Commodity Conversations Weekly Press Summary

Some developing nations are starting to struggle with rising food prices, a consequence of trade disruptions caused by the pandemic, export curbs in places like Argentina and Russia, higher commodity prices and depreciating currencies. Governments now have to decide whether to prioritise economic growth or step in to control inflation. The Brazilian central bank recently hinted that it would change its priorities and focus on keeping prices under control. Experts say Russia and South Africa are likely to focus on lowering food prices as well. 

In contrast, some countries are actively looking to remove trade barriers and sign new free trade agreements. The removal of trade barriers could be one of the most effective ways of addressing food security and nutrition issues, according to an economist at the World Bank. He highlighted the African Continental Free Trade Area (AfCFTA) which was implemented at the start of 2021. 

The UK is also looking for new trade partners and announced that it would apply to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The deal would only have a small impact as the region represented 8.4% of the UK’s exports in 2019, the same as exports to Germany alone. At the same time, some estimates suggest that the UK’s exports to the EU dropped 68% in January because of the UK’s departure from the bloc. 

Trade disruptions and higher raw material costs pose a challenge to food producers who have otherwise been dealing with a strong consumer demand amid the pandemic. Unilever revealed that its margins fell below initial estimates which affected revenue growth. Costs are expected to remain high in 2021 and weak currencies in emerging markets could start to impact purchases. 

Raizen announced it was buying Louis Dreyfus’ Biosev for BRL 3.6 billion (USD 670 million) this week, which some say is a sign Louis Dreyfus is taking another step towards exiting the sugar industry. The head of Raizen – a joint venture between Shell and Cosan – said that the final price tag was a good discount. The sale of Biosev marks another exodus from the sugar industry by the ABCDs, shortly after Cargill said it would sell its stake in Alvean. 

The CEO of Cargill revealed that the firm was looking for acquisitions to enter the aquaculture market. Cargill already owns 38 fish feed facilities across 20 nations but is now looking to produce its own seafood products. The CEO argued that global meat demand was still rising despite the growing popularity of plant-based protein, as he highlighted that fish was the fastest-growing protein source. 

The car and the drive-in experience is making a comeback as restaurants try to adapt to the restrictions imposed by the coronavirus. Many fast food chains were looking to move away from drive-ins and some cities even banned them completely in 2019, but restaurants recently unveiled new designs centered around the car. Some chains like Starbucks and Subway were disadvantaged by their focus on walk-in customers and have had to close hundreds of restaurants in cities with no car access. 

The pandemic has also shined a light on so-called cloud-kitchens like the Dubai-based Kitopi. The firm handles delivery orders from multiple food brands and is looking to expand across the Middle East and Southeast Asia. The delivery industry in the Middle East is growing fast but the head of Careem, which was acquired by Uber for USD 3.1 billion, argued that the sector was currently “not sustainable”. Carem announced that it will no longer charge a commission but a fixed fee to help food suppliers. Noon, a competitor, also announced that it will cut its commissions to better compete with Deliveroo and Talabat. 

Regulators in the US have already capped the fees collected by delivery services in Washington state and New York City. Rhode Island now wants to implement a maximum fee cap of 15%, half of what some services currently charge, until the Governor removes coronavirus restrictions. In Australia, New South Wales is looking to protect delivery workers by instructing companies to avoid imposing unreasonable delivery deadlines and limiting their shift to 12 hours. Workers currently have limited protections as they are classified as independent contractors. 

The UN published a new report on the environmental footprint of our food and – perhaps unsurprisingly – recommended switching to a plant-based diet as the best way to reduce the carbon footprint of food, followed by the need to set aside land for nature and improving our farming practices. For more detailed recommendations, the BBC unveiled its “Foodprint Calculator”, which you can find here

This summary was produced by ECRUU


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