Item 1. FINANCIAL STATEMENTS

Archer-Daniels-Midland Company

Consolidated Statements of Earnings

(Unaudited)

			Three Months Ended September 30,												Nine Months Ended September 30,
			2021						2020						2021						2020
			(In millions, except per share amounts)
Revenues			$	20,340					$	15,126					$	62,159					$	46,377
Cost of products sold			19,014						14,084						57,822						43,276
Gross Profit			1,326						1,042						4,337						3,101
Selling, general, and administrative expenses			720						636						2,208						1,938
Asset impairment, exit, and restructuring costs			2						4						84						61
Equity in (earnings) losses of unconsolidated affiliates			(110)						(160)						(398)						(403)
Investment income			(20)						(20)						(83)						(94)
Interest expense			61						100						188						270
Other (income) expense – net			20						282						36						202
Earnings Before Income Taxes			653						200						2,302						1,127
Income tax expense (benefit)			120						(26)						364						38
Net Earnings Including Noncontrolling Interests			533						226						1,938						1,089
Less: Net earnings attributable to noncontrolling interests			7						1						11						4
Net Earnings Attributable to Controlling Interests			$	526					$	225					$	1,927					$	1,085
Average number of shares outstanding – basic			564						561						564						561
Average number of shares outstanding – diluted			566						562						566						563
Basic earnings per common share			$	0.93					$	0.40					$	3.42					$	1.93
Diluted earnings per common share			$	0.93					$	0.40					$	3.41					$	1.93
Dividends per common share			$	0.37					$	0.36					$	1.11					$	1.08

See notes to consolidated financial statements.

Archer-Daniels-Midland Company

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

			Three Months Ended September 30,												Nine Months Ended September 30,
			2021						2020						2021						2020
			(In millions)
Net earnings including noncontrolling interests			$	533					$	226					$	1,938					$	1,089
Other comprehensive income (loss):
Foreign currency translation adjustment			(24)						(154)						305						(429)
Tax effect			(30)						51						(78)						37
Net of tax amount			(54)						(103)						227						(392)
Pension and other postretirement benefit liabilities adjustment			13						(5)						102						—
Tax effect			5						3						(22)						(9)
Net of tax amount			18						(2)						80						(9)
Deferred gain (loss) on hedging activities			75						112						258						111
Tax effect			(1)						(22)						(41)						(23)
Net of tax amount			74						90						217						88
Unrealized gain (loss) on investments			6						(28)						4						(25)
Tax effect			—						—						(1)						(1)
Net of tax amount			6						(28)						3						(26)
Other comprehensive income (loss)			44						(43)						527						(339)
Comprehensive income (loss) including noncontrolling interests			577						183						2,465						750
Less: Comprehensive income (loss) attributable to noncontrolling interests			6						2						10						9
Comprehensive income (loss) attributable to controlling interests			$	571					$	181					$	2,455					$	741

See notes to consolidated financial statements.

Archer-Daniels-Midland Company

Consolidated Balance Sheets

(In millions)			September 30, 2021						December 31, 2020
			(Unaudited)
Assets
Current Assets
Cash and cash equivalents			$	1,083					$	666
Segregated cash and investments			7,891						5,890
Trade receivables			3,797						2,793
Inventories			11,169						11,713
Current assets held for sale			130						—
Other current assets			5,220						6,224
Total Current Assets			29,290						27,286
Investments and Other Assets
Investments in and advances to affiliates			5,148						4,913
Goodwill and other intangible assets			5,705						5,413
Right of use assets			1,005						1,102
Other assets			1,302						1,054
Total Investments and Other Assets			13,160						12,482
Property, Plant, and Equipment
Land and land improvements			523						545
Buildings			5,557						5,522
Machinery and equipment			18,955						19,154
Construction in progress			1,126						1,118
			26,161						26,339
Accumulated depreciation			(16,313)						(16,388)
Net Property, Plant, and Equipment			9,848						9,951
Total Assets			$	52,298					$	49,719
Liabilities, Temporary Equity, and Shareholders’ Equity
Current Liabilities
Short-term debt			$	314					$	2,042
Trade payables			4,617						4,474
Payables to brokerage customers			8,675						6,460
Accrued expenses and other payables			4,121						4,943
Current lease liabilities			268						261
Current maturities of long-term debt			581						2
Total Current Liabilities			18,576						18,182
Long-Term Liabilities
Long-term debt			8,039						7,885
Deferred income taxes			1,351						1,302
Non-current lease liabilities			759						863
Other			1,358						1,391
Total Long-Term Liabilities			11,507						11,441
Temporary Equity - Redeemable noncontrolling interest			225						74
Shareholders’ Equity
Common stock			2,964						2,824
Reinvested earnings			21,081						19,780
Accumulated other comprehensive income (loss)			(2,076)						(2,604)
Noncontrolling interests			21						22
Total Shareholders’ Equity			21,990						20,022
Total Liabilities, Temporary Equity, and Shareholders’ Equity			$	52,298					$	49,719

See notes to consolidated financial statements.

Archer-Daniels-Midland Company

Consolidated Statements of Cash Flows

(Unaudited)

(In millions)			Nine Months Ended September 30,
			2021						2020
Operating Activities
Net earnings including noncontrolling interests			$	1,938					$	1,089
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities
Depreciation and amortization			739						727
Asset impairment charges			54						50
Deferred income taxes			(95)						57
Equity in earnings of affiliates, net of dividends			(36)						(165)
Stock compensation expense			135						114
Loss on debt extinguishment			36						410
Deferred cash flow hedges			258						111
Gains on sales of assets and businesses/investment revaluation			(95)						(132)
Other – net			156						34
Changes in operating assets and liabilities
Segregated investments			594						147
Trade receivables			(1,060)						(343)
Inventories			405						370
Deferred consideration in securitized receivables			—						(4,603)
Other current assets			1,187						(467)
Trade payables			170						(389)
Payables to brokerage customers			2,236						1,060
Accrued expenses and other payables			(769)						414
Total Operating Activities			5,853						(1,516)
Investing Activities
Purchases of property, plant, and equipment			(714)						(558)
Proceeds from sales of assets and businesses			73						708
Net assets of businesses acquired			(501)						(3)
Investments in and advances to affiliates			(7)						(5)
Distributions from affiliates			5						—
Investments in retained interest in securitized receivables			—						(2,121)
Proceeds from retained interest in securitized receivables			—						6,724
Other – net			(143)						(17)
Total Investing Activities			(1,287)						4,728
Financing Activities
Long-term debt borrowings			1,330						1,790
Long-term debt payments			(533)						(2,032)
Net borrowings (payments) under lines of credit agreements			(1,726)						(993)
Share repurchases			—						(117)
Cash dividends			(626)						(607)
Other – net			1						16
Total Financing Activities			(1,554)						(1,943)
Increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents			3,012						1,269
Cash, cash equivalents, restricted cash, and restricted cash equivalents - beginning of period			4,646						2,990
Cash, cash equivalents, restricted cash, and restricted cash equivalents - end of period			$	7,658					$	4,259
Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the consolidated balance sheets
Cash and cash equivalents			$	1,083					$	948
Restricted cash and restricted cash equivalents included in segregated cash and investments			6,575						3,311
Total cash, cash equivalents, restricted cash, and restricted cash equivalents			$	7,658					$	4,259
Supplemental Disclosure of Noncash Investing Activity:
Retained interest in securitized receivables			$	—					$	4,656

See notes to consolidated financial statements.

Archer-Daniels-Midland-Company

Consolidated Statements of Shareholders’ Equity

(Unaudited)

			Common Stock												Reinvested Earnings						Accumulated Other Comprehensive Income (Loss)						Noncontrolling Interests						Total Shareholders’ Equity
(In millions, except per share amounts)			Shares						Amount
Balance, June 30, 2021			559						$	2,941					$	20,762					$	(2,121)					$	21					$	21,603
Comprehensive income
Net earnings															526												7
Other comprehensive income (loss)																					45						(1)
Total comprehensive income																																	577
Dividends paid - $0.37 per share															(209)																		(209)
Stock compensation expense			—						21																								21
Other			—						2						2						—						(6)						(2)
Balance, September 30, 2021			559						$	2,964					$	21,081					$	(2,076)					$	21					$	21,990
Balance, December 31, 2020			556						$	2,824					$	19,780					$	(2,604)					$	22					$	20,022
Comprehensive income
Net earnings															1,927												11
Other comprehensive income (loss)																					528						(1)
Total comprehensive income																																	2,465
Dividends paid - $1.11 per share															(626)																		(626)
Stock compensation expense			3						135																								135
Other			—						5						—												(11)						(6)
Balance, September 30, 2021			559						$	2,964					$	21,081					$	(2,076)					$	21					$	21,990
Balance, June 30, 2020			556						$	2,705					$	19,293					$	(2,705)					$	18					$	19,311
Comprehensive income
Net earnings															225												1
Other comprehensive income (loss)																					(44)						1
Total comprehensive income																																	183
Dividends paid - $0.36 per share															(202)																		(202)
Share repurchases			—												(5)																		(5)
Stock compensation expense			—						39																								39
Other			—						16						—						—						(1)						15
Balance, September 30, 2020			556						$	2,760					$	19,311					$	(2,749)					$	19					$	19,341
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															1,085												4
Other comprehensive income (loss)																					(344)						5
Total comprehensive income																																	750
Dividends paid - $1.08 per share															(607)																		(607)
Share repurchases			(3)												(117)																		(117)
Stock compensation expense			2						114																								114
Other			—						(9)						—						—						(7)						(16)
Balance, September 30, 2020			556						$	2,760					$	19,311					$	(2,749)					$	19					$	19,341

See notes to consolidated financial statements.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements

(Unaudited)

Note 1. Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these statements do not include all of the information and footnotes required by generally accepted accounting principles for audited financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

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.

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 consolidated statements of cash flows.

Receivables

The Company records receivables at net realizable value in trade receivables, other current assets, and other assets. These amounts include allowances for estimated uncollectible accounts totaling $82 million and $100 million at September 30, 2021 and December 31, 2020, 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 a cumulative effect adjustment to retained earnings at January 1, 2020 of $8 million as a result of the adoption of Topic 326.

The Company recorded bad debt expense in selling, general, and administrative expenses of $1 million and $9 million in the three and nine months ended September 30, 2021, respectively, and $7 million and $32 million in the three and nine months ended September 30, 2020.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 1. Basis of Presentation (Continued)

Inventory Valuation

Effective January 1, 2020, the Company changed the method of accounting for certain of its agricultural commodity inventories from the last-in, first-out (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 did 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 nine months ended September 30, 2020 with no impact to the statement of cash flows.

Reclassification

During the quarter and nine months ended September 30, 2021, the Company recorded revaluation gains on cost method investments of $9 million and $49 million, respectively, in connection with observable third-party transactions in investment income (previously interest income) in the consolidated statements of earnings. Revaluation gains previously recorded in other (income) expense - net of $4 million and $23 million in the quarter and nine months ended September 30, 2020, respectively, were reclassified to conform to the current presentation.

Note 2. New Accounting Standards

Effective January 1, 2021, the Company adopted 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 simplify and improve consistent application of other areas of Topic 740. The adoption of the amended guidance did not have a significant impact on the Company’s consolidated financial statements.

Note 3. Pending Accounting Standards

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.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 4. Revenues

Revenue Recognition

The Company principally generates revenue from merchandising and transporting agricultural commodities, and manufacturing products for use in food, beverages, feed, energy, and industrial applications, and ingredients and solutions for human and animal nutrition. 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 ASC 606, Revenue from Contracts with Customers (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 $153 million and $408 million for the three and nine months ended September 30, 2021, respectively, and $87 million and $310 million for the three and nine months ended September 30, 2020, 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, Gains and Losses from the Derecognition of Nonfinancial Assets (Topic 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 $374 million and $626 million as of September 30, 2021 and December 31, 2020, respectively, were recorded in accrued expenses and other payables in the consolidated balance sheets. Contract liabilities recognized as revenues were $128 million and $697 million for the three and nine months ended September 30, 2021, respectively, and $121 million and $742 million for the three and nine months ended September 30, 2020, respectively.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 4. Revenues (Continued)

Disaggregation of Revenues

The following tables present revenue disaggregated by timing of recognition and major product lines for the three and nine months ended September 30, 2021 and 2020.

			Three Months Ended September 30, 2021
			Topic 606 Revenue									Topic 815**(1)**			Total
			Point in Time			Over Time			Total			Revenue			Revenues
			(In millions)
Ag Services and Oilseeds
Ag Services			$	616		$	153		$	769		$	9,130		$	9,899
Crushing			119			—			119			2,723			2,842
Refined Products and Other			657			—			657			2,291			2,948
Total Ag Services and Oilseeds			1,392			153			1,545			14,144			15,689
Carbohydrate Solutions
Starches and Sweeteners			1,516			—			1,516			456			1,972
Vantage Corn Processors			894			—			894			—			894
Total Carbohydrate Solutions			2,410			—			2,410			456			2,866
Nutrition
Human Nutrition			808			—			808			—			808
Animal Nutrition			889			—			889			—			889
Total Nutrition			1,697			—			1,697			—			1,697
Other Business			88			—			88			—			88
Total Revenues			$	5,587		$	153		$	5,740		$	14,600		$	20,340

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 4. Revenues (Continued)

			Nine Months Ended September 30, 2021
			Topic 606 Revenue									Topic 815**(1)**			Total
			Point in Time			Over Time			Total			Revenue			Revenues
			(In millions)
Ag Services and Oilseeds
Ag Services			$	2,080		$	408		$	2,488		$	30,372		$	32,860
Crushing			335			—			335			8,076			8,411
Refined Products and Other			1,828			—			1,828			5,868			7,696
Total Ag Services and Oilseeds			4,243			408			4,651			44,316			48,967
Carbohydrate Solutions
Starches and Sweeteners			4,326			—			4,326			1,237			5,563
Vantage Corn Processors			2,346			—			2,346			—			2,346
Total Carbohydrate Solutions			6,672			—			6,672			1,237			7,909
Nutrition
Human Nutrition			2,410			—			2,410			—			2,410
Animal Nutrition			2,583			—			2,583			—			2,583
Total Nutrition			4,993			—			4,993			—			4,993
Other Business			290			—			290			—			290
Total Revenues			$	16,198		$	408		$	16,606		$	45,553		$	62,159

			Three Months Ended September 30, 2020
			Topic 606 Revenue									Topic 815**(1)**			Total
			Point in Time			Over Time			Total			Revenue			Revenues
			(In millions)
Ag Services and Oilseeds
Ag Services			$	776		$	87		$	863		$	6,489		$	7,352
Crushing			113			—			113			2,204			2,317
Refined Products and Other			462			—			462			1,396			1,858
Total Ag Services and Oilseeds			1,351			87			1,438			10,089			11,527
Carbohydrate Solutions
Starches and Sweeteners			1,162			—			1,162			412			1,574
Vantage Corn Processors			490			—			490			—			490
Total Carbohydrate Solutions			1,652			—			1,652			412			2,064
Nutrition
Human Nutrition			719			—			719			—			719
Animal Nutrition			732			—			732			—			732
Total Nutrition			1,451			—			1,451			—			1,451
Other Business			84			—			84			—			84
Total Revenues			$	4,538		$	87		$	4,625		$	10,501		$	15,126

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 4. Revenues (Continued)

			Nine Months Ended September 30, 2020
			Topic 606 Revenue									Topic 815**(1)**			Total
			Point in Time			Over Time			Total			Revenue			Revenues
			(In millions)
Ag Services and Oilseeds
Ag Services			$	2,504		$	310		$	2,814		$	20,116		$	22,930
Crushing			493			—			493			6,542			7,035
Refined Products and Other			1,501			—			1,501			3,881			5,382
Total Ag Services and Oilseeds			4,498			310			4,808			30,539			35,347
Carbohydrate Solutions
Starches and Sweeteners			3,539			—			3,539			1,230			4,769
Vantage Corn Processors			1,625			—			1,625			—			1,625
Total Carbohydrate Solutions			5,164			—			5,164			1,230			6,394
Nutrition
Human Nutrition			2,161			—			2,161			—			2,161
Animal Nutrition			2,198			—			2,198			—			2,198
Total Nutrition			4,359			—			4,359			—			4,359
Other Business			277			—			277			—			277
Total Revenues			$	14,298		$	310		$	14,608		$	31,769		$	46,377

(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.

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.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 4. Revenues (Continued)

Nutrition

The Nutrition segment sells 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, edible beans, formula feeds, animal health and nutrition products, pet food and treats, 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 Business 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 5. Acquisitions

During the nine months ended September 30, 2021, the Company’s Nutrition segment acquired Golden Farm Production & Commerce Company Limited and a 75% majority stake in PetDine, Pedigree Ovens, The Pound Bakery, and NutraDine (“P4”), premier providers of private label pet treats and supplements, for an aggregate consideration of $501 million in cash. The acquisition of P4 advances ADM’s growth strategy by significantly expanding the Company’s pet treat and supplements capabilities. The consideration paid for these acquisitions was allocated as follows, subject to final measurement period adjustments:

			(In Millions)
Working capital			$	11
Property, plant, and equipment			85
Goodwill			360
Other intangible assets			195
Temporary equity - redeemable noncontrolling interest			(150)
Aggregate cash consideration			$	501

The Company has the option to acquire the remaining 25% interest in P4 from December 31, 2023 to March 31, 2025, based on a fixed multiple of earnings before interest, taxes, depreciation, and amortization for the twelve months prior to the exercise of this option. The noncontrolling interest holders also have the option to put the 25% interest to the Company on the same terms. The Company records the 25% remaining interest in temporary equity - redeemable noncontrolling interest.

Goodwill recorded in connection with the acquisitions is primarily attributable to synergies expected to arise after the Company’s acquisition of the businesses, of which, $358 million is expected to be deductible for tax purposes.

Nutrition segment results include the post-acquisition financial results of these acquisitions which were immaterial.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 6. 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 September 30, 2021 and December 31, 2020.

			Fair Value Measurements at September 30, 2021
			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			$	—					$	4,912					$	2,502					$	7,414
Unrealized derivative gains:
Commodity contracts			—						963						485						1,448
Foreign currency contracts			—						337						—						337
Interest rate contracts			—						58						—						58
Cash equivalents			326						—						—						326
Segregated investments			1,099						—						—						1,099
Total Assets			$	1,425					$	6,270					$	2,987					$	10,682
Liabilities:
Unrealized derivative losses:
Commodity contracts			$	—					$	904					$	703					$	1,607
Foreign currency contracts			—						256						—						256
Interest rate contracts			—						1						—						1
Debt conversion option			—						—						17						17
Inventory-related payables			—						735						15						750
Total Liabilities			$	—					$	1,896					$	735					$	2,631

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 6. Fair Value Measurements (Continued)

			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 currency 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 currency 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

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 the 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)

(Unaudited)

Note 6. 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, or 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 in Level 1.

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 debt conversion option is the equity-linked embedded derivative related to the exchangeable bonds issued in August 2020. 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).

The following table presents a rollforward of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended September 30, 2021.

			Level 3 Fair Value Asset Measurements at
			September 30, 2021
			Inventories Carried at Market						Commodity Derivative Contracts Gains						Total Assets
			(In millions)
Balance, June 30, 2021			$	2,824					$	551					$	3,375
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*			70						288						358
Purchases			7,351						—						7,351
Sales			(7,346)						—						(7,346)
Settlements			—						(311)						(311)
Transfers into Level 3			205						34						239
Transfers out of Level 3			(602)						(77)						(679)
Ending balance, September 30, 2021			$	2,502					$	485					$	2,987

• Includes increase in unrealized gains of $435 million relating to Level 3 assets still held at September 30, 2021.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 6. Fair Value Measurements (Continued)

The following table presents a rollforward of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended September 30, 2021.

			Level 3 Fair Value Liability Measurements at
			September 30, 2021
			Inventory- related Payables						Commodity Derivative Contracts Losses												Debt Conversion Option						Total Liabilities
			(In millions)
Balance, June 30, 2021			$	38					$	1,037											$	24					$	1,099
Total increase (decrease) in net realized/unrealized losses included in cost of products sold and interest expense*			3						310												(7)						306
Purchases			1						—												—						1
Sales			(27)						—												—						(27)
Settlements			—						(654)												—						(654)
Transfers into Level 3			—						60												—						60
Transfers out of Level 3			—						(50)												—						(50)
Ending balance, September 30, 2021			$	15					$	703											$	17					$	735

• Includes increase in unrealized losses of $313 million relating to Level 3 liabilities still held at September 30, 2021.

The following table presents a rollforward of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended September 30, 2020.

			Level 3 Fair Value Asset Measurements at
			September 30, 2020
			Inventories Carried at Market						Commodity Derivative Contracts Gains						Total Assets
			(In millions)
Balance, June 30, 2020			$	1,399					$	442					$	1,841
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*			258						286						544
Purchases			3,181						—						3,181
Sales			(2,703)						—						(2,703)
Settlements			—						(96)						(96)
Transfers into Level 3			290						13						303
Transfers out of Level 3			(333)						(65)						(398)
Ending balance, September 30, 2020			$	2,092					$	580					$	2,672

• Includes increase in unrealized gains of $392 million relating to Level 3 assets still held at September 30, 2020.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 6. Fair Value Measurements (Continued)

The following table presents a rollforward of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended September 30, 2020.

			Level 3 Fair Value Liability Measurements at
			September 30, 2020
			Inventory- related Payables						Commodity Derivative Contracts Losses						Debt Conversion Option						Total Liabilities
			(In millions)
Balance, June 30, 2020			$	14					$	363					$	—					$	377
Total increase (decrease) in net realized/unrealized losses included in cost of products sold and interest expense*			(3)						618						15						630
Purchases			3						—						17						20
Sales			(7)						—						—						(7)
Settlements			—						(188)						—						(188)
Transfers into Level 3			—						24						—						24
Transfers out of Level 3			—						(21)						—						(21)
Ending balance, September 30, 2020			$	7					$	796					$	32					$	835

• Includes increase in unrealized losses of $635 million relating to Level 3 liabilities still held at September 30, 2020.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 6. Fair Value Measurements (Continued)

The following table presents a rollforward of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended September 30, 2021.

			Level 3 Fair Value Asset Measurements at
			September 30, 2021
			Inventories Carried at Market						Commodity Derivative Contracts Gains						Total Assets
			(In millions)
Balance, December 31, 2020			$	2,183					$	859					$	3,042
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*			875						804						1,679
Purchases			20,899						—						20,899
Sales			(21,334)						—						(21,334)
Settlements			—						(1,134)						(1,134)
Transfers into Level 3			1,131						79						1,210
Transfers out of Level 3			(1,252)						(123)						(1,375)
Ending balance, September 30, 2021			$	2,502					$	485					$	2,987

• Includes increase in unrealized gains of $1.7 billion relating to Level 3 assets still held at September 30, 2021.

The following table presents a rollforward of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended September 30, 2021.

			Level 3 Fair Value Liability Measurements at
			September 30, 2021
			Inventory- related Payables						Commodity Derivative Contracts Losses												Debt Conversion Option						Total Liabilities
			(In millions)
Balance, December 31, 2020			$	11					$	918											$	34					$	963
Total increase (decrease) in net realized/unrealized losses included in cost of products sold and interest expense*			3						1,372												(17)						1,358
Purchase			30						—												—						30
Sales			(29)						—												—						(29)
Settlements			—						(1,667)												—						(1,667)
Transfers into Level 3			—						284												—						284
Transfers out of Level 3			—						(204)												—						(204)
Ending balance, September 30, 2021			$	15					$	703											$	17					$	735

• Includes increase in unrealized losses of $1.4 billion relating to Level 3 liabilities still held at September 30, 2021.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 6. Fair Value Measurements (Continued)

The following table presents a rollforward of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended September 30, 2020.

			Level 3 Fair Value Asset Measurements at
			September 30, 2020
			Inventories Carried at Market						Commodity Derivative Contracts Gains						Total Assets
			(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*			626						732						1,358
Purchases			9,600						—						9,600
Sales			(9,838)						—						(9,838)
Settlements			—						(331)						(331)
Transfers into Level 3			290						57						347
Transfers out of Level 3			(63)						(79)						(142)
Ending balance, September 30, 2020			$	2,092					$	580					$	2,672

• Includes increase in unrealized gains of $1.2 billion relating to Level 3 assets still held at September 30, 2020.

The following table presents a rollforward of liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended September 30, 2020.

			Level 3 Fair Value Liability Measurements at
			September 30, 2020
			Inventory- related Payables						Commodity Derivative Contracts Losses						Debt Conversion Option						Total Liabilities
			(In millions)
Balance, December 31, 2019			$	27					$	199					$	—					$	226
Total increase (decrease) in net realized/unrealized losses included in cost of products sold*			1						1,070						15						1,086
Purchases			11						—						17						28
Sales			(32)						—						—						(32)
Settlements			—						(521)						—						(521)
Transfers into Level 3			—						79						—						79
Transfers out of Level 3			—						(31)						—						(31)
Ending balance, September 30, 2020			$	7					$	796					$	32					$	835

• Includes increase in unrealized losses of $1.1 billion relating to Level 3 liabilities still held at September 30, 2020.

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.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 6. 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 determined 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 September 30, 2021 and December 31, 2020. 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 September 30, 2021 is a weighted average 33.3% of the total price for assets and 14.5% of the total price for liabilities.

			Weighted Average % of Total Price
			September 30, 2021												December 31, 2020
Component Type			Assets						Liabilities						Assets						Liabilities
Inventories and Related Payables
Basis			33.3		%				14.5		%				4.3		%				13.7		%
Transportation cost			16.2		%				—		%				10.6		%				—		%
Commodity Derivative Contracts
Basis			25.6		%				33.5		%				28.3		%				0.7		%
Transportation cost			3.7		%				3.4		%				1.9		%				1.3		%

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 7. Derivative Instruments and 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 product inventories, 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)

(Unaudited)

Note 7. Derivative Instruments and Hedging Activities (Continued)

The following table sets forth the fair value of derivatives not designated as hedging instruments as of September 30, 2021 and December 31, 2020.

			September 30, 2021												December 31, 2020
			Assets						Liabilities						Assets						Liabilities
			(In millions)
Foreign Currency Contracts			$	328					$	139					$	283					$	270
Commodity Contracts			1,448						1,607						2,764						2,034
Debt Conversion Option			—						17						—						34
Total			$	1,776					$	1,763					$	3,047					$	2,338

The following tables set 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 three and nine months ended September 30, 2021 and 2020.

															Other expense (income) - net
									Cost of									Interest
(In millions)			Revenues						products sold									expense
Three Months Ended September 30, 2021
Consolidated Statement of Earnings			$	20,340					$	19,014					$	20					$	61
Pre-tax gains (losses) on:
Foreign Currency Contracts			$	13					$	(92)					$	62					$	—
Commodity Contracts			—						214						—						—
Debt Conversion Option			—						—						—						7
Total gain (loss) recognized in earnings			$	13					$	122					$	62					$	7					$	204
Three Months Ended September 30, 2020
Consolidated Statement of Earnings			$	15,126					$	14,084					$	282					$	100
Pre-tax gains (losses) on:
Foreign Currency Contracts			$	8					$	(77)					$	(85)					$	—
Commodity Contracts			—						(272)						—						—
Debt Conversion Option			—						—						—						(15)
Total gain (loss) recognized in earnings			$	8					$	(349)					$	(85)					$	(15)					$	(441)

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 7. Derivative Instruments and Hedging Activities (Continued)

															Other expense (income) - net
									Cost of									Interest
(In millions)			Revenues						products sold									expense
Nine Months Ended September 30, 2021
Consolidated Statement of Earnings			$	62,159					$	57,822					$	36					$	188
Pre-tax gains (losses) on:
Foreign Currency Contracts			$	—					$	(140)					$	137					$	—
Commodity Contracts			—						(1,241)						—						—
Debt Conversion Option			—						—						—						17
Total gain (loss) recognized in earnings			$	—					$	(1,381)					$	137					$	17					$	(1,227)
Nine Months Ended September 30, 2020
Consolidated Statement of Earnings			$	46,377					$	43,276					$	202					$	270
Pre-tax gains (losses) on:
Foreign Currency Contracts			$	54					$	(738)					$	(13)					$	—
Commodity Contracts			—						321						55						—
Debt Conversion Option			—						—						—						(15)
Total gain (loss) recognized in earnings			$	54					$	(417)					$	42					$	(15)					$	(336)

Changes in the market value of inventories of certain merchandisable agricultural product inventories, 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 and Net Investment Hedging Strategies

The Company had certain derivatives designated as cash flow and net investment hedges as of September 30, 2021 and December 31, 2020.

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 as of September 30, 2021 and December 31, 2020, and foreign exchange forwards with an aggregate notional amount of $1.7 billion and $1.8 billion as of September 30, 2021 and December 31, 2020, respectively.

As of September 30, 2021 and December 31, 2020, the Company had after-tax losses of $82 million and $202 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.

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.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 7. Derivative Instruments and Hedging Activities (Continued)

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 underlying commodity trade flows are also recorded in revenues. As of September 30, 2021 and December 31, 2020, the Company had interest rate swaps maturing on various dates with aggregate notional amounts of $0.2 billion and $3.3 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. As of September 30, 2021 and December 31, 2020, the Company executed swap locks maturing on various dates with an aggregate notional amount of $400 million and $550 million, respectively.

As of September 30, 2021 and December 31, 2020, the Company had after-tax gains of $44 million and $31 million in AOCI, respectively, related to the interest rate swaps and the swap locks. The Company expects to recognize this amount in its consolidated statements of earnings during the life of the debt 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 September 30, 2021 and December 31, 2020, the Company had after-tax gains of $371 million and $164 million in AOCI, respectively, related to gains and losses from these programs. The Company expects to recognize $371 million of the September 30, 2021 after-tax gains in its consolidated statements 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. From April 2020 to March 2021, the Company temporarily idled dry mill assets and was grinding approximately 56 million bushels of corn per month. In April 2021, the Company resumed ethanol production at its two corn dry mill facilities. During the past 12 months, the Company hedged between 23% and 34% of its monthly grind. At September 30, 2021, the Company had designated hedges representing between 3% and 31% 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 and as of September 30, 2021, the Company had no hedges related to ethanol sales under these programs.

The Company uses futures and options contracts to hedge the purchase price of the anticipated volumes of soybeans to be purchased and processed in a future month for certain of its U.S. soybean crush facilities, subject to certain program limits. The Company also uses futures or options contracts to hedge the sales prices of the anticipated soybean meal and soybean oil sales proportionate to the soybean crushing process at these facilities, subject to certain program limits. 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. At September 30, 2021, the Company had 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 Company uses futures and OTC swaps to hedge the purchase price of anticipated volumes of natural gas consumption in a future month for certain of its facilities in North America and Europe, subject to certain program limits. During the past 12 months, the Company hedged between 20% and 94% of the anticipated monthly natural gas consumption at the designated facilities. At September 30, 2021, the Company had designated hedges representing between 10% and 96% of the anticipated monthly natural gas consumption over the next 12 months.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 7. Derivative Instruments and Hedging Activities (Continued)

The following table sets forth the fair value of derivatives designated as hedging instruments as of September 30, 2021 and December 31, 2020.

			September 30, 2021												December 31, 2020
			Assets						Liabilities						Assets						Liabilities
			(In millions)
Foreign Currency Contracts			$	9					$	117					$	—					$	265
Interest Rate Contracts			58						1						61						15
Total			$	67					$	118					$	61					$	280

The following table sets forth the pre-tax gains (losses) on derivatives designated as hedging instruments that have been included in the consolidated statements of earnings for the three and nine months ended September 30, 2021 and 2020.

									Cost of products sold
(In millions)			Revenues
Three Months Ended September 30, 2021
Consolidated Statement of Earnings			$	20,340					$	19,014
Effective amounts recognized in earnings
Pre-tax gains (losses) on:
Commodity Contracts			$	—					$	122
Total gain (loss) recognized in earnings			$	—					$	122																	$	122
Three Months Ended September 30, 2020
Consolidated Statement of Earnings			$	15,126					$	14,084
Effective amounts recognized in earnings
Pre-tax gains (losses) on:
Commodity Contracts			$	1					$	79
Interest Contracts			(14)						—
Total gain (loss) recognized in earnings			$	(13)					$	79																	$	66

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 7. Derivative Instruments and Hedging Activities (Continued)

									Cost of products sold						Interest expense
(In millions)			Revenues
Nine Months Ended September 30, 2021
Consolidated Statement of Earnings			$	62,159					$	57,822					$	188
Effective amounts recognized in earnings
Pre-tax gains (losses) on:
Commodity Contracts			$	—					$	450					$	—
Interest Contracts			(15)						—						—
Total gain (loss) recognized in earnings			$	(15)					$	450					$	—											$	435
Nine Months Ended September 30, 2020
Consolidated Statement of Earnings			$	46,377					$	43,276					$	270
Effective amounts recognized in earnings
Pre-tax gains (losses) on:
Commodity Contracts			$	9					$	19					$	—
Interest Contracts			(55)						—						(8)
Total gain (loss) recognized in earnings			$	(46)					$	19					$	(8)											$	(35)

Other Net Investment Hedging Strategies

The Company has designated €1.8 billion and €1.5 billion of its outstanding long-term debt and commercial paper borrowings at September 30, 2021 and December 31, 2020, respectively, as hedges of its net investment in a foreign subsidiary. As of September 30, 2021 and December 31, 2020, the Company had after-tax gains of $11 million and losses of $87 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)

(Unaudited)

Note 8. Other Current Assets

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

			September 30,						December 31,
			2021						2020
			(In millions)
Unrealized gains on derivative contracts			$	1,843					$	3,108
Margin deposits and grain accounts			580						500
Customer omnibus receivable			1,075						860
Financing receivables - net (1)			154						297
Insurance premiums receivable			17						35
Prepaid expenses			325						290
Biodiesel tax credit			40						101
Tax receivables			765						680
Non-trade receivables (2)			270						218
Other current assets			151						135
			$	5,220					$	6,224

(1) The Company provides financing to certain suppliers, primarily Brazilian farmers, to finance a portion of the suppliers’ production costs. The amounts are reported net of allowances of $3 million and $4 million at September 30, 2021 and December 31, 2020, respectively. Interest earned on financing receivables of $2 million and $8 million for the three and nine months ended September 30, 2021, respectively and $4 million and $15 million for the three and nine months ended September 30, 2020, respectively, is included in investment income in the consolidated statements of earnings.

(2) Non-trade receivables included $28 million and $40 million of reinsurance recoverables as of September 30, 2021 and December 31, 2020, respectively.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 9. Accrued Expenses and Other Payables

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

			September 30,						December 31,
			2021						2020
			(In millions)
Unrealized losses on derivative contracts			$	1,881					$	2,584
Accrued compensation			421						396
Income tax payable			132						41
Other taxes payable			154						127
Insurance claims payable			207						238
Contract liability			374						626
Other accruals and payables			952						931
			$	4,121					$	4,943

Note 10. Debt and Financing Arrangements

On September 10, 2021, the Company issued $750 million aggregate principal amount of 2.700% Notes due September 15, 2051 (the “Notes”). Net proceeds before expenses were $732 million.

In September 2021, the Company used the proceeds of the Notes to redeem $500 million aggregate principal amount of 2.750% notes due March 27, 2025 and recognized a debt extinguishment charge of $36 million in the quarter ended September 30, 2021.

On March 25, 2021, the Company issued, in a private placement transaction, €500 million aggregate principal amount of Fixed-to-Floating Rate Senior Notes due September 25, 2022.

At September 30, 2021, the fair value of the Company’s long-term debt exceeded the carrying value by $1.7 billion, as estimated using quoted market prices (a Level 2 measurement under applicable accounting standards).

At September 30, 2021, the Company had lines of credit, including the accounts receivable securitization programs described below, totaling $12.4 billion, of which $10.5 billion was unused. Of the Company’s total lines of credit, $6.5 billion supported the combined U.S. and European commercial paper borrowing programs, against which there was no commercial paper outstanding at September 30, 2021.

The Company has accounts receivable securitization programs (the “Programs”). The Programs provide the Company with up to $2.1 billion in funding resulting from the sale of accounts receivable with $0.6 billion unused capacity as of September 30, 2021 (see Note 16 for more information about the Programs).

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 11. Income Taxes

The Company’s effective tax rates for the three and nine months ended September 30, 2021 were 18.4% and 15.8%, respectively, compared to a benefit of 13.0% and an expense of 3.4% for the three and nine months ended September 30, 2020, respectively. The low rate in the three months September 30, 2020 included the effects of the significant early debt retirement, the sale of a portion of the Company’s shares in Wilmar and changes in the forecasted geographical mix of pretax earnings on the 2020 annual effective tax rate in that period. The favorable tax rate in the nine months ended September 30, 2020 was due to the impact of U.S. tax credits signed into law in December 2019, including a $73 million discrete tax benefit related to 45G railroad maintenance expenses, and changes in the forecasted geographical mix of pretax earnings.

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 tax 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.

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 September 30, 2021, these assessments totaled $9 million in tax and $39 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 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 $62 million in tax and $35 million in interest (adjusted for variation in currency exchange rates as of September 30, 2021). In the second quarter of 2021, Argentine tax authorities initiated criminal tax proceedings related to the Argentine tax matters. 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 September 30, 2021, this assessment was $94 million in tax and $33 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. On April 23, 2020, the court issued an unfavorable ruling and in October 2020, assigned a third party expert to establish a valuation by early 2021. During the second quarter of 2021, the third party expert issued a final valuation. The Company expects the court to issue a ruling on this matter in the first quarter of 2022. 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 reviewed the valuation and evaluated the underlying transactions and has concluded that the amount of gain recognized on the reorganization for tax purposes was appropriate. As of September 30, 2021, 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.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 12. Accumulated Other Comprehensive Income

The following tables set forth the changes in AOCI by component for the three and nine months ended September 30, 2021 and the reclassifications out of AOCI for the three and nine months ended September 30, 2021 and 2020:

			Three months ended September 30, 2021
			Foreign Currency Translation Adjustment						Deferred Gain (Loss) on Hedging Activities						Pension Liability Adjustment						Unrealized Gain (Loss) on Investments						Total
			(In millions)
Balance at June 30, 2021			$	(2,143)					$	328					$	(303)					$	(3)					$	(2,121)
Other comprehensive income (loss) before reclassifications			(149)						197						5						6						59
Gain (loss) on net investment hedges			126						—						—						—						126
Amounts reclassified from AOCI			—						(122)						8						—						(114)
Tax effect			(30)						(1)						5						—						(26)
Net of tax amount			(53)						74						18						6						45
Balance at September 30, 2021			$	(2,196)					$	402					$	(285)					$	3					$	(2,076)
			Nine months ended September 30, 2021
			Foreign Currency Translation Adjustment						Deferred Gain (Loss) on Hedging Activities						Pension Liability Adjustment						Unrealized Gain (Loss) on Investments						Total
			(In millions)
Balance at December 31, 2020			$	(2,424)					$	185					$	(365)					$	—					$	(2,604)
Other comprehensive income (loss) before reclassifications			14						693						12						4						723
Gain (loss) on net investment hedges			292						—						—						—						292
Amounts reclassified from AOCI			—						(435)						90						—						(345)
Tax effect			(78)						(41)						(22)						(1)						(142)
Net of tax amount			228						217						80						3						528
Balance at September 30, 2021			$	(2,196)					$	402					$	(285)					$	3					$	(2,076)

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 12. Accumulated Other Comprehensive Income (Continued)

			Amount reclassified from AOCI
			Three months ended September 30,									Nine months ended September 30,						Affected line item in the consolidated statements of earnings
Details about AOCI components			2021			2020						2021			2020
			(In millions)
Deferred loss (gain) on hedging activities
			$	—		$	13					$	15		$	46		Revenues
			(122)			(79)						(450)			(19)			Cost of products sold
			—			—						—			8			Interest expense
			(122)			(66)						(435)			35			Total before tax
			29			19						108			5			Tax
			$	(93)		$	(47)					$	(327)		$	40		Net of tax
Pension liability adjustment
Amortization of defined benefit pension items:
Prior service credit			$	(4)		$	(9)					$	(71)		$	(25)		Other (income) expense-net
Actuarial losses			12			9						161			30			Other (income) expense-net
			8			—						90			5			Total before tax
			6			1						(20)			(10)			Tax
			$	14		$	1					$	70		$	(5)		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 13. Other (Income) Expense - Net

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

			Three Months Ended												Nine Months Ended
			September 30,												September 30,
			2021						2020						2021						2020
			(In millions)
Gains on sales of assets			$	(7)					$	(68)					$	(46)					$	(132)
Debt extinguishment charges			36						396						36						410
Pension settlement			1						—						83						—
Other – net			(10)						(46)						(37)						(76)
Other (Income) Expense - Net			$	20					$	282					$	36					$	202

Gains on sales of assets in the three and nine months ended September 30, 2021 consisted of gains on the sale of certain assets and disposals of individually insignificant assets in the ordinary course of business. Gains on sales of assets in the three and nine months ended September 30, 2020 included gains related to the sale of a portion of the Company's shares in Wilmar, which decreased the Company’s ownership interest from 24.8% as of December 31, 2019 to 22.1% as of September 30, 2020, and net gains on the sale of certain other assets, and disposals of individually insignificant assets in the ordinary course of business.

Debt extinguishment charges in the current period were related to the early redemption of $500 million aggregate principal amount of 2.750% notes due in March 2025. Debt extinguishment charges in the prior period were related to multiple early debt redemptions.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 13. Other (Income) Expense - Net (Continued)

Pension settlement in the three and nine months ended September 30, 2021 was related to the purchase of group annuity contracts that irrevocably transferred the future benefit obligations and annuity administration for certain salaried and hourly retirees and terminated vested participants under the Company’s ADM Retirement Plan and ADM Pension Plan for Hourly-Wage Employees to independent third parties.

Other - net in the three and nine months ended September 30, 2021 included the non-service components of net pension benefit income of $1 million and $12 million, respectively, foreign exchange gains, and other expense. Other - net in the three and nine months ended September 30, 2020 included the non-service components of net pension benefit income of $7 million and $28 million, respectively, and other income. Other - net in the nine months ended September 30, 2020 also included loss provisions related to the Company’s futures commission and brokerage business and foreign exchange gains.

Note 14. Segment Information

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.

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, and interest expense net of interest income. Corporate results also include revaluation gains and losses on cost method investments and the share of the results of equity investments in early-stage start-up companies that ADM Ventures has investments in.

For more information about the Company’s business segments, refer to Note 17 of “Notes to Consolidated Financial Statements” included in Item 8, “Financial Statements and Supplementary Data” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 14. Segment Information (Continued)

			Three Months Ended												Nine Months Ended
			September 30,												September 30,
(In millions)			2021						2020						2021						2020
Gross revenues
Ag Services and Oilseeds			$	16,410					$	13,415					$	51,148					$	40,196
Carbohydrate Solutions			3,227						2,335						9,132						7,102
Nutrition			1,755						1,481						5,172						4,471
Other Business			88						84						290						277
Intersegment elimination			(1,140)						(2,189)						(3,583)						(5,669)
Total gross revenues			$	20,340					$	15,126					$	62,159					$	46,377
Intersegment sales
Ag Services and Oilseeds			$	721					$	1,888					$	2,181					$	4,849
Carbohydrate Solutions			361						271						1,223						708
Nutrition			58						30						179						112
Total intersegment sales			$	1,140					$	2,189					$	3,583					$	5,669
Revenues from external customers
Ag Services and Oilseeds
Ag Services			$	9,899					$	7,352					$	32,860					$	22,930
Crushing			2,842						2,317						8,411						7,035
Refined Products and Other			2,948						1,858						7,696						5,382
Total Ag Services and Oilseeds			15,689						11,527						48,967						35,347
Carbohydrate Solutions
Starches and Sweeteners			1,972						1,574						5,563						4,769
Vantage Corn Processors			894						490						2,346						1,625
Total Carbohydrate Solutions			2,866						2,064						7,909						6,394
Nutrition
Human Nutrition			808						719						2,410						2,161
Animal Nutrition			889						732						2,583						2,198
Total Nutrition			1,697						1,451						4,993						4,359
Other Business			88						84						290						277
Total revenues from external customers			$	20,340					$	15,126					$	62,159					$	46,377

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 14. Segment Information (Continued)

			Three Months Ended												Nine Months Ended
			September 30,												September 30,
(In millions)			2021						2020						2021						2020
Segment operating profit
Ag Services and Oilseeds			$	618					$	436					$	1,965					$	1,271
Carbohydrate Solutions			213						246						855						509
Nutrition			176						147						531						447
Other Business			(5)						20						10						69
Specified Items:
Gains (losses) on sales of assets and businesses(1)			—						57						22						80
Impairment, restructuring, and settlement charges(2)			(2)						(2)						(133)						(60)
Total segment operating profit			1,000						904						3,250						2,316
Corporate			(347)						(704)						(948)						(1,189)
Earnings before income taxes			$	653					$	200					$	2,302					$	1,127

(1) Current year-to-date gains consisted of gains on the sale of certain assets. Prior quarter and year-to-date gains consisted of a gain on the sale of a portion of the Company’s shares in Wilmar and certain other assets.

(2) Current quarter charges were related to restructuring. Current year-to-date charges related to impairment of certain long-lived assets, restructuring, and a legal settlement. Prior quarter and year-to-date charges related to the impairment of certain long-lived assets, restructuring, and a settlement.

Note 15. Asset Impairment, Exit, and Restructuring Costs

Asset impairment, exit, and restructuring costs in the three months ended September 30, 2021 consisted of $2 million of restructuring charges, presented as specified items within segment operating profit. Asset impairment, exit, and restructuring costs in the nine months ended September 30, 2021 consisted of $54 million of impairments related to certain long-lived assets and $26 million of restructuring charges, presented as specified items within segment operating profit, and $4 million of restructuring charges in Corporate.

Long-lived assets held for sale with a net book value of $0.1 billion were not considered impaired as of September 30, 2021.

Asset impairment, exit, and restructuring costs in the three months ended September 30, 2020 consisted of individually insignificant long-lived asset impairments of $3 million and restructuring charges of $1 million. Asset impairment, exit, and restructuring costs in the nine months ended September 30, 2020 consisted of $50 million of impairments related to certain intangible and other long-lived assets and $11 million of restructuring charges.

Note 16. Sale of Accounts Receivable

The Company has an accounts receivable securitization program (the “First Program”) with certain commercial paper conduit purchasers and committed purchasers (collectively, the “First Purchasers”). Under the First 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 First 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 First 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 $1.5 billion, an increase from $1.2 billion as of December 31, 2020, for the accounts receivable transferred. The First Program terminates on May 18, 2022, unless extended.

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Note 16. 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 February 14, 2022, 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 has no retained interests in the transferred receivables, other than collection and administrative responsibilities. At September 30, 2021 and December 31, 2020, 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 insignificant cost of servicing the receivables sold.

As of September 30, 2021 and December 31, 2020, the fair value of trade receivables transferred to the Purchasers under the Programs and derecognized from the Company’s consolidated balance sheets was $1.5 billion and $1.6 billion, respectively. Total receivables sold were $36.7 billion and $24.9 billion for the nine months ended September 30, 2021 and 2020, respectively. Cash collections from customers on receivables sold were $34.2 billion and $24.2 billion for the nine months ended September 30, 2021 and 2020, respectively. Of the amount in the nine months ended September 30, 2020, $6.7 billion were cash collections on the deferred receivables consideration reflected as cash inflows from investing activities for the nine months ended September 30, 2020. As of September 30, 2021 and December 31, 2020, receivables pledged as collateral to the Purchasers were $1.1 billion and $0.4 billion, respectively.

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 resulted in an expense for the loss on sale of $2 million and $8 million for the three and nine months ended September 30, 2021, respectively, and $2 million and $7 million for the three and nine months ended September 30, 2020, 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 reflected 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)

(Unaudited)

Note 17. Subsequent Events

In October 2021, the Company executed acquisition and investment agreements with a total aggregate consideration of approximately $0.7 billion. In addition, the Company executed an agreement to sell its ethanol production complex in Peoria, Illinois with a book value of approximately $0.1 billion, which will have an immaterial impact on operating results. These transactions are expected to close before December 31, 2021, subject to the satisfaction of customary closing conditions and regulatory approval.