Cargill, Inc., today said quarterly profit surged 68 percent, to $883 million, helped by volatile grain markets that boosted trading revenue for one of the world’s largest agricultural companies.
Results in Cargill’s origination and processing business, which includes commodity trading, rose “significantly” in the quarter, the Minneapolis-based company said in a statement Tuesday. That reflected “renewed market volatility and changes in trade flows (that) created opportunities for trading and for serving customers' price risk and raw material needs,” Cargill said.
Revenue during the three months ended Aug. 31, Cargill’s fiscal 2011 first quarter, rose to $27.8 billion, up 6 percent from the same period a year earlier, the company said
There was a “resurgence in volatility across agricultural commodity markets,” Greg Page, Cargill’s chief executive officer, said in the statement. Wide market swings “put Cargill's global breadth, trading and risk management skills more acutely into play,” he said.
Corn, wheat and soybean prices rallied to multi-year highs this year as drought slashed Russia’s grain crop and this autumn’s U.S. harvest produced weaker-than-expected results. At Chicago-based CME Group, corn futures today rallied to a two-year high for the third day in a row.
One of the largest grain and oilseed processors and traders, Cargill is also a top supplier of food and feed ingredients, fertilizer, pork and beef. In CME’s agricultural markets, Cargill is a major player, accounting for 15 percent to 20 percent of a typical day’s trading volume in corn futures, according to estimates from floor sources.
During the first nine months of this year, an average of 258,679 corn futures contracts - or almost 1.3 billion bushels - traded each day, up 28 percent from the same period in 2009, according to CME.
Cargill spokeswoman Lisa Clemens said the company doesn’t discuss its trading activity or its customers.
Quarterly results also benefitted from improved earnings from Cargill’s food ingredients and animal protein businesses and from its majority stake in Mosaic Co., a fertilizer maker, the company said.
The rally in corn and soybean prices is raising costs for beef and pork producers and other grain users. But Clemens noted that the U.S. corn crop this year – estimated at 12.66 billion bushels by the USDA – is still expected to be the third-largest ever.
“We’re heading into the Southern Hemisphere growing season, so good growing weather is going to be important to production there,” Clemens said when asked about the potential impact of rising corn prices. Longer-term, higher prices are “going to send a strong signal to produce more, and we expect farmers to respond.”
December corn futures in Chicago today rose 23 ¼ cents to $5.79 a bushel, after climbing to $5.84 ¼, the highest price for a closest-to-expiration contract since August 2008. Corn futures are up 64 percent from about $3.54 at the end of June.
Cargill owns a hedge fund, Black River Asset Management LLC, which as of 2007 had about $6 billion under management, according to news reports.
Additionally, Cargill operates two hog plants with total capacity of 38,500 head a day and eight U.S. cattle slaughter plants with combined capacity to process about 30,250 head a day.