60
Consolidated Statements of Cash Flows			61
Consolidated Statements of Shareholders’ Equity			62
Notes to Consolidated Financial Statements			63
Reports of Independent Registered Public Accounting Firm			119

Archer-Daniels-Midland Company

Consolidated Statements of Earnings

			Year Ended
(In millions, except per share amounts)			December 31
			2020						2019						2018
Revenues			$	64,355					$	64,656					$	64,341
Cost of products sold			59,902						60,509						60,160
Gross Profit			4,453						4,147						4,181
Selling, general and administrative expenses			2,687						2,493						2,165
Asset impairment, exit, and restructuring costs			80						303						171
Interest expense			339						402						364
Equity in earnings of unconsolidated affiliates			(579)						(454)						(518)
Loss on debt extinguishment			409						—						—
Interest income			(88)						(192)						(162)
Other (income) expense - net			(278)						7						101
Earnings Before Income Taxes			1,883						1,588						2,060
Income tax expense			101						209						245
Net Earnings Including Noncontrolling Interests			1,782						1,379						1,815
Less: Net earnings (losses) attributable to noncontrolling interests			10						—						5
Net Earnings Attributable to Controlling Interests			$	1,772					$	1,379					$	1,810
Average number of shares outstanding – basic			561						563						564
Average number of shares outstanding – diluted			563						565						567
Basic earnings per common share			$	3.16					$	2.45					$	3.21
Diluted earnings per common share			$	3.15					$	2.44					$	3.19

See notes to consolidated financial statements.

Archer-Daniels-Midland Company

Consolidated Statements of Comprehensive Income (Loss)

			Year Ended
(In millions)			December 31
			2020						2019						2018
Net earnings including noncontrolling interests			$	1,782					$	1,379					$	1,815
Other comprehensive income (loss):
Foreign currency translation adjustment			(362)						(176)						(581)
Tax effect			97						(12)						(28)
Net of tax amount			(265)						(188)						(609)
Pension and other postretirement benefit liabilities adjustment			(113)						(98)						156
Tax effect			16						50						(55)
Net of tax amount			(97)						(48)						101
Deferred gain (loss) on hedging activities			254						(91)						57
Tax effect			(57)						18						(13)
Net of tax effect			197						(73)						44
Unrealized gain (loss) on investments			(27)						13						(4)
Tax effect			—						(1)						(1)
Net of tax effect			(27)						12						(5)
Other comprehensive income (loss)			(192)						(297)						(469)
Comprehensive income (loss)			1,590						1,082						1,346
Less: Comprehensive income (loss) attributable to noncontrolling interests			17						2						5
Comprehensive income (loss) attributable to controlling interests			$	1,573					$	1,080					$	1,341

See notes to consolidated financial statements.

Archer-Daniels-Midland Company

Consolidated Balance Sheets

(In millions)			December 31, 2020						December 31, 2019
Assets
Current Assets
Cash and cash equivalents			$	666					$	852
Segregated cash and investments			5,890						4,458
Trade receivables - net			2,793						2,267
Inventories			11,713						9,170
Other current assets			6,224						4,600
Total Current Assets			27,286						21,347
Investments and Other Assets
Investments in and advances to affiliates			4,913						5,132
Goodwill and other intangible assets			5,413						5,476
Right-of-use assets			1,102						971
Other assets			1,054						965
Total Investments and Other Assets			12,482						12,544
Property, Plant, and Equipment
Land and land improvements			545						592
Buildings			5,522						5,381
Machinery and equipment			19,154						19,005
Construction in progress			1,118						1,021
			26,339						25,999
Accumulated depreciation			(16,388)						(15,893)
Net Property, Plant, and Equipment			9,951						10,106
Total Assets			$	49,719					$	43,997
Liabilities, Temporary Equity, and Shareholders’ Equity
Current Liabilities
Short-term debt			$	2,042					$	1,202
Trade payables			4,474						3,746
Payables to brokerage customers			6,460						5,022
Current lease liabilities			261						215
Accrued expenses and other payables			4,943						3,542
Current maturities of long-term debt			2						7
Total Current Liabilities			18,182						13,734
Long-Term Liabilities
Long-term debt			7,885						7,672
Deferred income taxes			1,302						1,194
Non-current lease liabilities			863						781
Other			1,391						1,333
Total Long-Term Liabilities			11,441						10,980
Temporary Equity - Redeemable noncontrolling interest			74						58
Shareholders’ Equity
Common stock			2,824						2,655
Reinvested earnings			19,780						18,958
Accumulated other comprehensive income (loss)			(2,604)						(2,405)
Noncontrolling interests			22						17
Total Shareholders’ Equity			20,022						19,225
Total Liabilities, Temporary Equity, and Shareholders’ Equity			$	49,719					$	43,997

See notes to consolidated financial statements.

Archer-Daniels-Midland Company

Consolidated Statements of Cash Flows

(In millions)			Year Ended December 31
			2020						2019						2018
Operating Activities
Net earnings including noncontrolling interests			$	1,782					$	1,379					$	1,815
Adjustments to reconcile net earnings to net cash provided by (used in) operating results
Depreciation and amortization			976						993						941
Asset impairment charges			54						142						142
Deferred income taxes			75						21						(47)
Equity in earnings of affiliates, net of dividends			(298)						(213)						(247)
Stock compensation expense			151						89						109
Deferred cash flow hedges			254						(91)						57
Loss on debt extinguishment			409						—						—
(Gain) loss on sales of assets and businesses			(161)						39						(43)
Other – net			(113)						(73)						(55)
Changes in operating assets and liabilities, net of acquisitions and dispositions
Segregated investments			408						278						1,176
Trade receivables			(149)						287						(376)
Inventories			(2,426)						(21)						226
Deferred consideration in securitized receivables			(4,603)						(7,681)						(7,838)
Other current assets			(2,126)						(1,449)						(70)
Trade payables			694						(64)						(300)
Payables to brokerage customers			1,400						347						(309)
Accrued expenses and other payables			1,287						565						35
Total Operating Activities			(2,386)						(5,452)						(4,784)
Investing Activities
Purchases of property, plant, and equipment			(823)						(828)						(842)
Net assets of businesses acquired			(15)						(1,946)						(464)
Proceeds from sales of assets and businesses			728						293						191
Investments in and advances to affiliates			(5)						(13)						(157)
Investments in retained interest in securitized receivables			(2,121)						(5,398)						(6,957)
Proceeds from retained interest in securitized receivables			6,724						13,079						14,795
Purchases of marketable securities			(2)						(27)						—
Proceeds from sales of marketable securities			6						104						13
Other – net			(27)						(5)						3
Total Investing Activities			4,465						5,259						6,582
Financing Activities
Long-term debt borrowings			1,791						8						1,762
Long-term debt payments			(2,136)						(626)						(30)
Net borrowings (payments) under lines of credit agreements			837						919						(743)
Share repurchases			(133)						(150)						(77)
Cash dividends			(809)						(789)						(758)
Other – net			27						(22)						33
Total Financing Activities			(423)						(660)						187
Increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents			1,656						(853)						1,985
Cash, cash equivalents, restricted cash, and restricted cash equivalents – beginning of year			2,990						3,843						1,858
Cash, cash equivalents, restricted cash, and restricted cash equivalents – end of year			$	4,646					$	2,990					$	3,843
Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the consolidated balance sheets
Cash and cash equivalents			$	666					$	852					$	1,997
Restricted cash and restricted cash equivalents included in segregated cash and investments			3,980						2,138						1,846
Total cash, cash equivalents, restricted cash, and restricted cash equivalents			$	4,646					$	2,990					$	3,843
Cash paid for interest and income taxes were as follows:
Interest			$	345					$	388					$	351
Income taxes			$	195					$	268					$	376
Supplemental Disclosure of Noncash Investing Activity:
Retained interest in securitized receivables			$	4,656					$	7,751					$	7,897

See notes to consolidated financial statements.

Archer-Daniels-Midland Company

Consolidated Statements of Shareholders’ Equity

																					Accumulated Other												Total
			Common Stock												Reinvested						Comprehensive						Noncontrolling						Shareholders’
			Shares						Amount						Earnings						Income (Loss)						Interests						Equity
			(In millions)
Balance, December 31, 2017			557						$	2,398					$	17,552					$	(1,637)					$	9					$	18,322
Comprehensive income
Net earnings															1,810												5
Other comprehensive income (loss)																					(469)
Total comprehensive income																																	1,346
Cash dividends paid-$1.34 per share															(758)																		(758)
Share repurchases			(2)												(77)																		(77)
Stock compensation expense			2						109																								109
Other			2						53																		1						54
Balance, December 31, 2018			559						$	2,560					$	18,527					$	(2,106)					$	15					$	18,996
Comprehensive income
Net earnings															1,379
Other comprehensive income (loss)																					(299)						2
Total comprehensive income																																	1,082
Cash dividends paid-$1.40 per share															(789)																		(789)
Share repurchases			(4)												(150)																		(150)
Stock compensation expense			2						89																								89
Other									6						(9)																		(3)
Balance, December 31, 2019			557						$	2,655					$	18,958					$	(2,405)					$	17					$	19,225
Impact of ASC 326 (see Note 1)															(8)																		(8)
Balance, January 1, 2020			557						$	2,655					$	18,950					$	(2,405)					$	17					$	19,217
Comprehensive income
Net earnings															1,772												10
Other comprehensive income (loss)																					(199)						7
Total comprehensive income																																	1,590
Cash dividends paid-$1.44 per share															(809)																		(809)
Share repurchases			(4)												(133)																		(133)
Stock compensation expense			2						151																								151
Other			1						18																		(12)						6
Balance, December 31, 2020			556						$	2,824					$	19,780					$	(2,604)					$	22					$	20,022

See notes to consolidated financial statements.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements

Note 1. Summary of Significant Accounting Policies

Nature of Business

ADM unlocks the power of nature to provide access to nutrition worldwide. The Company is a global leader in human and animal nutrition and the world’s premier agricultural origination and processing company. ADM’s breadth, depth, insights, facilities and logistical expertise give the Company unparalleled capabilities to meet needs for food, beverages, health and wellness, and more. From the seed of the idea to the outcome of the solution, ADM enriches the quality of life the world over.

The Company transforms natural products into staple foods, sustainable, renewable industrial products, and an expansive pantry of food and beverage ingredients and solutions for foods and beverages, supplements, nutrition for pets and livestock and more. And with an array of unparalleled capabilities across every part of the global food chain, ADM gives its customers an edge in solving global challenges of today and tomorrow. At ADM, sustainable practices and a focus on environmental responsibility are not separate from its primary business: they are integral to the work the Company does every day to serve customers and create value for shareholders. The Company is one of the world’s leading producers of ingredients for human and animal nutrition, and other products made from nature.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. The Company consolidates all entities, including variable interest entities (VIEs), in which it has a controlling financial interest. For VIEs, the Company assesses whether it is the primary beneficiary as defined under the applicable accounting standard. Investments in affiliates, including VIEs through which the Company exercises significant influence but does not control the investee and is not the primary beneficiary of the investee’s activities, are carried at cost plus equity in undistributed earnings since acquisition and are adjusted, where appropriate, for basis differences between the investment balance and the underlying net assets of the investee. The Company’s portion of the results of certain affiliates and results of certain VIEs are included using the most recent available financial statements. In each case, the financial statements are within 93 days of the Company’s year-end and are consistent from period to period.

Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect amounts reported in its consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Reclassifications

Effective January 1, 2020, the Company started reporting its newly created dry mill ethanol subsidiary, Vantage Corn Processors (VCP), as a sub-segment within the Carbohydrate Solutions segment. VCP replaces the Bioproducts sub-segment which included the combined results of the Company’s corn dry and wet mill ethanol operations. The wet mill ethanol operations that were previously reported in Bioproducts are now included in the Starches and Sweeteners sub-segment. In addition to dry mill ethanol production, VCP sells/brokers ADM’s wet mill ethanol production as the sole marketer of ethanol produced at the Company’s facilities. The change does not have an impact on the total results of the Carbohydrate Solutions segment.

Prior period information in Notes 2 and 17 has been reclassified to conform to the current period segment presentation.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 1. Summary of Significant Accounting Policies (Continued)

Cash Equivalents

The Company considers all non-segregated, highly-liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents.

Segregated Cash and Investments

The Company segregates certain cash, cash equivalents, and investment balances in accordance with regulatory requirements, commodity exchange requirements, and insurance arrangements. These balances represent deposits received from customers of the Company’s registered futures commission merchant and commodity brokerage services, cash margins and securities pledged to commodity exchange clearinghouses, and cash pledged as security under certain insurance arrangements. Segregated cash and investments also include restricted cash collateral for the various insurance programs of the Company’s captive insurance business. To the degree these segregated balances are comprised of cash and cash equivalents, they are considered restricted cash and cash equivalents on the statement of cash flows.

Receivables

The Company records accounts receivable at net realizable value. This value includes an allowance for estimated uncollectible accounts of $100 million and $110 million at December 31, 2020 and 2019, respectively, to reflect any loss anticipated on the accounts receivable balances including any accrued interest receivables thereon. Long-term receivables recorded in other assets were not material to the Company’s overall receivables portfolio.

Effective January 1, 2020, the Company adopted Accounting Standards Codification (ASC) Topic 326, Financial Instruments - Credit Losses (Topic 326), and developed a new methodology for estimating uncollectible accounts. Under this methodology, receivables are pooled according to type, region, credit risk rating, and age. Each pool is assigned an expected loss co-efficient to arrive at a general reserve based on historical write-offs adjusted, as needed, for regional, economic, and other forward-looking factors. The Company minimizes credit risk due to the large and diversified nature of its worldwide customer base. ADM manages its exposure to counter-party credit risk through credit analysis and approvals, credit limits, and monitoring procedures.

The Company recorded bad debt expense in selling, general, and administrative expenses of $47 million, $23 million, and $26 million in the years ended December 31, 2020, 2019, and 2018, respectively.

Inventories

Inventories of certain merchandisable agricultural commodities, which include inventories acquired under deferred pricing contracts, are stated at market value. In addition, the Company values certain inventories using the first-in, first-out (FIFO) method at the lower of cost or net realizable value. Prior to January 1, 2020, the Company also valued certain of its agricultural commodity inventories using the last-in, first-out (LIFO) method at the lower of cost or net realizable value.

Effective January 1, 2020, the Company changed the method of accounting for certain of its agricultural commodity inventories from the LIFO method to market value in the Ag Services and Oilseeds segment. As of December 31, 2019, inventories accounted for using LIFO at the lower of cost or net realizable value represented approximately 10% of consolidated inventories. The Company believes market value is preferable because it: (i) conforms to the inventory valuation methodology used for the majority of ADM’s agricultural commodity inventories; (ii) enhances the matching of inventory costs with revenues and better reflects the current cost of inventory on the Company’s balance sheet; and (iii) provides better comparability with the Company’s peers.

The Company concluded that the accounting change does not have a material effect on prior periods’ financial statements and elected not to apply the change on a retrospective basis. As a result, the Company recorded a reduction in cost of products sold of $91 million ($69 million after tax, equal to $0.12 per diluted share) for the cumulative effect of the change in the three months ended March 31, 2020 with no impact to the statement of cash flows. The change did not have a material impact on the Company’s results for the year ended December 31, 2020.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 1. Summary of Significant Accounting Policies (Continued)

If the Company had not made the accounting change, the effect of LIFO valuation on ADM’s operating results would have been an increase in cost of goods sold of $147 million ($113 million after tax, equal to $0.20 per diluted share) in the year ended December 31, 2020, with no impact to the consolidated statement of cash flows.

The following table sets forth the Company’s inventories as of December 31, 2020 and 2019.

			December 31, 2020						December 31, 2019
			(In millions)
LIFO inventories
FIFO value			$	—					$	1,022
LIFO valuation reserve			—						(91)
LIFO inventories carrying value			—						931
FIFO inventories			3,310						3,106
Market inventories			7,941						4,704
Supplies and other inventories			462						429
Total inventories			$	11,713					$	9,170

Fair Value Measurements

The Company determines fair value based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses the market approach valuation technique to measure the majority of its assets and liabilities carried at fair value. Three levels are established within the fair value hierarchy that may be used to report fair value: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Observable inputs, including Level 1 prices that have been adjusted; quoted prices for similar assets or liabilities; quoted prices in markets that are less active than traded exchanges; and other inputs that are observable or can be substantially corroborated by observable market data. Level 3: Unobservable inputs that are supported by little or no market activity and that are a significant component of the fair value of the assets or liabilities. In evaluating the significance of fair value inputs, the Company generally classifies assets or liabilities as Level 3 when their fair value is determined using unobservable inputs that individually or when aggregated with other unobservable inputs, represent more than 10% of the fair value of the assets or liabilities. Judgment is required in evaluating both quantitative and qualitative factors in the determination of significance for purposes of fair value level classification. Level 3 amounts can include assets and liabilities whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as assets and liabilities for which the determination of fair value requires significant management judgment or estimation.

Based on historical experience with the Company’s suppliers and customers, the Company’s own credit risk and knowledge of current market conditions, the Company does not view nonperformance risk to be a significant input to fair value for the majority of its forward commodity purchase and sale contracts. However, in certain cases, if the Company believes the nonperformance risk to be a significant input, the Company records estimated fair value adjustments, and classifies the measurement in Level 3.

In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy. The lowest level of input that is a significant component of the fair value measurement determines the placement of the entire fair value measurement in the hierarchy. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the classification of fair value assets and liabilities within the fair value hierarchy levels.

The Company’s policy regarding the timing of transfers between levels, including both transfers into and transfers out of Level 3, is to measure and record the transfers at the end of the reporting period.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 1. Summary of Significant Accounting Policies (Continued)

Derivatives

The Company recognizes all of its derivative instruments as either assets or liabilities at fair value in its consolidated balance sheet. Unrealized gains are reported as other current assets and unrealized losses are reported as accrued expenses and other payables. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and on the type of hedging relationship. The majority of the Company’s derivatives have not been designated as hedging instruments, and as such, changes in fair value of these derivatives are recognized in earnings immediately. For those derivative instruments that are designated and qualify as hedging instruments, the Company designates the hedging instrument, based upon the exposure being hedged, as a fair value hedge, a cash flow hedge, or a net investment hedge.

For derivative instruments that are designated and qualify as highly-effective cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the gain or loss on the derivative instrument is reported as a component of accumulated other comprehensive income (loss) (AOCI) and as an operating activity in the statement of cash flows and reclassified into earnings in the same line item affected by the hedged transaction and in the same period or periods during which the hedged transaction affects earnings. Hedge components excluded from the assessment of effectiveness and gains and losses related to discontinued hedges are recognized in the consolidated statement of earnings during the current period.

For derivative instruments that are designated and qualify as fair value hedges, changes in the fair value of the hedging instrument and changes in the fair value of the hedged item are recognized in the consolidated statement of earnings during the current period.

For derivative instruments that are designated and qualify as net investment hedges, foreign exchange gains and losses related to changes in foreign currency exchange rates are deferred in AOCI until the underlying investment is divested.

Property, Plant, and Equipment

Property, plant, and equipment is recorded at cost. Repair and maintenance costs are expensed as incurred. The Company generally uses the straight-line method in computing depreciation for financial reporting purposes and generally uses accelerated methods for income tax purposes. The annual provisions for depreciation have been computed principally in accordance with the following ranges of asset lives: buildings - 15 to 40 years; machinery and equipment - 3 to 40 years. The Company capitalized interest on major construction projects in progress of $14 million, $15 million, and $21 million for the years ended December 31, 2020, 2019, and 2018, respectively.

Income Taxes

The Company accounts for income taxes in accordance with the liability method. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and reported amounts in the consolidated financial statements using statutory rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recorded in the results of operations in the period that includes the enactment date under the law. Applicable accounting standards prescribe a minimum threshold a tax position is required to meet before being recognized in the consolidated financial statements. The Company recognizes in its consolidated financial statements tax positions determined more likely than not to be sustained upon examination, based on the technical merits of the position.

The Company classifies interest on income tax-related balances as interest expense and classifies tax-related penalties as selling, general, and administrative expenses.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 1. Summary of Significant Accounting Policies (Continued)

Goodwill and other intangible assets

Goodwill and other intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests. Definite-lived intangible assets, including capitalized expenses related to the Company’s 1ADM program, are amortized over their estimated useful lives of 1 to 50 years and are reviewed for impairment whenever there are indicators that the carrying value of the assets may not be fully recoverable. The Company’s accounting policy is to evaluate goodwill and other intangible assets with indefinite lives for impairment on October 1 of each fiscal year or whenever there are indicators that the carrying value of the assets may not be fully recoverable. The Company recorded impairment charges totaling $26 million related to customer lists, $11 million related to goodwill and intangibles, and $9 million related customer lists during the years ended December 31, 2020, 2019, and 2018, respectively (see Note 9 for additional information).

Asset Abandonments and Write-Downs

The Company evaluates long-lived assets for impairment whenever indicators of impairment exist. In addition, assets are written down to fair value after consideration of the Company’s ability to utilize the assets for their intended purpose, employ the assets in alternative uses, or sell the assets to recover the carrying value. Fair value is generally based on discounted cash flow analysis which relies on management’s estimate of market participant assumptions or estimated selling price for assets considered held for sale (a Level 3 measurement under applicable accounting standards). During 2020, the Company temporarily idled certain of its corn processing assets where ethanol is produced and performed a quantitative impairment assessment of those assets, resulting in no impairment charges. The total carrying value of the temporarily idled assets as of December 31, 2020 was immaterial. During the years ended December 31, 2020, 2019, and 2018, asset abandonment and impairment charges were $28 million, $131 million, and $100 million, respectively.

Payables to Brokerage Customers

Payables to brokerage customers represent the total of customer accounts at the Company’s futures commission merchant with credit or positive balances. Customer accounts are used primarily in connection with commodity transactions and include gains and losses on open commodity trades as well as securities and other deposits made for margins or other purposes as required by the Company or the exchange-clearing organizations or counterparties. Payables to brokerage customers have a corresponding balance in segregated cash and investments and customer omnibus receivable in other current assets.

Revenues

The Company follows a policy of recognizing revenue at a single point in time when it satisfies its performance obligation by transferring control over a product or service to a customer. For transportation service contracts, the Company recognizes revenue over time as the barge, ocean-going vessel, truck, rail, or container freight moves towards its destination in accordance with the transfer of control guidance of ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”). For physically settled derivative sales contracts that are outside the scope of Topic 606, the Company recognizes revenue when control of the inventory is transferred within the meaning of Topic 606 as required by ASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets (“Topic 610-20”).

Stock Compensation

The Company recognizes expense for its stock compensation based on the fair value of the awards that are granted. The Company’s stock compensation plans provide for the granting of restricted stock, restricted stock units, performance stock units, and stock options. The fair values of stock options and performance stock units are estimated at the date of grant using the Black-Scholes option valuation model and a lattice valuation model, respectively. These valuation models require the input of subjective assumptions. Measured compensation cost, net of forfeitures, is recognized ratably over the vesting period of the related stock compensation award.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 1. Summary of Significant Accounting Policies (Continued)

Research and Development

Costs associated with research and development are expensed as incurred. Such costs incurred, net of expenditures subsequently reimbursed by government grants, were $160 million, $154 million, and $141 million for the years ended December 31, 2020, 2019, and 2018, respectively.

Per Share Data

Basic earnings per common share are determined by dividing net earnings attributable to controlling interests by the weighted average number of common shares outstanding. In computing diluted earnings per share, average number of common shares outstanding is increased by common stock options outstanding with exercise prices lower than the average market price of common shares using the treasury share method.

Business Combinations

The Company’s acquisitions are accounted for in accordance with ASC Topic 805, Business Combinations, as amended*.* The consideration transferred is allocated to various assets acquired and liabilities assumed at their estimated fair values as of the acquisition date with the residual allocated to goodwill. Fair values allocated to assets acquired and liabilities assumed in business combinations require management to make significant judgments, estimates, and assumptions, especially with respect to intangible assets. Management makes estimates of fair values based upon assumptions it believes to be reasonable. These estimates are based upon historical experience and information obtained from the management of the acquired companies and are inherently uncertain. The estimated fair values related to intangible assets primarily consist of customer relationships, trademarks, and developed technology which are determined primarily using discounted cash flow models. Estimates in the discounted cash flow models include, but are not limited to, certain assumptions that form the basis of the forecasted results (e.g. revenue growth rates, customer attrition rates, and royalty rates). These significant assumptions are forward looking and could be affected by future economic and market conditions. During the measurement period, which may take up to one year from the acquisition date, adjustments due to changes in the estimated fair value of assets acquired and liabilities assumed may be recorded as adjustments to the consideration transferred and the related allocations. Upon the conclusion of the measurement period or the final determination of the values of assets acquired and liabilities assumed, whichever comes first, any such adjustments are charged to the consolidated statements of earnings.

Adoption of New Accounting Standards

Effective January 1, 2020, the Company adopted the amended guidance of Topic 326, which is intended to improve financial reporting by requiring more timely recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The amended guidance replaces the prior “incurred loss” approach with an “expected loss” model and requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The Company was required to adopt the amended guidance on a modified retrospective basis through a cumulative effect adjustment to retained earnings as of the beginning of the period of adoption. The Company evaluated its current methodology of estimating allowance for doubtful accounts and the risk profile of its receivable portfolio and developed a model that includes the qualitative and forecasting aspects of the “expected loss” model under the amended guidance. The Company finalized its assessment of the impact of the amended guidance and recorded a $8 million cumulative effect adjustment to retained earnings at January 1, 2020.

Effective January 1, 2020, the Company adopted the amended guidance of ASC Topic 820, Fair Value Measurement, which modifies the disclosure requirements on fair value measurements. The adoption of this amended guidance did not impact the Company’s financial results.

Effective December 31, 2020, the Company adopted the amended guidance of ASC Subtopic 715-20, Compensation - Retirement Benefits - Defined Benefit Plans - General, which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The adoption of this amended guidance did not impact the Company’s financial results.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 1. Summary of Significant Accounting Policies (Continued)

Pending Accounting Standards

Effective January 1, 2021, the Company will be required to adopt the amended guidance of ASC Topic 740, Income Taxes (Topic 740), which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify other areas of Topic 740. Early adoption is permitted. The Company does not expect the adoption of the amendments to have a significant impact on its financial results.

Through December 31, 2022, the Company has the option to adopt the amended guidance of ASC Topic 848, Reference Rate Reform, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amended guidance do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company plans to adopt the expedients and exceptions provided by the amended guidance before the December 31, 2022 expiry date but has not yet completed its assessment of the impact on the consolidated financial statements.

Note 2. Revenues

Revenue Recognition

The Company principally generates revenue from merchandising and transporting agricultural commodities and manufactured products used as ingredients in food, feed, energy, and industrial products. Revenue is measured based on the consideration specified in the contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties. The Company follows a policy of recognizing revenue at a single point in time when it satisfies its performance obligation by transferring control over a product or service to a customer. The majority of the Company’s contracts with customers have one performance obligation and a contract duration of one year or less. The Company applies the practical expedient in paragraph 10-50-14 of Topic 606 and does not disclose information about remaining performance obligations that have original expected durations of one year or less. For transportation service contracts, the Company recognizes revenue over time as the barge, ocean-going vessel, truck, rail, or container freight moves towards its destination in accordance with the transfer of control guidance of Topic 606. The Company recognized revenue from transportation service contracts of $423 million, $515 million, and $481 million for the years ended December 31, 2020, 2019, and 2018, respectively. For physically settled derivative sales contracts that are outside the scope of Topic 606, the Company recognizes revenue when control of the inventory is transferred within the meaning of Topic 606 as required by ASC 610-20.

Shipping and Handling Costs

Shipping and handling costs related to contracts with customers for the sale of goods are accounted for as a fulfillment activity and are included in cost of products sold. Accordingly, amounts billed to customers for such costs are included as a component of revenues.

Taxes Collected from Customers and Remitted to Governmental Authorities

The Company does not include taxes assessed by governmental authorities that are (i) imposed on and concurrent with a specific revenue-producing transaction and (ii) collected from customers, in the measurement of transactions prices or as a component of revenues and cost of products sold.

Contract Liabilities

Contract liabilities relate to advance payments from customers for goods and services that the Company has yet to provide. Contract liabilities of $626 million and $604 million as of December 31, 2020 and 2019, respectively, were recorded in accrued expenses and other payables in the consolidated balance sheet. Contract liabilities recognized as revenues for the years ended December 31, 2020 and 2019 were $604 million and $575 million, respectively.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 2. Revenues (Continued)

Disaggregation of Revenues

The following tables present revenue disaggregated by timing of recognition and major product lines for the years ended December 31, 2020, 2019, and 2018.

			Year Ended December 31, 2020
			Topic 606 Revenue									Topic 815**(1)**			Total
			Point in Time			Over Time			Total			Revenue			Revenues
			(In millions)
Ag Services and Oilseeds
Ag Services			$	3,108		$	423		$	3,531		$	29,195		$	32,726
Crushing			467			—			467			9,126			9,593
Refined Products and Other			2,095			—			2,095			5,302			7,397
Total Ag Services and Oilseeds			5,670			423			6,093			43,623			49,716
Carbohydrate Solutions
Starches and Sweeteners			4,756			—			4,756			1,631			6,387
Vantage Corn Processors			2,085			—			2,085			—			2,085
Total Carbohydrate Solutions			6,841			—			6,841			1,631			8,472
Nutrition
Human Nutrition			2,812			—			2,812			—			2,812
Animal Nutrition			2,988			—			2,988			—			2,988
Total Nutrition			5,800			—			5,800			—			5,800
Other Business			367			—			367			—			367
Total Revenues			$	18,678		$	423		$	19,101		$	45,254		$	64,355

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 2. Revenues (Continued)

			Year Ended December 31, 2019
			Topic 606 Revenue									Topic 815**(1)**			Total
			Point in Time			Over Time			Total			Revenue			Revenues
			(In millions)
Ag Services and Oilseeds
Ag Services			$	4,693		$	515		$	5,208		$	26,497		$	31,705
Crushing			736			—			736			8,743			9,479
Refined Products and Other			2,230			—			2,230			5,327			7,557
Total Ag Services and Oilseeds			7,659			515			8,174			40,567			48,741
Carbohydrate Solutions
Starches and Sweeteners			5,154			—			5,154			1,700			6,854
Vantage Corn Processors			3,032			—			3,032			—			3,032
Total Carbohydrate Solutions			8,186			—			8,186			1,700			9,886
Nutrition
Human Nutrition			2,745			—			2,745			—			2,745
Animal Nutrition			2,932			—			2,932			—			2,932
Total Nutrition			5,677			—			5,677			—			5,677
Other Business			352			—			352			—			352
Total Revenues			$	21,874		$	515		$	22,389		$	42,267		$	64,656

			Year Ended December 31, 2018
			Topic 606 Revenue									Topic 815**(1)**			Total
			Point in Time			Over Time			Total			Revenue			Revenues
			(In millions)
Ag Services and Oilseeds
Ag Services			$	2,182		$	481		$	2,663		$	29,103		$	31,766
Crushing			664			—			664			9,655			10,319
Refined Products and Other			1,792			—			1,792			6,014			7,806
Total Ag Services and Oilseeds			4,638			481			5,119			44,772			49,891
Carbohydrate Solutions
Starches and Sweeteners			5,127			—			5,127			1,795			6,922
Vantage Corn Processors			3,357			—			3,357			—			3,357
Total Carbohydrate Solutions			8,484			—			8,484			1,795			10,279
Nutrition
Human Nutrition			2,571			—			2,571			—			2,571
Animal Nutrition			1,219			—			1,219			—			1,219
Total Nutrition			3,790			—			3,790			—			3,790
Other Business			381			—			381			—			381
Total Revenues			$	17,293		$	481		$	17,774		$	46,567		$	64,341

(1) Topic 815 revenue relates to the physical delivery or the settlement of the Company’s sales contracts that are accounted for as derivatives and are outside the scope of Topic 606.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 2. Revenues (Continued)

Ag Services and Oilseeds

The Ag Services and Oilseeds segment generates revenue from the sale of commodities, from service fees for the transportation of goods, from the sale of products manufactured in its global processing facilities, and from its structured trade finance activities. Revenue is measured based on the consideration specified in the contract and excludes any sales incentives and amounts collected on behalf of third parties. Revenue is recognized when a performance obligation is satisfied by transferring control over a product or providing service to a customer. For transportation service contracts, the Company recognizes revenue over time as the barge, ocean-going vessel, truck, rail, or container freight moves towards its destination in accordance with the transfer of control guidance of Topic 606. The amount of revenue recognized follows the contractually specified price which may include freight or other contractually specified cost components. For physically settled derivative sales contracts that are outside the scope of Topic 606, the Company recognizes revenue when control of the inventory is transferred within the meaning of Topic 606 as required by Topic 610-20.

Carbohydrate Solutions

The Carbohydrate Solutions segment generates revenue from the sale of products manufactured at the Company’s global corn and wheat milling facilities around the world. Revenue is recognized when control over products is transferred to the customer. Products are shipped to customers from the Company’s various facilities and from its network of storage terminals. The amount of revenue recognized is based on the consideration specified in the contract which could include freight and other costs depending on the specific shipping terms of each contract. For physically settled derivative sales contracts that are outside the scope of Topic 606, the Company recognizes revenue when control of the inventory is transferred within the meaning of Topic 606 as required by Topic 610-20.

Nutrition

The Nutrition segment sells specialty products including natural flavor ingredients, flavor systems, natural colors, animal nutrition products, and other specialty food and feed ingredients. Revenue is recognized when control over products is transferred to the customer. The amount of revenue recognized follows the contracted price or the mutually agreed price of the product. Freight and shipping are recognized as a component of revenue at the same time control transfers to the customer.

Other Business

Other Business includes the Company’s futures commission business whose primary sources of revenue are commissions and brokerage income generated from executing orders and clearing futures contracts and options on futures contracts on behalf of its customers. Commissions and brokerage revenue are recognized on the date the transaction is executed. Other also includes the Company’s captive insurance business which generates third party revenue through its proportionate share of premiums from third-party reinsurance pools. Reinsurance premiums are recognized on a straight-line basis over the period underlying the policy.

Note 3. Acquisitions

Operating results of acquisitions are included in the Company’s financial statements from the date of acquisition and were not significant for the year ended December 31, 2020. Goodwill allocated in connection with the acquisitions is primarily attributable to synergies expected to arise after the Company’s acquisition of the businesses.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 3. Acquisitions (Continued)

Fiscal year 2020 acquisitions

During the year ended December 31, 2020, the Company acquired Yerbalatina and the remaining 70% interest in Anco Animal Nutrition Competence GmbH (“Anco”) for an aggregate cash consideration of $15 million. The aggregate cash consideration of these acquisitions plus the $3 million acquisition-date value of the Company’s previously held equity interest in Anco, were allocated as follows:

			(In millions)
Working capital			$	16
Property, plant, and equipment			1
Goodwill			2
Long-term liabilities			(1)
Aggregate cash consideration plus acquisition-date fair value of previously held equity interest			$	18

The Company recognized a pre-tax gain of $2 million on the Anco transaction, representing the difference between the carrying value and acquisition-date fair value of the Company’s previously held equity interest. The acquisition-date fair value was determined based on a discounted cash flow analysis using market participant assumptions (a Level 3 measurement under applicable accounting standards).

Fiscal year 2019 acquisitions

During the year ended December 31, 2019, the Company acquired Neovia SAS (“Neovia”), Florida Chemical Company (“FCC”), The Ziegler Group (“Ziegler”), and the remaining 50% interest in Gleadell Agriculture Ltd (“Gleadell”), for an aggregate cash consideration of $2.0 billion. The aggregate cash consideration of these acquisitions, net of $95 million in cash acquired, plus the $15 million acquisition-date value of the Company’s previously held equity interest in Gleadell, was allocated as follows:

(In millions)			Neovia			FCC			Ziegler			Gleadell			Total
Working capital			$	108		$	31		$	18		$	(6)		$	151
Property, plant, and equipment			384			17			3			13			417
Goodwill			773			94			23			10			900
Other intangible assets			669			29			35			—			733
Other long-term assets			83			—			—			9			92
Long-term liabilities			(325)			(1)			(10)			(11)			(347)
Aggregate cash consideration, net of cash acquired, plus acquisition-date fair value of previously held equity interest			$	1,692		$	170		$	69		$	15		$	1,946

Of the $900 million allocated to goodwill, $94 million is expected to be deductible for tax purposes.

The Company recognized a pre-tax gain of $4 million on the Gleadell transaction, representing the difference between the carrying value and acquisition-date fair value of the Company’s previously held equity interest. The acquisition-date fair value was determined based on a discounted cash flow analysis using market participant assumptions (a Level 3 measurement under applicable accounting standards).

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 3. Acquisitions (Continued)

The following table sets forth the fair values and the useful lives of the other intangible assets acquired.

			Useful Lives									Neovia			FCC			Ziegler			Total
			(In years)									(In millions)
Intangible assets with indefinite lives:
Trademarks/brands												$	194		$	—		$	—		$	194
Intangible assets with finite lives:
Trademarks/brands			5			to			15			12			—			4			16
Customer lists			10			to			20			304			15			5			324
Other intellectual property			6			to			10			159			14			26			199
Total other intangible assets acquired												$	669		$	29		$	35		$	733

The Neovia, FCC, and Ziegler acquisitions are in line with the Company’s strategy to become one of the world’s leading nutrition companies. The post-acquisition financial results of these acquisitions are reported in the Nutrition segment.

Fiscal year 2018 acquisitions

During the year ended December 31, 2018, the Company acquired Probiotics International Limited (also known as Protexin), a British-based provider of probiotic supplements for human, pet, and production-animal uses, Rodelle Inc., a premium originator, processor and supplier of vanilla products, and certain soybean origination, crushing, refining, and bottling assets of Brazil-based Algar Agro, for an aggregate cash consideration of $506 million. The aggregate cash consideration of these acquisitions, net of $42 million in cash acquired, was allocated as follows:

			(In millions)
Working capital			$	30
Property, plant, and equipment			133
Goodwill			187
Other intangible assets			132
Other long-term assets			6
Deferred tax liabilities			(15)
Noncontrolling interest			(9)
Aggregate cash consideration, net of cash acquired			$	464

The acquisitions of Protexin and Rodelle Inc. expand the Company’s wide portfolio of health and wellness offerings for both human and animal nutrition consumers.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 4. Fair Value Measurements

The following tables set forth, by level, the Company’s assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2020 and 2019.

			Fair Value Measurements at December 31, 2020
			Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)						Total
									(In millions)
Assets:
Inventories carried at market			$	—					$	5,758					$	2,183					$	7,941
Unrealized derivative gains:
Commodity contracts			—						1,905						859						2,764
Foreign exchange contracts			—						283						—						283
Interest rate contracts			—						61						—						61
Cash equivalents			297						—						—						297
Marketable securities			1						—						—						1
Segregated investments			1,067						—						—						1,067
Total Assets			$	1,365					$	8,007					$	3,042					$	12,414
Liabilities:
Unrealized derivative losses:
Commodity contracts			$	—					$	1,116					$	918					$	2,034
Foreign exchange contracts			—						535						—						535
Interest rate contracts			—						15						—						15
Debt conversion option			—						—						34						34
Inventory-related payables			—						498						11						509
Total Liabilities			$	—					$	2,164					$	963					$	3,127

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 4. Fair Value Measurements (Continued)

			Fair Value Measurements at December 31, 2019
			Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)						Total
									(In millions)
Assets:
Inventories carried at market			$	—					$	3,227					$	1,477					$	4,704
Unrealized derivative gains:
Commodity contracts			—						277						201						478
Foreign currency contracts			—						138						—						138
Interest rate contracts			—						3						—						3
Cash equivalents			505						—						—						505
Marketable securities			5						—						—						5
Segregated investments			628						—						—						628
Deferred consideration			—						446						—						446
Total Assets			$	1,138					$	4,091					$	1,678					$	6,907
Liabilities:
Unrealized derivative losses:
Commodity contracts			$	—					$	375					$	199					$	574
Foreign currency contracts			—						125						—						125
Interest rate contracts			—						43						—						43
Inventory-related payables			—						702						27						729
Total Liabilities			$	—					$	1,245					$	226					$	1,471

Estimated fair values for inventories carried at market are based on exchange-quoted prices, adjusted for differences in local markets and quality, referred to as basis. Market valuations for the Company’s inventories are adjusted for location and quality (basis) because the exchange-quoted prices represent contracts that have standardized terms for commodity, quantity, future delivery period, delivery location, and commodity quality or grade. The basis adjustments are generally determined using inputs from broker or dealer quotations or market transactions in either the listed or over the counter (OTC) markets and are considered observable. In some cases, the basis adjustments are unobservable because they are supported by little to no market activity. When unobservable inputs have a significant impact on the measurement of fair value, the inventory is classified in Level 3. Changes in the fair value of inventories are recognized in the consolidated statements of earnings as a component of cost of products sold.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 4. Fair Value Measurements (Continued)

Derivative contracts include exchange-traded commodity futures and options contracts, forward commodity purchase and sale contracts, and OTC instruments related primarily to agricultural commodities, energy, interest rates, and foreign currencies. Exchange-traded futures and options contracts are valued based on unadjusted quoted prices in active markets and are classified in Level 1. The majority of the Company’s exchange-traded futures and options contracts are cash-settled on a daily basis and, therefore, are not included in these tables. Fair value for forward commodity purchase and sale contracts is estimated based on exchange-quoted prices adjusted for differences in local markets. Market valuations for the Company’s forward commodity purchase and sale contracts are adjusted for location (basis) because the exchange-quoted prices represent contracts that have standardized terms for commodity, quantity, future delivery period, delivery location, and commodity quality or grade. The basis adjustments are generally determined using inputs from broker or dealer quotations or market transactions in either the listed or OTC markets and are considered observable. In some cases, the basis adjustments are unobservable because they are supported by little to no market activity. When observable inputs are available for substantially the full term of the contract, it is classified in Level 2. When unobservable inputs have a significant impact (more than 10%) on the measurement of fair value, the contract is classified in Level 3. Except for certain derivatives designated as cash flow hedges, changes in the fair value of commodity-related derivatives are recognized in the consolidated statements of earnings as a component of cost of products sold. Changes in the fair value of foreign currency-related derivatives are recognized in the consolidated statements of earnings as a component of revenues, cost of products sold, and other (income) expense - net, depending upon the purpose of the contract. The changes in the fair value of derivatives designated as effective cash flow hedges are recognized in the consolidated balance sheets as a component of accumulated other comprehensive income (loss) (AOCI) until the hedged items are recorded in earnings or it is probable the hedged transaction will no longer occur.

The Company’s cash equivalents are comprised of money market funds valued using quoted market prices and are classified as Level 1.

The Company’s marketable securities are comprised of U.S. Treasury securities and corporate debt securities. U.S. Treasury securities are valued using quoted market prices and are classified in Level 1. Corporate debt securities are valued using third-party pricing services and substantially all are classified in Level 2. Unrealized changes in the fair value of available-for-sale marketable debt securities are recognized in the consolidated balance sheets as a component of AOCI unless a decline in value is deemed to be other-than-temporary at which point the decline is recorded in earnings.

The Company’s segregated investments are comprised of U.S. Treasury securities. U.S. Treasury securities are valued using quoted market prices and are classified in Level 1.

The Company had deferred consideration under its accounts receivable securitization programs (the “Programs”) which represented notes receivable from the purchasers under the Programs (see Note 19). This amount was reflected in other current assets on the consolidated balance sheet (see Note 6). The Company carried the deferred consideration at fair value determined by calculating the expected amount of cash to be received. The fair value was principally based on observable inputs (a Level 2 measurement) consisting mainly of the face amount of the receivables adjusted for anticipated credit losses and discounted at the appropriate market rate. Receipt of deferred consideration was not subject to significant risks other than delinquencies and credit losses on accounts receivable transferred under the Programs which have historically been insignificant.

The debt conversion option is the equity linked embedded derivative related to the exchangeable bonds described in Note 10. The fair value of the embedded derivative is included in long-term debt, with changes in fair value recognized as interest, and is valued with the assistance of a third-party pricing service (a level 3 measurement under applicable accounting standards).

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 4. Fair Value Measurements (Continued)

The following tables present a rollforward of the activity of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the years ended December 31, 2020 and 2019.

			Level 3 Fair Value Assets Measurements at December 31, 2020
			Inventories Carried at Market						Commodity Derivative Contracts Gains						Total
			(In millions)
Balance, December 31, 2019			$	1,477					$	201					$	1,678
Total increase (decrease) in net realized/unrealized gains included in cost of products sold			146						938						1,084
Purchases			14,185						—						14,185
Sales			(13,852)						—						(13,852)
Settlements			—						(257)						(257)
Transfers into Level 3			290						70						360
Transfers out of Level 3			(63)						(93)						(156)
Ending balance, December 31, 2020 (1)			$	2,183					$	859					$	3,042

(1) Includes increase in unrealized gains of $1.7 billion relating to Level 3 assets still held at December 31, 2020.

			Level 3 Fair Value Liabilities Measurements at December 31, 2020
			Inventory- related Payables						Commodity Derivative Contracts Losses						Debt Conversion Option						Total
			(In millions)
Balance, December 31, 2019			$	27					$	199					$	—					$	226
Total increase (decrease) in net realized/unrealized losses included in cost of products sold and interest expense			—						1,729						17						1,746
Purchases/Issuance of debt conversion option			20						—						17						37
Sales			(36)						—						—						(36)
Settlements			—						(1,059)						—						(1,059)
Transfers into Level 3			—						112						—						112
Transfers out of Level 3			—						(63)						—						(63)
Ending balance, December 31, 2020 (1)			$	11					$	918					$	34					$	963

(1) Includes increase in unrealized losses of $1.8 billion relating to Level 3 liabilities still held at December 31, 2020.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 4. Fair Value Measurements (Continued)

			Level 3 Fair Value Assets Measurements at December 31, 2019
			Inventories Carried at Market						Commodity Derivative Contracts Gains						Total
			(In millions)
Balance, December 31, 2018			$	1,515					$	155					$	1,670
Total increase (decrease) in net realized/unrealized gains included in cost of products sold			327						417						744
Purchases			10,833						—						10,833
Sales			(11,167)						—						(11,167)
Settlements			—						(421)						(421)
Transfers into Level 3			108						74						182
Transfers out of Level 3			(139)						(24)						(163)
Ending balance, December 31, 2019 (1)			$	1,477					$	201					$	1,678

(1) Includes increase in unrealized gains of $900 million relating to Level 3 assets still held at December 31, 2019.

			Level 3 Fair Value Liabilities Measurements at December 31, 2019
			Inventory- related Payables						Commodity Derivative Contracts Losses						Total
			(In millions)
Balance, December 31, 2018			$	18					$	245					$	263
Total increase (decrease) in net realized/unrealized losses included in cost of products sold			(1)						398						397
Purchases			48						—						48
Sales			(38)						—						(38)
Settlements			—						(451)						(451)
Transfers into Level 3			—						51						51
Transfers out of Level 3			—						(44)						(44)
Ending balance, December 31, 2019 (1)			$	27					$	199					$	226

(1) Includes increase in unrealized losses of $7 million relating to Level 3 liabilities still held at December 31, 2019.

Transfers into Level 3 of assets and liabilities previously classified in Level 2 were due to the relative value of unobservable inputs to the total fair value measurement of certain products and derivative contracts rising above the 10% threshold. Transfers out of Level 3 were primarily due to the relative value of unobservable inputs to the total fair value measurement of certain products and derivative contracts falling below the 10% threshold and thus permitting reclassification to Level 2.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 4. Fair Value Measurements (Continued)

In some cases, the price components that result in differences between exchange-traded prices and local prices for inventories and commodity purchase and sale contracts are observable based upon available quotations for these pricing components, and in some cases, the differences are unobservable. These price components primarily include transportation costs and other adjustments required due to location, quality, or other contract terms. In the table below, these other adjustments are referred to as basis. The changes in unobservable price components are impacted by specific local supply and demand characteristics at each facility and the overall market. Factors such as substitute products, weather, fuel costs, contract terms, and futures prices also impact the movement of these unobservable price components.

The following table sets forth the weighted average percentage of the unobservable price components included in the Company’s Level 3 valuations as of December 31, 2020 and 2019. The Company’s Level 3 measurements may include basis only, transportation cost only, or both price components. As an example, for Level 3 inventories with basis, the unobservable component as of December 31, 2020 is a weighted average 4.3% of the total price for assets and 13.7% of the total price for liabilities.

						Weighted Average % of Total Price
						December 31, 2020												December 31, 2019
Component Type						Assets						Liabilities						Assets						Liabilities
Inventories and Related Payables
Basis						4.3%						13.7%						28.2%						14.7%
Transportation cost						10.6%						—%						24.7%						—%
Commodity Derivative Contracts
Basis						28.3%						0.7%						16.0%						20.2%
Transportation cost						1.9%						1.3%						9.7%						3.1%

In certain of the Company’s principal markets, the Company relies on price quotes from third parties to value its inventories and physical commodity purchase and sale contracts. These price quotes are generally not further adjusted by the Company in determining the applicable market price. In some cases, availability of third-party quotes is limited to only one or two independent sources. In these situations, absent other corroborating evidence, the Company considers these price quotes as 100% unobservable and, therefore, the fair value of these items is reported in Level 3.

Note 5. Derivative Instruments & Hedging Activities

Derivatives Not Designated as Hedging Instruments

The majority of the Company’s derivative instruments have not been designated as hedging instruments. The Company uses exchange-traded futures and exchange-traded and OTC options contracts to manage its net position of merchandisable agricultural product inventories and forward cash purchase and sales contracts to reduce price risk caused by market fluctuations in agricultural commodities and foreign currencies. The Company also uses exchange-traded futures and exchange-traded and OTC options contracts as components of merchandising strategies designed to enhance margins. The results of these strategies can be significantly impacted by factors such as the correlation between the value of exchange-traded commodities futures contracts and the value of the underlying commodities, counterparty contract defaults, and volatility of freight markets. Derivatives, including exchange traded contracts and physical purchase or sale contracts, and inventories of certain merchandisable agricultural products, which include amounts acquired under deferred pricing contracts, are stated at market value. Inventory is not a derivative and therefore fair values of and changes in fair values of inventories are not included in the tables below.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 5. Derivative Instruments & Hedging Activities (Continued)

The following table sets forth the fair value of derivatives not designated as hedging instruments as of December 31, 2020 and 2019.

			December 31, 2020												December 31, 2019
			Assets						Liabilities						Assets						Liabilities
			(In millions)
Foreign Currency Contracts			$	283					$	270					$	125					$	120
Commodity Contracts			2,764						2,034						478						574
Debt Conversion Option			—						34						—						—
Total			$	3,047					$	2,338					$	603					$	694

The following table sets forth the pre-tax gains (losses) on derivatives not designated as hedging instruments that have been included in the consolidated statements of earnings for the years ended December 31, 2020, 2019, and 2018.

									Cost of						Other expense (income) - net
									products									Interest
(In millions)			Revenues						sold									Expense
For the Year Ended December 31, 2020
Consolidated Statement of Earnings			$	64,355					$	59,902					$	(278)					$	339
Pre-tax gains (losses) on:
Foreign Currency Contracts			$	28					$	(496)					$	(153)					$	—
Commodity Contracts			—						(68)						—
Debt Conversion Option			—						—						—						(17)
Total gain (loss) recognized in earnings			$	28					$	(564)					$	(153)					$	(17)					$	(706)
For the Year Ended December 31, 2019
Consolidated Statement of Earnings			$	64,656					$	60,509					$	7					$	402
Pre-tax gains (losses) on:
Foreign Currency Contracts			$	9					$	32					$	(21)					$	—
Commodity Contracts			—						24						—						—
Total gain (loss) recognized in earnings			$	9					$	56					$	(21)					$	—					$	44
For the Year Ended December 31, 2018
Consolidated Statement of Earnings			$	64,341					$	60,160					$	101					$	364
Pre-tax gains (losses) on:
Foreign Currency Contracts			$	5					$	(139)					$	(177)					$	—
Commodity Contracts			—						258						—						—
Total gain (loss) recognized in earnings			$	5					$	119					$	(177)					$	—					$	(53)

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 5. Derivative Instruments & Hedging Activities (Continued)

Changes in the market value of inventories of certain merchandisable agricultural commodities, forward cash purchase and sales contracts, exchange-traded futures, and exchange-traded and OTC options contracts are recognized in earnings immediately as a component of cost of products sold.

Derivatives Designated as Cash Flow, Fair Value or Net Investment Hedging Strategies

The Company had certain derivatives designated as cash flow and net investment hedges as of December 31, 2020 and certain derivatives designated as cash flow, fair value, and net investment hedges as of December 31, 2019.

For derivative instruments that were designated and qualify as fair value hedges, changes in the fair value of the hedging instrument and changes in the fair value of the hedged item were recognized in the consolidated statement of earnings during the period.

The Company used interest rate swaps designated as fair value hedges to protect the fair value of $496 million in fixed-rate debt due to changes in interest rates. The terms of the interest rate swaps matched the terms of the underlying debt. At December 31, 2019, the Company had $3 million other current assets representing the fair value of the interest rate swaps and a corresponding increase in the underlying debt for the same amount with no net impact to earnings. In June 2020, the Company redeemed the debt and recorded a gain of $8 million from the termination of the swaps.

For derivative instruments that are designated and qualify as net investment hedges, foreign exchange gains and losses related to changes in foreign currency exchange rates are deferred in AOCI until the underlying investment is divested.

The Company uses cross-currency swaps and foreign exchange forwards designated as net investment hedges to protect the Company’s investment in a foreign subsidiary against changes in foreign currency exchange rates. The Company executed USD-fixed to Euro-fixed cross-currency swaps with an aggregate notional amount of $1.3 billion and $1.2 billion as of December 31, 2020 and 2019, respectively, and foreign exchange forwards with an aggregate notional amount of $1.8 billion as of December 31, 2020.

As of December 31, 2020 and 2019, the Company had after-tax losses of $202 million and after-tax gains of $6 million in AOCI, respectively, related to foreign exchange gains and losses from the net investment hedge transactions. The amount is deferred in AOCI until the underlying investment is divested.

For derivative instruments that are designated and qualify as highly-effective cash flow hedges (i.e., hedging the exposure to variability in expected future cash flow that is attributable to a particular risk), the gain or loss on the derivative instrument is reported as a component of AOCI and as an operating activity in the statement of cash flows and reclassified into earnings in the same line item affected by the hedged transaction and in the same period or periods during which the hedged transaction affects earnings. Hedge components excluded from the assessment of effectiveness and gains and losses related to discontinued hedges are recognized in the consolidated statement of earnings during the current period.

The Company’s structured trade finance programs use interest rate swaps designated as cash flow hedges to hedge the forecasted interest payments on certain letters of credit from banks. The terms of the interest rate swaps match the terms of the forecasted interest payments. The deferred gains and losses are recognized in revenues over the period in which the related interest payments are paid to the banks. The amounts are recorded in revenues as the related results are also recorded in revenues. As of December 31, 2020 and 2019, the Company had interest rate swaps maturing on various dates with aggregate notional amounts of $3.3 billion and $4.7 billion, respectively.

The Company also uses swap locks designated as cash flow hedges to hedge the changes in the forecasted interest payments due to changes in the benchmark rate leading up to future bond issuance dates. The terms of the swap locks match the terms of the forecasted interest payments. The deferred gains and losses will be recognized in interest expense over the period in which the related interest payments will be paid. During the year ended December 31, 2020, the Company executed swap locks maturing on various dates with an aggregate notional amount of $550 million.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 5. Derivative Instruments & Hedging Activities (Continued)

At December 31, 2020 and 2019, the Company had after-tax gains of $31 million and after-tax losses of $43 million in AOCI, respectively, related to the interest rate swaps and swap locks. The Company expects to recognize amounts deferred in AOCI in its consolidated statement of earnings during the life of the instruments.

For each of the hedge programs described below, the derivatives are designated as cash flow hedges. The changes in the market value of such derivative contracts have historically been, and are expected to continue to be, highly effective at offsetting changes in price movements of the hedged item. Once the hedged item is recognized in earnings, the gains and losses arising from the hedge are reclassified from AOCI to either revenues or cost of products sold, as applicable. As of December 31, 2020 and 2019, the Company had $119 million of after-tax gains and $5 million of after-tax losses in AOCI, respectively, related to gains and losses from these programs. The Company expects to recognize $119 million of the 2020 after-tax gains in its consolidated statement of earnings during the next 12 months.

The Company uses futures or options contracts to hedge the purchase price of anticipated volumes of corn to be purchased and processed in a future month. The objective of this hedging program is to reduce the variability of cash flows associated with the Company’s forecasted purchases of corn. The Company’s corn processing plants normally grind approximately 72 million bushels of corn per month. Due to the temporarily idled dry mill assets, the Company is currently grinding approximately 56 million bushels of corn per month. During the past 12 months, the Company hedged between 20% and 38% of its monthly grind. At December 31, 2020, the Company had designated hedges representing between 20% to 33% of its anticipated monthly grind of corn for the next 12 months.

The Company, from time to time, also uses futures, options, and swaps to hedge the sales price of certain ethanol sales contracts. The Company has established hedging programs for ethanol sales contracts that are indexed to unleaded gasoline prices and to various exchange-traded ethanol contracts. The objective of these hedging programs is to reduce the variability of cash flows associated with the Company’s sales of ethanol. During the past 12 months, the Company hedged between 0 and 28 million gallons of ethanol sales per month under these programs. At December 31, 2020, the Company had no hedges related to ethanol sales.

The Company uses futures and options contracts to hedge the purchase price of anticipated volumes of soybeans to be purchased and processed in a future month for certain of its U.S. soybean crush facilities. The Company also uses futures or options contracts to hedge the sales prices of anticipated soybean meal and soybean oil sales proportionate to the soybean crushing process at these facilities. During the past 12 months, the Company hedged between 27% and 100% of the anticipated monthly soybean crush for soybean purchases and soybean meal and oil sales at the designated facilities. The Company has designated hedges representing between 0% and 100% of the anticipated monthly soybean crush for soybean purchases and soybean meal and oil sales at the designated facilities over the next 12 months.

The following table sets forth the fair value of derivatives designated as hedging instruments as of December 31, 2020 and 2019.

			December 31, 2020												December 31, 2019
			Assets						Liabilities						Assets						Liabilities
			(In millions)
Foreign Currency Contracts			$	—					$	265					$	13					$	5
Interest Rate Contracts			61						15						3						43
Total			$	61					$	280					$	16					$	48

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 5. Derivative Instruments & Hedging Activities (Continued)

The following table sets forth the pre-tax gains (losses) on derivatives designated as hedging instruments that have been included in the consolidated statement of earnings for the years ended December 31, 2020, 2019, and 2018.

									Cost of products sold						Interest expense						Other expense (income) - net
(In millions)			Revenues
For the Year Ended December 31, 2020
Consolidated Statement of Earnings			$	64,355					$	59,902					$	339					$	(278)
Effective amounts recognized in earnings
Pre-tax gains (losses) on:
Interest Contracts			(75)						$	—					$	(2)					$	—
Commodity Contracts			7						27						—						(2)
Total gain (loss) recognized in earnings			$	(68)					$	27					$	(2)					$	(2)					$	(45)
For the Year Ended December 31, 2019
Consolidated Statement of Earnings			$	64,656					$	60,509					402						$	7
Effective amounts recognized in earnings
Pre-tax gains (losses) on:
Interest Rate Contracts			$	—					$	—					$	1					$	(46)
Commodity Contracts			(44)						(11)						—						—
Total gain (loss) recognized in earnings			$	(44)					$	(11)					$	1					$	(46)					$	(100)
For the Year Ended December 31, 2018
Consolidated Statement of Earnings			$	64,341					$	60,160					$	364					$	101
Effective amounts recognized in earnings
Pre-tax gains (losses) on:
Interest Rate Contracts			$	—					$	—					$	1					$	—
Commodity Contracts			36						(113)						—						—
Total gain (loss) recognized in earnings			$	36					$	(113)					$	1					$	—					$	(76)

Other Net Investment Hedging Strategies

The Company has designated €1.5 billion and €1.7 billion of its outstanding long-term debt and commercial paper borrowings at December 31, 2020 and 2019, respectively, as hedges of its net investment in a foreign subsidiary. As of December 31, 2020 and 2019, the Company had after-tax losses of $87 million and after-tax gains of $7 million in AOCI, respectively, related to foreign exchange gains and losses from these net investment hedge transactions. The amount is deferred in AOCI until the underlying investment is divested.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 6. Other Current Assets

The following table sets forth the items in other current assets:

			December 31, 2020						December 31, 2019
			(In millions)
Unrealized gains on derivative contracts			$	3,108					$	619
Deferred receivables consideration			—						446
Margin deposits and grain accounts			500						111
Customer omnibus receivable			860						1,014
Financing receivables - net (1)			297						395
Insurance premiums receivable			35						41
Prepaid expenses			290						318
Biodiesel tax credit			101						541
Tax receivables			680						579
Non-trade receivables (2)			218						369
Other current assets			135						167
			$	6,224					$	4,600

(1) The Company provides financing to suppliers, primarily Brazilian farmers, to finance a portion of the suppliers’ production costs. The amounts are reported net of allowances of $4 million and $3 million at December 31, 2020 and 2019, respectively. Interest earned on financing receivables of $20 million, $27 million, and $26 million for the years ended December 31, 2020, 2019, and 2018, respectively, is included in interest income in the consolidated statements of earnings.

(2) Non-trade receivables included $40 million and $81 million of reinsurance recoverables as of December 31, 2020 and 2019, respectively.

Note 7. Accrued Expenses and Other Payables

The following table sets forth the items in accrued expenses and other payables:

			December 31, 2020						December 31, 2019
			(In millions)
Unrealized losses on derivative contracts			$	2,584					$	742
Accrued compensation			396						300
Income tax payable			41						72
Other taxes payable			127						120
Biodiesel tax credit payable			5						332
Insurance claims payable			238						284
Contract liability			626						604
Other accruals and payables			926						1,088
			$	4,943					$	3,542

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 8. Investments in and Advances to Affiliates

The Company applies the equity method of accounting for investments in investees over which ADM has the ability to exercise significant influence, including the Company’s 22.2% and 24.8% share ownership in Wilmar as of December 31, 2020 and 2019, respectively. The Company had 60 and 63 unconsolidated domestic and foreign affiliates as of December 31, 2020 and 2019, respectively. The following table summarizes the combined balance sheets as of December 31, 2020 and 2019, and the combined statements of earnings of the Company’s unconsolidated affiliates for the years ended December 31, 2020, 2019, and 2018.

			December 31
(In millions)			2020						2019
Current assets			$	29,508					$	26,695
Non-current assets			23,853						22,627
Current liabilities			(25,969)						(23,580)
Non-current liabilities			(7,191)						(5,913)
Noncontrolling interests			(1,075)						(1,066)
Net assets			$	19,126					$	18,763

			Year Ended December 31
(In millions)			2020						2019						2018
Revenues			$	59,195					$	50,596					$	53,143
Gross profit			5,070						5,334						5,118
Net income			2,093						1,455						1,881

The Company’s share of the undistributed earnings of its unconsolidated affiliates as of December 31, 2020 is $2.6 billion. The Company’s investment in Wilmar has a carrying value of $3.6 billion as of December 31, 2020, and a market value of $5.0 billion based on quoted market price converted to U.S. dollars at the applicable exchange rate at December 31, 2020.

The Company provides credit facilities totaling $106 million to five unconsolidated affiliates. Two facilities that bear interest between 0.00% and 2.46% have a total outstanding balance of $36 million. The other three facilities have no outstanding balance as of December 31, 2020. The outstanding balance is included in other current assets in the accompanying consolidated balance sheet.

Net sales to unconsolidated affiliates during the years ended December 31, 2020, 2019, and 2018 were $4.7 billion, $4.9 billion, and $5.6 billion, respectively.

Accounts receivable due from unconsolidated affiliates as of December 31, 2020 and 2019 was $197 million and $156 million, respectively.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 9. Goodwill and Other Intangible Assets

Goodwill balances attributable to consolidated businesses, by segment, are set forth in the following table.

			December 31, 2020						December 31, 2019
			(In millions)
Ag Services and Oilseeds			$	212					$	206
Carbohydrate Solutions			263						261
Nutrition			2,972						2,914
Other Business			4						4
Total			$	3,451					$	3,385

The changes in goodwill during the year ended December 31, 2020 related to foreign currency translation.

The following table sets forth the other intangible assets:

															December 31, 2020																		December 31, 2019
			Useful												Gross						Accumulated												Gross						Accumulated
			Life												Amount						Amortization						Net						Amount						Amortization						Net
			(In years)												(In millions)
Intangible assets with indefinite lives:
Trademarks/brands															$	429					$	—					$	429					$	440					$	—					$	440
Other															1						—						1						1						—						1
Intangible assets with definite lives:
Trademarks/brands			5			to			20						39						(16)						23						35						(13)						22
Customer lists			5			to			30						1,196						(390)						806						1,194						(310)						884
Computer software			1			to			8						464						(354)						110						425						(305)						120
Land rights			2			to			50						177						(35)						142						168						(30)						138
Other intellectual property			6			to			20						241						(79)						162						238						(56)						182
Recipes and other			3			to			35						489						(200)						289						538						(234)						304
Total															$	3,036					$	(1,074)					$	1,962					$	3,039					$	(948)					$	2,091

Aggregate amortization expense was $173 million, $165 million, and $129 million for the years ended December 31, 2020, 2019, and 2018, respectively. The estimated future aggregate amortization expense for the next five years is $188 million, $178 million, $164 million, $153 million, and $132 million, respectively.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 10. Debt Financing Arrangements

The Company’s long-term debt consisted of the following:

Debt Instrument
Interest Rate			Face Amount						Due Date			December 31, 2020						December 31, 2019
												(In millions)
2.5% Notes			$1 billion						2026			$	995					$	994
3.25% Notes			$1 billion						2030			987						—
1% Notes			€650 million						2025			789						723
1.75% Notes			€600 million						2023			731						669
4.5% Notes			$600 million						2049			588						587
2.75% Notes			$500 million						2025			493						—
5.375% Debentures			$432 million			(4)			2035			424						461
3.75% Notes			$408 million			(1)			2047			402						493
5.935% Debentures			$336 million			(6)			2032			333						379
0% Bonds			$300 million						2023			330						—
5.765% Debentures			$297 million			(5)			2041			297						378
4.535% Debentures			$383 million			(3)			2042			281						384
4.016% Debentures			$371 million			(2)			2043			255						389
7% Debentures			$160 million			(11)			2031			159						163
6.95% Debentures			$157 million			(10)			2097			154						155
7.5% Debentures			$147 million			(12)			2027			146						150
6.625% Debentures			$144 million			(8)			2029			144						159
6.75% Debentures			$103 million			(9)			2027			103						117
6.45% Debentures			$103 million			(7)			2038			102						126
4.479% Debentures			$516 million						2021			—						500
3.375% Notes			$400 million						2022			—						398
Other												174						454
Total long-term debt including current maturities												7,887						7,679
Current maturities												(2)						(7)
Total long-term debt												$	7,885					$	7,672

(1) $500 million face amount in 2019 (10) $159 million face amount in 2019

(2) $570 million face amount in 2019 (11) $164 million face amount in 2019

(3) $528 million face amount in 2019 (12) $150 million face amount in 2019

(4) $470 million face amount in 2019

(5) $378 million face amount in 2019

(6) $383 million face amount in 2019

(7) $127 million face amount in 2019

(8) $160 million face amount in 2019

(9) $118 million face amount in 2019

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 10. Debt Financing Arrangements (Continued)

On March 27, 2020, the Company issued $0.5 billion and $1.0 billion aggregate principal amounts of 2.75% Notes due in 2025 and 3.25% Notes due in 2030, respectively. Net proceeds before expenses for the 2.75% and 3.25% Notes were $492 million and $988 million, respectively.

During the second half of 2020, the global credit market stabilized with corporate credit spreads below pre-pandemic levels. Continued actions by central banks provided additional support in both the short-term and long-term funding markets further stabilizing corporate credit markets. Low benchmark yields and favorable credit spreads coupled with continued strong cash flow generation during the second half of the year presented opportunities for ADM to re-balance the Company’s liability portfolio to pre-pandemic levels. Starting in June 2020, ADM began a series of liability management transactions including multiple early debt redemptions and the $665 million debt tender in September 2020 to capitalize on all-time low interest rates:

In June 2020, the Company redeemed $495 million aggregate principal amount of 4.479% debentures due in 2021 and recognized a debt extinguishment charge of $14 million in the year ended December 31, 2020.

In September 2020, the Company redeemed $400 million aggregate principal amount of 3.375% notes due in 2022 and recognized a debt extinguishment charge of $19 million in the year ended December 31, 2020.

In September 2020, the Company repurchased $665 million aggregate principal amount of certain of its outstanding notes and debentures (the “Debentures”) validly tendered and not withdrawn. Pursuant to the terms of its cash tender offers, the Company paid aggregate total consideration of $933 million for the Debentures accepted for repurchase. The cash tender offers were partially financed by the proceeds of the exchangeable bonds issued by the Company's wholly-owned subsidiary, ADM Ag Holding Limited (“ADM Ag”), on August 26, 2020 as discussed below. The Company recognized a debt extinguishment charge of $370 million in the year ended December 31, 2020 which consisted of make-whole premiums and the write-off of debt issuance costs.

In September 2020 and November 2020, the Company’s wholly-owned subsidiary, ADM Germany GmbH, redeemed private placement notes due in 2021 and 2024 totaling $200 million aggregate principal amount and recognized a debt extinguishment charge of $6 million in the year ended December 31, 2020.

On August 26, 2020, ADM Ag issued $300 million aggregate principal amount of zero coupon exchangeable bonds (the “Bonds”) due in 2023 to non-U.S. persons outside of the U.S. Subject to and upon compliance with the terms and conditions of the Bonds and any conditions, procedures, and certifications prescribed thereunder, the Bonds will be exchangeable for ordinary shares of Wilmar International Limited (“Wilmar”) currently held by the Company’s consolidated subsidiaries. Effective October 6, 2020, holders of the Bonds will be entitled to receive 50,597.0453 Wilmar shares (the “Exchange Property per Bond”) for each $200,000 principal amount of the Bonds, on the exercise of their exchange rights, subject to dividend adjustments. Effective February 26, 2022, ADM Ag has the option to call the outstanding Bonds at their principal amount if the value of the Exchange Property per Bond exceeds 120% of the principal amount for 20 consecutive trading days. The Company accounts for the Bond’s exchange feature as an equity-linked embedded derivative that is not clearly and closely related to the host debt instrument since it is indexed to Wilmar’s stock. The Company unconditionally and irrevocably guarantees the payment of all sums payable and the performance of all of ADM Ag’s other obligations under the Bonds. In contemplation of the issuance of the Bonds, Archer Daniels Midland Asia-Pacific Limited, the Company’s wholly-owned subsidiary that holds shares in Wilmar, entered into a stock borrowing and lending agreement with a financial institution.

Discount amortization expense, net of premium amortization, of $13 million, $12 million, and $10 million for the years ended December 31, 2020, 2019, and 2018, respectively, are included in interest expense related to the Company’s long-term debt.

At December 31, 2020, the fair value of the Company’s long-term debt exceeded the carrying value by $1.6 billion, as estimated using quoted market prices (a Level 2 measurement under applicable accounting standards).

The aggregate maturities of long-term debt for the five years after December 31, 2020, are $2 million, $0 million, $1.1 billion, $1 million, and $1.3 billion, respectively.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 10. Debt Financing Arrangements (Continued)

At December 31, 2020, the Company had lines of credit, including the accounts receivable securitization programs described below, totaling $10.2 billion, of which $6.6 billion was unused. The weighted average interest rates on short-term borrowings outstanding at December 31, 2020 and 2019, were 0.45% and 1.23%, respectively. Of the Company’s total lines of credit, $5.0 billion supported the commercial paper borrowing programs, against which there was $1.7 billion of commercial paper outstanding at December 31, 2020.

The Company’s credit facilities and certain debentures require the Company to comply with specified financial and non-financial covenants including maintenance of minimum tangible net worth as well as limitations related to incurring liens, secured debt, and certain other financing arrangements. The Company is in compliance with these covenants as of December 31, 2020.

The Company had outstanding standby letters of credit and surety bonds at December 31, 2020 and 2019, totaling $1.2 billion and $1.4 billion, respectively.

The Company has accounts receivable securitization programs (the “Programs”). The Programs provide the Company with up to $1.8 billion in funding resulting from the sale of accounts receivable. As of December 31, 2020, the Company utilized $1.6 billion of its facility under the Programs (see Note 19 for more information on the Programs).

Note 11. Stock Compensation

The Company’s employee stock compensation plans provide for the granting of options to employees to purchase common stock of the Company pursuant to the Company’s 2020 Incentive Compensation Plan. These options are issued at market value on the date of grant, vest incrementally over one year to five years, and expire ten years after the date of grant.

The fair value of each option grant is estimated as of the date of grant using the Black-Scholes single option pricing model. The volatility assumption used in the Black-Scholes single option pricing model is based on the historical volatility of the Company’s stock. The volatility of the Company’s stock was calculated based upon the monthly closing price of the Company’s stock for the period immediately prior to the date of grant corresponding to the average expected life of the grant. The average expected life represents the period of time that option grants are expected to be outstanding. The risk-free rate is based on the rate of U.S. Treasury zero-coupon issues with a remaining term equal to the expected life of option grants. The assumptions used in the Black-Scholes single option pricing model for 2019 and 2018 were as follows. No options were granted in 2020.

			Year Ended December 31
			2020						2019						2018
Dividend yield			—%						3%						3%
Risk-free interest rate			—%						2%						2%
Stock volatility			—%						22%						23%
Average expected life (years)			—						6						6

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 11. Stock Compensation (Continued)

A summary of option activity during 2020 is presented below:

			Shares						Weighted-Average Exercise Price
			(In thousands, except per share amounts)
Shares under option at December 31, 2019			8,048						$35.20
Granted			—						0.00
Exercised			(1,778)						27.41
Forfeited or expired			(1)						34.52
Shares under option at December 31, 2020			6,269						$37.40
Exercisable at December 31, 2020			5,801						$37.74

The weighted-average remaining contractual term of options outstanding and exercisable at December 31, 2020, is 4 years and 4 years, respectively. The aggregate intrinsic value of options outstanding and exercisable at December 31, 2020, is $77 million and $69 million, respectively. The weighted-average grant-date fair values of options granted during the years ended December 31, 2019, and 2018 were $7.88, and $6.95, respectively. The total intrinsic values of options exercised during the years ended December 31, 2020, 2019, and 2018, were $32 million, $15 million, and $36 million, respectively. Cash proceeds received from options exercised during the years ended December 31, 2020, 2019, and 2018, were $49 million, $27 million, and $55 million, respectively.

At December 31, 2020, unrecognized compensation expense related to option grants to be recognized as compensation expense during the next year was immaterial.

The Company’s 2020 Incentive Compensation Plan provides for the granting of restricted stock and restricted stock units (Restricted Stock Awards) at no cost to certain officers and key employees. In addition, the Company’s 2020 Incentive Compensation Plan also provides for the granting of performance stock units (PSUs) at no cost to certain officers and key employees. Restricted Stock Awards are made in common stock or stock units with equivalent rights and vest at the end of a restriction period of three years. The awards for PSUs are made in common stock units and vest at the end of a vesting period of three years subject to the attainment of certain future service and performance criteria based on the Company’s adjusted return on invested capital (ROIC), adjusted earnings before taxes, interest, and depreciation and amortization (EBITDA), and total shareholder return (TSR). During the years ended December 31, 2020, 2019, and 2018, 2.7 million, 2.6 million, and 2.5 million common stock or stock units, respectively, were granted as Restricted Stock Awards and PSUs. At December 31, 2020, there were 19.4 million shares available for future grants pursuant to the 2020 plan.

The fair value of Restricted Stock Awards is determined based on the market value of the Company’s shares on the grant date. The fair value of PSUs is based on the weighted-average values of adjusted ROIC, adjusted EBITDA, and TSR. The adjusted ROIC and adjusted EBITDA fair value is determined based on the market value of the Company’s shares on the grant date while the TSR fair value is determined using the Monte Carlo simulation. The weighted-average grant-date fair values of awards granted during the years ended December 31, 2020, 2019, and 2018 were $45.59, $42.11, and $42.72, respectively.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 11. Stock Compensation (Continued)

A summary of Restricted Stock Awards and PSUs activity during 2020 is presented below:

			Restricted Stock Awards and PSUs						Weighted Average Grant-Date Fair Value
			(In thousands, except per share amounts)
Non-vested at December 31, 2019			6,722						$42.97
Granted			2,732						45.59
Vested			(1,417)						44.49
Forfeited			(665)						43.95
Non-vested at December 31, 2020			7,372						$43.56

At December 31, 2020, there was $107 million of total unrecognized compensation expense related to Restricted Stock Awards and PSUs. Amounts to be recognized as compensation expense during the next three years are $67 million, $34 million, and $6 million, respectively. The total grant-date fair value of Restricted Stock Awards that vested during the year ended December 31, 2020 was $63 million.

Compensation expense for option grants, Restricted Stock Awards, and PSUs granted to employees is generally recognized on a straight-line basis during the service period of the respective grant. Certain of the Company’s option grants, Restricted Stock Awards, and PSUs continue to vest upon the recipient’s retirement from the Company and compensation expense related to option grants and Restricted Stock Awards granted to retirement-eligible employees is recognized in earnings on the date of grant. Compensation expense for PSUs is based on the probability of meeting the performance criteria. The Company recognizes forfeitures as they occur.

Total compensation expense for option grants, Restricted Stock Awards, and PSUs recognized during the years ended December 31, 2020, 2019, and 2018 was $151 million, $89 million, and $109 million, respectively. Changes in incentive compensation expense are primarily caused by the level of attainment of the PSU performance criteria described above.

Note 12. Other (Income) Expense – Net

The following table sets forth the items in other (income) expense:

(In millions)			Year Ended December 31
			2020						2019						2018
(Gain) loss on sales of assets and businesses			$	(161)					$	39					$	(43)
Pension settlement			—						—						117
Other – net			(117)						(32)						27
			$	(278)					$	7					$	101

Individually significant items included in the table above are:

Gain on sales of assets for the year ended December 31, 2020 included a gain on the sale of a portion of the Company’s shares in Wilmar, an investment revaluation gain, and net gains on the sale of certain other assets and disposals of individually insignificant assets in the ordinary course of business. Gain (loss) on sales of assets for the year ended December 31, 2019 included a loss on the sale of the Company’s equity investment in CIP, partially offset by gains on the sale of certain other assets, and step-up gains on equity investments. Gain on sales of assets and businesses for the year ended December 31, 2018 included gains on the sale of the Company’s oilseeds operations in Bolivia and an equity investment.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 12. Other (Income) Expense – Net (Continued)

Pension settlement for the year ended December 31, 2018 related to the purchase of a group annuity contract that irrevocably transferred the future benefit obligations and annuity administration for certain retirees under the Company’s ADM Retirement Plan.

Realized gains and losses on sales of available-for-sale marketable securities were immaterial for all periods presented.

Other - net for the year ended December 31, 2020 included the non-service components of net pension benefit income of $33 million, foreign exchange gains, and other income. Other - net for the year ended December 31, 2019 included other income and the non-service components of net pension benefit income of $15 million, partially offset by foreign exchange losses. Other - net for the year ended December 31, 2018 included foreign exchange losses partially offset by other income and the non-service components of net benefit income of $10 million.

Note 13. Income Taxes

The following table sets forth the geographic split of earnings before income taxes:

			Year Ended
(In millions)			December 31
			2020						2019						2018
United States			$	442					$	756					$	972
Foreign			1,441						832						1,088
			$	1,883					$	1,588					$	2,060

Significant components of income taxes are as follows:

(In millions)			Year Ended December 31
			2020						2019						2018
Current
Federal			$	(164)					$	37					$	96
State			4						11						25
Foreign			186						181						171
Deferred
Federal			41						47						(55)
State			(10)						1						(16)
Foreign			44						(68)						24
			$	101					$	209					$	245

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 13. Income Taxes (Continued)

Significant components of deferred tax liabilities and assets are as follows:

			December 31, 2020						December 31, 2019
			(In millions)
Deferred tax liabilities
Property, plant, and equipment			$	903					$	1,012
Intangibles			334						286
Right of use assets			223						220
Equity in earnings of affiliates			64						72
Inventory reserves			25						32
Debt exchange			53						80
Reserves and other accruals			195						20
Other			173						109
			$	1,970					$	1,831
Deferred tax assets
Pension and postretirement benefits			$	163					$	155
Lease liabilities			227						225
Stock compensation			80						62
Foreign tax loss carryforwards			470						411
Capital loss carryforwards			70						62
State tax attributes			79						74
Reserves and other accruals			42						—
Other			136						147
Gross deferred tax assets			1,267						1,136
Valuation allowances			(339)						(325)
Net deferred tax assets			$	928					$	811
Net deferred tax liabilities			$	1,042					$	1,020
The net deferred tax liabilities are classified as follows:
Noncurrent assets (foreign)			$	260					$	174
Noncurrent liabilities			(957)						(969)
Noncurrent liabilities (foreign)			(345)						(225)
			$	(1,042)					$	(1,020)

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 13. Income Taxes (Continued)

Reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate on earnings is as follows:

			Year Ended
			December 31
			2020						2019						2018
Statutory rate			21.0		%				21.0		%				21.0		%
State income taxes, net of federal tax benefit			(0.3)						0.6						0.3
Foreign earnings taxed at rates other than the U.S. statutory rate			(4.5)						(0.9)						(1.5)
Foreign currency effects/remeasurement			(1.1)						0.7						(1.9)
Income tax adjustment to filed returns			(0.4)						0.2						(1.9)
Tax benefit on U.S. biodiesel credits			(3.3)						(7.5)						(2.3)
Tax benefit on U.S. railroad credits			(8.0)						(3.6)						—
Tax on Global Intangible Low Taxed Income (GILTI)			2.9						1.4						1.0
Tax benefit on Foreign Derived Intangible Income Deduction (FDII)			(0.1)						—						(1.0)
U.S. tax reform impacts			(0.3)						0.4						(1.1)
Other			(0.5)						0.9						(0.7)
Effective income tax rate			5.4		%				13.2		%				11.9		%

The effective tax rate for 2020 was impacted by changes in the geographic mix of earnings and U.S. tax credits, mainly the railroad maintenance tax credit, and GILTI. The effective tax rate for 2019 was impacted by U.S. tax credits, including the 2018 and 2019 biodiesel tax credit and the railroad maintenance tax credit, signed into law in December 2019. The effective tax rate for 2018 included the 2017 biodiesel tax credit recorded in the first quarter of 2018 and the additional true-up adjustments related to the 2017 U.S. tax reform, along with certain favorable discrete tax items.

The foreign rate differential was primarily due to lower tax rates from the Company’s operations in Switzerland, Asia, and the Caribbean. The Company’s foreign earnings, which were taxed at rates lower than the U.S. rate and generated from these jurisdictions, were 59%, 61%, and 56% of its foreign earnings before taxes in fiscal years 2020, 2019, and 2018, respectively.

Undistributed earnings of the Company’s foreign subsidiaries and corporate joint ventures were approximately $12.5 billion at December 31, 2020. Because these undistributed earnings continue to be indefinitely reinvested in foreign operations, no income taxes, other than the transition tax, the U.S. tax on undistributed Subpart F, and the minimum tax on GILTI, have been provided after the Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. It is not practicable to determine the amount of unrecognized deferred tax liability related to any remaining undistributed earnings of foreign subsidiaries and corporate joint ventures not subject to the transition tax.

The Company has elected to pay the one-time transition tax on accumulated foreign earnings over eight years. As of December 31, 2020, the Company’s remaining transition tax liability was $164 million, which will be paid in installments through 2025

The Company incurred U.S. taxable income of $259 million, $105 million, and $101 million related to GILTI and deducted $12 million, $1 million, and $101 million related to FDII in fiscal years 2020, 2019, and 2018 respectively. The Company made an accounting policy election to treat GILTI as a period cost. The Company has recorded and will continue to record the impact of tax reform items as U.S. tax authorities issue Treasury Regulations and other guidance addressing tax reform-related changes. It is also reasonable to expect that global taxing authorities will be reviewing their current legislation for potential modifications in reaction to the implementation of the Act. The additional guidance, along with the potential for additional global tax legislation changes, may affect significant deductions and income inclusions and could have a material adverse effect on the Company’s net income or cash flow.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 13. Income Taxes (Continued)

The Company had $470 million and $411 million of tax assets related to net operating loss carry-forwards of certain international subsidiaries at December 31, 2020 and 2019, respectively. As of December 31, 2020, approximately $357 million of these assets have no expiration date, and the remaining $113 million expire at various times through fiscal 2029. The annual usage of certain of these assets is limited to a percentage of taxable income of the respective foreign subsidiary for the year. The Company has recorded a valuation allowance of $197 million and $193 million against these tax assets at December 31, 2020 and 2019, respectively, due to the uncertainty of their realization.

The Company had $70 million and $62 million of tax assets related to foreign capital loss carryforwards at December 31, 2020 and 2019, respectively. The Company has recorded a valuation allowance of $70 million and $62 million against these tax assets at December 31, 2020 and 2019, respectively.

The Company had $79 million and $74 million of tax assets related to state income tax attributes (incentive credits and net operating loss carryforwards), net of federal tax benefit, at December 31, 2020 and 2019, the majority of which will expire between 2021 and 2025. Due to the uncertainty of realization, the Company recorded a valuation allowance of $72 million and $70 million related to state income tax assets net of federal tax benefit as of December 31, 2020 and 2019, respectively.

The Company remains subject to federal examination in the U.S. for the calendar tax years 2016, 2017, 2018, 2019, and 2020.

The following table sets forth a rollforward of activity of unrecognized tax benefits for the year ended December 31, 2020 and 2019 as follows:

			Unrecognized Tax Benefits
			December 31, 2020						December 31, 2019
			(In millions)
Beginning balance			$	130					$	107
Additions related to current year’s tax positions			2						8
Additions related to prior years’ tax positions			37						—
Additions (adjustments) related to acquisitions			(1)						32
Reductions related to prior years’ tax positions			(3)						(14)
Reductions related to lapse of statute of limitations			(9)						(2)
Settlements with tax authorities			(5)						(1)
Ending balance			$	151					$	130

The additions and reductions in unrecognized tax benefits shown in the table included effects related to net income and shareholders’ equity. The changes in unrecognized tax benefits did not have a material effect on the Company’s net income or cash flow. At December 31, 2020 and 2019, the Company had accrued interest and penalties on unrecognized tax benefits of $33 million and $26 million, respectively.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 13. Income Taxes (Continued)

The Company is subject to income taxation and routine examinations in many jurisdictions around the world and frequently faces challenges regarding the amount of taxes due. These challenges include positions taken by the Company related to the timing, nature, and amount of deductions and the allocation of income among various jurisdictions. In its routine evaluations of the exposure associated with various tax filing positions, the Company recognizes a liability, when necessary, for estimated potential tax owed by the Company in accordance with applicable accounting standards. Resolution of the related tax positions, through negotiations with relevant tax authorities or through litigation, may take years to complete. Therefore, it is difficult to predict the timing for resolution of tax positions and the Company cannot predict or provide assurance as to the ultimate outcome of these ongoing or future examinations. However, the Company does not anticipate that the total amount of unrecognized tax benefits will increase or decrease significantly in the next twelve months. Given the long periods of time involved in resolving tax positions, the Company does not expect that the recognition of unrecognized tax benefits will have a material impact on the Company’s effective income tax rate in any given period. If the total amount of unrecognized tax benefits were recognized by the Company at one time, there would be a reduction of $151 million on the tax expense for that period.

Between 2011 and 2019, the Company’s subsidiary in Argentina, ADM Agro SRL (formerly ADM Argentina SA and Alfred C. Toepfer Argentina SRL), received tax assessments challenging transfer prices used to price grain exports for the tax years 1999 through 2011. As of December 31, 2020, these assessments totaled $10 million in tax and up to $42 million in interest (adjusted for variation in currency exchange rates). The Argentine tax authorities conducted a review of income and other taxes paid by large exporters and processors of cereals and other agricultural commodities resulting in allegations of income tax evasion. The Company strongly believes that it has complied with all Argentine tax laws. To date, the Company has not received assessments for closed years subsequent to 2011. While the statute of limitations has expired for tax years 2012 and 2013, the Company cannot rule out receiving additional assessments challenging transfer prices used to price grain exports for years subsequent to 2013, and estimates that these potential assessments could be approximately $31 million in tax and $27 million in interest (adjusted for variation in currency exchange rates as of December 31, 2020). The Company believes that it has appropriately evaluated the transactions underlying these assessments, and has concluded, based on Argentine tax law, that its tax position would be sustained, and accordingly, has not recorded a tax liability for these assessments. In accordance with the accounting requirements for uncertain tax positions, the Company has not recorded an uncertain tax liability for this assessment because it has concluded that it is more likely than not to prevail on the matter based upon its technical merits and because the taxing jurisdiction’s process does not provide a mechanism for settling at less than the full amount of the assessment. The Company intends to vigorously defend its position against the current assessments and any similar assessments that may be issued for years subsequent to 2013.

In 2014, the Company’s wholly-owned subsidiary in the Netherlands, ADM Europe B.V., received a tax assessment from the Netherlands tax authority challenging the transfer pricing aspects of a 2009 business reorganization, which involved two of its subsidiary companies in the Netherlands. As of December 31, 2020, this assessment was $99 million in tax and $38 million in interest (adjusted for variation in currency exchange rates). In September 2019, the Company received an interim decision on its appeal which directed the parties to work toward a settlement. In April 2020, the court issued a ruling unfavorable to the Company and in October 2020, assigned a third party expert to establish a valuation by early 2021. Subsequent appeals may take an extended period of time and could result in additional financial impacts of up to the entire amount of the assessment. The Company has carefully evaluated the underlying transactions and has concluded that the amount of gain recognized on the reorganization for tax purposes was appropriate. As of December 31, 2020, the Company has accrued its best estimate of what it believes will be the likely outcome of the litigation and will vigorously defend its position against the assessment.

During the quarter ended June 30, 2020, the ongoing litigation between the Company’s wholly-owned subsidiary, ADM do Brasil Ltda., and the Brazilian Federal Revenue Service was favorably resolved without any tax due. The litigation related to assessments received with respect to the tax deductibility of commodity hedging losses and related expenses. The Company does not expect to receive any additional tax assessments with respect to this issue.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 14. Leases

Lessee Accounting

The Company leases certain transportation equipment, plant equipment, office equipment, land, buildings, and storage facilities. Most leases include options to renew, with renewal terms that can extend the lease term from 10 months to 49 years. The renewal options are not included in the measurement of the right of use assets and lease liabilities unless the Company is reasonably certain to exercise the optional renewal periods. Certain leases also include index and non-index escalation clauses and options to purchase the leased property. Leases accounted for as finance leases were immaterial at December 31, 2020.

As an accounting policy election, the Company does not apply the recognition requirements of Topic 842 to short-term leases in all of its underlying asset categories. The Company recognizes short-term lease payments in earnings on a straight-line basis over the lease term, and variable lease payments in the period in which the obligation for those payments is incurred. The Company also combines lease and non-lease contract components in all of its underlying asset categories as an accounting policy election.

The following table sets forth the amounts relating to the Company’s total lease cost and other information.

			Year Ended
			December 31, 2020			December 31, 2019
			(In millions)
Lease cost:
Operating lease cost			$	315		$	275
Short-term lease cost			101			99
Total lease cost			$	416		$	374
Other information:
Operating lease liability principal payments			$	302		$	209
Right-of-use assets obtained in exchange for new operating lease liabilities			$	314		$	302
			December 31, 2020			December 31, 2019
Weighted-average remaining lease term - operating leases (in years)			7			7
Weighted average discount rate - operating leases			4.2		%	4.6		%

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 14. Leases (Continued)

Below is a tabular disclosure of the future annual undiscounted cash flows for operating lease liabilities as of December 31, 2020.

			Undiscounted
			Cash Flows
			(In millions)
2021			$	302
2022			268
2023			218
2024			156
2025			95
Thereafter			260
Total			1,299
Less interest (1)			(175)
Lease liability			$	1,124

(1) Calculated using the implicit rate of the lease, if available, or the incremental borrowing rate that is appropriate for the tenor and geography of the lease.

Note 15. Employee Benefit Plans

The Company provides substantially all U.S. employees and employees at certain foreign subsidiaries with retirement benefits including defined benefit pension plans and defined contribution plans. The Company provides certain eligible U.S. employees who retire under qualifying conditions with subsidized postretirement health care coverage or Health Care Reimbursement Accounts.

In April 2019, the Company announced an enhanced early retirement program for some eligible employees in the U.S. and Canada. As a result, the Company recognized a pension remeasurement charge of $48 million in the second quarter of 2019. Employees electing to retire early were also given the option to receive their benefit in the form of a lump sum payment which resulted in a pension settlement charge of $51 million during the second half of 2019.

In October 2018, the Company amended the ADM Retirement Plan (the “Plan”) and entered into a binding agreement to purchase a group annuity contract from The Prudential Insurance Company of America (“Prudential”), irrevocably transferring the future benefit obligations and annuity administration for approximately 3,800 retirees from the Plan to Prudential. The purchase of the group annuity contract, which was funded directed by the Plan’s assets, was completed on November 2, 2018 and reduced the Company’s pension obligations by approximately $528 million. As a result of the transaction, the Company recognized a non-cash pension settlement charge of approximately $117 million in the fourth quarter of 2018.

On July 31, 2017, the Company announced that all participants in the Company’s U.S. salaried pension plan and the Supplemental Executive Retirement Plan (SERP) will begin accruing benefits under the cash balance formula effective January 1, 2022. Benefits for participants who were accruing under the final average pay formula will be frozen as of December 31, 2021, including pay and service through that date.

The Company maintains 401(k) plans covering substantially all U.S. employees. The Company contributes cash to the plans to match qualifying employee contributions, and also provides a non-matching employer contribution of 1% of pay to eligible participants. Under an employee stock ownership component of the 401(k) plans, employees may choose to invest in the Company’s stock as part of their own investment elections. The employer contributions are expensed when paid. Assets of the Company’s 401(k) plans consist primarily of listed common stocks and pooled funds. The Company’s 401(k) plans held 7 million shares of Company common stock at December 31, 2020, with a market value of $371 million. Cash dividends received on shares of Company common stock by these plans during the year ended December 31, 2020 were $11 million.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 15. Employee Benefit Plans (Continued)

The following table sets forth the components of retirement plan expense for the years ended December 31, 2020, 2019, and 2018:

			Pension Benefits												Postretirement Benefits
(In millions)			Year Ended December 31												Year Ended December 31
			2020			2019			2018						2020			2019			2018
Retirement plan expense
Defined benefit plans:
Service cost (benefits earned during the period)			$	61		$	58		$	66					$	1		$	2		$	2
Interest cost			70			82			93						4			5			5
Expected return on plan assets			(126)			(115)			(146)						—			—			—
Settlement charges			—			96			117						—			3			—
Curtailments			—			—			(1)						—			—			—
Amortization of actuarial loss			38			26			55						6			4			3
Amortization of prior service cost (credit)			(19)			(19)			(19)						(13)			(15)			(15)
Net periodic defined benefit plan expense			24			128			165						(2)			(1)			(5)
Defined contribution plans			54			58			50						—			—			—
Total retirement plan expense			$	78		$	186		$	215					$	(2)		$	(1)		$	(5)

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 15. Employee Benefit Plans (Continued)

The following tables set forth changes in the defined benefit obligation and the fair value of defined benefit plan assets for the years ended December 31, 2020 and 2019:

			Pension Benefits												Postretirement Benefits
			December 31 2020						December 31 2019						December 31 2020						December 31 2019
			(In millions)												(In millions)
Benefit obligation, beginning			$	2,650					$	2,323					$	167					$	144
Service cost			61						58						1						2
Interest cost			70						82						4						5
Actuarial loss (gain)			285						363						17						24
Employee contributions			2						2						—						—
Business combinations			—						26						—						3
Settlements			(17)						35						—						3
Benefits paid			(84)						(249)						(14)						(14)
Plan amendments			—						(2)						—						—
Foreign currency effects			47						12						(2)						—
Benefit obligation, ending			$	3,014					$	2,650					$	173					$	167
Fair value of plan assets, beginning			$	2,018					$	1,736					$	—					$	—
Actual return on plan assets			317						348						—						—
Employer contributions			85						166						14						14
Employee contributions			2						2						—						—
Settlements			(18)						(10)						—						—
Business combinations			—						7						—						—
Benefits paid			(84)						(249)						(14)						(14)
Foreign currency effects			17						18						—						—
Fair value of plan assets, ending			$	2,337					$	2,018					$	—					$	—
Funded status			$	(677)					$	(632)					$	(173)					$	(167)
Prepaid benefit cost			$	29					$	38					$	—					$	—
Accrued benefit liability – current			(19)						(18)						(16)						(16)
Accrued benefit liability – long-term			(687)						(652)						(157)						(151)
Net amount recognized in the balance sheet			$	(677)					$	(632)					$	(173)					$	(167)

The actuarial loss in the pension plans in 2020 and 2019 is primarily due to declines in the global bond yield.

Included in AOCI for pension benefits at December 31, 2020, are the following amounts that have not yet been recognized in net periodic pension cost: unrecognized prior service credit of $113 million and unrecognized actuarial loss of $639 million.

Included in AOCI for postretirement benefits at December 31, 2020, are the following amounts that have not yet been recognized in net periodic postretirement benefit cost: unrecognized prior service credit of $2 million and unrecognized actuarial loss of $57 million.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 15. Employee Benefit Plans (Continued)

The following table sets forth the principal assumptions used in developing net periodic benefit cost:

			Pension Benefits												Postretirement Benefits
			December 31 2020						December 31 2019						December 31 2020						December 31 2019
Discount rate			2.9%						3.9%						3.2%						4.3%
Expected return on plan assets			6.6%						6.5%						N/A						N/A
Rate of compensation increase			4.9%						4.9%						N/A						N/A
Interest crediting rate			2.2%						3.3%						N/A						N/A

The following table sets forth the principal assumptions used in developing the year-end actuarial present value of the projected benefit obligations:

			Pension Benefits												Postretirement Benefits
			December 31 2020						December 31 2019						December 31 2020						December 31 2019
Discount rate			2.3		%				2.9		%				2.3%						3.2%
Rate of compensation increase			4.8		%				4.9		%				N/A						N/A
Interest crediting rate			2.0		%				2.2		%				N/A						N/A

The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with projected benefit obligations in excess of plan assets were $2.6 billion, $2.5 billion, and $1.9 billion, respectively as of December 31, 2020, and $2.3 billion, $2.2 billion, and $1.6 billion, respectively, as of December 31, 2019. The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $2.6 billion, $2.5 billion, and $1.9 billion, respectively, as of December 31, 2020 and $2.2 billion, $2.1 billion, and $1.5 billion, respectively, as of December 31, 2019. The accumulated benefit obligation for all pension plans as of December 31, 2020 and 2019, was $2.9 billion and $2.6 billion, respectively.

For postretirement benefit measurement purposes, a 6.1% annual rate of increase in the per capita cost of covered health care benefits was assumed for the year ended December 31, 2020. The rate was assumed to decrease gradually to 4.5% by 2029 and remain at that level thereafter.

Plan Assets

The Company’s employee benefit plan assets are principally comprised of the following types of investments:

Common stock:

Equity securities are valued based on quoted exchange prices and are classified within Level 1 of the valuation hierarchy.

Mutual funds:

Mutual funds are valued at the closing price reported on the active market on which they are traded and are classified within Level 1 of the valuation hierarchy.

Common collective trust (CCT) funds:

The fair values of the CCTs are valued using net asset value (NAV). The investments in CCTs are comprised of international equity and short-term investments. The investments are valued at NAV provided by administrators of the funds.

Corporate debt instruments:

Corporate debt instruments are valued using third-party pricing services and are classified within Level 2 of the valuation hierarchy.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 15. Employee Benefit Plans (Continued)

U.S. Treasury instruments:

U.S. Treasury instruments are valued at the closing price reported on the active market on which they are traded and are classified within Level 1 of the valuation hierarchy.

U.S. government agency, state, and local government bonds:

U.S. government agency obligations and state and municipal debt securities are valued using third-party pricing services and are classified within Level 2 of the valuation hierarchy.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants’ methods, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

The following tables set forth, by level within the fair value hierarchy, the fair value of plan assets as of December 31, 2020 and 2019.

			Fair Value Measurements at December 31, 2020
			Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)						Total
			(In millions)
Common stock			$	251					$	—					$	—					$	251
Mutual funds			666						—						—						666
Corporate bonds			—						328						—						328
U.S. Treasury instruments			345						—						—						345
U.S. government agency, state and local government bonds			—						4						—						4
Other			—						9						—						9
Total assets			$	1,262					$	341					$	—					$	1,603
Common collective trust funds at NAV
U.S. equity																					418
International equity																					316
Total assets at fair value																					$	2,337

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 15. Employee Benefit Plans (Continued)

			Fair Value Measurements at December 31, 2019
			Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)						Total
			(In millions)
Common stock			$	187					$	—					$	—					$	187
Mutual funds			575						—						—						575
Corporate bonds			—						249						—						249
U.S. Treasury instruments			322						—						—						322
U.S. government agency, state and local government bonds			—						4						—						4
Other			—						9						—						9
Total assets			$	1,084					$	262					$	—					$	1,346
Common collective trust funds at NAV
U.S. equity																					391
International equity																					281
Total assets at fair value																					$	2,018

Level 3 Gains and Losses:

There are no Plan assets classified as Level 3 in the fair value hierarchy; therefore there are no gains or losses associated with Level 3 assets.

The following table sets forth the actual asset allocation for the Company’s global pension plan assets as of the measurement date:

			December 31 2020**(1)(2)**						December 31 2019**(2)**
Equity securities			54%						53%
Debt securities			35%						36%
Other			11%						11%
Total			100%						100%

(1)The Company’s U.S. pension plans contain approximately 75% of the Company’s global pension plan assets. The actual asset allocation for the Company’s U.S. pension plans as of the measurement date consists of 60% equity securities and 40% debt. The target asset allocation for the Company’s U.S. pension plans is approximately the same as the actual asset allocation. The actual asset allocation for the Company’s foreign pension plans as of the measurement date consists of 36% equity securities, 20% debt securities, and 44% in other investments. The target asset allocation for the Company’s foreign pension plans is approximately the same as the actual asset allocation.

(2)The Company’s pension plans did not directly hold any shares of Company common stock as of the December 31, 2020 and 2019 measurement dates.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 15. Employee Benefit Plans (Continued)

Investment objectives for the Company’s plan assets are to:

• Optimize the long-term return on plan assets at an acceptable level of risk.

• Maintain a broad diversification across asset classes and among investment managers.

• Maintain careful control of the risk level within each asset class.

Asset allocation targets promote optimal expected return and volatility characteristics given the long-term time horizon for fulfilling the obligations of the pension plans. Selection of the targeted asset allocation for plan assets was based upon a review of the expected return and risk characteristics of each asset class, as well as the correlation of returns among asset classes. The U.S. pension plans target asset allocation is also based on an asset and liability study that is updated periodically.

Investment guidelines are established with each investment manager. These guidelines provide the parameters within which the investment managers agree to operate, including criteria that determine eligible and ineligible securities, diversification requirements, and credit quality standards, where applicable. In some countries, derivatives may be used to gain market exposure in an efficient and timely manner; however, derivatives may not be used to leverage the portfolio beyond the market value of underlying investments.

The Company uses external consultants to assist in monitoring the investment strategy and asset mix for the Company’s plan assets. To develop the Company’s expected long-term rate of return assumption on plan assets, the Company generally uses long-term historical return information for the targeted asset mix identified in asset and liability studies. Adjustments are made to the expected long-term rate of return assumption when deemed necessary based upon revised expectations of future investment performance of the overall investment markets.

Contributions and Expected Future Benefit Payments

Based on actuarial calculations, the Company expects to contribute $29 million to the pension plans and $16 million to the postretirement benefit plan during 2021. The Company may elect to make additional discretionary contributions during this period.

The following benefit payments, which reflect expected future service, are expected to be paid by the benefit plans:

			Pension Benefits						Postretirement Benefits
			(In millions)
2021			$	84					$	16
2022			90						15
2023			96						14
2024			101						14
2025			108						13
2026-2030			620						50

Note 16. Shareholders’ Equity

The Company has authorized one billion shares of common stock and 500,000 shares of preferred stock, each with zero par value. No preferred stock has been issued. At December 31, 2020 and 2019, the Company had approximately 160.0 million shares and 158.8 million shares, respectively, of its common shares in treasury. Treasury stock of $5.2 billion and $5.3 billion at December 31, 2020 and 2019, respectively, is recorded at cost as a reduction of common stock, and treasury stock of $0.3 billion and $0.1 billion at December 31, 2020 and 2019, respectively, is recorded at cost as a reduction of retained earnings.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 16. Shareholders’ Equity (Continued)

The following tables set forth the changes in AOCI by component and the reclassifications out of AOCI for the years ended December 31, 2020 and 2019:

			Foreign Currency Translation Adjustment						Deferred Gain (Loss) on Hedging Activities						Pension and Other Postretirement Benefit Liabilities Adjustment						Unrealized Gain (Loss) on Investments						Accumulated Other Comprehensive Income (Loss)
															(In millions)
Balance at December 31, 2018			$	(1,962)					$	61					$	(220)					$	15					$	(2,106)
Other comprehensive income before reclassifications			(220)						(191)						(89)						14						(486)
Gain (loss) on net investment hedges			35						—						—						—						35
Amounts reclassified from AOCI			7						100						(9)						(1)						97
Tax effect			(12)						18						50						(1)						55
Net of tax amount			(190)						(73)						(48)						12						(299)
Balance at December 31, 2019			$	(2,152)					$	(12)					$	(268)					$	27					$	(2,405)
Other comprehensive income before reclassifications			29						209						(120)						(27)						91
Gain (loss) on net investment hedges			(398)						—						—						—						(398)
Amounts reclassified from AOCI			—						45						7						—						52
Tax effect			97						(57)						16						—						56
Net of tax amount			(272)						197						(97)						(27)						(199)
Balance at December 31, 2020			$	(2,424)					$	185					$	(365)					$	—					$	(2,604)

The change in foreign currency translation adjustment in 2020 is primarily due to net investment hedges as discussed in Note 5 while the change in foreign currency translation adjustment in 2019 is primarily due to the U.S. dollar appreciation, impacting the Euro-denominated equities of the Company’s foreign subsidiaries.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 16. Shareholders’ Equity (Continued)

			Amounts reclassified from AOCI Year Ended December 31									Affected line item in the consolidated statement of
Details about AOCI components			2020			2019			2018			earnings
			(In millions)
Foreign currency translation adjustment
			$	—		$	7		$	(1)		Other income/expense
			—			—			—			Tax
			$	—		$	7		$	(1)		Net of tax
Deferred loss (gain) on hedging activities
			$	(27)		$	11		$	113		Cost of products sold
			2			46			(36)			Other income/expense
			2			(1)			(1)			Interest expense
			68			44			—			Revenues
			45			100			76			Total before tax
			7			(13)			(18)			Tax on reclassifications
			$	52		$	87		$	58		Net of tax
Pension liability adjustment
Amortization of defined benefit pension items:
Prior service losses (credit)			$	(32)		$	(26)		$	(33)		Other (income) expense - net
Actuarial losses			39			17			65			Other (income) expense - net
			7			(9)			32			Total before tax
			(11)			18			(8)			Tax on reclassifications
			$	(4)		$	9		$	24		Net of tax
Unrealized loss (gain) on investments
			$	—		$	(1)		$	(2)		Other income/expense
			—			—			—			Tax on reclassifications
			$	—		$	(1)		$	(2)		Net of tax

The Company’s accounting policy is to release the income tax effects from AOCI when the individual units of account are sold,

terminated, or extinguished.

Note 17. Segment and Geographic Information

As discussed in Note 1, prior period results have been reclassified to conform to the current period segment presentation.

The Company’s operations are organized, managed, and classified into three reportable business segments: Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition. Each of these segments is organized based upon the nature of products and services offered. The Company’s remaining operations are not reportable segments, as defined by the applicable accounting standard*,* and are classified as Other Business.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 17. Segment and Geographic Information (Continued)

The Ag Services and Oilseeds segment includes global activities related to the origination, merchandising, transportation, and storage of agricultural raw materials, and the crushing and further processing of oilseeds such as soybeans and soft seeds (cottonseed, sunflower seed, canola, rapeseed, and flaxseed) into vegetable oils and protein meals. Oilseeds products produced and marketed by the segment include ingredients for food, feed, energy, and industrial customers. Crude vegetable oils produced by the segment’s crushing activities are sold “as is” to manufacturers of renewable green diesel and other customers or are further processed by refining, blending, bleaching, and deodorizing into salad oils. Salad oils are sold “as is” or are further processed by hydrogenating and/or interesterifying into margarine, shortening, and other food products. Partially refined oils are used to produce biodiesel and glycols or are sold to other manufacturers for use in chemicals, paints, and other industrial products. Oilseed protein meals are principally sold to third parties to be used as ingredients in commercial livestock and poultry feeds. The Ag Services and Oilseeds segment is also a major supplier of peanuts and peanut-derived ingredients to both the U.S. and export markets. In North America, cotton cellulose pulp is manufactured and sold to the chemical, paper, and other industrial markets. The Ag Services and Oilseeds segment’s grain sourcing, handling, and transportation network (including barge, ocean-going vessel, truck, rail, and container freight services) provides reliable and efficient services to the Company’s customers and agricultural processing operations. The Ag Services and Oilseeds segment also includes agricultural commodity and feed product import, export, and global distribution, and structured trade finance activities. Structured trade finance’s activities include programs under which ADM prepays financial institutions, on a discounted basis, U.S. dollar-denominated letters of credit based on underlying commodity trade flows. This segment also includes the Company’s share of the results of its equity investment in Wilmar and its share of the results of its Pacificor, Stratas Foods LLC, Edible Oils Limited, Olenex Sarl, and SoyVen joint ventures. In August 2020, the Company sold a portion of its shares in Wilmar, decreasing its ownership interest from 24.8% as of December 31, 2019 to 22.2% as of December 31, 2020.

The Carbohydrate Solutions segment is engaged in corn and wheat wet and dry milling and other activities. The Carbohydrate Solutions segment converts corn and wheat into products and ingredients used in the food and beverage industry including sweeteners, corn and wheat starches, syrup, glucose, wheat flour, and dextrose. Dextrose and starch are used by the Carbohydrate Solutions segment as feedstocks in other downstream processes. By fermentation of dextrose, the Carbohydrate Solutions segment produces alcohol and other food and animal feed ingredients. Ethyl alcohol is produced by the Company for industrial use in products such as hand sanitizers, as ethanol, or as beverage grade. Ethanol, in gasoline, increases octane and is used as an extender and oxygenate. Corn gluten feed and meal, as well as distillers’ grains, are produced for use as animal feed ingredients. Corn germ, a by-product of the wet milling process, is further processed into vegetable oil and protein meal. Other Carbohydrate Solutions products include citric acids which are used in various food and industrial products. This segment also includes the Company’s share of the results of its equity investments in Hungrana Ltd., Almidones Mexicanos S.A., Red Star Yeast Company, LLC, and Aston Foods and Food Ingredients.

The Nutrition segment serves various end markets including food, beverages, nutritional supplements, and feed and premix for livestock, aquaculture, and pet food. The segment engages in the manufacturing, sale, and distribution of a wide array of ingredients and solutions including plant-based proteins, natural flavors, flavor systems, natural colors, emulsifiers, soluble fiber, polyols, hydrocolloids, probiotics, prebiotics, enzymes, botanical extracts, and other specialty food and feed ingredients. The Nutrition segment includes the activities related to the procurement, processing, and distribution of edible beans. The segment also includes activities related to the processing and distribution of formula feeds and animal health and nutrition products and the manufacture of contract and private label pet treats and foods. In January 2020, ADM acquired Yerbalatina, a natural plant-based extracts and ingredients manufacturer. In October 2020, the Company formally launched PlantPlus Foods, a 30% joint venture with Marfrig, one of the world’s leading beef producers and the world’s largest beef patty producer, that will offer a wide range of finished plant-based food products across North and South America, and entered into an agreement with Spiber Inc. (Spiber) to expand the production of Spiber’s innovative Brewed Protein™ polymers for use in apparel and other consumer products..

Other Business includes the Company’s financial business units related to futures commission and insurance activities.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 17. Segment and Geographic Information (Continued)

Intersegment sales have been recorded at amounts approximating market. Operating profit for each segment is based on net sales less identifiable operating expenses. Also included in operating profit for each segment is equity in earnings of affiliates based on the equity method of accounting. Specified items included in total segment operating profit and certain corporate items are not allocated to the Company’s individual business segments because operating performance of each business segment is evaluated by management exclusive of these items. Corporate results principally include the impact of LIFO-related adjustments, unallocated corporate expenses, interest cost net of investment income, the results of early-stage start-up companies that ADM Ventures has investments in, and the Company’s share of the results of its equity investment in CIP, which was sold in December 2019.

Segment Information

			Year Ended
(In millions)			December 31
			2020						2019						2018
Gross revenues
Ag Services and Oilseeds			$	55,667					$	54,633					$	56,591
Carbohydrate Solutions			9,423						11,154						11,421
Nutrition			5,959						5,786						3,836
Other			367						352						381
Intersegment elimination			(7,061)						(7,269)						(7,888)
Total			$	64,355					$	64,656					$	64,341
Intersegment revenues
Ag Services and Oilseeds			$	5,951					$	5,892					$	6,700
Carbohydrate Solutions			951						1,268						1,142
Nutrition			159						109						46
Total			$	7,061					$	7,269					$	7,888
Revenues from external customers
Ag Services and Oilseeds
Ag Services			$	32,726					$	31,705					$	31,766
Crushing			9,593						9,479						10,319
Refined Products and Other			7,397						7,557						7,806
Total Ag Services and Oilseeds			49,716						48,741						49,891
Carbohydrate Solutions
Starches and Sweeteners			6,387						6,854						6,922
Vantage Corn Processors			2,085						3,032						3,357
Total Carbohydrate Solutions			8,472						9,886						10,279
Nutrition
Human Nutrition			2,812						2,745						2,571
Animal Nutrition			2,988						2,932						1,219
Total Nutrition			5,800						5,677						3,790
Other			367						352						381
Total			$	64,355					$	64,656					$	64,341

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 17. Segment and Geographic Information (Continued)

			Year Ended
(In millions)			December 31
			2020						2019						2018
Depreciation
Ag Services and Oilseeds			$	351					$	361					$	372
Carbohydrate Solutions			305						320						328
Nutrition			114						113						80
Other			6						6						6
Corporate			27						27						26
Total			$	803					$	827					$	812
Long-lived asset abandonments and write-downs(1)
Ag Services and Oilseeds			$	8					$	130					$	40
Carbohydrate Solutions			—						1						—
Nutrition			13						—						11
Corporate			7						—						49
Total			$	28					$	131					$	100
Interest income
Ag Services and Oilseeds			$	39					$	51					$	45
Carbohydrate Solutions			—						—						1
Nutrition			2						1						2
Other			40						125						100
Corporate			7						15						14
Total			$	88					$	192					$	162
Equity in earnings of affiliates
Ag Services and Oilseeds			$	475					$	378					$	421
Carbohydrate Solutions			81						60						62
Nutrition			22						17						17
Corporate			1						(1)						18
Total			$	579					$	454					$	518
(1) See Note 18 for total asset impairment, exit, and restructuring costs.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 17. Segment and Geographic Information (Continued)

			Year Ended
(In millions)			December 31
			2020						2019						2018
Segment Operating Profit
Ag Services and Oilseeds			$	2,105					$	1,935					$	2,020
Carbohydrate Solutions			717						644						945
Nutrition			574						418						339
Other			52						85						58
Specified Items:
Gain on sales of assets and businesses(1)			83						12						13
Impairment, restructuring, exit, and settlement charges(2)			(76)						(146)						(102)
Total segment operating profit			3,455						2,948						3,273
Corporate			(1,572)						(1,360)						(1,213)
Earnings before income taxes			$	1,883					$	1,588					$	2,060

(1) The gain in 2020 consisted of a gain on the sale of a portion of the Company’s shares in Wilmar and certain other assets. The gain in 2019 consisted of a gain on the sale of certain assets and a step-up gain on an equity investment. The gain in 2018 related to the sale of the Company’s oilseeds operations in Bolivia and certain other assets.

(2) The charges in 2020 related to the impairment of certain assets, restructuring, and settlement. The charges in 2019 primarily related to the impairment of certain assets. The charges in 2018 related to the impairment of certain assets, restructuring, and settlement.

.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 17. Segment and Geographic Information (Continued)

(In millions)			December 31
			2020						2019
Investments in and advances to affiliates
Ag Services and Oilseeds			$	4,402					$	4,662
Carbohydrate Solutions			392						363
Nutrition			102						98
Corporate			17						9
Total			$	4,913					$	5,132
Identifiable assets
Ag Services and Oilseeds			$	24,792					$	21,397
Carbohydrate Solutions			5,963						6,032
Nutrition			8,652						8,622
Other			7,152						5,661
Corporate			3,160						2,285
Total			$	49,719					$	43,997
(In millions)			Year Ended December 31
			2020						2019
Gross additions to property, plant, and equipment
Ag Services and Oilseeds			$	261					$	271
Carbohydrate Solutions			251						275
Nutrition			149						166
Other			8						2
Corporate			148						103
Total			$	817					$	817

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 17. Segment and Geographic Information (Continued)

Geographic information: The following geographic data include revenues attributed to the countries based on the location of the subsidiary making the sale and long-lived assets based on physical location. Long-lived assets represent the net book value of property, plant, and equipment.

			Year Ended
(In millions)			December 31
			2020						2019						2018
Revenues
United States			$	25,986					$	27,509					$	28,726
Switzerland			13,819						13,016						12,911
Cayman Islands			3,958						4,374						5,724
Brazil			2,357						2,381						1,702
Mexico			2,244						2,068						1,627
Germany			1,979						2,026						2,179
Other Foreign			14,012						13,282						11,472
			$	64,355					$	64,656					$	64,341

(In millions)			December 31
			2020						2019
Long-lived assets
United States			$	6,329					$	6,488
Brazil			781						869
Other Foreign			2,841						2,749
			$	9,951					$	10,106

Note 18. Asset Impairment, Exit, and Restructuring Costs

The following table sets forth the charges included in asset impairment, exit, and restructuring costs.

(In millions)			Year Ended December 31
			2020						2019						2018
Restructuring and exit costs (1)			$	26					$	161					$	29
Impairment charge - equity method investment(2)			—						—						12
Impairment charge - goodwill and other intangible assets (3)			26						11						9
Impairment charge - other long-lived assets (4)			28						131						121
Total asset impairment, exit, and restructuring costs			$	80					$	303					$	171

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 18. Asset Impairment, Exit, and Restructuring Costs (Continued)

(1)Restructuring and exit costs for the year ended December 31, 2020 consisted of several individually insignificant restructuring charges totaling $17 million presented as specified items within segment operating profit and $9 million in Corporate. Restructuring and exit costs for the year ended December 31, 2019 consisted of restructuring and pension settlement and remeasurement charges of $159 million in Corporate primarily related to early retirement and reorganization initiatives and several individually insignificant restructuring charges presented as specified items within segment operating profit. Restructuring and exit costs for the year ended December 31, 2018 consisted of restructuring charges of $24 million in Corporate primarily related to the reorganization of IT services in Corporate and several individually insignificant restructuring charges presented as specified items within segment operating profit.

(2)Impairment charge - equity method investment consisted of an impairment charge on an equity investment presented as a specified item within segment operating profit.

(3)Impairment charge - goodwill and other intangible assets for the year ended December 31, 2020 consisted of $26 million of an intangible asset impairment in Ag Services and Oilseeds presented as specified items within segment operating profit. Impairment charge - goodwill and other intangible assets for the year ended December 31, 2019 consisted of goodwill and other intangible asset impairments in Ag Services and Oilseeds presented as specified items within segment operating profit. Impairment charge - goodwill and other intangible assets for the year ended December 31, 2018 consisted of an intangible asset impairment in Ag Services and Oilseeds presented as specified items within segment operating profit.

(4)Impairment charge - other long-lived assets for the year ended December 31, 2020 consisted of impairments related to certain long-lived assets in Ag Services and Oilseeds and Nutrition of $8 million and $13 million, respectively, presented as specified items within segment operating profit, and $7 million of impairments related to certain assets in Corporate. Impairment charge - other long-lived assets for the year ended December 31, 2019 consisted of $130 million of asset impairments related to certain facilities, vessels and other long-lived assets in Ag Services and Oilseeds and $1 million of asset impairments related to certain long-lived assets in Carbohydrate Solutions presented as specified items within segment operating profit. Impairment charge - other long-lived assets for the year ended December 31, 2018 consisted of $61 million of asset impairments related to a long-term receivable and certain long-lived assets in Ag Services and Oilseeds and $11 million of asset impairments related to certain long-lived assets in Nutrition presented as specified items within segment operating profit and a $49 million charge related to a discontinued software project in Corporate.

Note 19. Sale of Accounts Receivable

The Company has an accounts receivable securitization program (the “Program”) with certain commercial paper conduit purchasers and committed purchasers (collectively, the “First Purchasers”). Under the Program, certain U.S.-originated trade accounts receivable are sold to a wholly-owned bankruptcy-remote entity, ADM Receivables, LLC (“ADM Receivables”). Prior to October 1, 2020, ADM Receivables transferred such purchased accounts receivable in their entirety to the Purchasers pursuant to a receivables purchase agreement. In exchange for the transfer of the accounts receivable, ADM Receivables received a cash payment up to a certain amount and an additional amount upon the collection of the accounts receivable (deferred consideration). On October 1, 2020, the Company restructured the Program from a deferred purchase price to a pledge structure. Under the new structure, ADM Receivables transfers certain of the purchased accounts receivable to each of the First Purchasers together with a security interest in all of its right, title, and interest in the remaining purchased accounts receivable. In exchange, ADM Receivables receives a cash payment of up to $1.2 billion for the accounts receivables transferred. The Program terminates on May 18, 2021, unless extended.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 19. Sale of Accounts Receivable (Continued)

The Company also has an accounts receivable securitization program (the “Second Program”) with certain commercial paper conduit purchasers and committed purchasers (collectively, the “Second Purchasers”). Under the Second Program, certain non-U.S.-originated trade accounts receivable are sold to a wholly-owned bankruptcy-remote entity, ADM Ireland Receivables Company (ADM Ireland Receivables). Prior to April 1, 2020, ADM Ireland Receivables transferred such purchased accounts receivable in their entirety to the Second Purchasers pursuant to a receivables purchase agreement. In exchange for the transfer of the accounts receivable, ADM Ireland Receivables received a cash payment up to a certain amount and an additional amount upon the collection of the accounts receivable (deferred consideration). On April 1, 2020, the Company restructured the Second Program from a deferred purchase price to a pledge structure. Under the new structure, ADM Ireland Receivables transfers certain of the purchased accounts receivable to each of the Second Purchasers together with a security interest in all of its right, title, and interest in the remaining purchased accounts receivable. In exchange, ADM Ireland Receivables receives a cash payment of up to $0.6 billion (€0.5 billion) for the accounts receivables transferred. The Second Program terminates on March 12, 2021, unless extended.

Under the First and Second Programs (collectively, the “Programs”), ADM Receivables and ADM Ireland Receivables use the cash proceeds from the transfer of receivables to the First Purchasers and Second Purchasers (collectively, the “Purchasers”) and other consideration, as applicable, to finance the purchase of receivables from the Company and the ADM subsidiaries originating the receivables. The Company accounts for these transfers as sales. The Company acts as a servicer for the transferred receivables. At December 31, 2020 and 2019, the Company did not record a servicing asset or liability related to its retained responsibility, based on its assessment of the servicing fee, market values for similar transactions, and its cost of servicing the receivables sold.

As of December 31, 2020 and 2019, the fair value of trade receivables transferred to the Purchasers under the Programs and derecognized from the Company’s consolidated balance sheet was $1.6 billion and $1.9 billion, respectively. In exchange for the transfer as of December 31, 2020 and 2019, the Company received cash of $1.6 billion and $1.4 billion, respectively. The Company recorded a receivable for deferred consideration included in other current assets of $446 million as of December 31, 2019. Total receivables sold were $35.0 billion, $34.5 billion, and $35.7 billion for the years ended December 31, 2020, 2019, and 2018, respectively. Cash collections from customers on receivables sold were $34.2 billion, $33.8 billion, and $34.8 billion for the years ended December 31, 2020, 2019, and 2018, respectively. Of this amount, $6.7 billion, $13.1 billion, and $14.8 billion were cash collections on the deferred consideration reflected as cash inflows from investing activities for the years ended December 31, 2020, 2019, and 2018, respectively. As of December 31, 2020, $0.4 billion of receivables were pledged as collateral to the Purchasers.

Under the Programs’ previous structure, the Company’s risk of loss following the transfer of accounts receivable was limited to the deferred receivables consideration outstanding. The Company carried the deferred receivables consideration at fair value determined by calculating the expected amount of cash to be received and was principally based on observable inputs (a Level 2 measurement under the applicable accounting standards) consisting mainly of the face amount of the receivables adjusted for anticipated credit losses and discounted at the appropriate market rate. Payment of deferred receivables consideration was not subject to significant risks other than delinquencies and credit losses on accounts receivable transferred under the Programs which had historically been insignificant.

Transfers of receivables under the Programs during the years ended December 31, 2020, 2019, and 2018 resulted in an expense for the loss on sale of $9 million, $18 million, and $18 million, respectively, which is classified as selling, general, and administrative expenses in the consolidated statements of earnings.

In accordance with the amended guidance of Topic 230, the Company reflects cash flows related to the deferred receivables consideration as investing activities in its consolidated statements of cash flows. All other cash flows are classified as operating activities because the cash received from the Purchasers upon both the sale and collection of the receivables is not subject to significant interest rate risk given the short-term nature of the Company’s trade receivables.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 20. Legal Proceedings

The Company is routinely involved in a number of actual or threatened legal actions, including those involving alleged personal injuries, employment law, product liability, intellectual property, environmental issues, alleged tax liability (see Note 13 for information on income tax matters), and class actions. The Company also routinely receives inquiries from regulators and other government authorities relating to various aspects of our business, and at any given time, the Company has matters at various stages of resolution. The outcomes of these matters are not within our complete control and may not be known for prolonged periods of time. In some actions, claimants seek damages, as well as other relief including injunctive relief, that could require significant expenditures or result in lost revenues. In accordance with applicable accounting standards, the Company records a liability in its consolidated financial statements for material loss contingencies when a loss is known or considered probable and the amount can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a material loss contingency is reasonably possible but not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed in the notes to the consolidated financial statements. When determining the estimated loss or range of loss, significant judgment is required to estimate the amount and timing of a loss to be recorded. Estimates of probable losses resulting from litigation and governmental proceedings involving the Company are inherently difficult to predict, particularly when the matters are in early procedural stages, with incomplete facts or legal discovery; involve unsubstantiated or indeterminate claims for damages; potentially involve penalties, fines, disgorgement, or punitive damages; or could result in a change in business practice.

On September 4, 2019, AOT Holding AG (AOT) filed a putative class action under the U.S. Commodities Exchange Act in federal district court in Urbana, Illinois, alleging that the Company sought to manipulate the benchmark price used to price and settle ethanol derivatives traded on futures exchanges. AOT alleges that members of the putative class suffered “hundreds of millions of dollars in damages” as a result of the Company’s alleged actions. On July 14, 2020, Green Plains Inc. and its related entities filed a putative class action lawsuit, alleging substantially the same operative facts, in federal court in Nebraska, seeking to represent all sellers of ethanol. On July 23, 2020, Midwest Renewable Energy, LLC filed a putative class action in federal court in Illinois alleging substantially the same operative facts and asserting claims under the Sherman Act. On November 11, 2020, six ethanol producers filed a lawsuit in federal court in Illinois alleging substantially the same facts and asserting claims under the Sherman Act and Illinois and Wisconsin law. The Company denies liability, and is vigorously defending itself in these actions. As these actions are in pretrial proceedings, the Company is unable at this time to predict the final outcome with any reasonable degree of certainty, but believes the outcome will not have a material adverse effect on its financial condition, results of operations, or cash flows.

On September 5, 2019, D&M Farms, Mark Hasty, and Dustin Land filed a putative class action on behalf of a purported class of peanut farmers under the U.S. federal antitrust laws in federal court in Norfolk, Virginia, alleging that the Company’s subsidiary, Golden Peanut, and another peanut shelling company, conspired to fix the price they paid to farmers for raw peanuts. Plaintiffs subsequently added a third peanut shelling company to the case. Two defendants have reached preliminary settlements with the plaintiffs. On December 2, 2020, the district court certified the class. The Company denies liability and is vigorously defending itself, in this action. As this action is in pretrial proceedings, the Company is unable at this time to predict the final outcome with any reasonable degree of certainty, but believes the outcome will not have a material adverse effect on its financial condition, results of operations, or cash flows.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 21. Quarterly Financial Data (Unaudited)

			Quarter Ended
			March 31						June 30						September 30						December 31						Year
			(In millions, except per share amounts)
Fiscal Year Ended December 31, 2020
Revenues			$	14,970					$	16,281					$	15,126					$	17,978					$	64,355
Gross Profit			951						1,108						1,042						1,352						4,453
Net Earnings Attributable to Controlling Interests			391						469						225						687						1,772
Basic Earnings Per Common Share			0.69						0.84						0.40						1.22						3.16
Diluted Earnings Per Common Share			0.69						0.84						0.40						1.22						3.15
Fiscal Year Ended December 31, 2019
Revenues			$	15,304					$	16,297					$	16,726					$	16,329					$	64,656
Gross Profit			928						972						1,078						1,169						4,147
Net Earnings Attributable to Controlling Interests			233						235						407						504						1,379
Basic Earnings Per Common Share			0.41						0.42						0.72						0.90						2.45
Diluted Earnings Per Common Share			0.41						0.42						0.72						0.90						2.44

Net earnings attributable to controlling interest for the first quarter of the year ended December 31, 2020 included after-tax charges of $32 million (equal to $0.06 per share) related to the impairment of certain assets and a tax expense adjustment of $7 million (equal to $0.01 per share) related to the U.S. tax reform and certain discrete items.

Net earnings attributable to controlling interest for the second quarter of the year ended December 31, 2020 included after-tax gains of $18 million (equal to $0.03 per share) related to the sale of certain assets, after-tax charges of $12 million (equal to $0.02 per share) related to the impairment of certain assets and restructuring, after-tax charges of $11 million (equal to $0.02 per share) related to the early repayment of debt, and a tax expense adjustment of $1 million (equal to $0.00 per share) related to the U.S. tax reform and certain discrete items.

Net earnings attributable to controlling interest for the third quarter of the year ended December 31, 2020 included after-tax gains of $54 million (equal to $0.10 per share) the sale of a portion of the Company’s shares in Wilmar shares and certain other assets, after-tax charges of $5 million (equal to $0.01 per share) related to the impairment of certain assets, restructuring, and a settlement, after-tax charges of $300 million (equal to $0.53 per share) related to the early repurchase of certain of the Company’s notes and debentures, after-tax charges of $15 million (equal to $0.03 per share) related to the mark-to-market adjustment of the conversion option of the exchangeable bonds issued in August 2020, and a tax expense adjustment of $8 million (equal to $0.02 per share) related to certain discrete items.

Net earnings attributable to controlling interest for the fourth quarter of the year ended December 31, 2020 included after-tax charges of $20 million (equal to $0.03 per share) related to the impairment of certain assets, restructuring, and a settlement, after-tax charges of $3 million (equal to $0.01 per share) related to a target acquisition, after-tax charges of $2 million (equal to $0.00 per share) related to the mark-to-market adjustment of the conversion option of the exchangeable bonds issued in August 2020, after-tax gains of $8 million (equal to $0.01 per share) related to the sale of certain assets, an after-tax gain of $1 million (equal to $0.00 per share) related to the early repayment of certain debt, and a tax benefit adjustment of $19 million (equal to $0.04 per share) related to certain discrete items.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

Note 21. Quarterly Financial Data (Unaudited) (Continued)

Net earnings attributable to controlling interests for the first quarter of the year ended December 31, 2019 included after-tax gains of $9 million (equal to $0.02 per share) related to the sale of certain assets and a step-up gain on an equity investment; after-tax charges of $10 million (equal to $0.02 per share) related to the impairment of certain assets and restructuring; after-tax charges of $9 million (equal to $0.02 per share) related to the Neovia acquisition; and a tax expense adjustment of $17 million (equal to $0.03 per share) related to the U.S. tax reform and certain discrete items.

Net earnings attributable to controlling interests for the second quarter of the year ended December 31, 2019 included after-tax charges of $105 million (equal to $0.18 per share), related to the impairment of certain assets, restructuring, and pension remeasurement, and a tax benefit adjustment of $19 million (equal to $0.03 per share) related to the U.S. tax reform and certain discrete items.

Net earnings attributable to controlling interest for the third quarter of the year ended December 31, 2019 included after-tax charges of $41 million (equal to $0.08 per share) related to the impairment of certain assets, restructuring, and pension settlement, and a tax benefit adjustment of $5 million (equal to $0.01 per share) related to the U.S. tax reform and certain discrete items.

Net earnings attributable to controlling interest for the fourth quarter of the year ended December 31, 2019 included an after-tax loss of $133 million (equal to $0.24 per share), related to the sale of an equity investment; after-tax charges of $93 million (equal to $0.16 per share) related to impairment of certain assets, restructuring, and pension settlement; after-tax charges of $2 million (equal to $0.00 per share) related to certain acquisitions; and a tax expense adjustment of $46 million (equal to $0.08 per share) related to the U.S. tax reform and certain discrete items.

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Archer-Daniels-Midland Company

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Archer-Daniels-Midland Company (the Company) as of December 31, 2020 and 2019, the related consolidated statements of earnings, comprehensive income (loss), shareholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated February 18, 2021, expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

			Fair Value Measurements over Inventory and Commodity Derivatives
Description of the matter			As explained in Notes 1 and 4 to the financial statements, the estimated fair values for inventories carried at market and forward commodity purchase and sale contracts are based on exchange-quoted prices adjusted for differences in local markets and/or quality, referred to as basis. Market valuations for inventories or fair values for forward commodity purchase and sale contracts are adjusted for location and quality differences (basis) because the exchange-quoted prices represent contracts that have standardized terms for commodity, quantity, future delivery period, delivery location, and commodity quality or grade. The stated fair values as of December 31, 2020 for inventories, commodity contracts in an asset position, and commodity contracts in a liability position were $7,941 million, $2,764 million and $2,034 million, respectively. Auditing the estimated fair values for inventories carried at market and forward commodity purchase and sale contracts is complex due to the judgment involved in determining market prices, specifically related to determining the estimated basis adjustment. The basis adjustment is impacted by specific local supply and demand characteristics at each facility and the overall market. Factors such as substitute products, weather, fuel costs, contract terms, and futures prices also impact the basis adjustment.
How we addressed the matter in our audit			We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s determination of the estimated fair values for inventories carried at market and forward commodity purchase and sale contracts. Our tests included controls over the estimation process supporting the basis adjustments. To test the estimated fair values of inventories carried at market and forward commodity purchase and sale contracts, our audit procedures included, among others, evaluating (i) the Company’s selection of the principal market, (ii) the inputs for the basis adjustments, and (iii) the completeness and accuracy of the underlying data supporting the basis adjustments. For example, we evaluated management’s methodology for determining the basis adjustment such as assessing the principal market identified and sources utilized by management to support the basis adjustment. Specifically, we compared the basis adjustments used by management to broker quotes, trade publications, and/or recent trade prices, including recently executed transactions. Further, we investigated, to the extent necessary, basis adjustments that were inconsistent with third party, available information. Finally, we evaluated the adequacy of the Company’s financial statement disclosures related to the estimated fair value of inventories carried at market and forward commodity purchase and sale contracts.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1930.

Saint Louis, Missouri

February 18, 2021

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Archer-Daniels-Midland Company

Opinion on Internal Control over Financial Reporting

We have audited Archer-Daniels-Midland Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). In our opinion, Archer-Daniels-Midland Company (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of Archer-Daniels-Midland Company as of December 31, 2020 and 2019, the related consolidated statements of earnings, comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2), and our report dated February 18, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Saint Louis, Missouri

February 18, 2021