Minnetonka, MN — Archer Daniels Midland Co. is in the final stages of selling its cocoa business to Cargill, Inc., a move that would make Cargill big enough to compete with Barry Callebaut A.G., the world’s largest processor.
The companies declined to comment, however, ADM confirmed it was considering selling its cocoa unit in August. Its “cocoa and other results” division was down $58 million in the second quarter from the second quarter in 2012, because of “lower margins on businesses contracted in earlier quarters,” Juan Luciano, COO, said on the company’s earnings call. Overall, the company saw a 21 percent decrease in earnings during the quarter, largely a result of poor harvests for its grains business. However a better crop season is expected to re-energize the unit, as is the company’s acquisition of Australia-based GrainCorp, on-track for completion by the end of the year.
Cargill reported profits of $483 million for the fourth quarter ending May 31, up from $73 million in 2012. The firm, which does not break down performance by individual business units, did note its food ingredients segment, including cocoa, posted record earnings.
The acquisition comes as the chocolate market gains steam — cocoa ICE futures traded at a year-high in mid-September, while U.S. processing, a sign of demand, was up 11.8 percent in June from the same period a year prior. What's more, the International Cocoa Organization predicts a deficit of more than 50,000 tons for the 2012-2013 season. Together these factors contribute to record-high chocolate prices, expected to reach $12.25 per kilogram this year.