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Cargill, the world’s largest trader of agricultural products, said annual revenues fell by a tenth as large supplies of farm produce pushed down prices.
The revenue decline to $160 billion for the year through May 2024, from a record $177 billion a year earlier, comes as Brian Sikes, who took over the trading company in early 2023, is reorganizing its operations.
Last month, Cargill’s publicly traded rivals Archer Daniels Midland and Bunge reported earnings declines, with earnings per share at both companies falling to their lowest levels since 2020, missing analysts’ expectations.
Cargill, one of the world’s largest private companies by revenue, is the C in the so-called ABCD of global food commodity traders, along with ADM and Bunge in the United States and Louis Dreyfus in Europe.
The quartet has made record profits in recent years, despite volatility and price spikes caused by the pandemic and Russia’s invasion of Ukraine in 2022, but prices have since collapsed as crop inventories have swelled, squeezing traders’ margins.
Cargill’s restructuring comes as the major agricultural trader has failed to meet its profit targets for fiscal 2024, Reuters reported.
Under the new structure, Cargill’s five business units (Agricultural Supply Chain, Protein & Salt, Animal Nutrition & Health, Food & Bioindustry, Financial Services, and Metals) will be divided into three divisions: Food Enterprise, Agriculture & Trading, and Specialty Portfolio.
The trader has closed its steel trading operations in China aVsceker the country’s real estate crisis took a toll on its business.
“Like all healthy companies, we are constantly reviewing our performance and portfolio to ensure we are positioned to delight our customers and win in the marketplace,” Cargill said. “Looking ahead, we have a clear plan to evolve and strengthen our portfolio to take advantage of the exciting trends ahead.”
The group’s profit decline comes at a time when the beef industry is coming under pressure: last year’s drought in the West and South forced ranchers to reduce the nation’s cattle herd to its lowest level since 1951.
Cargill’s meatpacking operations, with plants that slaughter and cut beef, chicken and turkey, have helped boost profits and distinguish it from ADM, Bunge and Dreyfus, which primarily trade and process grains.
However, the U.S. Department of Agriculture projects that domestic beef production will decline by about 2% in 2024 from a year earlier, and Tyson, another major U.S. meat producer, said earlier this month that it expects adjusted operating losses of between $400 million and $300 million in fiscal 2024.
“As we move forward, we are not looking for short-term solutions. Instead, we are focused on a transformation strategy that will fundamentally change the way we manage Cargill to ensure we drive long-term profitable growth,” the company said.
Cargill was making “significant strategic investments, including methane reduction research,” the company added. In 2019, it committed to reducing greenhouse gas emissions from its beef business by 30 percent by 2030.
