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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, 2023
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

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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 Filer☒Accelerated Filer☐Emerging Growth Company☐
Non-accelerated Filer☐Smaller 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 – 544,634,817 shares
(April 24, 2023)

SAFE HARBOR STATEMENT

This Quarterly Report on 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, 2022, as may be updated in our subsequent Quarterly Reports on Form 10-Q. To the extent permitted under applicable law, Archer-Daniels-Midland 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,
 20232022
(In millions, except per share amounts)
Revenues$24,072 $23,650 
Cost of products sold21,992 21,753 
Gross Profit2,080 1,897 
Selling, general, and administrative expenses881 829 
Asset impairment, exit, and restructuring costs7 1 
Equity in earnings of unconsolidated affiliates(174)(204)
Interest and investment income(134)(59)
Interest expense147 92 
Other (income) expense – net(44)(33)
Earnings Before Income Taxes1,397 1,271 
Income tax expense225 207 
Net Earnings Including Noncontrolling Interests1,172 1,064 
Less: Net earnings attributable to noncontrolling interests2 10 
Net Earnings Attributable to Controlling Interests$1,170 $1,054 
Average number of shares outstanding – basic550 566 
Average number of shares outstanding – diluted551 568 
Basic earnings per common share$2.13 $1.86 
Diluted earnings per common share$2.12 $1.86 
Dividends per common share$0.45 $0.40 

See notes to consolidated financial statements.



3

Archer-Daniels-Midland Company

Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
Three Months Ended
March 31,
20232022
(In millions)
Net earnings including noncontrolling interests$1,172 $1,064 
Other comprehensive income (loss):
Foreign currency translation adjustment153 149 
Tax effect14 (31)
Net of tax amount167 118 
Pension and other postretirement benefit liabilities adjustment(26)37 
Tax effect(13)(7)
Net of tax amount(39)30 
Deferred gain (loss) on hedging activities(104)282 
Tax effect16 (47)
Net of tax amount(88)235 
Unrealized gain (loss) on investments4 (5)
Tax effect(1)— 
Net of tax amount3 (5)
Other comprehensive income (loss)43 378 
Comprehensive income (loss)1,215 1,442 
Less: Comprehensive income (loss) attributable to noncontrolling interests(1)5 
Comprehensive income (loss) attributable to controlling interests$1,216 $1,437 

See notes to consolidated financial statements.




4

Archer-Daniels-Midland Company

Consolidated Balance Sheets
(In millions)March 31, 2023December 31, 2022
 (Unaudited)
Assets  
Current Assets  
Cash and cash equivalents$899 $1,037 
Segregated cash and investments8,736 9,010 
Trade receivables - net4,471 4,926 
Inventories14,771 14,771 
Other current assets5,448 5,666 
Total Current Assets34,325 35,410 
Investments and Other Assets  
Investments in affiliates5,525 5,467 
Goodwill and other intangible assets6,583 6,544 
Right of use assets1,025 1,088 
Other assets1,273 1,332 
Total Investments and Other Assets14,406 14,431 
Property, Plant, and Equipment  
Land and land improvements546 502 
Buildings5,673 5,639 
Machinery and equipment19,390 19,194 
Construction in progress1,502 1,440 
 27,111 26,775 
Accumulated depreciation(17,040)(16,842)
Net Property, Plant, and Equipment10,071 9,933 
Total Assets$58,802 $59,774 
Liabilities, Temporary Equity, and Shareholders’ Equity  
Current Liabilities  
Short-term debt$1,809 $503 
Trade payables6,271 7,803 
Payables to brokerage customers9,430 9,856 
Accrued expenses and other payables3,981 4,795 
Current lease liabilities287 292 
Current maturities of long-term debt952 942 
Total Current Liabilities22,730 24,191 
Long-Term Liabilities  
Long-term debt7,745 7,735 
Deferred income taxes1,362 1,402 
Non-current lease liabilities757 816 
Other1,011 1,014 
Total Long-Term Liabilities10,875 10,967 
Temporary Equity - Redeemable noncontrolling interest301 299 
Shareholders’ Equity  
Common stock3,106 3,147 
Reinvested earnings24,217 23,646 
Accumulated other comprehensive income (loss)(2,463)(2,509)
Noncontrolling interests36 33 
Total Shareholders’ Equity24,896 24,317 
Total Liabilities, Temporary Equity, and Shareholders’ Equity$58,802 $59,774 
See notes to consolidated financial statements.
5

Archer-Daniels-Midland Company

Consolidated Statements of Cash Flows
(Unaudited)
(In millions)Three Months Ended
March 31,
 20232022
Operating Activities  
Net earnings including noncontrolling interests$1,172 $1,064 
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities  
Depreciation and amortization259 257 
Asset impairment charges3 1 
Deferred income taxes47 144 
Equity in earnings of affiliates, net of dividends(113)(159)
Stock compensation expense65 69 
Deferred cash flow hedges(104)283 
Gains on sales of assets and businesses/investment revaluation(11)(34)
Other – net(8)(9)
Changes in operating assets and liabilities, net of acquisitions and dispositions  
Segregated investments(935)(482)
Trade receivables488 (937)
Inventories52 (2,881)
Other current assets328 (2,141)
Trade payables(1,556)(245)
Payables to brokerage customers(460)2,501 
Accrued expenses and other payables(837)1,363 
Total Operating Activities(1,610)(1,206)
Investing Activities  
Capital expenditures(327)(217)
Proceeds from sales of assets and businesses13 5 
Investments in affiliates(4)(36)
Cost method investments— (102)
Other – net(10)8 
Total Investing Activities(328)(342)
Financing Activities  
Long-term debt borrowings— 750 
Long-term debt payments(2)— 
Net borrowings (payments) under lines of credit agreements1,306 2,824 
Share repurchases(351)— 
Cash dividends(248)(226)
Other – net(107)(30)
Total Financing Activities598 3,318 
Effect of exchange rate on cash, cash equivalents, restricted cash, and restricted cash equivalents(6)— 
Increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents(1,346)1,770 
Cash, cash equivalents, restricted cash, and restricted cash equivalents - beginning of period7,033 7,454 
Cash, cash equivalents, restricted cash, and restricted cash equivalents - end of period$5,687 $9,224 
Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the consolidated balance sheets
Cash and cash equivalents$899 $1,079 
Restricted cash and restricted cash equivalents included in segregated cash and investments4,788 8,145 
Total cash, cash equivalents, restricted cash, and restricted cash equivalents$5,687 $9,224 

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, 2022547 $3,147 $23,646 $(2,509)$33 $24,317 
Comprehensive income      
Net earnings 1,170  2  
Other comprehensive income (loss)   46 (3) 
Total comprehensive income     1,215 
Cash dividends paid - $0.45 per share  (248)  (248)
Share repurchases(4)(351)(351)
Stock compensation expense3 65    65 
Stock option exercises net of taxes(1)(108)(108)
Other— 2 — — 4 6 
Balance, March 31, 2023545 $3,106 $24,217 $(2,463)$36 $24,896 
Balance, December 31, 2021560 $2,994 $21,655 $(2,172)$31 $22,508 
Comprehensive income      
Net earnings 1,054  10  
Other comprehensive income (loss)   383 (5) 
Total comprehensive income     1,442 
Cash dividends paid - $0.40 per share  (226)  (226)
Stock compensation expense3 69    69 
Stock option exercises net of taxes— (36)(36)
Other— 1 — — (3)(2)
Balance, March 31, 2022563 $3,028 $22,483 $(1,789)$33 $23,755 
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 U.S. 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 GAAP 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, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.  For further information, refer to the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2022 for Archer-Daniels-Midland Company (the Company or ADM).

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 included allowances for estimated uncollectible accounts to reflect any loss anticipated on the accounts receivable balances including any accrued interest receivables thereon. The Company estimates uncollectible accounts by pooling receivables 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. Long-term receivables recorded in other assets were not material to the Company’s overall receivables portfolio.











8
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 1.    Basis of Presentation (Continued)
Changes to the allowance for estimated uncollectible accounts are as follows:

Three Months Ended March 31
20232022
Beginning, January 1 $199 $122 
Current year provisions422
Recoveries1 1 
Write-offs against allowance(24)(1)
Foreign exchange translation adjustment1 — 
Other1 (7)
Ending, March 31$182 $137 

Write-offs against allowance in the current quarter related primarily to allowance on receivables that were subsequently sold.

Inventories

Certain merchandisable agricultural commodity inventories, which include inventories acquired under deferred pricing contracts, are stated at market value.  In addition, the Company values certain inventories using the first-in, first-out (FIFO) method at the lower of cost or net realizable value.

The following table sets forth the Company’s inventories as of December 31, 2022 and 2021.

March 31, 2023December 31, 2022
 (In millions)
Raw materials and supplies$6,310 $6,975 
Finished goods8,461 7,796 
Total inventories$14,771 $14,771 

Included in raw materials and supplies are work in process inventories which were not material as of March 31, 2023 and December 31, 2022.

Cost Method Investments

Cost method investments of $489 million and $488 million as of March 31, 2023 and December 31, 2022, respectively, were included in Other Assets in the Company’s consolidated balance sheets. Revaluation gains of $34 million in the three months ended March 31, 2022 in connection with observable third-party transactions, were recorded in interest and investment income in the Company's consolidated statements of earnings. There were no revaluation gains in the three months ended March 31, 2023.

Operations in Ukraine and Russia

ADM employs approximately 640 people in Ukraine and operates an oilseeds crushing plant, a grain port terminal, inland and river silos, and a trading office. Facilities have been temporarily idled since February 24, 2022, most of which were brought back online by March 31, 2023, due in part to the opening of the Black Sea grain export corridor. The Company’s footprint in Russia is limited to operations related to the production and transport of essential food commodities and ingredients.





9
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 1.    Basis of Presentation (Continued)
As a result of the ongoing conflict in Ukraine, the Company reviewed the valuation of its assets and concluded that as of March 31, 2023, receivables, net of allowances, are deemed collectible and market inventories are valued appropriately. The temporarily idled property, plant, and equipment, which are immaterial, are not considered impaired. The Company also evaluated the impact of Russia’s announcement of its purported annexation of four Ukrainian regions on the valuation of ADM’s assets in those regions and concluded that the assets are appropriately valued. As the conflict in Ukraine evolves, the Company will continue to review the valuation of these assets and make any required adjustments, which are not expected to be material to the Company’s consolidated financial statements.

Note 2.    New Accounting Standards

Effective January 1, 2023, the Company adopted the amended guidance of Accounting Standards Codification (ASC) Topic 805, Business Combinations, which improves comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination. The amended guidance requires an entity (acquirer) to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers, (Topic 606). The Company’s adoption of this amended guidance did not have an impact on its consolidated financial statements.

Effective January 1, 2023, the Company adopted the amended guidance of ASC Subtopic 405-50, Liabilities - Supplier Finance Programs, which enhances the transparency of supplier finance programs. The amended guidance requires an entity (buyer) in a supplier finance program to disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period, and potential magnitude. ADM has Supplier Payable Programs (“SPP”) with financial institutions which act as its paying agents for payables due to certain of its suppliers. The Company has neither an economic interest in a supplier’s participation in the SPP nor a direct financial relationship with the financial institutions, and has concluded that its obligations to the suppliers, including amounts due and scheduled payment terms, are not impacted by their participation in the SPP. Accordingly, amounts associated with the SPP continue to be classified in current liabilities in the Company’s consolidated balance sheet and in operating activities in its consolidated statement of cash flows. The supplier invoices that have been confirmed as valid under the program require payment in full generally within 90 days of the invoice date. As of March 31, 2023 and December 31, 2022, the Company’s outstanding payment obligations that suppliers had elected to sell to the financial institutions were $247 million and $196 million, respectively.

Through December 31, 2024, 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, 2024, except for hedging relationships existing as of December 31, 2024, 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, 2024 expiry date and does not expect the adoption of the amended guidance to have an impact on its consolidated financial statements.














10

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 3.    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. The Company follows a policy of recognizing revenue at a single point in time when it satisfies its performance obligation by transferring control over a product or service to a customer. The majority of the Company’s contracts with customers have one performance obligation and a contract duration of one year or less. The Company applies the practical expedient in paragraph 10-50-14 of Topic 606 and does not disclose information about remaining performance obligations that have original expected durations of one year or less. For transportation service contracts, the Company recognizes revenue over time as the mode of transportation moves towards its destination in accordance with the transfer of control guidance of Topic 606. The Company recognized revenue from transportation service contracts of $178 million and $175 million for the three months ended March 31, 2023 and 2022, 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 transaction 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 $473 million and $694 million as of March 31, 2023 and December 31, 2022, respectively, were recorded in accrued expenses and other payables in the consolidated balance sheets. Contract liabilities recognized as revenues were $362 million and $324 million for the three months ended March 31, 2023 and 2022, respectively.





















11
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 3.    Revenues (Continued)

Disaggregation of Revenues

The following tables present revenue disaggregated by timing of recognition and major product lines for the three months ended March 31, 2023 and 2022.
Three Months Ended March 31, 2023
Topic 606 Revenue
Topic 815(1)
Total
(In millions)Point in TimeOver TimeTotalRevenueRevenues
Ag Services and Oilseeds
Ag Services$1,017 $178 $1,195 $10,500 $11,695 
Crushing191 — 191 3,492 3,683 
Refined Products and Other626 — 626 2,575 3,201 
Total Ag Services and Oilseeds1,834 178 2,012 16,567 18,579 
Carbohydrate Solutions
Starches and Sweeteners2,084 — 2,084 653 2,737 
Vantage Corn Processors800 — 800 — 800 
Total Carbohydrate Solutions2,884 — 2,884 653 3,537 
Nutrition
Human Nutrition936 — 936 — 936 
Animal Nutrition917 — 917 — 917 
Total Nutrition1,853 — 1,853 — 1,853 
Other Business103 — 103 — 103 
Total Revenues$6,674 $178 $6,852 $17,220 $24,072 
Three Months Ended March 31, 2022
Topic 606 Revenue
Topic 815(1)
Total
(In millions)Point in TimeOver TimeTotalRevenueRevenues
Ag Services and Oilseeds
Ag Services$970 $175 $1,145 $10,702 $11,847 
Crushing125 — 125 3,097 3,222 
Refined Products and Other632 — 632 2,552 3,184 
Total Ag Services and Oilseeds1,727 175 1,902 16,351 18,253 
Carbohydrate Solutions
Starches and Sweeteners1,930 — 1,930 568 2,498 
Vantage Corn Processors868 — 868 — 868 
Total Carbohydrate Solutions2,798 — 2,798 568 3,366 
Nutrition
Human Nutrition958 — 958 — 958 
Animal Nutrition966 — 966 — 966 
Total Nutrition1,924 — 1,924 — 1,924 
Other Business107 — 107 — 107 
Total Revenues$6,556 $175 $6,731 $16,919 $23,650 
(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.
12
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 3.    Revenues (Continued)

Ag Services and Oilseeds

The Ag Services and Oilseeds segment generates revenue from the sale of commodities, from service fees for the transportation of goods, from the sale of products manufactured in its global processing facilities, and from its structured trade finance activities. Revenue is measured based on the consideration specified in the contract. 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 mode of transportation 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. The Company engages in various structured trade finance activities to leverage its global trade flows whereby the Company obtains letters of credit (LCs) to guarantee payments on both global purchases and sales of grain. LCs guaranteeing payment on grain sales are sold on a non-recourse basis with no continuing involvement. The Company earns returns from the difference in interest rates between the LCs that guarantee payment on the underlying purchases and sales of grain given the differing risk profiles of the underlying transactions. The net return related to structured trade finance activities is included in revenue and is not significant for the quarters ended March 31, 2023 and 2022.

Carbohydrate Solutions

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

Nutrition

The Nutrition segment sells 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.










13

Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)
Note 4.    Fair Value Measurements

The following tables set forth, by level, the Company’s assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2023 and December 31, 2022.
 Fair Value Measurements at March 31, 2023
 
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$— $5,654 $3,503 $9,157 
Unrealized derivative gains:    
Commodity contracts— 959 649 1,608 
Foreign currency contracts— 238 — 238 
Cash equivalents397 — — 397 
Segregated investments1,916 — — 1,916 
Total Assets$2,313 $6,851 $4,152 $13,316 
Liabilities:    
Unrealized derivative losses:    
Commodity contracts$— $656 $455 $1,111 
Foreign currency contracts— 211 — 211 
Debt conversion option— — 1 1 
Inventory-related payables— 2,235 57 2,292 
Total Liabilities$— $3,102 $513 $3,615 
14
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.    Fair Value Measurements (Continued)
 Fair Value Measurements at December 31, 2022
  
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$— $6,281 $2,760 $9,041 
Unrealized derivative gains:    
Commodity contracts— 796 541 1,337 
Foreign currency contracts— 258 — 258 
Interest rate contracts— 109 — 109 
Cash equivalents405 — — 405 
Segregated investments1,453 — — 1,453 
Total Assets$1,858 $7,444 $3,301 $12,603 
Liabilities:    
Unrealized derivative losses:    
Commodity contracts$— $665 $603 $1,268 
Foreign currency contracts— 275 — 275 
Debt conversion option— — 6 6 
Inventory-related payables— 1,181 89 1,270 
Total Liabilities$— $2,121 $698 $2,819 

Estimated fair values for inventories and inventory-related payables 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 competitor and broker quotations or market transactions and are considered observable. Basis adjustments are impacted by specific local supply and demand characteristics at each facility and the overall market. Factors such as substitute products, weather, fuel costs, contract terms, and futures prices also impact the movement of these basis adjustments. 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 (more than 10%) 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.













15
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.    Fair Value Measurements (Continued)
Derivative contracts include exchange-traded commodity futures and options contracts, forward commodity purchase and sale contracts, and OTC instruments related primarily to agricultural commodities, energy, interest rates, and foreign currencies.  Exchange-traded futures and options contracts are valued based on unadjusted quoted prices in active markets and are classified in Level 1.  The majority of the Company’s exchange-traded futures and options contracts are cash-settled on a daily basis and, therefore, are not included in these tables.  Fair value for forward commodity purchase and sale contracts is estimated based on exchange-quoted prices adjusted for differences in local markets.  Market valuations for the Company’s forward commodity purchase and sale contracts are adjusted for location (basis) because the exchange-quoted prices represent contracts that have standardized terms for commodity, quantity, future delivery period, delivery location, and commodity quality or grade. The basis adjustments are generally determined using inputs from competitor and broker quotations or market transactions and are considered observable. Basis adjustments are impacted by specific local supply and demand characteristics at each facility and the overall market. Factors such as substitute products, weather, fuel costs, contract terms, and futures prices also impact the movement of these basis adjustments. In some cases, the basis adjustments are unobservable because they are supported by little to no market activity.  When observable inputs are available for substantially the full term of the contract, it is classified in Level 2.  When unobservable inputs have a significant impact (more than 10%) on the measurement of fair value, the contract is classified in Level 3.  Except for certain derivatives designated as cash flow hedges, changes in the fair value of commodity-related derivatives are recognized in the consolidated statements of earnings as a component of cost of products sold.  Changes in the fair value of foreign currency-related derivatives are recognized in the consolidated statements of earnings as a component of revenues, cost of products sold, and other (income) expense - net, depending upon the purpose of the contract.  The changes in the fair value of derivatives designated as effective cash flow hedges are recognized in the consolidated balance sheets as a component of 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. 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).

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, 2023.
 Level 3 Fair Value Asset Measurements at
March 31, 2023
 Inventories
 Carried at
 Market		Commodity
Derivative
Contracts
Gains
 
Total 
Assets
 (In millions)
Balance, December 31, 2022$2,760 $541 $3,301 
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*
2 477 479 
Purchases8,665 — 8,665 
Sales(8,254)— (8,254)
Settlements— (382)(382)
Transfers into Level 3605 50 655 
Transfers out of Level 3(275)(37)(312)
Ending balance, March 31, 2023$3,503 $649 $4,152 

* Includes increase in unrealized gains of $632 million relating to Level 3 assets still held at March 31, 2023.

16
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.    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, 2023.

Level 3 Fair Value Liability Measurements at
 March 31, 2023
 Inventory-
 related
 Payables		Commodity
Derivative
Contracts
Losses		Debt Conversion Option
 
Total 
Liabilities
 (In millions)
Balance, December 31, 2022$89 $603 $6 $698 
Total increase (decrease) in net realized/unrealized losses included in cost of products sold and interest expense*
(2)243 (5)236 
Purchases2 — — 2 
Sales— — — — 
Settlements(31)(424)— (455)
Transfers into Level 3— 39 — 39 
Transfers out of Level 3(1)(6)— (7)
Ending balance, March 31, 2023$57 $455 $1 $513 

* Includes increase in unrealized losses of $248 million relating to Level 3 liabilities still held at March 31, 2023.

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, 2022.
 Level 3 Fair Value Asset Measurements at
March 31, 2022
 Inventories
 Carried at
 Market		Commodity
Derivative
Contracts
Gains
 
Total 
Assets
 (In millions)
Balance, December 31, 2021$3,004 $460 $3,464 
Total increase (decrease) in net realized/unrealized gains included in cost of products sold*647 633 1,280 
Purchases9,552 — 9,552 
Sales(9,315)— (9,315)
Settlements— (276)(276)
Transfers into Level 3327 23 350 
Transfers out of Level 3(256)(12)(268)
Ending balance, March 31, 2022$3,959 $828 $4,787 

* Includes increase in unrealized gains of $1.4 billion relating to Level 3 assets still held at March 31, 2022.
17
Archer-Daniels-Midland Company

Notes to Consolidated Financial Statements (Continued)
(Unaudited)

Note 4.    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, 2022.
Level 3 Fair Value Liability Measurements at
 March 31, 2022
 Inventory-
 related
 Payables		Commodity
Derivative
Contracts
Losses		Debt Conversion Option