Cargill Q4 profit falls on exchange rate loss

(Dave Bedard photo)

Reuters — Top global commodities trader Cargill said Thursday its quarterly earnings fell as drought limited farm services opportunities in the U.S. and due to a loss stemming from the drop in the value of Venezuela’s currency.

Minneapolis-based Cargill was also stung by elevated rail shipping costs and railcar shortages in the northern U.S. Plains states, which have similarly impacted rival agribusinesses Archer Daniels Midland and Bunge.

Privately-held Cargill reported net earnings of $424 million for the fiscal fourth quarter ended May 31. That was down 12 per cent from $483 million in the same quarter a year earlier (all figures US$).

Revenue rose two per cent to $36.2 billion in the quarter, compared with $35.4 billion a year earlier.

The company’s full-year fiscal 2014 earnings declined 19 per cent to $1.87 billion while revenues slipped one per cent to $134.9 billion.

Cargill was the latest U.S. corporation to be hurt by the drop in value of Venezuela’s bolivar, joining the likes of Colgate-Palmolive, Fiat Chrysler, Goodyear and numerous U.S. airlines. Critics have called the country’s revamped exchange rate system a devaluation in disguise.

It also said earnings in its food ingredients and applications business declined after four straight years of record profits due to weaker economic conditions in some markets and the negative Venezuelan currency impact.

Results from Cargill’s origination and processing segment — which buys, sells, stores and transports agricultural products — slipped on the lingering impact of the drought in the U.S. Plains as well as rail shipping woes.

Rail carriers in the northern U.S. and Canada have struggled to recover from severe winter service delays caused by harsh weather as demand for shipping oil by rail has soared.

Canada’s government ordered the country’s key railways to ship at least one million tonnes of crops a week to clear a grain backlog ahead of the fall harvest, while the U.S. Surface Transportation Board has ordered railroads to report weekly grain shipping performance.

Cargill’s beef business was a bright spot as a downturn in feed costs boosted North American cattle feeding margins and beef exports from Australia were brisk.

However, the company, one of the largest U.S. beef processors, has closed plants in Wisconsin and Texas over the past year as the U.S. cattle herd shrunk to the smallest in 63 years.

Pork and poultry results improved from a year ago.

Earnings in industrial and financial services were mixed, the company said, with poor results in energy more than offsetting stronger profits in its ocean shipping business and gains from a joint steel-making venture.

— Karl Plume reports on ag markets for Reuters from Chicago.



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