Cargill profit surges as lower grain prices spur demand

(Dave Bedard photo)

Reuters — Replenished grain supplies following a bumper North American harvest bolstered global commodities trader Cargill’s bottom line in its latest quarter as lower prices lifted demand for crops and padded margins on meat sales.

Privately-held Cargill, based in Minnesota, reported net earnings of $784 million for the second quarter ended Nov. 30, up 41 per cent from $556 million a year earlier (all figures US$). Quarterly revenue fell eight per cent to $30.3 billion from $32.9 billion.

Cargill’s origination and processing segment and its animal nutrition and protein business gained most from tumbling prices for major crops including corn, soybeans and wheat, all of which hit multi-year lows during the quarter.

“With first-rate performance in our agricultural, animal nutrition and meat businesses, Cargill posted strong results, outpacing recent quarters by a good margin,” President and CEO David MacLennan said in a release.

U.S. farmers reaped their largest-ever corn and soybean crops in 2014 while Canadian growers harvested a second consecutive bumper crop, providing domestic processors, livestock producers, biofuel makers and exporters the cheapest raw materials in several years.

Cargill rivals Archer Daniels Midland, Bunge and Louis Dreyfus Commodities, known collectively as the ABCD companies that dominate the global grains trade, are all anticipating a profit bump as grain prices moderate from several years of historically high prices.

Cargill said its Canadian crop handling and processing arm’s performance “stayed strong, bolstered by the country’s 2014 harvest, the carryover from 2013’s record crops and a steady export pull.”

Cargill said its Australian beef processing and its U.S. cattle, pork and turkey businesses also generated strong returns.

Delayed farmer selling in Brazil and Argentina curbed results in its South American operations, the company said.

Cargill’s food ingredients business profit fell from the year-ago quarter due to a charge related to the closure of its Memphis corn mill.

Outside of its agricultural businesses, Cargill stumbled.

Energy trading profits rose despite tumbling crude oil prices, but asset management, ocean transportation and metals trading results were down from the same period a year ago.

— Karl Plume reports on agriculture and ag markets for Reuters in Chicago. Includes files from Network staff.

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