Cargill posts loss after wrong-way soybean bets

Traders caught off guard by oilseed market volatility

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Bloomberg

Cargill posted an adjusted operating loss in the fourth quarter partly because of wrong-way bets in soybean markets

The company, with corn and soybean processing plants in Cedar Rapids, joined other traders caught off guard by volatility in the oilseed used in cooking oil and animal feed.

The operating loss in the three months that ended on May 31 was $19 million, compared with an operating profit of $230 million a year earlier, Minneapolis-based Cargill said Wednesday in a statement. Net income was $15 million, compared with a $51 million loss a year earlier stemming from asset impairments and costs related to Venezuela’s currency.

The company, among the world’s agriculture giants, said sales fell 5 percent to $27.1 billion.

A loss in the origination and processing segment was related to the rally in soybeans in April and May, “which worked against our view of the market,” spokeswoman Lisa Clemens said in a telephone interview. Results were “negatively affected” by trading and timing in oilseed processing, she said.

Betting on markets is a daily task for traders. Cargill posted a 20 percent gain in first-quarter profit partly because of smart calls in corn and soybeans. The company said its team “ably navigated” weather-driven agricultural markets.

In the fourth quarter, the industrial and financial-services segment recorded a loss mainly because of an adjustment for “counterparty risk in ocean shipping,” and the energy businesses had “a small loss,” Cargill said.

The counterparty risk in shipping was related to “depressed dry bulk markets,” weak demand and an oversupply of ships, Clemens said. She declined to specify what led to the loss in energy and cited “challenging markets.”

The 151-year-old company has a diverse range of businesses including grain trading and livestock processing.

Cargill has been reshaping its portfolio in the past year. The Black River Asset Management investment unit has been broken up and spun off, while the U.S. pork business was sold to Brazil’s JBS.

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