UPDATE 2-Cargill exits coal trading, European power and gas

Thu Mar 27, 2014 11:30am EDT

(Adds earlier closure of carbon emissions and renewable energy businesses)

By David Sheppard

LONDON, March 27 (Reuters) - Cargill Inc will stop trading coal and dealing in gas and power in Europe, the global commodities giant said, becoming the first traditional commodities trading firm to step away from a sector hard-hit by falling margins.

Privately held Cargill, which employs 140,000 people in 65 countries, said its Geneva-based Energy, Transportation and Metals (ETM) division would close the businesses following a review that identified few opportunities in those sectors.

"Significant changes in the coal and European power and gas markets have led Cargill ETM to withdraw from these two sectors," the company said in a statement on Thursday.

"These changes come after a thorough review of its strategy to offer distinctive, long-term value to its customers."

The firm said separately it was combining its global sugar trading activities with Brazilian firm Copersucar in a new joint venture to be led by Ivo Sarjanovic, the head of Cargill's sugar business. The move will create one of the world's largest traders of the sweetener.

Last month Cargill was reported to have lost $100 million-plus in U.S. energy markets due to a wrong-way trade during the bitter cold snap at the start of this year. Cargill's head of physical trading at its North American thermal energy arm left the firm in February.

A spokesman for the company said the decision to close the desks was not related to the North American trading loss. He added that the total number of people affected by the closures would be "less than 50", and that many would be redeployed in other Cargill ETM businesses.

Cargill will continue to trade oil, petrochemicals, iron ore and steel, ocean freight and North American gas and power, the statement said.

FIRST OF TRADITIONAL TRADERS

Cargill's European gas and power trading was centred in Geneva, while the coal operation was also conducted from offices in North America and Singapore.

A spokesman said Cargill had also closed its carbon emissions trading and renewable energy businesses but could not confirm when its activities in those areas had ceased.

Many banks have already stripped back their European power and gas desks in recent years, but the announcement from the Minneapolis-based firm marks the first time a traditional commodities trader has pulled out.

JPMorgan, Deutsche Bank, Barclays , Bank of America Merrill Lynch and Morgan Stanley have all either reduced or closed their European power and gas trading units.

Coal trading has been hard hit by plunging prices due to a supply glut. On Thursday, Glencore Xstrata said it would suspend operations at its Ravensworth underground coal mine in Australia, which was no longer financially viable.

Cargill is one of the world's largest commodity traders, and its focus has historically been on grains and agricultural markets, rather than energy. It is the "C" of the so-called ABCD firms that dominate agricultural commodities and include Archer Daniels Midland, Bunge and Louis Dreyfus. (Additional reporting by Henning Gloystein and Michael Szabo; editing by Keiron Henderson and Jane Baird)

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