High fuel costs likely to hurt Cargill's profitability in Brazil in 2022

By Roberto Samora

SAO PAULO, April 25 (Reuters) - U.S. commodities trader Cargill Inc is navigating troubled waters in Brazil in 2022, with pressure stemming from rising fuel prices denting profitability even as China's demand for Brazilian grains remains solid.

Cargill's chief executive in Brazil, Paulo Sousa, told Reuters in an interview that high grain processing margins and an expected record 2021/22 second corn crop could help matters,

while galloping fuel costs in a continental-size country will affect the company's results.

"I don't want to sound pessimistic about the sector. But the reality is that, in our view, exports in general are less profitable this year than they were in the last one," Sousa said.

"Most of the 'safrinha' (second corn crop) was sold last year, when we did not have the same view about freight prices that we have now," he noted.

On the bright side, Sousa said there is still "very healthy" Chinese demand for Brazilian soybeans and good demand in general for soy-based products - such as soy oil and soymeal - in 2022.

"(Local) soybean processing margins are at one of the highest levels ever... A large part of our investments is in it," he said.

According to Sousa, Cargill is looking to improve its crushing capacity in Brazil and 20 projects to fulfill that goal were developed last year as the company invested a total 1.02 billion reais, up 11% from 2020.

Cargill's net income in the country fell 15% in 2021 to 1.8 billion reais ($374.42 million), partly reflecting fallout from last season's corn crop failure due to drought and frost. Results were also affected by higher energy and input costs. ($1 = 4.8074 reais) (Reporting by Roberto Samora; Writing by Gabriel Araujo; Editing by Sandra Maler)

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