Cargill's recovery from a "rough start" to its financial year could be hampered by elevated livestock and feed prices, Fitch analysts said, underlining concerns which have led them to threaten a ratings downgrade.

Fitch, assigning an "A" rating to $1bn of Cargill notes issued on Tuesday to refinance maturing debt, blamed "multiple factors" for a 78% tumble to $336m in the agribusiness giant's earnings in the June-to-November half.

These included hits from higher livestock and feed costs on animal processing operations, the influence on commodity markets of political decisions which were difficult to anticipate, and a "weak" performance in sugar, in which Cargill replaced its divisional head in December.

Live cattle futures, for February, hit a fresh record high for a spot contract of 129.775 cents a pound in Chicago on Wednesday.

Sector difficulties

Fitch warned that some of these setbacks "could linger, and hinder a recovery in Cargill's earnings", which for the September-to-November period represented the weakest quarterly figure in a decade.

Cargill, the world's largest agricultural commodity trader, has like some peers found volatile markets difficult to negotiate, and like rival Archer Daniels Midland has announced job cuts.

Separately, Wilmar International, Asia's largest trading house, saw its shares tumble despite unveiling a tripling in fourth-quarter profits, after it acknowledged "weaker demand" in Europe and India, and "challenging" margins in China, at its palm oil and soybean division.

Wilmar shares closed down 10.9% at Sing$5.22 in Singapore, wiping Sing$4bn, ($3.2bn) off the group's stockmarket value.

'High for the rating level'

Fitch's comments came as the ratings agency, which in December warned Cargill of the risk of a ratings downgrade, restated that it might realise its threat if the agribusiness group's earnings remained weak, unless debt levels were moved "materially" lower.

Fitch highlighted "upward pressure" on crop prices, rather than the lower values of late 2011 which stood to reduce the outlays that traders such as Cargill needed to fund agricultural commodity positions, so freeing up cash.

Furthermore it hardened to "high for the rating level", from "slightly high", its assessment of Cargill's debt levels, compared to earnings.

Including borrowings used to fund commodity positions, Cargill's leverage - as measured by debt to operating earnings before interest, tax, depreciation and amortisation (ebitda) - stood at 3.9 times at the end of November, compared with 2.8 times at the end of August.

Ebitda was sufficient to cover interest payments 4.1 times, compared with 5.4 times in the year to August.

Timing issue

However, Fitch signalled that any change in Cargill's rating, which remains five notches above junk grade, was not imminent.

"Cargill's operating performance during the remainder of fiscal 2012 and earnings expectations for fiscal 2013 will be important factors in determining whether the company has an appropriate level of debt for the current rating level," the agency said.

Cargill, one of the world's biggest privately held companies, is not expected until August to release its results for its 2012 financial year.