Rising demand for protein fattens Cargill's profit

A resurgent meat business has propelled a one-third rise in net profit at Cargill, the world's biggest agricultural commodities company, reflecting how worldwide demand for animal protein continues to grow despite even as emerging economies slow down.

Privately owned Cargill's sprawling food business includes operations that raise and slaughter pigs and produce Chicken McNuggets for McDonald's. Its meat and animal nutrition divisions led the company to net profit of $425m in its third quarter ended February 28, up 33 per cent from $319m a year ago.

Cargill's beef processing joint venture with Teys Bros of Australia was among the businesses buttressing performance. A drought in Australia forced cattle owners to sell herds to its slaughterhouses, boosting supply, a Cargill spokeswoman said. Beef processors tend to improve their profitability when they run at higher volumes.

Australia's weaker dollar also drove beef exports to countries including the US, which puts Australian beef in hamburgers, and to Asia. Australia is the predominant foreign supplier of beef to China, where beef imports have risen by a factor of five in the past three years.

Global meat consumption is growing as populations and incomes rise. The need to feed herds and flocks is also spurring greater world trade of grains such as sorghum and barley, primarily used in livestock feed.

The US Department of Agriculture on Thursday raised its estimate of sorghum exports by 50m bushels to "accommodate the continuing strong demand from China," it said.

Cargill's origination and processing division, which buys grain from farmers and ships it around the world, also improved results from a year ago as it handled last year's record US crops.

Cargill noted that the economic slowdown in China, Brazil and Indonesia and the stronger US dollar had reduced earnings in its food ingredients business, which makes products including sweeteners, starches, flour and cocoa.

David MacLennan, chief executive, said: "Faced with slowing growth and currency shifts in a range of markets, our food segment lagged expectations."

Meanwhile, the company's recently reorganised energy team rebounded as it traded through the recent plunge in oil prices, the company said.

The North American beef processing industry, in which Cargill ranks second, has struggled with excess capacity in the face of a cattle herd that has just begun to rebuild after years of decline. During its latest quarter Cargill divested a Texas cattle feedlot near a slaughterhouse it idled in 2013.

Cargill's meat business was caught up in a recent scandal over foreign objects found in food sold at McDonald's in Japan. Cargill said a piece of blue plastic found in one McNugget had not come from one of its production facilities.

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