Cargill’s Profits Plunge 42% Due to Drought
Cargill said Tuesday that its third-quarter net earnings were down 42 percent from the same period a year ago, due in large part to the most severe U.S. drought in half a century.
While net earnings slid from $766 million to $445 million, revenue for the quarter, which ended February 28, edged up 1 percent to $32.2 billion. For the first nine months of this fiscal year, earnings rose 66 percent to $1.83 billion.
“The current quarter demonstrated the balance that comes from Cargill’s diversified portfolio,” Chairman and CEO Greg Page said in a statement. “In North America, our meat processing businesses were pressured by the drought-related high cost of feed ingredients. Even though many of our global food ingredients businesses experienced higher input costs, they nearly matched their strong performance in last year’s third quarter.”
The prolonged impact of the drought, which reduced crop yields in North America, hurt Cargill’s agricultural services business. The company said that its animal nutrition results were negatively affected by Venezuela’s currency, which was devalued by a third on February 8. The company did, however, see strong demand for U.S. soybean exports due to limited harvest supplies in South America.
Cargill’s animal protein business was hurt throughout North America due to high feed costs, tight cattle supplies, and an oversupplied turkey market. Cargill’s earnings also took a hit when a beef processing plant in Texas was idled in February due to the low cattle supply caused by the drought.
Cargill said that results in its risk management, finance, and energy segments were also “moderately” below last year’s third quarter. Cargill’s industrial sector, meanwhile, increased quarterly earnings through higher sales volumes of de-icing products.
Cargill is not the only Minnesota-based company to feel the impact of last year’s drought. GNP Company, a St. Cloud-based poultry company, and Litchfield-based egg producer Sparboe Company, both told Twin Cities Business last fall that higher feed costs and smaller crop supplies have hurt their bottom line.
Cargill’s earnings have fluctuated greatly over the last fiscal year. Its third-quarter decline comes after two very successful quarters in which earnings increased four-fold each time. However, the company saw earnings plummet 82 percent during last year’s fourth quarter.
Cargill is the largest privately held company in Minnesota based on revenue from its most recently completed fiscal year, which totaled $133.9 billion.