EU member states are unlikely to ratify the EU-Mercosur trade agreement following Brazil’s decision to open up sugarcane farming in the Amazon, according to an EU official talking to the Financial Times. Even cane industry sources complained that the policy would only benefit a fraction of growers and that the 44 million ha of degraded land was more than enough to expand planting.
The Brazilian President may also be looking at scrapping the 2008 soy moratorium, an agreement under which traders committed not to buy soy from Amazon cleared land. The agriculture minister said that the moratorium was ‘absurd,’ echoing earlier comments by the President that existing laws were sufficient to protect the Amazon. The oilseed crushers’ organisation Abiove, on the other hand, said it would stick to the moratorium.
There is a concern that the African Swine Fever and the ensuing surge in Chinese demand for Brazilian beef are also threatening the Amazon. Brazil’s meatpacking group JBS, for one, reported a 6% increase in its last quarterly profits thanks to the higher prices and stronger demand from Asia. And the meat trade between Brazil and China is expected to continue growing. Earlier this month, China approved 25 more meatpacking plants in Brazil for exports, bringing the total to 89. Some cities in the US, meanwhile, have suggested boycotting meat from companies linked to Amazon deforestation.
This comes as data from Brazil’s space agency released this week showed that Amazon deforestation in the twelve months to July was up 30% on year and at a decade high. Brazil’s environment minister recognised that this was an issue and said they were using satellite data and the army to enforce existing rules.
In northern India, the government has started fining farmers found burning crop residues, which is being blamed for the toxic air pollution. An estimated 23 million mt of crop residue from 80,000sq km of farmland is burnt in the north of the country every year. An analysis on the BBC explained that agricultural laws in the states of Punjab and Haryana force farmers to plant in June, instead of April, to take advantage of the monsoon rain and reduce the use of groundwater. The shorter window before the next crop, combined with the high costs of machines required to pick up the stubble, push farmers to burn their fields to prepare for the next crop. An analyst suggested that India will need to go through a second technological ‘green revolution’ involving machinery to fight the current pollution crisis.
A month after the French constitutional court maintained legislation that would ban palm oil as a biofuel feedstock by January 2020, the National Assembly passed an amendment that delayed the end of tax incentives on palm oil biofuels to 2026 to give producers more time to adapt. In the meantime, major producers in Malaysia and Indonesia set up the Council of Palm Oil Producing Countries (CPOPC) to defend the image of palm oil. Malaysia also pledged to meet the new EU food standards for palm oil by 2021, as food consumption still accounts for 70% of global palm oil demand.
China’s swine fever outbreak might be much worse than initially expected. The CFO of ADM said the group had seen some benefits on its crush margins but added that the full impact of the disease has not been felt yet. China might lose 20 million mt of pork to the outbreak, twice the initial estimate, which has led to a surge in exports of animal protein from countries around the world, such as Canada, the EU and Brazil.
Louis Dreyfus (LDC) announced more changes in management this week, with the departure of the COO, a new head of risk and compliance and changes to the board of directors. The group reported a 45% drop in profit during the first half of the year and the CEO said things were unlikely to improve before 2020.
The agriculture industry has not gone through a wave of consolidation and megamergers as some expected despite a thin-margin environment. A director at ADM said this was partly because consolidation can be a very complicated process while potential targets are limited. The trade war is also making it harder to make long-term plans and accurately assess the value of assets. Instead, the industry has been collaborating through joint ventures to minimise cost. For example, ADM, Cargill, Bunge, LDC, Glencore and Cofco are all working together to track shipping transactions using blockchain technology.
In Turkey, finally, the Internet-famous chef Nusret Gokce, more widely known as Salt Bae for his extravagant (and salty) meat dishes, is reportedly looking to sell a stake in the Istanbul-based Nusret Gokce steakhouse. This could value the company at over USD 1 billion.
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