Cargill SWOT and PESTLE Analysis

Strength

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Weakness

1. Vulnerability to extreme weather conditions: Agri business is susceptible to loss in extreme weather conditions. Its adjusted operated earnings fell 44 per cent in FY 2018. Cargill’s trading margins squeezed due to crop gluts. Cargill’s earnings before adjustment increased only marginally from $3.02 bn in 2017 to $3.4 bn in 2018. In the past years too, draughts, poor yield due to erratic weather conditions have increased volatile commodity markets and hurt livestock demand as well. Unfavorable weather conditions disturb the normal distribution of raw materials, push more international sellers in the market and affect market prices. Price cuts in vulnerable cycles puts more pressure on prices, reduces profitability and may also affect brand equity due to supply shortfall. Flooding in the US has also contributed to the 41 per cent decline in adjusted quarterly profit in the first quarter of FY 2019.

2. Slowdown in Thailand’s poultry market: The demand supply mismatch in Thailand’s chicken market adversely affected Cargill’s global poultry results. Thailand’s poultry market has slowed down due to government’s price intervention on domestic feed ingredients such as corn which accounts for nearly 60 percent in broiler feed rations. The higher feed costs, less than break-even prices for live broilers for almost 10 months from October 2017 to July 2018 resulted in a production slowdown. Live broiler prices fell due to broiler supply surplus and reduction in meat prices. It also led to decrease in prices for day-old chicks to plummet.

3. Involvement in activities related to illegal deforestation: Cargill had to face the consequences of illegal deforestation in Brazil when it was charged with a $29 million fine. In order to avoid this in the future and reduce impact of deforestation, Cargill has developed new strategies and operational methods for its cocoa, palm oil, and soy production supply chains. However, in spite of steps already taken, it seems unlikely that the stakeholders to the pledge will achieve their 2020 goal of eliminating deforestation from the beef, soy, and palm oil supply chains. In a 2019 report by environmental campaigners Mighty Earth, Cargill has been labeled as “the worst company in the world”. These impact not only the brand image of the company but also put questions into its sustainability practices and investments.

Opportunity

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Threat

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Political

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Economic

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Social

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Technological

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Legal

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Environmental

1. Transformation to sustainable marine production and rearing methods: Cargill has adopted sustainable practices such as nutritional innovations to enhance fish performance. It is helping farmers produce more with less and stay competitive in the fast-changing marketplace. As per the reports from FY2017 & FY 2018, Cargill sourced 43 per cent of its total marine ingredients from MSC-certified fisheries globally. It aims to increase this figure to 100 per cent by 2025.

2. Implementation of sustainable business practices: Cargill has engaged in fishery improvement projects around the world and worked with WWF for assessing its marine ingredients and identifying areas of improvement. The group is committed to cut down its greenhouse gas emissions in operations by 10 percent by 2025, in compliance with the U.N. Sustainable Development Goals and the Paris Agreement. Cargill is one of the first few companies to sign the GMF CEO Declaration and is committed towards transitioning towards a decarbonized future. Its CO2 output per cargo-ton-mile across time-chartered fleet has decreased by 12.1% in 2018 as compared to 2016 and it aims to further reduce it to 15 per cent by 2020. With no reports of oil spills beyond 10m3, Cargill has already exceeded its 2020 target for safety performance.