Profits soar for Cargill but BSE casts shadow on future earnings

Related tags Bovine spongiform encephalopathy

Agri-giant and leading beef processor Cargill sees profits soar in
the first half of fiscal 2004. But as the fallout from the first
mad cow case in the US begins, pressure on current quarter figures
steps up with jobs already lost. Rumours that the FDA to tighten
livestock feed ban would bring relief to the sliding figures.

Over 750 jobs were axed last week at five of the compay's Excel beef plants following the news of the first case of Bovine Spongiform Encephalopathy (BSE) in the US.

Sending ripples of fear down the spines of importing countries, US beef is now closed to nearly all of its export markets, valued at $3.2 billion in annual sales for the $21 billion cattle industry.

"A number of countries have banned US beef, and there are some products we will not now be processing for export. That has led to the layoffs,?/i> said Bill Rupp, executive vice president of Excel Corporation.

The US announced on 23 December that a Holstein dairy cow in Washington state had contracted the deadly brain-wasting mad cow disease, known formally as bovine spongiform encephalopathy.

With investigations into the mad cow case ongoing in North America it is likely that beef processors such as Cargill, or competitor Tyson, will continue to see chunks of revenue lost from the bottom line in the next few months.

But strong first half year results for Cargill will go some way to softening the potentially devasting blow dealt by the BSE discovery. A further key factor could significantly boost possible waning earnings - soy.

One principle advantage for a company like Cargill that has its fingers in so many pies, is that a blow at one end of business, can actually help lift the other.

Rumours in the US media this week suggest that the FDA may soon tighten its ban on the use of cattle remains in livestock feed. If this is the case, soybean sales would immediately soar as soymeal, crushed from the beans, would be used as a high-protein ingredient in feed for US hogs, chickens, cattle and other livestock.

According to US reports, soybean futures prices at the Chicago Board of Trade briefly rose yesterday by as much as 26 cents a bushel to a 6-1/2 year high. Soybeans for March delivery closed up 16-1/4 cents at $8.39 a bushel. For Cargill, a leading global supplier of soy, the ruling would be a fine boost to the bottom line.

For the first half, Cargill said net profit in the fiscal second quarter ended 30 November reached $518 million, compared with $314 million a year ago, with its global grain, oilseed, cocoa and starch and sweetener operations showing improved results and the latest quarter including gains of $117 million from potential liabilities from a prior acquisition.

The company, whose operations span grain and crude oil trading, meat processing, and fertiliser production, said one time gains saw profit from continuing operations hitting $513 million, up 62 per cent from $316 million for the same period last year.

Stepping into Europe in the first half and plucking a UK flavour house ?The Duckworth Group - and a chocolate supplier - OCG Cacao - Cargill's recent acquisitions in the European ingredients arena helped boost overall earnings for the group.

Related news

Show more

Related products

show more

Take Control with Predictive Modeling from Corbion

Take Control with Predictive Modeling from Corbion

Content provided by Corbion | 08-Mar-2024 | Product Brochure

Increased demand for uncured, higher pH formulations and natural products has made the challenge of controlling Listeria difficult. The good news: the...

Oat Groats – Heat-treated Oat Kernels

Oat Groats – Heat-treated Oat Kernels

Content provided by Lantmännen Biorefineries AB | 06-Dec-2023 | Product Brochure

Lantmännen offers now Oat Groats: Heat-treated oat kernels, also known as oat groats or kilned oats, undergo heat treatment to inhibit enzymes that could...

Follow us

Products

View more

Webinars