Weather, Trade Weigh on CHS, Cargill

Two Agribusinesses Show Significant Drops in Net Income

Todd Neeley
By  Todd Neeley , DTN Staff Reporter
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CHS Inc. and Cargill reported earnings recently that show continued challenges in the agriculture economy. (DTN photo by Elaine Shein)

OMAHA (DTN) -- Recent earnings reports in the past week from two of the nation's largest agribusinesses continue to show the strain agriculture faces.

CHS Inc. reported a 70% drop in net income in its 2019 third-quarter earnings report on Monday, from the same time period in 2018. However, when comparing the first nine months of fiscal year 2018 and 2019, the company showed an increase in overall net income.

CHS, the largest farmers cooperative in the country, reported a net income of $54.6 million for the recently ended third quarter, compared to $181.8 million in the third quarter of 2018.

Overall, however, CHS generated an increase in net income for the first nine months of fiscal year 2019 to $650.9 million, or an increase of 21.5% compared to the first nine months of fiscal year 2018.

CHS owns and operates in food processing and wholesale, farm supplies, Cenex brand fuel, financial services and retail businesses. The company is a co-owner of vegetable oil processor Ventura Foods.

On the agriculture side of the ledger, CHS reported a $39 million decrease in earnings as a result of "decreased margins and volumes for grain and oilseed, poor weather conditions, including heavy snow and rainfall, historic flooding on waterways and continuing global trade tensions."

CHS President and Chief Executive Officer Jay Debertin said in a news release the company continues to battle the same headwinds all agriculture experiences.

"The uncertainty of the international trade markets continues to create difficult circumstances for all who work in agribusiness," he said.

"Weather challenges led to late planting that has hurt our owners -- America's farmers and cooperatives that help grow the food to feed the world. We traveled throughout our trade territory this spring to meet with our owners, and every location we visited was impacted by heavy spring rains and late planting. At CHS, we are working to navigate external challenges, and we are committed to leveraging the strength of our supply chain to help our owners and customers navigate as the year progresses."

In the third quarter of 2019, CHS completed the acquisition of West Central Distribution LLC in Willmar, Minnesota, https://wcdst.com. In addition, the company said scheduled maintenance at a refinery in McPherson, Kansas, "slowed production of refined fuels."

As a result of that maintenance and other factors, the company said it saw a $92.7 million decrease in pre-tax energy earnings.

CARGILL EARNINGS

At the end of last week, Cargill reported a 41% drop in fourth-quarter 2019 earnings to $476 million from what was a record fourth quarter for the company in 2018 of $809 million. Cargill reported both 2019 fourth-quarter and full-year earnings.

Cargill reported full-year earnings for fiscal year 2019 at $2.82 billion, or a drop of 12% from 2018.

The company reported a 1% drop in both fourth-quarter and full-year revenues, to $29.9 billion and $113.5 billion, respectively. Cargill also reported a 1% decline in cash flow.

Dave MacLennan, Cargill's chairman and chief executive officer, said in a news release the company continues to make progress.

"Throughout the year, we faced a very challenging global business environment that slowed earnings," he said. "Still, we improved performance in several food and financial businesses and significantly reduced costs companywide."

Cargill said its animal nutrition and protein segments were the "biggest contributor" to the company's earnings in the fourth quarter.

"Within the segment, North American protein results were slightly below last year's level, as spring flooding in the U.S. Midwest delayed cattle shipments and cool weather dampened the start of the outdoor grilling season," the company said in a news release.

"Still, domestic and export demand for beef remained strong, as did domestic demand for value-added egg products."

Other major agriculture businesses are set to release their latest financial results in the coming weeks. That includes Caterpillar on July 24, AGCO on July 30, Bunge on July 31, Archer Daniels Midland on Aug. 1, The Mosaic Company on Aug. 5 and Deere and Co. on Aug. 16.

Read Cargill's financial report here: https://www.cargill.com/…

Read CHS Inc.'s financial report here: http://www.chsinc.com/…

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

(BAS/CZ)

Todd Neeley