Cargill Inc.’s third-quarter earnings dropped 42 percent from a year ago, as the agribusiness giant was hit by a confluence of drought in North America, weakness in its global animal feed business and a currency devaluation in Venezuela.
Four of Cargill’s five major business units experienced a decline in earnings, as its overall profits tallied $445 million. Cargill, one of the world’s largest privately held firms, reported revenue of $32.2 billion for the quarter, up 1 percent.
Despite the rough quarter, Cargill’s nine-month profits of $1.83 billion were up 66 percent from the same time a year ago. The Minnetonka-based company has been rebounding from its 2012 fiscal year, when it posted one of its weakest financial performances in the past decade.
Last year’s scorching drought hurt both Cargill’s meat processing and farm services businesses in North America.
“In North America, our meat processing businesses were pressured by the drought-related high cost of feed ingredients,” Cargill CEO Greg Page said in a statement.
The drought pushed up the cost of corn and other grains, the main ingredient in animal feed. The beef industry has been particularly hard hit, and Cargill is one of the largest players in the U.S. market. In February, the company indefinitely idled one of its five giant plants that take in live cattle and ship out boxed beef.
The company’s third-quarter earnings included an undisclosed charge for the shuttered plant in Plainview, Texas, which employed 2,000 people. The drought has helped reduce cattle supply, as farmers faced with high feed costs liquidate herds, driving up input prices for processors.
Cargill spokesman Mike Martin also acknowledged Tuesday that a contributing factor to Plainview’s shutdown was the big drop in demand last year for “lean finely textured beef,” a ground beef filler that was unflatteringly featured as “pink slime” in some media reports. Cargill produces the product, which food safety experts say is safe.
Cargill’s farm services sector — which buys and stores grain from North American farmers — saw its earnings decline over last year. The drought cut U.S. grain harvests.
The company’s grain origination and processing business, which includes exports and grain trading, was hurt by poor weather and port backups in Brazil that significantly reduced soybean exports there.
Meanwhile, in Venezuela, Cargill’s animal feed businesses were hurt by that country’s currency devaluation in February. The global feed business also was hit by “difficult economic conditions” in southern Europe and South Korea, said Lisa Clemens, a Cargill spokeswoman.
On the plus side, Cargill’s industrial segment posted an increase in third-quarter earnings over last year. And Page said Cargill’s variety of businesses — the company makes everything from chocolate to road salt to myriad food ingredients — helped it weather the quarter’s strong headwinds.
“The current quarter demonstrated the balance that comes from Cargill’s diversified portfolio,” he said in a statement. “Even though many of our global food ingredients businesses experienced higher input costs, they nearly matched their strong performance in last year’s third quarter.”