Agribusiness company Cargill Inc said on Tuesday that lingering pressure from a historic U.S. drought hurt its meat and grain operations, knocking quarterly earnings down 42 percent.
The worst drought in more than half a century last year devastated the corn harvest in the United States, the world's top grain producer, and catapulted prices for grain fed to livestock.
Recent rains and snow have improved conditions for the next corn crop, which is starting to be planted in the Midwest, and grain prices have weakened recently.
However, Cargill, one of the world's largest privately held corporations, said the drought had a "prolonged impact."
Cargill has broad exposure to poor harvests as a leading crop processor and exporter, a maker of livestock feeds and a livestock feeder, and a producer of meats and ethanol. The company also operates as a global commodity trader and risk manager in world financial markets.
"Whenever you have a short crop, it just affects your whole system," company spokeswoman Lisa Clemens said.
Cargill is among four large players, known as the "ABCD" companies, that dominate the flow of agricultural goods around the world. Its performance is often studied for clues about the conditions impacting competitors Archer Daniels Midland Co , Bunge Ltd and Louis Dreyfus Corp.
Minneapolis-based Cargill, one of the nation's largest beef processors, has been warning since last summer that the drought would hurt its meat operations by tightening cattle supplies and raising production costs.
In February, Cargill idled a beef plant in Plainview, Texas, as the U.S. cattle herd fell to its lowest level in 61 years. Some of the plant's 2,000 employees were laid off.
Cargill took a one-time financial charge from the closure, but does not expect it to have a "material adverse impact" on its overall 2013 performance, Clemens said.
The company reported net earnings of $445 million for the fiscal 2013 third quarter ended Feb. 28, compared with a record $766 million for the same quarter a year before. Revenue for the third quarter edged up 1 percent to $32.2 billion, the company said in a statement.
"SHREWD PENCIL PUSHERS"
Improved crop weather and a rebound in U.S. grain production this year would likely give Cargill a boost by increasing the amount of grain available for the company to purchase, handle and store.
The U.S. Department of Agriculture, in a crop report on March 28, indicated farmers will harvest a record 14.6 billion bushels of corn - a bumper crop that would help replenish razor-tight supplies.