Risk management tools pay off for Cargill

Related tags Cargill Risk Sugar

Despite a squeeze on ingredients prices and global volatility in
key commodities, adept risk management tools help agri-giant
Cargill deliver a strong performance for the year, with sales in
the last quarter rising by a considerable 38 per cent.

The Minneapolis maker of food ingredients, grains, oilseeds and animal nutrition products pulled in a 24 per cent lift in 2004 earnings to $1.28 billion (€1.04bn), up from $1.03 billion a year ago.

"Our team's ability to manage the price volatility and trade uncertainty that permeated markets was critical to our results,"​ said Warren Staley, chairman and chief executive officer of the privately-held firm.

The supplier of cocoa and sweeteners managed to weather higher raw material prices - soy at 15 year highs - and tight supply for commodities - wheat supplies at 30 year lows - through able commodity trading.

"Equally important was Cargill's focus on assisting customers to respond to consumers' changing diets and lifestyles, lessen the fluctuations in their supply chains, and help them manage the commodity price risk in their businesses,"​ added Staley.

Revenue growth from the firm's ingredients operations contributed to the bottom line. Cargill, the largest private company in the US, only recently entered the European ingredients scene, earlier this year buying OCG Cacao, a European maker of industrial chocolate, and UK-based The Duckworth Group, which creates flavour systems for food and beverage makers.

Although the US giant produces flavour carriers, texturisers, emulsifiers, functional ingredients, sweeteners and other speciality ingredients, the Duckworth acquisition marked the firm's first entry into the European flavour business.

"During the past year, Cargill increased its food ingredient capabilities by acquiring OCG Cacao and The Duckworth group, it also introduced a number of ingredients and ingredient systems that food manufacturers can use to add taste, convenience and health-promoting benefits to new food and beverage applications,"​ the firm said in a statement yesterday.

Last month Cargill linked up with US starch producer MGP Ingredients to push a new resistant starch product onto the currently burgeoning market for low-carb food products.

And almost a year after first reaching an agreement with the brand's owner, the starch derivative subsidiary of Cargill, Cerestar Food & Pharma Specialties Europe, in June this year began the pan-European distribution of trehalose, a multi-functional sugar created by Japan's Hayashibara for use in a range of food products, including bakery, dairy, egg products and confectionery.

Without providing any specific figures, Cargill added that the meat side of the business showed signs of recovery after being knocked by the discovery of a single case of BSE in the US at the end of 2003.

Overall Staley said Cargill's operating earnings for the full year were broad based, with significant contributions from its food ingredient, grain and oilseeds, animal nutrition, risk management and financial businesses. "More than half of our business units generated higher earnings than a year ago, and over a third posted record results,"​ commented the CEO.

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