The growing implications of the Wuhan coronavirus in China make it very unlikely that the country will be able to meet its commitment to double the purchase of US agricultural products under the Phase One trade deal. Analysts, who were already sceptical about the targets before the virus outbreak, say that demand in the country, which is effectively shut down, will drop significantly.
China’s industrial and agricultural supply chain is also likely to be affected given the importance of the river port in Wuhan. Industry experts have been trying to draw comparisons with the SARS outbreak in 2002 and point out that the country’s supply chain is now much more integrated and depends hugely on river freight. Basically, investors expect the situation is likely to get worse.
In the US, the President has moved on to his next big goal: reforming the WTO – which he considers to be another “worst trade deal ever.” He said he had talked with the WTO chief in Davos about making “dramatic” changes in the organisation. Bloomberg argued that the strategy the US has been using so far to renegotiate trade deals may not work in a multilateral organisation like the WTO.
The head of the WTO, for his part, cautioned that changes would probably take a long time to happen but he welcomed the approach. The EU Agriculture Commissioner, meanwhile, urged the US Agriculture Secretary to uphold the WTO to protect farmers from trade disputes. The US Agriculture Secretary responded by saying that EU farmers were running the risk of becoming uncompetitive on a global scale because of the ban on gene-editing technology and other limiting regulations.
Cargill is concerned about the lack of agricultural purchases from China, warning that US farmers were struggling as the Asian giant had kept most import tariffs in place. In Indonesia, the company complained that conflicting regulations, as well as patchy implementation, were making it difficult to compete. It called on the government to make sure it implements regulations fairly among all stakeholders. Back in the US, Cargill increased the production capacity of its Iowa animal health products plant and invested in cultivated meat company Memphis Meats Inc. The start-up, which raised USD 161 million in funding, will be focusing on commercialising cultivated meat. The CEO, meanwhile, said that Cargill had no plans to go public but was looking at selling assets.
Glencore is reportedly poised to take over Argentina’s agricultural giant Vicentin. Sources told Reuters that a sale would save the group, which has some USD 1.3 billion in debt, from declaring bankruptcy. Experts warned that bankruptcy could cause a social and economic crisis, including for its main creditor the National Bank. Vicentin already sold to Glencore part of its shares in Renova, the joint venture they have together. However, with such high debt, it will be difficult to value the company which may have to be nationalised. The crisis in the country’s grain sector is growing with farmers threatening to withhold grains sales in protest against the increase in export taxes.
Louis Dreyfus is tying up with China’s Donlink to build a USD 1 billion food industrial park near the Nansha port in China. The park will include plants that make aquaculture, bioenergy as well as grains trading, Louis Dreyfus said. The trading group also received a USD 100 million loan from the European Bank for Reconstruction and Development, part of which will be used to improve the integration of small cotton farmers in its supply chain.
Nestle bought pancreatic enzyme companies Zenpep and Viokace this week. The CEO said the acquisitions were part of a plan to grow the group’s medical nutrition offerings, a segment that is growing faster than mainstream food. Analysts said this could be the sign of a return for Nestle into the business of prescription medicines, a market it exited in 2019. Otherwise, Nestle announced it was partnering with Burcon and Merit on developing plant-based alternatives to meat and dairy. This comes at the time when Tyson Foods, which also invested in Memphis Meat Inc, announced a new Coalition for Global Protein, a multi-stakeholder initiative for the sustainable production of protein.
For those worried about food becoming too bland and healthy, a director at Diana Food argued that indulgence and taste will always remain the main criteria in the snacks industry and that bakery products will never be viewed as healthy. Nonetheless, she noted that some products could be seen as healthier than others.
This summary was produced by ECRUU
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