Cargill Inc.

We believe the company will continue to focus on bolt-on and midsize M&A to the extent available, consistent with its recently announced 50/50 joint-venture (JV) with Continental Grain Corp. that will merge Wayne Farms with Sanderson Farms. In August 2021, the company announced a 50/50 JV with Continental Grains (not rated) in the to-be-formed Sanderson Farms and Wayne Farms (subsidiary of Continental Grain), privately held poultry business. Although Cargill has not announced its financing intentions, we do not believe the transaction will significantly change our leverage expectations for Cargill. Assuming Cargill's 50% of the $4.53 billion equity valuation of the JV is debt financed, we estimate pro forma leverage would remain below 1x--well below our downgrade trigger for leverage sustained

...The operating outlook for fiscal 2022 remains largely favorable, underpinned by healthy global demand for animal feed and nutrition and continued demand for animal protein. The strong performance in the company's first quarter, ended Aug 30, 2021, should continue into the next several quarters, particularly in the Animal Nutrition and Protein and Origination and Processing segments. Continued strong global demand for grains and oilseeds supports good origination and processing margins even as soy and corn prices continue to be high (see charts 1 and 2). Cargill's Animal Nutrition and Protein Segment margins continue to benefit from strong global demand for livestock feed as protein exports out of Latin America and the U.S. remain strong. Cargill's favorable margin outlook is also due to strong beef processing margins in the company's Animal Nutrition and Protein segment and strong grain and oilseed demand in China that benefitted its North American grain origination and processing operations....

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