Cargill’s quarterly profit up on beef, egg demand

(Dave Bedard photo)

Chicago | Reuters — Global commodities trader Cargill reported a three per cent increase in adjusted quarterly profit on Thursday, citing strong consumer demand for meat and eggs in North America and growth in its animal nutrition businesses.

Cargill, the largest privately held U.S. company, said its adjusted operating earnings rose to $908 million in the first fiscal quarter ended Aug. 31, from $883 million a year earlier (all figures US$).

The results come as trade tensions between Washington and Beijing have battered the U.S. agricultural sector going on a second year, as tit-for-tat tariffs have reduced commodities exports from the United States and redrawn global trade flows.

On Thursday, two of Cargill’s four business units posted higher quarter-on-quarter results — specifically, its protein and animal nutrition group, and its industrial and financial services division.

The biggest bright spot was the North American beef business, boosted by domestic demand for beef and egg products, the company said. Similarly, demand for poultry among consumers in China, Thailand and the United Kingdom helped boost the company’s quarterly results.

Cargill’s global trading business also improved, the company said, thanks in part to better execution by its Asia-based metals business. But the company’s trade finance results were pressured by the economic crisis in Argentina late in the first fiscal quarter of 2020.

Profit at Cargill’s origination and processing business also fell from last year, with the company saying ongoing trade and weather-related disruptions had continued to take a toll.

Despite a flurry of recent commodity grain purchases, U.S. farm product exports continue to face stiff headwinds as tariffs on U.S. goods imported by China, the world’s top soybean buyer and a major importer of various other agricultural goods, remain in place.

The company’s first-quarter revenues rose one per cent, to $29 billion. Net earnings on a U.S. GAAP basis were $915 million, a 10 per cent decrease from last year’s $1.02 billion, the company said.

“Our year started on a good note as we continued to help our customers navigate an unpredictable business environment,” Cargill CEO Dave MacLennan said in a statement.

Minnesota-based Cargill is the first of the major grain traders to report earnings as the U.S. harvest is just beginning to get under way, after rains led to the slowest U.S. spring planting season on record.

Competitors Archer Daniels Midland and Bunge report quarterly results next month.

Protein profits

Cargill said that keeping costs down and growing demand for its aquatic feedstuffs helped its global feed business results improve, despite ongoing pressure on feed demand because of the spread of African swine fever, which has devastated China’s hog herd.

The company has been impacted by the ASF outbreak: It shuttered feed mills in China in recent months, in part because of reduced feed demand. The closures highlight the pain for global agriculture companies from the outbreak in China, the world’s top hog producer and pork consumer.

Meanwhile, in the United States, profit margins for beef packers have soared after fire damage shut down a Tyson Foods slaughterhouse at Holcomb, Kansas.

Cargill is one of only a handful of large packers which dominate the U.S. beef sector, fueling complaints among some farmers about the power of the companies over cattle and beef prices.

After cattle prices tanked because the fire temporarily eliminated a key buyer of livestock, the U.S. Department of Agriculture launched an investigation into whether there is evidence of price manipulation, collusion or other unfair practices.

— P.J. Huffstutter reports on agriculture and agribusiness for Reuters from Chicago; additional reporting by Arunima Kumar in Banaglore.

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