Cargill Q2 revenues rise as low corn, soy prices leave their mark

Agribusiness major Cargill has posted a 6% fall in net profit for the three months ending November 30, sliding to $924 million from $986 million a year ago, the Minneapolis-based company said in a statement Wednesday.

Despite the fall, the figures take the company's first half profit to $1.9 billion, up 3% year-on-year, on revenues of $56.5 billion. 

Much of the pressure in the last quarter has come from the company's grain business, which is operating in markets facing abundant corn and soybean crops and rising global stocks, the company said.

“Although global demand continues to grow, today’s abundant supplies have weighed on markets, diminishing volatility and trading opportunities,” the statement said.

The company said its origination and processing business performance was “moderately down” versus last year’s second quarter.

Cargill's performance mirrors that of many of its peers in the agribusiness sector, all of which are operating on thin margins as a result of low grain and oilseed prices, which have steadily declined over the last six months due to rising supply.

Corn prices have fallen roughly 20% over the past six months, with soybeans slumping 10% amid successive record harvests, according to data from the Chicago Board of Trade.

That dynamic has led to a flurry of mergers and acquisitions in the sector, with Glencore Agriculture reportedly making several bids for companies in the space, including Bunge.

Biodiesel

With increased competition from overseas producers clouding US export performance for corn, wheat and soybeans, Cargill highlighted the $90 million investment in a new biodiesel plant at Wichita, Kansas – construction of which got underway during the second quarter.

“The new plant, which is set to open in early 2019, will allow Cargill to better serve biofuel producers in the Midwest and Southwest, and create an additional consumption flow for U.S. soybean production,” the company statement said.

For the company’s other segments, Animal Nutrition and Protein, Food Ingredients and Applications and Industrial and Financial Services all saw their performance outpace that of the corresponding period of the previous financial year.

Cargill is one of the world’s largest private companies and, unlike publicly-listed companies, provides only a limited public overview of company operations at the end of each quarter.

As such, the company is not obliged to show the same level of transparency and does not widely circulate detailed accounts.