Commodity Conversations Weekly Press Summary

Bunge reported a net income of USD 205 million in Q2, compared to a loss of USD 21 million in the same period last year. This was thanks in part to gains in soybean crush hedging and despite weak demand out of the US due to the ongoing US-China conflict. Bunge also benefited from its 1.6% stake in plant-based burger company Beyond Meat (more on this below). Bunge’s CEO said that the trade war, as well as the killing of hogs in China due to the African Swine Fever, were two big red flags. However, analysts argued that Bunge would be better-shielded than its competitors thanks to its strong South American presence. 

COFCO International is planning to invest at least USD 200 million in Brazil within the next two years. The head of the company’s Brazilian branch explained that the focus would be on infrastructure, transport and especially storage, adding that it had been on the verge of making an acquisition which fell through. A lot will depend on making sure any investment is sustainable environmentally speaking, he added. He also expressed concern over the solvability of independent farmers – many of which are going broke – as well as the issues with the minimum freight rates. When asked about the impact of the African Swine Fever, he said that shipments of soybean to China had been within expectations for the group. 

Marubeni’s US-based Columbia Grain Trading, on the other hand, announced it completely stopped soybean sales to China. Marubeni’s Gavilon unit, however, will continue business as usual. The group is facing other issues; a huge pile of soybean stored in the open near one of its Missouri grain elevators has been burning since mid-July due to a heat-wave. The pile is inaccessible because of the surrounding floodwater so the company decided to let it burn.  

ADM, meanwhile, continues to believe in a near resolution of the US-China trade dispute and that China will soon resume buying significant amounts of US crops. An analysis by Morgan Stanley, however, argued that such an approach put the group at risk. The bank forecast that the second half of 2019 will probably continue to be tough for US origination. Separately, Cargill told Bloomberg it was focusing on cutting costs amid difficult times, while sources said that two senior executives have already left. The company said it was “reviewing [their] business plans.”

Nestle beat expectations when it reported a 3.5% increase in sales for the first half of 2019 reaching USD 45.83 billion – a 3-year high. The sales growth in developed markets was at a 7-year high of 2.4% thanks in part to pet products and drinks. Chinese sales were disappointing, on the other hand. In China, Nestle launched a competition with Tsinghua University to find the best alternative to current packaging with a focus on sustainability. In the UK, the group has switched to using biodegradable security seals on its transport fleet in a bid to reduce the estimated 200,000 seals that end up every year in landfills. Both moves are part of the company’s target of only using recyclable and reusable packaging by 2025. 

Nestle’s CEO said that in the three years he’s been in the position, the main challenge has been to become much faster and flexible when innovating and launching new products to compete with new smaller companies. He pointed to two areas of significant growth and prospects for the group: plant-based foods and retailing Starbucks products. The plant-based market has attracted a lot of interest from investors although Nestle does not see it as replacing meat products but rather as a way of offering a wider choice to consumers. 

On the subject of investor interest in plant-based alternatives, Beyond Meat’s share value increased 775% since the group’s IPO (which was already the biggest in a decade) three months ago. Analysts were quick to point out, however, that the company is not even making a profit yet. 

Danone’s sales in the first half of the year were up 1.2% to USD 14.119 billion, driven in big part by the Essential Dairy and Plant-based Protein segment. The CEO said that plant-based beverages were a key driver, while the group continued to focus on innovation as well as expanding geographically. In New Zealand, Danone is investing USD 26 million to make its spray drying plant – which processes raw milk into powder – carbon neutral by 2021. The group is aiming to be completely carbon neutral by 2050 across its supply chain – from farm to fork. 

Mondelez, meanwhile, is planning to cash in on changing consumption patterns in rural India. Chocolate demand in India was 15% higher on year last year due to a reduction in sales tax from 28% to 18% but also because villagers are becoming richer. Mondelez said they will be doubling their presence within three years from 50,000 villages in 2018. It also launched a Dairy Milk bar with low sugar last month in India. Similarly, it launched its Dairy Milk with 30% less sugar last week in the UK. It took several years to nail the formula, the company said.  

Several NGOs have started a petition against the EU’s proposal to ban the use of meat and dairy names for plant-based products, such as ‘steak,’ ‘sausage’ or ‘cheese.’ They argue that consumers buy these products specifically because they are plant-based and that changing the labelling was pretty much an “insult to the public’s intelligence.” Taking it one step further, a councilwoman in NYC has sponsored a bill to completely ban foie gras on animal welfare grounds. 

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