October 14, 2010

Cargill reaps bumper harvest from grain price

Big spikes in grain prices have led to soaring profits at Cargill, the world's largest agricultural commodities trader.

The Minnesota-based company's net profit rose 68% to US$883 million in the first quarter ended August 31, from US$525 million a year earlier. Cargill's trading and processing segment, the historic heart of the 145-year-old company, was the fastest-growing contributor to earnings.

The gains came as food demand rebounded after the global financial slowdown and fears of a shortfall sent grain prices toward the highest levels since the world food crisis of 2007-08. During the quarter, wheat jumped 43% and corn moved up 20%.

Fertiliser and seed companies, including DuPont and Monsanto, and manufacturers of farm equipment, such as Deere, would also profit. Cargill also owns a 64% stake in Mosaic, the fertiliser company whose earnings in the same quarter nearly tripled from a year ago to US$297.7 million.

Cargill said changes in trade flows created opportunities for the group that sources and trades grains, oilseeds and other commodities between continents, without specifying which flows changed.

In the reporting quarter, the worst heatwave and drought in more than a century devastated grain crops in Russia, leading to export restrictions on grains.

Excluding its Mosaic stake, Cargill earned US$693 million in the quarter, 51% up on a year ago. Revenue rose 6% to US$27.8 billon.