Cargill Earnings Hit by Commodity Market Disruptions

MarineLink.com
Tuesday, April 08, 2014

Cargill Inc said on Tuesday its quarterly earnings fell 28 percent, making it one of the largest companies yet to demonstrate how big commodity market disruptions this year have hurt its bottom line.

Minneapolis-based Cargill, a top global commodities trader, was hit by a triple-whammy of unexpected events, including a surge in energy prices in January, rail backlogs, and the rejection of U.S. corn shipments by China.

The problems are likely to have also hit Cargill peers such as Archer Daniels Midland Co and Bunge Ltd, which are due to report financial results in the coming weeks.

The coldest winter in 30 years catapulted regional U.S. natural gas prices to record highs, while power markets gyrated as producers struggled to keep supplies flowing to consumers. The harsh weather also snarled rail transport for products as diverse as coal, grain and ethanol.

"In North America, we had record harvests and this extreme weather, so that created a backlog," Cargill spokeswoman Lisa Clemens said about the rail disruptions. "We couldn't move grain or deliver products as fast as we would otherwise."

Cargill, one of the world's largest privately held companies, reported net earnings of $319 million for the third quarter ended Feb. 28, down from $445 million a year earlier. Revenue was $32 billion, nearly even with a year earlier.

A trading loss in U.S. power markets was related to an "unprecedented price spike" in late January, Cargill said. It added that part of the loss has been recovered but provided no details.

In February, the head of physical trading at Cargill's North American thermal energy arm left the company. Cargill was reported by an industry publication to have lost more than $100 million in U.S. energy markets.

Cargill said last month it would stop trading coal and dealing in gas and power in Europe, but denied the moves were linked to the U.S. loss.

The company's focus historically has been on grains and agricultural markets, rather than energy. ADM, Bunge, Cargill and Louis Dreyfus Corp make up the so-called ABCD firms that dominate agricultural commodities.

Rail Slows Down
Cargill said earnings for its grain sector were down from a year earlier because of costs related to China's rejection of genetically modified U.S. corn. Further, there were generally "limited opportunities" in grain trading and storage, the company said.

Grain dealers have struggled to find empty railway cars amid competition with oil shippers for track capacity.

The surprise rejections by China were notable because it is important for Cargill to accurately assess the risks associated with counterparties in its transactions, said Chris Johnson, a credit analyst at Standard & Poor's.

"The fact that there is a bit of a counterparty surprise in the corn thing, that's the one that is more of an eyebrow-raiser," he said.

Johnson said he was confident Cargill's overall loss exposure was "well contained" and that the Chinese rejections were likely not material to the company's credit rating.

Outlook for Rivals
Cargill's comments about limited opportunities for grain handling were "somewhat surprising" and offer a mixed outlook for ADM and Bunge, said Ken Zaslow, analyst at BMO Capital Markets.

Cargill said export demand for beef was strong, which is a positive sign for meat companies Tyson Foods Inc and Hormel Foods Corp, Zaslow said.

Shares of ADM were down 0.9 percent at $43.20, while Bunge shares were up 1.7 percent at $79.73. Tyson Foods shares were up 0.2 percent at $41.20, and Hormel was down 0.6 percent at $47.77.

(Reporting by Tom Polansek; Editing by Lisa Von Ahn; and Peter Galloway)

Maritime Reporter April 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Finance

Royal Caribbean Cuts Profit Forecast

Royal Caribbean Cruises Ltd cut its adjusted profit forecast for the year, citing a jump in fuel prices since its January forecast and a strong dollar.   Shares

Baltic Index Up Slightly on Higher Rates for Large Vessels

The Baltic Exchange's main sea freight index, which tracks rates for ships carrying dry bulk commodities, rose slightly on Monday due to firmer rates for the large vessel segments.

ExxonMobil President Seeks Swift Action on US LNG Exports

The United States is at risk of losing economic opportunity and the ability to solidify its role as a global leader in energy production unless the government moves

Environmental

Biloxi Industrial Seaway Closed Due to Landslide

The U.S. Coast Guard closed the Biloxi Industrial Seaway in Gulfport, Miss., due to a landslide, Saturday.   The Biloxi Industrial Seaway in the vicinity of the

Dispersants ... Will we ever be able to use them again?

On January 22, 2015, the Environmental Protection Agency (EPA) published a Proposed Rule on dispersants. The Proposed Rule drastically changes the EPA’s approach

Marshall Islands Calls for New Emissions Target

In a submission to the International Maritime Organization, the Republic of the Marshall Islands, currently the world’s third largest shipping registry, has called

News

SAAM SMIT Towage Brazil Signs on with Helm

Helm Operations has signed on Brazilian harbor services company SAAM SMIT Towage to its Helm Marine Operations software to manage its billing and dispatch.    SAAM

Siemens Wins Vessel Electrical Installation Contract

Nautilus Minerals Inc. announces that the order for the supply of the entire electrical installation for the production support vessel has been awarded to Siemens International Trading (Shanghai) Ltd.

Delivery Begins for HMS Prince of Wales Bridge

The bridge section of the U.K.’s second Queen Elizabeth Class aircraft carrier has been loaded out of its dock hall in Glasgow ahead of its first sea voyage to Rosyth.

Intermodal

Cargo Ferry Project Moves Transport from Road to Sea

A new competitive and eco-friendly maritime transport concept, the Cargo Ferry project, was presented in Oslo today. The result of more than two years of work,

Taiwan's Yang Ming Marine to Add Bigger Vessels to its Fleet

Yang Ming Marine Transport Corporation, Taiwnanese global shipping and logistics services company,  will take delivery of 14 large-sized ships over the next two years,

Star Bulk Adds Jennifer

Star Bulk Carriers Corp has added M/V Star Jennifer (ex "Ore Hansa), a 82,290 dwt Kamsarmax bulk carrier, built in 2006, to its fleet.   The Company completed

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Standards Naval Architecture Pipelines Salvage Ship Repair Ship Simulators Shipbuilding / Vessel Construction Sonar
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1963 sec (5 req/sec)