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Cargill’s Profit Falls 69% on Lower Fertilizer Demand (Update2)

By Choy Leng Yeong

Aug. 18 (Bloomberg) -- Cargill Inc., the largest privately held U.S. company, said fiscal fourth-quarter profit plunged 69 percent because of lower demand for fertilizers.

Net income declined to $327 million for the three months through May 31 from $1.05 billion a year earlier, Minnetonka, Minnesota-based Cargill said today in a statement. For the full year, profit fell 16 percent to $3.33 billion from a record $3.95 billion as sales slid about 3 percent to $116.6 billion.

Cargill’s fertilizer unit, Mosaic Co., has cut production of potash and phosphorus as farmers delayed purchases after corn, soybean and wheat prices tumbled from record highs last year. Cargill, which distributes and processes grains, has cut discretionary capital spending and debt as the recession reduces demand for food and livestock feed.

“In the second half, earnings slowed considerably as the world economy contracted for the first time in six decades,” Chief Executive Officer Gregory Page said in the statement. “The path to economic recovery may well be uneven.”

Plymouth, Minnesota-based Mosaic, 64 percent owned by Cargill, said in July that its fiscal fourth-quarter profit plunged 83 percent to $146.9 million, or 33 cents a share, as demand fell. Mosaic is North America’s second-largest fertilizer maker after Potash Corp. of Saskatchewan Inc.

Cargill’s risk management and financial segment, which includes Black River Asset Management LLC and CarVal Investors LLC, incurred a loss for a third consecutive quarter because of “financial trading and investment activities,” Cargill spokeswoman Lisa Clemens said today in an e-mail.

Grain Handling

Earnings from the grain-handling unit fell from a year earlier, Cargill said.

Corn slumped 45 percent from a June 2008 record of $7.9925 a bushel through the end of Cargill’s fourth quarter, as the global economic slump reduced demand for food, livestock feed and ethanol. Soybeans dropped 28 percent from a July 2008 record of $16.3675 a bushel.

Profit from agricultural services, which includes livestock feed, and from the food-ingredient segment, which includes beef, pork and high-fructose corn syrup, rose partly because of lower input costs, Clemens said.

Cargill, which doesn’t disclose earnings by business unit, has 159,000 employees in 68 countries. Cargill was ranked the largest privately held company in 2008 by Forbes.com.

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