Bumper corn, soy harvests send Cargill profits soaring
Cargill emerged as one of the winners of the bumper US corn and soybean harvests, seeing its earnings soar 41%, as strong crop volumes boosted its grain handling operations, while low ag prices lifted processing margins.
The US-based group - with Archer Daniels Midland, Bunge and Louis Dreyfus one of the big four agricultural trading houses – reported earnings of $784m for the September-to-November period, its best quarterly performance in more than two years.
For many agriculture groups, such as farm machinery makers, record US corn and soybean harvests have been a negative, with the resulting crop price weakness hitting farm income, and growers' willingness of invest.
However, for grain merchandisers, the high crop volumes have allowed them to operate at higher rates, so spreading overheads, while users such as soybean crushers and livestock producers have enjoyed lower raw material costs.
'All about execution'
"Just as last quarter's focus was on getting ready for North America's big harvest, the current quarter was all about execution," said David MacLennan, Cargill's chief executive.
"Our team did an excellent job serving farmer customers and fully utilising our supply chains to meet domestic and export demand."
Cargill, which as a privately-owned group does not divulge details of its results, said that the large crops saw profits at its origination and processing segment rise "considerably".
"Record corn and soybean harvests in the US, combined with strong domestic and export demand, boosted soybean origination, crush volumes, and bean and meal exports," the group said, if highlighting continued weakness in South American results from crop hoarding by growers.
Weakening currencies in Brazil and, especially, Argentina have encouraged farmers to withhold sales, with crops representing a dollar-denominated hedge against currency declines and rising inflation.
Sidesteps oil price hit
The animal production and nutrition division saw profits rise "significantly" year on year, helped by strong meat prices at a time of depressed grain values.
"Results were led by Australian beef processing, and US cattle feeding and pork processing," Cargill said.
The animal feed operation saw profits rise "moderately", helped by the lower prices of raw materials such as grains.
The growth in the protein and origination and processing divisions more than offset earnings declines in food ingredients, which were undermined by a drop in cocoa and chocolate profits, and in industrial and financial services, where profits in shipping and metals trading fell.
Cargill said, however, that it was not caught out by the slump in oil prices, saying that "energy earnings rose on a combined basis, reinforced by effective risk management in volatile global oil markets".
Cargill emerged as one of the winners of the bumper US corn and soybean harvests, seeing its earnings soar 41%, as strong crop volumes boosted its grain handling operations, while low ag prices lifted processing margins.
The US-based group - with Archer Daniels Midland, Bunge and Louis Dreyfus one of the big four agricultural trading houses – reported earnings of $784m for the September-to-November period, its best quarterly performance in more than two years.
For many agriculture groups, such as farm machinery makers, record US corn and soybean harvests have been a negative, with the resulting crop price weakness hitting farm income, and growers' willingness of invest.
However, for grain merchandisers, the high crop volumes have allowed them to operate at higher rates, so spreading overheads, while users such as soybean crushers and livestock producers have enjoyed lower raw material costs.
'All about execution'
"Just as last quarter's focus was on getting ready for North America's big harvest, the current quarter was all about execution," said David MacLennan, Cargill's chief executive.
"Our team did an excellent job serving farmer customers and fully utilising our supply chains to meet domestic and export demand."
Cargill, which as a privately-owned group does not divulge details of its results, said that the large crops saw profits at its origination and processing segment rise "considerably".
"Record corn and soybean harvests in the US, combined with strong domestic and export demand, boosted soybean origination, crush volumes, and bean and meal exports," the group said, if highlighting continued weakness in South American results from crop hoarding by growers.
Weakening currencies in Brazil and, especially, Argentina have encouraged farmers to withhold sales, with crops representing a dollar-denominated hedge against currency declines and rising inflation.
Sidesteps oil price hit
The animal production and nutrition division saw profits rise "significantly" year on year, helped by strong meat prices at a time of depressed grain values.
"Results were led by Australian beef processing, and US cattle feeding and pork processing," Cargill said.
The animal feed operation saw profits rise "moderately", helped by the lower prices of raw materials such as grains.
The growth in the protein and origination and processing divisions more than offset earnings declines in food ingredients, which were undermined by a drop in cocoa and chocolate profits, and in industrial and financial services, where profits in shipping and metals trading fell.
Cargill said, however, that it was not caught out by the slump in oil prices, saying that "energy earnings rose on a combined basis, reinforced by effective risk management in volatile global oil markets".
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