Growing consumer demand for beef, along with a balanced supply, lifted Cargill Inc.’s profit during the summer months, the company said Wednesday.
The Wayzata-based conglomerate said its profit rose 14 percent to $973 million in the three months ended Aug. 31, the first quarter of its 2018 fiscal year. Revenue rose slightly to $27.3 billion.
“We’re off to a good start in our new fiscal year, powered by the significant work we’ve done over the last few years and continuing to accelerate our performance,” David MacLennan, Cargill’s chairman and chief executive, said in a statement.
The momentum in Cargill’s protein business, the biggest contributor to its profitability recently, was a carry-over from the fiscal year that ended in May.
The U.S. cattle supply has fully rebounded following years of drought in Texas and the southern Plains states, meaning Cargill can process more cattle through its massive slaughterhouses and sell beef to customers. This is passed on to consumers who are responding by buying more beef. Cargill said it is also exporting more beef abroad.
Profits in the company’s chicken business, which operates chiefly outside the U.S., and in its global animal feed business fell slightly compared to a year ago.
Cargill’s food-ingredient business was its second largest contributor to financial gains, led in most regions by cocoa and chocolate products, as well as food sweeteners and starches.
The company’s origination and processing business — or its agricultural supply chain — was down from last year’s strong comparative quarter. While global demand for grain and oil continues to grow, Cargill said an overabundance of production during the last four crop cycles has depressed commodity prices and market volatility.
Cargill’s industrial and financial services, which includes shipping, metals trading and structured finance, was down slightly from a year ago. Strengths within this business included earnings from iron ore and steel trading in Asia, and from trade and structured finance services in emerging markets.
During the first quarter, Cargill sold its North American power and gas business to Australia-based Macquarie Group. It also agreed to sell its U.S. metals business to Metal One, a Japanese steel trader and distributor. Cargill will still be a player in the energy industry through its metals business in Asia, as well as in biofuels, tanker shipping and bio-industrial businesses.