Cargill, the US agribusiness conglomerate, reported record quarterly profits thanks to a jump in earnings at its food processing and sales unit – underlining how the boom in global food prices has boosted some large companies in the agricultural sector.
Cargill, one of the world’s largest privately held companies, said profits increased 86 per cent from the same period last year, from $553m to $1.03bn in the third quarter ending on February 29.
Profits in the first nine months of the company’s fiscal year totalled $2.9bn, a 69 per cent increase from $1.71bn a year ago. Both figures set records for the agribusiness, which is based in Minneapolis.
“The dimensions of change in global agriculture are striking,” said Greg Page, chairman and chief executive. “Demand for food in developing economies and for energy worldwide is boosting demand for agricultural goods, at the same time that investment monies have streamed into commodity markets.”
World grain stocks were at their lowest in 35 years relative to demand, Mr Page said. “Prices are setting new highs and markets are extraordinarily volatile.”
Average food prices around the world have risen 45 per cent in the past nine months, sparking food riots in developing countries and the imposition of export bans on scarce foodstuffs.
World leaders, gathered in Washington last week for the spring meetings of the World Bank and International Monetary Fund, called for urgent action to tackle the problem. Dominique Strauss-Kahn, managing director of the IMF, warned of “terrible” consequences if food prices continued to rise. All the good work done in recent years in Africa could be “destroyed very rapidly by the crisis coming from rising food prices”, he said.
The IMF said further price rises were possible in the short term.
Food price cycles in the past have typically averaged three years, and supply has responded quickly to changes in demand conditions. But the fund said the current cycle was likely to last longer.
The World Bank expects food prices to remain high throughout 2008 and 2009 and not return to the levels of the early 2000s at least until 2015.
Cargill is a private company and does not disclose detailed financial information. But the company said its food ingredients and applications segment – which includes more than 40 food ingredient and meat businesses in Asia, Europe, Latin America and North America – exceeded earnings from a year ago.
Profits had risen in its agriculture services division, mostly on the improved performance of the company’s global animal nutrition operations, Cargill said.