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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.  20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-44


ARCHER-DANIELS-MIDLAND COMPANY
(Exact name of registrant as specified in its charter)
Delaware41-0129150
(State or other jurisdiction of incorporation or organization)(I. R. S. Employer Identification No.)
 
77 West Wacker Drive, Suite 4600 
Chicago,Illinois 60601
(Address of principal executive offices) (Zip Code)
(312) 634-8100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, no par valueADMNYSE
1.000% Notes due 2025NYSE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.         Yes    No .
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes    No  .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated FilerEmerging Growth Company
Non-accelerated FilerSmaller Reporting Company




If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes    No  .
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock, no par value – 558,702,110 shares
(April 27, 2021)

SAFE HARBOR STATEMENT

This Form 10-Q contains forward-looking information within the meaning of the Private Securities Litigation Reform Act of 1995 that is subject to risks and uncertainties that could cause actual results to differ materially from those projected, expressed, or implied by such forward-looking information.  Risks and uncertainties that could cause or contribute to such differences include, but are not limited to, those discussed in Item 1A, “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2020, as may be updated in our subsequent Quarterly Reports on Form 10-Q. To the extent permitted under applicable law, the Company assumes no obligation to update any forward-looking statements as a result of new information or future events.







PART I - FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS
Archer-Daniels-Midland Company

Consolidated Statements of Earnings
(Unaudited)
Three Months Ended
March 31,
 20212020
(In millions, except per share amounts)
Revenues$18,893 $14,970 
Cost of products sold17,345 14,019 
Gross Profit1,548 951 
Selling, general, and administrative expenses749 664 
Asset impairment, exit, and restructuring costs59 41 
Interest expense — 
Equity in (earnings) losses of unconsolidated affiliates(125)(140)
Interest income(13)(40)
Interest expense87 83 
Other (income) expense – net(33)(32)
Earnings Before Income Taxes824 375 
Income tax (benefit) expense131 (16)
Net Earnings Including Noncontrolling Interests693 391 
Less: Net earnings attributable to noncontrolling interests4  
Net Earnings Attributable to Controlling Interests$689 $391 
Average number of shares outstanding – basic563 563 
Average number of shares outstanding – diluted564 564 
Basic earnings per common share$1.22 $0.69 
Diluted earnings per common share$1.22 $0.69 
Dividends per common share$0.37 $0.36 

See notes to consolidated financial statements.



3


Archer-Daniels-Midland Company

Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
Three Months Ended
March 31,
20212020
(In millions)
Net earnings including noncontrolling interests$693 $391 
Other comprehensive income (loss):
Foreign currency translation adjustment294 (241)
Tax effect(56)(42)
Net of tax amount238 (283)
Pension and other postretirement benefit liabilities adjustment18 4 
Tax effect(5)(12)
Net of tax amount13 (8)
Deferred gain (loss) on hedging activities101 (82)
Tax effect(25)14 
Net of tax amount76 (68)
Unrealized gain (loss) on investments(1)6 
Tax effect (2)
Net of tax amount(1)4 
Other comprehensive income (loss)326 (355)
Comprehensive income (loss) including noncontrolling interests1,019 36 
Less: Comprehensive income (loss) attributable to noncontrolling interests4 4 
Comprehensive income (loss) attributable to controlling interests$1,015 $32 

See notes to consolidated financial statements.




4


Archer-Daniels-Midland Company

Consolidated Balance Sheets
(In millions)March 31, 2021December 31, 2020
 (Unaudited)
Assets  
Current Assets  
Cash and cash equivalents$694 $666 
Segregated cash and investments6,403 5,890 
Trade receivables3,269 2,793 
Inventories12,764 11,713 
Other current assets6,154 6,224 
Total Current Assets29,284 27,286 
Investments and Other Assets  
Investments in and advances to affiliates4,998 4,913 
Goodwill and other intangible assets5,249 5,413 
Right of use assets1,071 1,102 
Other assets1,077 1,054 
Total Investments and Other Assets12,395 12,482 
Property, Plant, and Equipment  
Land and land improvements534 545 
Buildings5,500 5,522 
Machinery and equipment19,165 19,154 
Construction in progress1,097 1,118 
 26,296 26,339 
Accumulated depreciation(16,497)(16,388)
Net Property, Plant, and Equipment9,799 9,951 
Total Assets$51,478 $49,719 
Liabilities, Temporary Equity, and Shareholders’ Equity  
Current Liabilities  
Short-term debt$2,763 $2,042 
Trade payables4,011 4,474 
Payables to brokerage customers7,028 6,460 
Accrued expenses and other payables4,448 4,943 
Current lease liabilities262 261 
Current maturities of long-term debt 2 
Total Current Liabilities18,512 18,182 
Long-Term Liabilities  
Long-term debt8,437 7,885 
Deferred income taxes1,385 1,302 
Non-current lease liabilities830 863 
Other1,371 1,391 
Total Long-Term Liabilities12,023 11,441 
Temporary Equity - Redeemable noncontrolling interest82 74 
Shareholders’ Equity  
Common stock2,858 2,824 
Reinvested earnings20,261 19,780 
Accumulated other comprehensive income (loss)(2,278)(2,604)
Noncontrolling interests20 22 
Total Shareholders’ Equity20,861 20,022 
Total Liabilities, Temporary Equity, and Shareholders’ Equity$51,478 $49,719 
See notes to consolidated financial statements.
5


Archer-Daniels-Midland Company

Consolidated Statements of Cash Flows
(Unaudited)
(In millions)Three Months Ended
March 31,
 20212020
Operating Activities  
Net earnings including noncontrolling interests$693 $391 
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities  
Depreciation and amortization249 245 
Asset impairment charges31 44 
Deferred income taxes(7)64 
Equity in earnings of affiliates, net of dividends(81)(115)
Stock compensation expense76 51 
Deferred cash flow hedges102 (82)
Gains on sales of assets and businesses(11) 
Other – net150 241 
Changes in operating assets and liabilities  
Segregated investments666 17 
Trade receivables(515)(251)
Inventories(1,138)182 
Deferred consideration in securitized receivables (2,045)
Other current assets413 (436)
Trade payables(441)(260)
Payables to brokerage customers561 811 
Accrued expenses and other payables(450)488 
Total Operating Activities298 (655)
Investing Activities  
Purchases of property, plant, and equipment(174)(194)
Proceeds from sales of assets and businesses14 7 
Net assets of businesses acquired (8)
Proceeds from sales of marketable securities1 5 
Investments in and advances to affiliates(4)(3)
Distributions from affiliates5  
Investments in retained interest in securitized receivables (1,271)
Proceeds from retained interest in securitized receivables 3,316 
Other – net(11)1 
Total Investing Activities(169)1,853 
Financing Activities  
Long-term debt borrowings593 1,481 
Long-term debt payments (1)
Net borrowings (payments) under lines of credit agreements729 2,188 
Share repurchases (112)
Cash dividends(208)(203)
Other – net(37)(11)
Total Financing Activities1,077 3,342 
Increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents1,206 4,540 
Cash, cash equivalents, restricted cash, and restricted cash equivalents - beginning of period4,646 2,990 
Cash, cash equivalents, restricted cash, and restricted cash equivalents - end of period$5,852 $7,530 
Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the consolidated balance sheets
Cash and cash equivalents$694 $4,734 
Restricted cash and restricted cash equivalents included in segregated cash and investments5,158 2,796 
Total cash, cash equivalents, restricted cash, and restricted cash equivalents$5,852 $7,530 
Supplemental Disclosure of Noncash Investing Activity:
Retained interest in securitized receivables$ $2,105 

See notes to consolidated financial statements.
6


Archer-Daniels-Midland-Company

Consolidated Statements of Shareholders’ Equity
(Unaudited)
Common StockReinvested
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interests
Total
Shareholders’
Equity
(In millions, except per share amounts)SharesAmount
Balance, December 31, 2020556 $2,824 $19,780 $(2,604)$22 $20,022 
Comprehensive income      
Net earnings 689  4  
Other comprehensive income (loss)   326   
Total comprehensive income     1,019 
Dividends paid - $0.37 per share  (208)  (208)
Stock compensation expense3 76    76 
Other (42) (6)(48)
Balance, March 31, 2021559 $2,858 $20,261 $(2,278)$20 $20,861 
Balance, December 31, 2019557 $2,655 $18,958 $(2,405)$17 $19,225 
Impact of ASC 326 (see Note 1)(8)(8)
Balance, January 1, 2020557 2,655 18,950 (2,405)17 19,217 
Comprehensive income      
Net earnings 391    
Other comprehensive income (loss)   (359)4  
Total comprehensive income     36 
Dividends paid - $0.36 per share  (203)  (203)
Share repurchases(3)(112)(112)
Stock compensation expense1 51    51 
Other (16)  3 (13)
Balance, March 31, 2020555 $2,690 $19,026 $(2,764)$24 $18,976 
See notes to consolidated financial statements.
7


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 three months ended March 31, 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 $98 million and $100 million at March 31, 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 $4 million and $11 million in the three months ended March 31, 2021 and 2020, respectively.


8

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 three months ended March 31, 2020 with no impact to the statement of cash flows.
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.

Note 4.    Revenues

Revenue Recognition

The Company principally generates revenue from merchandising and transporting agricultural commodities, and manufactured 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 $104 million and $117 million for the three months ended March 31, 2021 and 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).


9

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.    Revenues (Continued)

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 $555 million and $626 million as of March 31, 2021 and December 31, 2020, respectively, were recorded in accrued expenses and other payables in the consolidated balance sheets. Contract liabilities recognized as revenues for the three months ended March 31, 2021 and 2020 were $282 million.

Disaggregation of Revenues

The following tables present revenue disaggregated by timing of recognition and major product lines for the three months ended March 31, 2021 and 2020.

Three Months Ended March 31, 2021
Topic 606 Revenue
Topic 815(1)
Total
Point in TimeOver TimeTotalRevenueRevenues
(In millions)
Ag Services and Oilseeds
Ag Services$662 $104 $766 $9,380 $10,146 
Crushing124  124 2,618 2,742 
Refined Products and Other512  512 1,607 2,119 
Total Ag Services and Oilseeds1,298 104 1,402 13,605 15,007 
Carbohydrate Solutions
Starches and Sweeteners1,361  1,361 384 1,745 
Vantage Corn Processors478  478  478 
Total Carbohydrate Solutions1,839  1,839 384 2,223 
Nutrition
Human Nutrition754  754  754 
Animal Nutrition809  809  809 
Total Nutrition1,563  1,563  1,563 
Other Business100  100  100 
Total Revenues$4,800 $104 $4,904 $13,989 $18,893 






10

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.    Revenues (Continued)

Three Months Ended March 31, 2020
Topic 606 Revenue
Topic 815(1)
Total
Point in TimeOver TimeTotalRevenueRevenues
(In millions)
Ag Services and Oilseeds
Ag Services$851 $117 $968 $5,958 $6,926 
Crushing180 — 180 2,133 2,313 
Refined Products and Other518 — 518 1,322 1,840 
Total Ag Services and Oilseeds1,549 117 1,666 9,413 11,079 
Carbohydrate Solutions
Starches and Sweeteners1,240 — 1,240 410 1,650 
Vantage Corn Processors666 — 666 — 666 
Total Carbohydrate Solutions1,906 — 1,906 410 2,316 
Nutrition
Human Nutrition719 — 719 — 719 
Animal Nutrition752 — 752 — 752 
Total Nutrition1,471 — 1,471 — 1,471 
Other Business104 — 104 — 104 
Total Revenues$5,030 $117 $5,147 $9,823 $14,970 

(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.




11

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, 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.    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 March 31, 2021 and December 31, 2020.
 Fair Value Measurements at March 31, 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$ $5,933 $3,070 $9,003 
Unrealized derivative gains:    
Commodity contracts 1,590 684 2,274 
Foreign currency contracts 215  215 
Interest rate contracts 130  130 
Cash equivalents302   302 
Segregated investments995   995 
Total Assets$1,297 $7,868 $3,754 $12,919 
Liabilities:    
Unrealized derivative losses:    
Commodity contracts$ $1,165 $648 $1,813 
Foreign currency contracts 302 11 313 
Interest rate contracts 2  2 
Debt conversion option  54 54 
Inventory-related payables 1,151 21 1,172 
Total Liabilities$ $2,620 $734 $3,354 
12

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 5.    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 equivalents297   297 
Marketable securities1   1 
Segregated investments1,067   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.

13

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 5.    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 as 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 March 31, 2021.

 Level 3 Fair Value Asset Measurements at
March 31, 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*
730 243 973 
Purchases6,385  6,385 
Sales(6,632) (6,632)
Settlements (428)(428)
Transfers into Level 3516 23 539 
Transfers out of Level 3(112)(13)(125)
Ending balance, March 31, 2021$3,070 $684 $3,754 

* Includes increase in unrealized gains of $847 million relating to Level 3 assets still held at March 31, 2021.
14

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 5.    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 March 31, 2021.

Level 3 Fair Value Liability Measurements at
 March 31, 2021
 Inventory-
 related
 Payables
Commodity
Derivative
Contracts
Losses
Foreign Currency Derivative Contracts LossesDebt 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*
 381  20 401 
Purchases12    12 
Sales(2)   (2)
Settlements (566)  (566)
Transfers into Level 3 54 11  65 
Transfers out of Level 3 (139)  (139)
Ending balance, March 31, 2021$21 $648 $11 $54 $734 

* Includes increase in unrealized losses of $383 million relating to Level 3 liabilities still held at March 31, 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 March 31, 2020.
 Level 3 Fair Value Asset Measurements at
March 31, 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*
187 217 404 
Purchases3,407  3,407 
Sales(3,510) (3,510)
Settlements (45)(45)
Transfers into Level 3441 21 462 
Transfers out of Level 3(64)(3)(67)
Ending balance, March 31, 2020