Commodity Conversations News Monitor

Ukraine’s agriculture minister has said Ukraine’s ability to export grains was getting worse by the day and would only improve if the war with Russia ended. The country faces a possible grain revenue loss of $6 billion as the blockade of its ports prevents it from shipping wheat and corn earmarked for export by June. Unfortunately, damage to port facilities may mean that it will take a long time before shipments recover.

The fighting could lead to Ukraine planting only half of its usual sunflower crop.  Some analysts expect the country to sow 3.5 to 4 million hectares of the oilseed this spring, down from 6.8 million last year. Others are even more pessimistic.

US farmers have asked the USDA to allow them to plant on 4 million acres of “prime farmland” currently enrolled in the Farm Service Agency’s Conservation Reserve Program (CRP) to help compensate for the loss of Ukrainian corn, wheat and sunflower oil.

The EU has proposed a 1.5-billion-euro funding package for farmers to plant crops on almost 4 million hectares of fallow land. Ireland’s government has already approved a payment of €400 per hectare to encourage farmers to grow barley, wheat, and oats. Meanwhile, an environmental lobby group has called for the EU to suspend its mandates for crop-based biofuels.

The European Commission has delayed the publication of its proposals on sustainable farming as the Ukraine crisis does not allow the “political space” for a proper discussion now.

The head of the WTO has warned countries against restricting food exports, arguing that it will only exacerbate the situation. She said that countries with surplus vegetable oils and grains stocks should release them on world markets.

When Vietnam, India, China, and Cambodia imposed export bans on rice in 2008, prices soared to about $1,100 per tonne from about $480. Rice currently trades at about $405 per tonne, down from $410 before Russia invaded Ukraine. Bloomberg argues that rice prices need to stay where they are if the world is to avoid a full-blown food emergency.

India could limit sugar exports to 8 million tonnes this season to prevent a surge in domestic prices. Mills have so far signed contracts to export 7 million tonnes.

China’s agriculture minister has said that “China faces big difficulties in food production because of the unusual floods last autumn.”

Nestle will stop selling a wide range of brands in Russia after the Ukrainian President criticised the company. Nestlé said that the products make up the “vast majority of volume and sales” Russia. The FT writes that the war in Ukraine presents Nestlé with some difficult choices. The Minnesota Reformer feels that “Cargill should pull out of Russia.”

Spiking commodity prices and subsequent margin calls leave some trading firms short of liquidity and searching for additional financing. At last week’s FT Commodity Conference, traders warned that financial stress could lead to consolidation in the sector.

In an article on rising fertiliser prices, the FT calls for a reduction in financial speculation in commodities, arguing that derivatives trading plays a significant role in food and fuel inflation. However, in this article on the merits of investing in agricultural commodities, the newspaper writes that after the last grain price surge in 2007-8, a report from the FAO found: “Available empirical evidence does not support claims that non-commercial traders have increased the volatility of grain prices.”

The CEO of Yara, a major Norwegian fertiliser producer, told the WSJ, “We will have a food crisis. It’s a question of how large.” Brazilian farmers have been caught off guard by soaring fertiliser prices, with only 28 per cent of their needs for the second half of this year bought by the end of February.

The world’s small scale coffee farmers are already facing a “crisis” because of the fertiliser shortage. Meanwhile, a container shortage is leading some Brazilian coffee producers to export their beans in bags in break-bulk vessels.

Nigeria’s Dangote Group has opened a $2.5 billion fertiliser plant at the Lekki Free Zone in Lagos State. The plant is designed to produce 3 million tonnes of urea per year and supply all the major markets in sub-Saharan Africa. The company will also export to Brazil, the US, India, and Mexico.

Olam Group has agreed to sell 35.4 per cent of Olam Agri Holdings to Saudi Agricultural and Livestock Investment Co. (SALIC) for $1.24 billion. The deal values Olam Agri at $3.5 billion.

ADQ, an Abu Dhabi wealth fund, is acquiring Egypt state-held stakes in Abou Kir Fertilizers & Chemical Industries, Misr Fertilizers Production Co. and Alexandria Container & Cargo Handling Co. as part of a roughly $2 billion investment in the country.

Qatar and the Gates Foundation will invest up to $200 million over the next two years to help farmers adapt to climate change. Recent climate models warn that climate change will result in a dramatic drop in agricultural yields.

Unilever is piloting Green Token, SAP blockchain technology, to increase transparency in their palm oil supply chain. The company has already used the technology to source 188,000 tonnes of palm oil from Indonesia.

Finally, this writer argues that we should stop growing wheat and eat beef instead. (Well, everyone is entitled to their opinion.)

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