Commodity Conversations Weekly Press Summary

Cargill officially exited the world of sugar trading this week. It confirmed earlier talk that it was selling its stake in Alvean, the Joint Venture (JV) with Brazilian sugar giant Copersucar which deals with a fifth of the global sugar trade. Cargill said the sale was part of a wider portfolio review that will see it remain in the business of sugar ingredients but focus on its core agriculture businesses. 

Louis Dreyfus continues to have a sugar trading unit but announced it was selling its US-based Imperial Sugar business to US Sugar, just a month after announcing the sale of its Brazilian unit Biosev to Raizen, the JV between Cosan and Shell. Cosan’s CFO said that the acquisition of Biosev will boost the value of Raizen ahead of an upcoming initial public offering (IPO) and would attract so-called green investors given the ethanol angle. Sources estimated the IPO could raise BRL 13 billion (USD 2.25 billion). Raizen and its joint venture with Wilmar, RAW, exported 5.49 million mt of Brazilian sugar in 2020, Brazil’s biggest sugar exporter. Alvean came second with 4.8 million mt, followed by Louis Dreyfus with 3.86 million mt. 

The consortium of NGOs Chain Reaction Research accused Bunge of being the biggest buyer of soybean from deforested land in Brazil’s Cerrado in 2020, equivalent to 131.5 sq km. The second position went to Cargill but for an area 12 times smaller. The report conceded that the deforestation was not illegal as farmers in the Cerrado are allowed to deforest 80% of their land, compared to 20% in the Amazon. However, it argued that consumers were increasingly concerned about deforestation, regardless of whether it is legal. 

Sourcing deforestation-free soy is an increasingly big headache for the global aquaculture industry. The US Soybean Export Council (USSEC) said “There are no viable alternatives to soy that can provide the volume of protein needed in [farmed fish diets] to keep up with increasing demand.” Cargill’s new chief sustainability officer suggested that US soybean could step in as part of the solution. The USSEC estimated that, in terms of land use change, US soybean has a 319 times lower impact on the climate than Brazilian soybean. Cargill added, however, that it was necessary to source from various origins to ensure supply chain resilience. Besides, an official from ProTerra argued that it made more sense to focus on spreading sustainable agriculture practices everywhere instead of switching origins. 

ADM forecast that US demand for soybean oil could surge by 500 million pounds (227,000mt) in 2021 due to the increase in renewable diesel production capacity fuelled by government incentives. Additional demand could reach 15 billion pounds (6.8 million mt) within the next 4 years. According to Bloomberg, many of the biggest agricultural traders, from Cargill to Bunge, are investing in boosting their soy crushing capacity in anticipation. Bunge, however, said it was being careful about investments in case the bubble bursts. 

A new study found that 64% of the world’s agricultural land was at risk of pesticide pollution, while 31% was estimated to be at high risk. Farmers are the first affected, with 44% of farm workers globally experiencing at least one accidental pesticide poisoning every year, according to a recent meta-analysis. One of the researchers involved argued that the relatively low immediate fatality rate from the poisoning concealed chronic diseases and the farm productivity lost due to illnesses. The analysis noted that, over the last 35 years, the use of pesticides had increased by 81% globally. The growth has been uneven, from a 500% increase in South America to only 3% in Europe. 

European Union agricultural stakeholders, however, are worried that EU restrictions, such as those on gene editing, will delay innovation. Several MEPs argued that implementing new restrictions on farmers, including environmental restrictions, in the absence of viable alternatives would threaten the bloc’s competitiveness and farmers’ economic survival. On the other hand, the European Commission said it is planning to incentivise organic aquaculture which can “help meet consumer demand for diversified high quality food produced in a way that respects the environment and ensures animal welfare.”

This summary was produced by ECRUU

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