Reuters reports that agri-food companies are encountering challenges as commodity crop prices approach four-year lows and crop processing margins have declined.
US agri-food giant Cargill is reportedly planning a strategic overhaul that will see the business restructured into three operating units, down from the current five.
News agency Reuters, citing an internal memo it has seen and two unnamed company sources, wrote that Cargill, like other agri-food businesses, is facing difficulties as the prices of the commodity crops they trade reach four-year lows and crop processing margins have decreased.
According to Reuters, the memo indicates that the company intends to “reduce our costs and optimise our capital investments” and quotes CEO Brian Sykes as saying: “Our recent performance and the market trends unfolding in front of us have proven a clear and pressing case for change.”
The Minnesota-based business, a major supplier of meat and agricultural commodities with roots dating back to 1865, is reportedly planning to reorganise into three divisions: Food, Ag & Trading, and a Specialised Portfolio, primarily focusing on animal nutrition and health.
The new Food enterprise will merge the Food & Bio and Protein & Salt teams, while Cargill Risk Management and Metals will be incorporated into the new Ag & Trading enterprise.
As a privately-held company – the largest in the US – Cargill does not disclose its earnings, but Reuters notes that publicly traded peers such as Archer-Daniels-Midland and Bunge Global missed Wall Street estimates for second-quarter earnings.
