Volatile commodity markets boost Cargill profits to near record levels

13-Apr-2011 - Last updated on 14-Apr-2011 at 13:56 GMT

Volatile commodity markets and global food supply disruption spurred a 23 percent spike in Cargill’s third quarter net earnings, the company said Wednesday.

Cargill reported $1.1bn in net earnings in the third quarter ended February 28, up from $898m for the prior-year period, driven to a large degree by its supply networks for bulk commodities, as unrest in the Middle East led to uncertainty in grain supply.

Cargill chairman and CEO Greg Page said: "Cargill posted solid earnings in a period of volatile commodity markets and geopolitical change. All of us in agriculture are living with high levels of price volatility, in which small changes in the quantity of production are having dramatic impacts on price. Cargill's ability to focus on the factors of supply and demand, while gauging external events that can uproot market fundamentals temporarily, is critical to the risk management services we provide to our customers and to our own financial performance."

The company’s net profit for the first nine months was $3.48bn compared with $1.91bn a year earlier – and approaching the record $3.95bn annual net profit it reported in fiscal 2008.

As a private company, Cargill does not publish its full financial results, nor give a detailed breakdown of performance across divisions, but it said that earnings “increased moderately” in its food ingredients and applications division, with many of its business units relying on operational efficiencies and price risk management to offset higher input costs. Earnings increased in four of its five segments, the one exception being its agriculture services segment.

“Results were led by the origination and processing segment, which used its global sourcing and risk management capabilities to fulfill customers' supply needs in spite of market disruptions,” Cargill said.

The company reported that $342m of its Q3 profits were attributable to its majority investment in the fertilizer and feed firm The Mosaic Company. In January, Cargill announced a deal to sell its 64 percent ownership stake in Mosaic to Cargill shareholders – due to close in the second quarter of the 2011 calendar year.

Excluding contributions from Mosaic, Cargill earned $763m in the quarter, up 30 per cent from $588m in the prior year period.