CARGILL Inc. has reported a 42% decrease in income for its fiscal 2013 third quarter due in large part to drought-related cost increases for corn and other feed ingredients that drove up livestock prices and pressured the company's meat processing business.
For its quarter ended Feb. 28, Cargill reported net earnings of $445 million on revenues that totaled $32.2 billion, compared with earnings of $766 million and revenues of $31.9 billion in its 2012 third quarter. The company noted that year-before earnings were a record.
For the nine-month period, Cargill reported net earnings of $1.83 billion on revenues of $101.2 billion, compared with earnings of $1.1 billion in the first three quarters of fiscal 2012.
For its agricultural segment, Cargill said third-quarter earnings were down due mostly to the impact of the drought last year on crops and harvests in North America.
The company said its animal feed and nutrition operations were adversely affected by difficult economic conditions in dairy and meat production in regions around the world and by Venezuela's currency devaluation in February.
For its origination and processing segment, Cargill said earnings were down but noted that export demand for U.S. soybeans and soybean meal was good due to limited pre-harvest supplies in South America and to weather delays and logistical challenges in Brazil that "significantly" decreased the country's exports of soybeans and meal compared to the year before.
Cargill reported lower earnings for its food ingredients and applications segment. The company said food ingredients reflected value-added products and good cost and risk management but also reflected Venezuela's currency devaluation.
Cargill said its meat processing results were adversely affected by high feed costs, limited cattle supplies and "an oversupplied turkey market."
The company noted that it closed its beef packing plant in Plainview, Texas, in the third quarter because of the tight cattle supply brought about by drought in Texas and the southern Plains (Feedstuffs, Jan. 21) and reported that it took a one-time charge against earnings for the action.
For its financial and risk management segment, Cargill said asset management activities performed well, although not as briskly as the year before, when markets were rallying in response to an easing of the European debt crisis.
For its industrial segment, Cargill said results were up for its road deicing products, compared with low demand during the very warm year-before winter.
The company noted that it acquired a vegetable oil-based dielectric fluid business in its fiscal 2013 first quarter that has been accretive to earnings through the first nine months. (Dielectric fluids are used to cool electrical and transformer equipment.)
Cargill reported that it opened a food innovation center in India in January -- the first of its kind in India and the third such center Cargill operates in Asia. The center collaborates with customers to create new or improved bakery, confectionery and convenience foods.
Cargill reported that it also reached an agreement to enter into a joint venture with CHS Inc. and ConAgra Foods Inc. The three companies plan to merge their flour milling businesses into one operation, Ardent Mills (Feedstuffs, March 11), with CHS owning a 12% stake and Cargill and ConAgra each owning a 44% stake.
Cargill said Ardent Mills will offer "the broadest range" of flours, mixes and specialty products through a flour milling network in the U.S., Canada and Puerto Rico. The formation of the venture is scheduled to be completed late this year.
Cargill, headquartered in Minneapolis, Minn., is an international provider of agricultural, food, financial and industrial products and services. It reported fiscal 2012 revenues totaling $133.9 billion.