Cargill withstands price pressures

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Related tags: Bovine spongiform encephalopathy

Risk management helped US firm Cargill achieve a 7 per cent rise in
profit for the three months to February this year despite tougher
trading conditions that saw raw material prices rising, a knock in
demand for soy through Asian bird flu and soaring prices for
freight.

The privately-held agri business that acquired UK flavour company Duckworth earlier this year said that profit for the third quarter rose to $259 million up from $243 million for the same period in 2003.

Commodity trading combined with bolstered profits in its food ingredient units in Europe and Latin America offset weaker demand for soy feed and poultry from Asian customers that were hit by the recent outbreak of bird flu.

"Our team did a terrific job managing the changing supply-and-demand equation in the commodity markets, particularly the increased volatility and tighter supplies that accompanied the demand-led rise in raw material costs,"​ said Warren Staley, chairman and chief executive officer.

But the higher prices - soy at a 15 year high - and tight supply for commodities - wheat supplies at 30 year lows - together with the avian influenza in Asia and the single case of mad cow disease in the US still knocked the bottom line. "Parts of Cargill's meat processing, animal nutrition, and feed grain and vegetable protein import operations were negatively affected,"​ acknowledged Staley.

Demonstrating the benefits of a diversified business model Cargill said, in addition to the rise in profits from ingredients operations, that pork processing and cattle feeding figures also boosted the results. The 100,000 strong company processes, sells and distributes agricultural, food, financial and industrial products.

Strong US demand for beef helped offset a slump in exports hit by the ban on US beef following the BSE scare at the beginning of 2004.

In the previous quarter Cargill reported that over 750 jobs had been axed at five of the compay's Excel beef plants following the news of the first case of Bovine Spongiform Encephalopathy (BSE) in the US in December 2003. More than 40 countries immediately imposed bans, hitting the $3.2 billion beef export market.

Expanding into the European ingredients sector in the first few months of 2004, Cargill acquired OCG Cacao, a supplier of industrial chocolate to the European food industry.

Related topics: Markets, Poultry, Asia