Wednesday, October 27, 2010
Cargill CEO Expects U.S. Grain Output to Rise in 2011
Bloomberg reporters Andra Timu and Irina Savu write that the U.S., the world’s largest grain shipper, may increase production next year if weather conditions are favorable as farmers invest in fertilizers and high-quality seeds, Cargill Inc.’s Chief Executive Officer Greg Page said.
The 66 percent gain in corn prices from June lows and a doubling in wheat have bolstered U.S. farm revenue and will spur investment in technologies to increase output, Page said today in an interview from the southern Romanian town of Calarasi.
“Production in 2011 in the U.S., if we have good weather, I would expect it to increase based on the behavior of farmers, which is to purchase more fertilizer and be very careful to use the very best seeds,” Page said.
Rising farm income and spending contrasts with a slowing U.S. economy, where growth eased to an annualized 1.7 percent in the second quarter from 3.7 percent in the previous three months. While agriculture accounts for just 1 percent of the $14.3 trillion economy, the impact of surging prices may be 10 times more once spending on equipment, seeds, grain handling and food production are added, said Jason Henderson, an economist at the Federal Reserve Bank of Kansas City, on Oct. 18.
By contrast, the European Union grain harvest is estimated to fall 4 percent this year to 284.9 million metric tons, the bloc’s weather-monitoring unit said on Oct. 13.
Grain consumption in Europe will be “quite stable,” Page said. “We have been impressed in many countries with the stability of the world’s diets in 2009 and
2010,” compared with other crisis periods, he said.
Grain prices rose this year as drought in Russia, flooding in Canada and parched fields in Kazakhstan and Europe ruined crops. Russia, once the third-biggest wheat exporter, banned overseas sales in August. Ukraine, the largest barley shipper, said Oct. 12 it would introduce grain quotas. Corn, wheat and soybeans jumped the most allowed by the Chicago Board of Trade on Oct. 8 after the U.S. Department of Agriculture predicted less supply.
“All the statistics are not completely compiled, but that reduction in production in Russia will probably represent far less than 1 percent of the world’s grain production,” Page said. “That small reduction in production has led to an enormous change in price.”
Cargill, the Minnetonka, Minnesota-based grain handler and the largest closely held company in the U.S., said Oct. 12 that its 64 percent stake in Mosaic Co. and farm-price volatility drove a 68 percent gain in profit in the most recent quarter.
Page, speaking at the opening of a grain-storage facility in Calarasi, said Cargill plans to expand its Romanian business and increase working capital at the unit to $100 million by 2015.