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Cargill admits below-par year despite meat revival

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David MacLennan, unveiling his first full year results as Cargill chief executive, admitted earnings "fell short of expectations", as the agribusiness giant joining the likes of Procter & Gamble in taking a hit from Venezuelan currency devaluation.

Mr MacLennan said that Cargill was undertaking measures, such as software changes, to improve its operational efficiency after a year in which earnings fell 19% to $1.87bn, on revenues down 1% at $134.9m.

For the fourth quarter, which ended on May 31, earnings dropped 12% to $424m, on revenues up 2% at 36.2bn.

"We look back on a year in which overall earnings fell short of expectations," said Mr MacLennan, who succeeded Greg Page as chief executive in December.

'Weaker economic conditions'

The decline in profits reflected in part an, unspecified, loss from balance sheet adjustments "to account for Venezuela's effective currency exchange rates".

Changes in Venezuela's strict currency rules, introducing a set of official exchange rates, which remain at odds with black market exchange rates, have prompted a series of companies, including Procter & Gamble, Ford and Colgate-Palmolive to takes hit to their Venezuelan balance sheets.

However, the group also revealed declines in origination and processing results, for both the year and the March-to-May quarter, reflecting the rejection by China of a series of cargos of imported US corn.

And profits in the food ingredients division dropped too, down in part to "weaker economic conditions in some countries", besides the Venezuela writedown.

'Good cattle feeding results'

However, earnings rose "significantly" in the meat and feed business, in both the fourth quarter and the full year, helped by the impact of acquisitions such as Provimi in recent years, but also the boost to livestock margins from depressed grain costs and high meat prices.

"Performance in animal protein was led by the beef business, which was boosted by increased operating efficiency, good cattle feeding results in North America and brisk exports of Australian beef," Cargill said

In US pork, profits rose "on improved live production and processing efficiency, and steady demand".

Surging meat prices

The comments came hours after the United Nations Food and Agriculture Organization revealed a rise in world meat prices, up 14% over the last year, to the highest on records going back to the start of 1990.

The latest rise in prices "was principally due to a strong rise of bovine meat prices in Australia, where herd rebuilding has reduced export supplies, and continued strong import demand in Asia, China in particular", the FAO said.

In the case of beef in particular, "many exporting countries are in a herd rebuilding phase, which is limiting availability for exports and sustaining prices".

In the US, for instance, cattle prices have hit record highs, lifting beef values too, as breeders and feedlots compete for supplies from a herd at its smallest in decades.

Price reversal

However, cattle futures actually fell limit down in Chicago on Thursday, in a profit-taking drive fuelled by concerns over the knock-on effects of Russia's ban on imports of US agricultural products.

"Consumer resistance could develop at anytime as competing meats are on the rise, more poultry will be in the US with the Russian meat ban," broker US Commodities said.

Feeder cattle futures fell the exchange limit of 3.00 cents a pound in Chicago to 318.325 cents a pound for August delivery, 217.725 cents a pound for September and 216.975 cents a pound for October.

Live cattle futures also dropped the 3.0 cents-a-pound limit for the spot August contract, which fell to 155.55 cents a pound, and the best-traded October lot, which tumbled to 152.95 cents a pound.


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