Glencore credits Canada for 'striking' ag results

GlencoreXstrata revealed hopes of holding on to its "striking" improvement in agriculture despite acknowledging a one-off boost from last year's bumper Canadian grains harvests.

The copper-to-cane giant - unveiling an 8.1% rise to $2.01bn in earnings for the first half of 2014, and a share buyback of up to $1bn - highlighted the performance of its, relatively small, agriculture division in the improved performance.

The division recovered from an operating loss of $20m in the first half of 2013 to an operating profit of $473m, led by an improvement in the crop marketing business, which focused on more lucrative business.

Profits in crop marketing jumped from $15m to $473m, overtaking the group's takings from energy trading.

This rise came despite a 25% drop in revenues, a reflection of lower crop prices and lower oilseed and grain volumes, down 13% and 11% respectively - although not, it appears, in Canada, where the group bought grain handler Viterra two years ago.

'Striking performance'

"The performance of agriculture was striking," Ivan Glasenberg, the GlencoreXstrata chief executive, said flagging the performance of Viterra in what was a "challenging price environment in our core commodities of barley, canola and wheat".

Viterra, which also came with an Australian business, the former ABB, made a "robust contribution" achieved a on the back of a record crop in Canada and an above-average crop in South Australia," the group said

Chris Mahoney, the group's head of agricultural products, said that "Canada was good, primarily because of the large crop in Canada which was a crop record by about 25% larger than the previous crop".

Canada achieved record canola and wheat harvests last year, of 17.96m tonnes and 37.53m tonnes respectively, supporting bumper 2013-14 exports of 8.1m tonnes for the oilseed and 21.55m tonnes for the grain, on farm ministry estimates.

'Good demand growth'

Mr Mahoney acknowledged that the "Canadian situation probably is a little bit exceptional", with harvests this year expected to prove less bountiful.

Statistics Canada will tomorrow unveil fresh crop estimates expected at 28.5m tonnes for wheat,  although up from a forecast of 27.74m tonnes in July, and 14.5m tonnes for canola, nudged up from 14.45m tonnes.

However, he also flagged improved performances in soft seed processing in Europe, and soybean crushing in Argentina.

"In fact, the trading generally was better in the first half, particularly the oil seed trading," he told investors.

Looking ahead, "we still have good demand growth.... The crush margin situation looks okay - I would say it looks good in South America.

"I don't know that the earnings will come in the same way that they came in the first half from the same bits of the division, but without making a hard and fast prediction, I would say it looks okay.

"And longer term, the outlook I think is pretty positive for the industry."

Sugar improvement

In oilseed crushing, volumes soared 73% to 2.68m tonnes, a reflection of an improved performance at the Timbues plant in Argentina, and of GlencoreXstrata raising from 33% to 50% its stake in the operation.

The group also highlighted a 42% rise to 723,000 tonnes in sugar cane processed at its Brazilian mill, Rio Vermelho, a reflection of an "ongoing expansion" programme.

The group also revealed a 31% drop to 232,000 tonnes in volumes from its farming operations, which stretch from Australia to the former Soviet Union, but failed to comment on the decline.

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