Cargill Profit Hit by Trade Challenges, Weather



Jacob Bunge | Wall Street Journal

Cargill Inc. said the U.S.-China trade war continued to erode profits for the agricultural conglomerate, slowing soybean exports and challenging U.S. farmers.

Reduced soybean sales and processing margins contributed to a 10% decline in Cargill’s quarterly profit, the Minnesota-based grain and meat giant said. Trade tensions also held down crop prices, limiting farmers’ willingness to make advance sales through Cargill.

Executives of Cargill, as well as other agricultural companies, are warning of long-lasting changes for the global food business, as the U.S.-China trade dispute stretches into its second year. China increasingly has turned to South American suppliers for crops, while ramping up meat imports from the European Union, Brazil, Australia and New Zealand, as China’s pork industry combats a deadly hog disease.

David Dines, Cargill’s chief financial officer, in July said that the longer the trade battle continues, the more permanent the changes to international food commerce will be. Ray Young, CFO for Chicago-based grain giant Archer Daniels Midland Co., said last week at a London conference that China over the long term will rely less on U.S. food exports, and the U.S. farm sector will need to become less reliant on China.

China this month exempted from tariffs purchases of U.S. soybeans, pork and other farm goods, part of efforts by U.S. and China officials to ease tensions as trade negotiations continue.

Trade disruptions pushed down profits across Cargill’s grain-purchasing and processing operations in most parts of the world, the company said Thursday. China’s absence from U.S. soybean exports contributed to lower crop prices, which left farmers reluctant to lock in sales and hedge risk through Cargill’s risk management business.

Cargill also dealt with continued problems arising from springtime flooding. High water levels slowed Cargill’s river barge business and impeded ship loading at its New Orleans port, a spokeswoman said.

For its fiscal first quarter, Cargill’s net earnings were $915 million, downfrom $1.02 billion in the same period a year ago, while revenue increased 1% to $29 billion. Adjusting for one-time costs, Cargill said its earnings increased 3% to $908 million.


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