Strong profit for Cargill, but BSE shadow looming
half of fiscal 2004 despite challenging trading conditions. But the
first mad cow case in the US is set to knock figures for the
current quarter, warned the agro-giant Cargill.
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.
"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," said Bill Rupp, executive vice president of Excel Corporation.
The US announced on December 23 that a Holstein dairy cow in Washington state had contracted the deadly brain-wasting mad cow disease, known formally as bovine spongiform encephalopathy, or BSE.
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.
With investigations into the mad cow case ongoing in North America it is likely that beef processors such as Cargill, or competitor Tyson, will 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.
Cargill said net earnings in the fiscal second quarter ended November 30 were $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, fertilizer production, said earnings from continuing operations totaled $513 million, up 62 per cent from $316 million in the year-ago period on one-time gains.
One key advantage for a company such as Cargill that has its fingers in so many pies, is that a blow at one end, can actually help lift the other. US media reports this week note that soybean prices ended sharply higher on Tuesday on market speculation that the Food and Drug Administration plans to tighten its ban on the use of cattle remains in livestock feed to prevent mad cow disease.
A tightened ban on cattle remains in livestock feed would be good news for the soybean market because it would likely result in higher use of soymeal, produced from crushed soybeans, as a high-protein ingredient in feed for US hogs, chickens, cattle and other livestock.
For Cargill, a leading global supplier of soy, the ruling would be a fine boost to the bottom line.
