Cargill Q1 profit jumps despite commodities slump

Chicago | Reuters — Global commodities trader Cargill Inc. effectively navigated tumbling commodities markets and volatile currencies to turn in a 20 per cent gain in first-quarter profit, the privately held company said Wednesday.

The Minnesota-based company’s grain and oilseed supply chain and energy businesses were standouts in the quarter ended Aug. 31, in stark contrast with several rival agribusinesses that have struggled in the commodities market downturn.

Cargill, which holds major stakes in Canadian grain handling, beef packing and food processing, reported net earnings of $512 million for the fiscal first quarter, compared with a profit of $425 million a year earlier (all figures US$). Revenue declined 17 per cent to $27.5 billion, from $33.3 billion.

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“Our team ably navigated the quarter’s weather-driven agricultural commodity markets, as well as the effects of more volatile emerging markets, currency fluctuations and other macroeconomic uncertainty,” CEO David MacLennan said in a release.

Cargill’s origination and processing unit, which buys, sells, stores and processes crops such as corn and soybeans, was its largest contributor in a quarter marked by falling prices and tepid global demand.

Soybean processing profit strengthened amid bumper crops in North and South America, Cargill said.

Rival agribusiness Louis Dreyfus Commodities last week said first-half profit fell by half due to falling commodity prices and faltering growth in major markets such as China and Brazil.

Archer Daniels Midland and Bunge, which along with Cargill and Dreyfus are known as the “ABCD companies” that dominate global grain trading, report results in the coming weeks.

Results were down in Cargill’s animal nutrition and protein segment as high cattle and beef prices steered consumers to cheaper pork and poultry. The company sold its pork business to meat packer JBS this summer.

Cargill’s food ingredients segment also posted lower quarterly results, pressured by weak profits in sweeteners and starches, which slumped amid historically low sugar prices, the company said.

Lower operating earnings after the closure of its hedge fund arm Black River Asset Management this summer weighed on results in Cargill’s industrial and financial services segment, only partly offsetting stronger returns in energy trading.

Karl Plume reports on agricultural commodity markets for Reuters from Chicago.

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