Commodity Conversations Weekly Press Summary

Olam saw better results in the first quarter with net profit 6.9% higher than the same period last year, helped by a strong performance in the edible nuts and cocoa segments. In the quarter, the group acquired Indonesia’s largest cocoa processor and made a proposal to buy Nigeria’s Dangote Flour Mills, while it closed its sugar, fundamental fund and wood product businesses.

Wilmar also reported good results with earnings increasing 26% compared to last year thanks to better performance in the sugar and tropical oils business units. The oilseeds and grains segment did not perform as well, in part due to the African swine fever outbreak in China. Nonetheless, analysts suggested that Wilmar was in a good position to deal with trade tensions and that it would continue to see good results.

In contrast, experts argued that ADM was in a vulnerable position amid the breakdown in talks between the US and China. The firm weathered the trade disruptions with a better-than-expected performance last year, but this year has seen the added effects of the Midwestern floods and a struggling ethanol market. In response, the CEO highlighted that ADM was looking at acquisitions in the speciality ingredients sector, while possibly spinning off its ethanol business.

The market reacted abruptly to news of the US escalating tariffs and China’s retaliation but analysts estimate that commodity tradeflows should not be affected as most products were already under some tariffs. In addition, traders were already limiting new shipments between the two countries amid the uncertainty. Nonetheless, the viability of long term investments is now being questioned as the dispute could last for years.

US farmers are particularly worried because they expected the situation to be resolved by now, while recent weeks saw more floods affecting the Mississippi River. The government had offered growers compensation for the trade war last year, and the President mentioned that the state might spend up to USD 15 billion to buy crops this year which could be sent as international aid. The reaction from experts was quick and unanimous: buying crops to send to developing nations will backfire by upsetting world markets, and would be ineffective because the crops concerned – mainly soybeans and corn – are not for human consumption.

Moreover, dairy farmers in the US could feel the impact of the African swine fever in China for years, according to Rabobank. A lot of livestock feed is made from milk, such as whey permeate, whey powder and lactose, and the hog population in China could take years to fully recover. Exports of US whey and permeate already dropped by about 60% in March.

While some countries are busy imposing new tariffs, Chad announced this week that it removed all the import duties on major food staples like rice, flour, cooking oil and dates. The move is seen as a means to preempt shortages and the possibility of protests, such as the ones that led to the removal of Sudan’s President. Another trade news surprised the market this week, as Australia reportedly imported a shipment of wheat from Canada. Usually one of the biggest wheat exporters, Australian prices surged because of the prolonged drought.

The Australian agriculture minister recently told reporters that the country produced “the most environmentally and ethically sustainable food and fibre in the world”. However, AAP FactCheck ruled that the claim was false. The Food Sustainability Index (FSI), published by The Economist Intelligence Unit, ranks Australia as 13th out of 67 most sustainable, while the Yale Centre for Environmental Law and Policy ranks Australia as 53rd out of 177.

After the recent successful IPO of Beyond Meat, firms have been quick to announced new investments in the sector. Cargill invested in Israel’s Aleph Farms, which makes steaks from cattle cells in a lab, Impossible Food raised a further USD 300 million which valued the company at USD 2 billion and McDonald’s will start selling a new vegan burger made by Nestle in Germany.

Among all the excitement, some plant-based food producers are starting to worry about the availability of a key protein source: peas. Analysts estimate that global pea demand could quadruple by 2025 as firms moved away from soy as a protein source. Northern countries such as Canada, France, Belgium and Germany could become major pea growers, although activists are now highlighting that peas contain just as much herbicide residues as other crops. A food producer also noted that pea protein was nothing special and that it could be substituted for mung bean, brown rice, mustard seeds or lentils.

Burger King also announced that it was expanding sales of Beyond Meat Whoppers in the US. But it made a much more exciting announcement in Mexico as it started to deliver burgers to people stuck in their cars in traffic. It now plans to test the project in Sao Paulo, Los Angeles and Shanghai.

This summary was produced by ECRUU

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