Cargill's Market Medley

Ann Davis of the Wall Street Journal snagged a rare interview with Greg Page, CEO of the notoriously closed-mouthed, somewhat mysterious Cargill, the closely held food giant.

Somewhat predictably, the piece is mostly laudatory. That's how these things go, of course: landing such an interview is bound to color the resulting coverage and to create hopes for more access. But Cargill has turned in stellar results even as the economy has tanked.

As Davis points out, this is largely because Cargill, like its publicly traded rival, Archer Daniels Midland, is so often on both sides of markets. It buys grain, and it sells grain. It hedges all of its investments. It serves many customers that compete with each other. It has its fingers in the entire food-supply chain, from the cornfield to the kitchen table. Its omnipresence "gives Cargill an unusually detailed view of the industries it bets on, as well as the ability to trade on its knowledge in ways few others can match," Davis writes.

But even Cargill isn't immune from a sinking economy. A spokeswoman said as much on Tuesday, even as the company reported that earnings had jumped by 25 percent in its fourth quarter. "We don’t expect our company to be spared the difficulties that come with a worsening economic environment,” Lisa Clemens, director of investor relations, told the Journal on Tuesday.

Its stellar fourth-quarter results came at the end of Cargill's best year ever. But those results came mainly from the company's majority stake in Mosaic, a fertilizer company. And with crop demand falling, Cargill can't rely on that investment in the coming year. The company, which doesn't report revenue figures, said that, excluding the Mosaic investment, its fourth-quarter earnings would have been lower than last year's. And even the gain from Mosaic was based partly on a big asset sale. Mosaic has projected an earnings slump for at least the next quarter.

Much of Davis' article takes on the vagaries of how "inside information" is treated in commodities futures markets as opposed to the stock market. In many instances, inside information is not only allowed but encouraged in futures markets, because it tends to send needed signals to traders, resulting, at least theoretically, in more "correct" pricing.

But, Davis writes, the "reach of food-trading companies occasionally raises questions about pricing power." The European Commission is examining what it says may be "cartels" in the grain business, and, in July, antitrust officials conducted surprise inspections at a Cargill's Italian operations.

And being on both sides of a market doesn't always benefit companies like Cargill or ADM. When grain prices are plummeting, as they have been, Cargill pays less for feed for its livestock operations, but it also earns less from the grain it sells to others. Just like any other market player, it has to project where prices are going, which is extremely difficult when markets are volatile.