Political unrest takes toll | Violence in Ukraine, reduced exports and lower grain prices also blamed
CHICAGO, Ill. (Reuters) — Cargill’s quarterly earnings have fallen as global grain and oilseed prices tumbled in anticipation of a record large U.S. harvest and as turmoil in some countries affected its operations.
The company its fiscal first quarter, which ended Aug. 31, was “marked by a great deal of geopolitical uncertainty,” including inflation in Venezuela and Argentina, violence in eastern Ukraine, and tightening credit markets in China.
Rival grain trader Louis Dreyfus has also blamed geopolitical turmoil for its disappointing quarterly results.
Cargill reported net earnings of US$425 million in the quarter, down 26 percent from $571 million in the same quarter a year earlier.
Read Also
Canada’s plant hardiness zones receive update
The latest update to Canada’s plant hardiness zones and plant hardiness maps was released this summer.
Revenue fell nearly two percent to $33.3 billion from $33.8 billion a year earlier.
Returns from Cargill’s origination and processing business, which is its largest segment, slipped as farmers held back grain sales amid tumbling prices. As well, the lower commodity markets volatility made it difficult for the company to generate trading profits.
Benchmark corn futures prices tumbled 23 percent in the quarter and soybean prices fell 27 percent as largely ideal crop weather in the United States fuelled expectations for a record harvest.
Cargill said it was poised to benefit from replenished grain supplies as the harvest advances in its second quarter and lower grain prices attract demand.
“This year’s big crops, not just in North America but across agricultural production areas worldwide, will enhance food security after several years of weather disruptions. Our company is well positioned to connect these new supplies to growing demand,” president David MacLennan said.
Cargill blamed lower profits in its food and ingredients business on weak economic conditions in several countries, but said strong demand for corn-based ethanol supported its North American processing operations.
A bright spot for Cargill in the quarter came from its animal protein businesses as lower grain prices re-duced cattle feed input costs. As well, the shortage of hogs caused by a deadly pig virus in the U.S. was lower than expected. Strong consumer demand and historically high meat prices further bolstered returns.
Profits in energy rebounded after two weak quarters and a revamping of its trading unit, but Cargill reported weaker results from ocean freight trading and metals as tighter Chinese credit markets hurt demand for iron ore and steel.
