Cargill ‘on the Lookout’ for Acquisitions After Slump

By Paul Gordon, Madelene Pearson and Claire Leow

Nov. 27 (Bloomberg) -- Cargill Inc., the second-largest privately held U.S. company, is looking for acquisitions after the collapse in raw material and share prices cut valuations, according to an executive at the farm-commodity supplier.

“There will be opportunities to acquire both assets, companies and hire people that we didn’t think we’d be able to do six months ago,” Asia-Pacific President Paul Conway said today in an interview with Bloomberg Television in Singapore.

Commodity prices and equities have plunged this year as the credit crunch curbed demand and pushed the global economy into recession. The Reuters/Jefferies CRB Index of 19 raw materials has slumped 48 percent from a July record.

“It’s been very fast and that hasn’t really worked its way through yet, but yes we are on the lookout for acquisitions,” Conway said. “A lot of people earlier in the summer booked forward at considerably higher prices than today, so counter- party risk is a real big concern.”

The company has taken non-material writedowns in the last few months, and would take more, he said, estimating the figure in the tens of millions of dollars, without giving a precise number. Cargill’s net profit in the three months through August gained 62 percent to $1.49 billion.

‘Core Businesses’

“We missed some opportunities a year ago in Malaysia,” Conway said in a separate interview. “We’re interested in starch, interested in vegetable oils, fats, all our core businesses.”

Cargill’s plan to take advantage of the global sell-off tallies with the approach by other commodity-related companies including Tyson Foods Inc., the largest U.S. meat producer, and Zijin Mining Group Co., China’s largest gold producer.

Zijin Mining said Nov. 10 that the company may spend as much as 20 billion yuan ($2.9 billion) on acquisitions, describing the slump as “the biggest opportunity.” Tyson Chairman John Tyson said in October that he had about $1.5 billion for possible acquisitions in the U.S. and overseas.

Some commodities may have found a bottom after the surge in prices earlier this year reduced demand, Conway said. Wheat, corn, rice, soybeans and palm oil all gained to records in the first seven months of the year.

‘Bottoming Out’

“Certainly, at the moment, we’re starting to see tentative signs of things bottoming out,” Conway said, without identifying particular commodities. A recovery may come in “the last third of 2009 or early 2010,” he said.

Palm oil has tumbled 63 percent since peaking in March, while cotton futures have halved. Goldman Sachs Group Inc. called the bottom of the palm oil market this week.

Cargill may delay some building projects as the prices of construction materials such as steel decline, Conway said. “It doesn’t matter if capacity is a little bit late,” he said. “If you can’t buy, you build. Building costs are dropping very, very sharply, by 25 to 30 percent.”

Cargill transports, processes and distributes grains, oilseeds and other commodities to makers of food and animal feed. It also provides crop and livestock producers with farm services and products, and provides meat and poultry products to food manufacturers, according to its Web site.

To contact the reporters on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net; Paul Gordon in Hong Kong on Pgordon6@bloomberg.net; Claire Leow in Singapore at at cleow@bloomberg.net