Cargill reaps windfall amongst food speculation bonanza

mark at mark at
Wed Aug 10 15:17:40 BST 2011

Note also earlier report posted on this list 9 days ago revealing that 
"Cargill recently purchased all British wheat stocks in 
an‘unprecedented’ purchase"
Url ref:

Record earnings from Cargill on back of crop disruptions

By Javier Blas, Commodities Editor
FT,  August 9, 2011

Cargill reported its best year on Tuesday, as its profits breached 
$4bn on the back of disruptions to global food supplies.

The world’s biggest agricultural trader said its net profit rose to 
$4.24bn in the year to May, compared with a previous record of $3.95bn 
in 2007-08, and an increase of 63 per cent compared with the $2.6bn 
earned last year.

The Minnesota-based company is controlled by 80 members of the Cargill 
and MacMillan families descendants of William Wallace Cargill, who 
founded the trading house in 1865. The company does not disclose its 
dividends policy to the families, but according to a report last 
December by Moody’s Investors Service, it limits pay-outs to 20 per 
cent of trailing two-year earnings.

The record profit highlights the big margins in the sector led by 
Cargill, which rose to prominence in the 2007-08 food crisis, when 
agricultural commodities prices hit all-time highs. Cargill and its 
main competitors, including ADM, Bunge and France’s Louis Dreyfus are 
known in the industry as “ABCD” and together dominate global flows of 
agricultural commodities.

Cargill benefited from disruptions in global grain trading over the 
past year. Russia imposed an export ban on wheat and barley last 
summer after a drought devastated its crop. Months later, as unrest 
gathered in the Middle East, countries from Algeria to Saudi Arabia 
announced extraordinary purchases of wheat. Stockpiling by governments 
combined with strong demand in emerging markets and disappointing 
crops drove the prices of key agricultural commodities higher.

Sergio Rial, chief financial officer at Cargill, told the Financial 
Times the trading house had yet to see a slowdown in agricultural 
commodities demand, but warned about economic growth in the developing 

“As we have seen in China and a number developing countries 
controlling inflation, it is possible that the growth path of the 
so-called Brics may slowdown,” he said.

The company is unlikely to repeat its record profitability anytime 
soon, after it spun off earlier this year its 64 per cent stake in 
Mosaic, the fertiliser producer, in a $24bn deal to satisfy a 
shareholder who wanted to cash out. The deal closed in May.

The details of its complex deal to spin off Mosaic allowed outsiders 
to calculate the value of the trading house for the first time, with 
bankers putting it at about $50bn.

Mr Rial insisted that Cargill did not have any plans to float it 
shares. “Public markets are not the only way of value creation,” he 

Glencore, the world’s largest commodities trader, raised about $10bn 
earlier this year in an initial public offering in London and Hong 

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