Commodity Conversations Weekly Press Summary

Last week, we talked about the importance of supermarket workers in countries that are under lockdown; this week the emphasis has moved higher up the supply chain to truck drivers and labourers. Exporters in Brazil are saying there aren’t enough trucks to bring commodities to the ports, which in turn is causing demurrage costs. Truck drivers say they are struggling because the usual amenities they require, such as highway stops and restaurants, are closing down. In India, labourers are reportedly worried about their working conditions and refuse to work unless they are provided with proper equipment to protect them from the coronavirus. This labour shortage has forced most Indian ports to declare force majeure, while industries such as sugar mills are struggling to finish the harvest. 

The global sugar market has been particularly affected by the coronavirus outbreak as Brazilian mills, which can choose whether to make ethanol or sugar with their cane, are maximising sugar output given the collapse in fuel demand. Whereas a few months ago many analysts had forecast a global deficit of sugar, the switch in Brazil means the world is likely to see a sugar surplus instead, causing a collapse in sugar prices. 

The price of coffee has soared, on the other hand, with coffee roasting nations looking to bring supply forward in anticipation of further logistic disruptions. Packaged coffee sales in the US surged 25% over the past month, according to Nielsen. Coffee producers in countries such as Brazil and Colombia are getting near-record high prices for their coffee in local currency. A lack of containers, as well as labour shortages, are expected to exacerbate the situation. 

The Ivory Coast said it won’t be selling any more cocoa to major exporters like Cargill and Barry Callebaut, which have already bought more than they had contracted. This is to ensure there is enough supply for smaller buyers amid a lower crop. The smaller, mainly domestic, exporters had earlier asked for support from the Coffee and Cocoa Council to help them compete as they cannot afford to pay the same level of premiums as bigger companies. 

Cocoa importers in the US, meanwhile, have been asked by customs to fill in a questionnaire to identify forced child labour in their supply chain from the Ivory Coast. However, the World Cocoa Foundation said there were only few instances of forced child labour in the country’s cocoa industry, adding that potential restrictions, or even an outright ban, on cocoa imports would be counterproductive and end up hurting farmers who are already very poor. 

Barry Callebaut argued that helping farmers out of poverty was key to ending deforestation. The group said it was on track with its cocoa sustainability targets, having mapped 220,000 farms it sources cocoa from in the Ivory Coast and Ghana, an area of 160,000sq km. It has also helped plant 750,000 native trees to shade cocoa trees and protect them from the weather. Similarly, Nestle said it had managed to map three-quarters of the 120,000 farms it sources cocoa from in the Ivory Coast and Ghana, with the remaining quarter expected to be mapped by October this year. It has also planted 560,000 shade trees. 

Olam said it had spotted over 7,000 instances of child labour in its cocoa supply chain, following a partnership with the Fair Labor Association to monitor 7,000 suppliers in Cameroon. It said it had solved two-thirds of the issues identified by using revenues from the sustainable premium cocoa to build schools. On the other hand, Olam has been accused of failing to prevent deforestation in its palm oil plantations in Gabon. Olam denied the allegations, which will be investigated by the Forest Stewardship Council. 

Environmentalists are worried that deforestation could surge in Brazil’s Amazon as Ibama, the environment protection agency, said it had to reduce enforcement personnel on the ground because of the coronavirus outbreak. Around 30% of Ibama’s workforce is in the most vulnerable age group, it explained, adding that budget cuts had not made it possible to hire younger people.  

In the UK, the Global Resource Initiative Task Force is urging the government to make deforestation targets in the supply chain legally binding by 2030. The taskforce, which has the support of McDonald’s, Tesco and Cargill, among others, also recommends compulsory due diligence. 

Did you know? This week marked the 128th anniversary of the birth of Coca-Cola. The drink, which was initially designed to be a hangover cure, was advertised as a “brain tonic.”

This summary was produced by ECRUU

Commodity Conversations Weekly Press Summary

The spread of the coronavirus is making us rethink the world’s food supply chain. We have, suddenly, come to realise how important supermarkets employees and cashiers are. So much so, in fact, that the US states of Minnesota and Vermont decided to classify food distribution workers as “essential” workers, putting them on par with health professionals and making them eligible for free child care. 

For the elderly, sick or disabled consumers, food delivery staff act like emergency first responders. According to this opinion piece, people working for services like Instacart, DoorDash or UberEats are shouldering the health risks involved with shopping and are often badly compensated, with poor or no health insurance. With the government yet to recognise their role, the onus might be on the companies to protect their workers. This is especially so given that food delivery firms are reaping huge financial returns from the surge in demand. The value of the meal delivery company Blue Apron is now seven times higher than it was last week, while shares jumped as much as 198% in one day. 

Further along the supply chain, containment measures like lockdowns are starting to have an impact on transport logistics. The FAO warned that the biggest issue at the moment was making sure products can be quickly transported from origin to destination. Experts say food prices will inevitably go up if quarantine measures are extended for more than two months. The outbreak is revealing that the food distribution system is “more fragile than we think it is”, a professor at Purdue University said. 

Countries that rely on imports are the most at risk, while some countries play an outsize role in producing a single crop, like Russia’s growing importance as a wheat exporter. The whole situation could escalate even further if countries start to hoard food. Kazakhstan and Serbia, for example, recently banned the export of some food products. 

Eventually, food production itself could take a hit due to the shortage of workers, especially with borders closing down. Rural populations face a higher risk because they often have pre-existing conditions, while rural hospitals are less equipped. In the UK, farmers are calling on the government to help retrain workers who lost their jobs because of the virus to help with food production. The sector faces a potential shortage of 80,000 workers and needs a “land army” to ensure the food supply remains stable, unions said. In some sectors, like Brazil’s and Australia’s sugar industry, the switch to mechanised harvesting will help maintain supply, although other operations like plant maintenance could be affected. 

Most government’s containment measures include clear exemptions for essential products like food and drinks. The problem is that there is a lot of confusion. In Brazil’s Mato Grosso, the city of Rondonopolis forced all facilities to close, including plants owned by Bunge and COFCO. The agriculture ministry said the decree did not comply with federal guidance and called on firms to sue the local government. Nestle also fell victim to the confusion over a lockdown in India. The group, which operates eight facilities in the country, said it suspended or slowed operations while it was engaged in talks with the government over an exemption to the lockdown. 

For the most part, however, agricultural groups are not reporting any major disruptions so far. In the US, ADM, Anderson and Bayer mentioned that they were able to maintain operations as usual ahead of the crucial planting season. Cargill said it had noted a slight increase in net demand although the food service sector now only represents 15% of sales, compared to 55% a week ago. A global recession could change consumption patterns and reduce the global meat demand, a Cargill director said, although supply issues could support prices. In the meantime, he said the group was “making decisions by the hour.” 

On a brighter note, corn futures were supported by news that China had bought the most amount of US corn since 2013, a sign that the country is on the road to recovery. China had been expected to increase imports only in the second half of the year. Cargill also reported that it was now operating its Chinese poultry plant at 80% capacity, compared to 30-40% during the worst of the outbreak. 

The lockdown is also forcing people to spend more time cooking at home. Some, like the Silicon Valley crowd, are struggling more than others. Check out this new recipe from San Francisco – cooking frozen tater tots in a waffle iron – called a totwaffles.

This summary was produced by ECRUU

Commodity Conversations Weekly Press Summary

As more countries go into lockdown to fight the coronavirus outbreak, the impact on agriculture and food is still very unclear. There has been a lot of talk of lost consumption, especially with the closure of restaurants, but some analysts point out that people are likely to eat just as much – if not more – while they are confined at home. 

Governments are urging citizens not to resort to panic buying, arguing that it was a bigger threat to the food supply than the coronavirus itself. A Spanish official explained that with one supermarket for 1,000 people or less, the country was well equipped to keep everyone supplied. Labour shortage is an issue, however, especially in Italy where most of the food is transported in trucks. However, Italian consumers have reportedly responded well to a call from the authorities to focus on buying local products to support local farmers and businesses. 

In the UK, where almost half of all the food is imported, the government confirmed that there would be no shortages as planes and ships continue to supply the country. Having said that, a food policy expert warned that UK supermarkets had stopped storing significant quantities of food in the last few decades in favour of a “just in time approach” which could easily be disrupted. As such, supermarkets have started rationing what people can buy. One online shopping service, Ocado, had to interrupt operations as it could not deal with the huge demand. 

Psychologists have been attributing panic buying in supermarkets to people’s need to regain control in a situation where they have little to no control. An expert at University College London explained that toilet paper had become, quite literally, an “icon of mass panic” because people tend to look for “value and volume” when panic buying and toilet paper definitely fits the bill. In Turkey, meanwhile, thousands of people rushed to buy lemon cologne. But what’s probably more telling is what is being left behind. In the UK, buyers have focused on the cheapest options, like baked beans and ready-made meals. Premium products, which often include low sugar and fat versions, tend to still be on the shelves. Similarly, the gluten-free aisles continue to be full. 

Beverage alcohol companies have offered to supply hospitals and governments with ethanol amid sanitiser and disinfectant shortages. Greek customs are planning to transform confiscated bootleg alcohol, for instance. In Sweden, Absolut offered to supply alcohol, as did France’s luxury brand LVMH. There have been multiple warnings, however, not to use vodka directly to wash hands because the alcohol content is too low to kill the bacteria. Talking of alcohol, those stuck at home have come up with new cocktails, including the Quarantini which seems to have gone viral. 

In the US, the closure of restaurants and schools is having a catastrophic impact on small farmers, many of which supply these establishments directly. The impact of the virus could be especially devastating for the farm community given that over one-third of farmers are above 65 years old. Besides, farmers are struggling to get the labour they need, a situation that is expected to get worse. 

On the other hand, the fall in fuel prices will help lower costs of production, especially for farmers who are just starting to plant. However, farmers who grow biofuel feedstocks, notably corn, are very concerned about the ramification of the collapse in oil prices and demand. Some say that the US ethanol demand could fall by as much as 40% this year, which would mean a lot of unused corn. The effects could be felt for years and many ethanol plants, which are reeling from several years of hardship, might have to permanently close down. 

Brazilian farmers, on the other hand, are already benefiting. The Real dropped to a record low last week, falling below the BRL 5/USD level and almost 20% below its value at the start of 2020, which is translating into record-high prices for farmers. As such, farm exports from Brazil in March and April are expected to surge. 

There was a moment of panic, however, when workers in Brazil’s Santos port announced a strike because of the exposure risk to the coronavirus. A state official pointed out that the worker union’s decision to gather several hundred people to decide on whether they should strike completely defeated the point of reducing the exposure risk. He warned that the government would declare a state of emergency which would scrap their right to strike as so much of the economy is dependent on ports operations. In the end, port operators managed to find an arrangement, including avoiding large gatherings during operations. 

In China, the agricultural sector could end being the least impacted by the virus outbreak. The government has released millions in subsidies to help farmers acquire machines and tools to ensure they can start planting and harvest again as soon as possible. For instance, agricultural drone maker XAG expects revenue to go up fourfold this year. Smaller farmers are expected to be worse hit, however, which could lead to a wave of consolidation. 

The other good news coming out of China is that food consumption is coming back, with a vengeance. A consumer survey in Jiangsu Province showed that 90% of respondents aimed to catch up on consuming what they had missed out as business goes back to normal. Restaurants that reopened reported a surge in bookings, with one barbeque shop saying it had consumers ordering the entire menu. Another tea shop reported one consumer ordering 77 cups of tea. 

This summary was produced by ECRUU

Commodity Conversations Weekly Press Summary

As the world is still cautiously analysing the impact of the new coronavirus outbreak, it has been almost two years since the first cases of the African swine fever were detected in China and some of the long-term consequences are now clearer. For one, up to 25% of the world’s pig population died, while a new report suggested that only large-scale industrial pig farms were able to overcome the disease and are now reaping the benefits of soaring prices. In contrast, China’s 40 million small-scale farmers, who did not have the funds to recover their losses or the organisation to apply for government help, might have to stop herding pigs as a result. 

Some exciting news was reported by researchers around the world who have successfully tested safe and effective vaccines against swine fever. Teams in China and the US reported some successful tests, although experts warn against being too optimistic too soon. An important step will be to find a vaccine that is broadly applicable to different strains, on top of finding a way to address contamination in the wild boar population. In the meantime, the USDA published its action plan to deal with an outbreak in the US. The country would ban all shipments of pigs for at least three days in the case an infection was detected. 

Commodity markets were affected by the sudden drop in oil prices this week following the dispute between Saudi Arabia and Russia. Many agricultural producers found out that the price of their products is now tied to energy prices because they are used to make biofuels, such as EU rapeseed, American corn, Brazilian sugarcane and Indonesian palm oil. As one journalist put it, farmers are now also energy traders. On the other hand, some suggested that oil prices no longer have an impact on renewable energy investments in the short and medium-term. Only an unlikely structural shift in oil prices would change the situation for clean energy producers, like Brazil’s ethanol sector.

Cargill announced a partnership with Rainmaking to find solutions to decarbonise the shipping sector in Singapore. Rainmaking launched a similar program in Europe which finds viable technological solutions and encourages industry leaders to support them. In Sweden, Sekab and Vertoro from the Netherlands announced the construction of a demo plant that will make a proprietary blend of ethanol from waste wood products. The fuel will initially be used by the shipping industry but could also serve for cars and planes.

The private equity arm of the Rabobank Group, Rabo Corporate Investments, announced an investment in Protix BV, a Dutch producer of insect protein. The company makes an alternative to animal and fish feed using the larvae of the black soldier fly. Meanwhile, the plant-based meat producer Impossible Foods said it was able to address scaling issues and reduced prices by 15% for food service distributors. Its products still cost around USD 7.90/lb, compared to USD 1.79/lb for 81% ground beef, but better than the competitor Beyond Meat which is still selling for around USD 11.98/lb. 

Investors are now looking at synthetic palm oil, including a Bill Gates fund which announced an investment in C16 Biosciences, a start-up that produces palm oil from food waste. However, experts note that the current technology is far from being scalable, although it could help address a shortage of certified sustainable palm oil. In the same vein, PepsiCo expanded its commitment to source only sustainable palm oil to cover third-party suppliers instead of only direct suppliers. 

PepsiCo is also working to shift away from depending too much on sugary soft-drinks and announced that it will buy Rockstar, an energy-drink brand, for USD 3.85 billion in an attempt to increase its presence in the fast-growing category. Interestingly, however, sales data from Arca Continental and Coca-Cola Femsa in Mexico show that the consumption of sweet beverages continued to increase in the 2014-19 period despite the introduction of a sugar tax in 2014. This includes beverages with high and low sugar content.

Finally, Bloomberg compiled a great table of recent dramatic weather events and their impact on prices, such as warm weather in the EU, drought in Thailand and Australia, or a salinity buildup in Vietnam.

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Commodity Conversations Weekly Press Summary

Michelin has been accused of “greenwashing” with its restaurant guide’s new sustainable gastronomy award. The chef of Michelin star restaurant Relae in Denmark complained it had been awarded the label without any independent audit being conducted. Environmentalists added that the label was vague and without any clear requirements. To top it off, some were quick to point out the irony of a tire company handing out sustainability awards. 

In any case, the traditional concept of restaurant dining could be on its way out. A deep-dive by The Counter looked at US data which, although confusing, pointed to the increasing number of restaurants closing down every year. While this is partly because more restaurants are opening up in the first place, with the chef and restaurateur culture becoming increasingly cool, it is mainly due to new eating habits. People either prefer to order in or eat on the go. As such, venture capital is being poured into so-called “cloud kitchens” that only cater to deliveries. 

The water bottle industry, too, could be facing significant changes going forward. In Washington, the Senate approved a bill banning new permits for water bottling operations and other states, such as Maine and Michigan, are looking to follow suit. Congress has set up an oversight committee to look into the operations of the bottled water industry, under which Nestle has been asked to submit data on sales, water extraction and the amount of plastic used, among other things. 

Nestle announced a USD 700 million investment to “meet the nutritional needs of Mexicans.” Under the plan, its 17 factories in Mexico will be upgraded to focus on products that either have lower sugar and fat content or are fortified with vitamins and probiotics, among other wellness food and beverage products. It will open a new coffee plant too but it hopes to offset the carbon emissions from that factory by planting 3 million trees in Mexico and Brazil within the next 18 months. 

In Australia, Nestle tied up with recycling company iQ Renew to collect and recycle soft plastics from homes. The trial will include around 2,000 homes with the aim of reaching 100,000 by the end of the year. Similarly, Unilever said it was working on creating a market for recycled plastics in Australia and New Zealand. It aims to use half as many new plastics and collect more than it uses by 2025. McDonald’s announced it was phasing out plastic cutlery by the end of the year and replacing it with fibre-based cutlery. The timing is probably good because 10 of the major food and beverage companies are being sued in the US by Earth Island Institute for their use of single-use plastics. The organisation hopes that the companies will be forced to clean up and recycle. Besides, supermarkets, in Australia and elsewhere, are worried they might eventually run out of food packaging because of the supply disruption out of China due to the coronavirus. 

Olam reported a net profit of SGD 313 million (USD 225 million) for Oct-Dec, four times as much as the previous year, thanks to divestments as well as better performance in several segments, such as coffee and grains. This brought the total 2019 net profit to SGD 564 million (USD 405 million), up 62% on year. The CEO said the group’s exposure to the new coronavirus and China was limited but added that it had affected consumption on a global scale, causing lower prices across commodities. In Nigeria, Olam is investing in tomato farming and finding better seeds. In Indonesia, it agreed to sell its 50% stake in Indonesian sugar refinery Far East Agri to Mitr Phol as part of its strategy to exit the sugar market. 

In Brazil, meat producers JBS and Marfrig have been accused of sourcing cattle from a farmer who murdered people trying to protect the Amazon forest in 2017. This is the emerging part of a much bigger issue known as “cattle laundering.” While the likes of JBS say they do everything they can to check that their direct suppliers are not involved in deforestation, the indirect suppliers are able to go around these checks by selling their cattle to companies that are vetted to supply directly. 

In the UK, meanwhile, a study found that the anti-meat lobby is contributing to growing mental health issues among livestock farmers. Part of the problem, however, is that meat farmers are stuck between shaming on platforms such as social media and pressure from big supermarkets to provide cheap meat. Greenpeace argued that livestock farmers should not be blamed. On the contrary, they should be helped to switch to farming something else. In the same vein, the European Commission is looking into its subsidy system designed to help promote agricultural products. It faced a backlash after data showed that EUR 60 million (USD 67 million) had been spent over three years to subsidise the marketing of meat products. 

Finally, Belgian researchers are taking the quest to replace dairy products to a new level. They are testing using larva fat to replace butter in bakery products. Apparently it tastes exactly the same. 

This summary was produced by ECRUU

Commodity Conversations Weekly Press Summary

As the spread of the new coronavirus is expected to impact global trade flows, the US President said the government might offer farmers more trade aid in 2020 to compensate for the lack of purchases from China. The USDA said the news, announced on Twitter in all-caps, was a surprise. Meanwhile, lawmakers are looking at how the trade aid money – over USD 23 billion since 2018 – is being distributed. Critics point to the fact that foreign firms like Brazil’s JBS are receiving hundreds of millions of dollars in government funds.

The giant meat processor JBS received some more good news this week as the USDA ended a ban on raw beef imports from Brazil. The agency blocked Brazilian imports in 2017 on health and safety concerns. Otherwise, US efforts to isolate Iran have allowed it to take the position of biggest pistachio grower in the world. This deep-dive by Bloomberg looks at how geopolitics, climate change and resource mismanagement created challenges for Iranian producers, along with how investors are looking at new potential pistachio-growing countries, like Georgia, Uzbekistan, and Azerbaijan. 

China’s virus outbreak is having indirect but impactful consequences for the food industry worldwide, such as the fall in Chinese fertiliser production. India usually imports 50% of its diammonium phosphate from China but the lockdown of Hubei province is forcing India to look for alternative suppliers. In North Korea, the price of many basic goods started to fall again after a spike caused by the closure of the border with China. Sources reported that the price of imported goods dropped as distributors were forced to release their stocks.

China is also one of the largest producers of alternative sweeteners and Coca-Cola warned that the ongoing virus will lead to a shortage. Although China is the group’s third-biggest market, it expects that the coronavirus will only affect revenues by 1-2% in the quarter. Likewise, Danone said sales will be down about USD 100 million in the first quarter because of the virus. Danone also pledged to spend USD 2.2 billion over the next three years in order to “build climate change resilience” into the business. The money will go to reduce plastic waste and to lower the carbon footprint of its supply chain. 

The environment was also on the minds of British people as the UK is looking to launch post-Brexit trade talks. A YouGov poll showed that 57% of respondents thought the UK should enforce stricter environmental laws once it leaves the EU, while 37% said food safety standards should be strengthened, compared to 6% who thought they should be loosened. Moreover, farmers are worried as the environment secretary said he could not guarantee that food standards will not be lowered. British farmers are afraid they will be unable to compete amid cheap imports, funding cuts and a restriction on hiring immigrant workers. 

The Netherlands only narrowly approved the free-trade agreement with Canada, in force since 2017, amid pressure from local farmers afraid of competition from imports. Farmers across the bloc have also opposed efforts to sign new deals with Mercosur, Australia and New Zealand. Otherwise, the EU’s efforts to punish Cambodia for human rights violations are being challenged as the Cambodian Prime Minister said the state will compensate for losses faced by local companies. The EU ended about 20% of the preferential duties under the Everything But Arms scheme but the PM said he will offer tax breaks to affected exporters. 

Pakistan declared a state of emergency due to a locust outbreak that has destroyed crops, including wheat and cotton. The Prime Minister approved a plan which includes buying planes to spray pesticides. India’s agriculture ministry blamed the country for not reacting fast enough and letting the invasion spread, adding that some 400,000ha of crops in northern India had been affected. In response to a video of locusts in Xinjiang, China, the agriculture department said this was a desert variety which was unlikely to survive in China. Besides, the Himalaya provides an efficient wall against the migration of locusts, while the country has among the world’s best locust monitoring and extermination systems, it said. 

The situation is more serious in Africa, however, as locusts are devastating crops in South Sudan, having crossed over from Uganda. Locusts have also been reported in Kenya, where farmers asked the government to intervene to avoid significant crop losses. The UN warned that the locust invasion could spread to more countries which could potentially create a food crisis. Somalia has declared a national emergency and the UN is appealing for funds to fight the locusts with aerial spraying. Climate change is likely behind the outbreak, which is the worst in 25 years, the UN said.

As farmers struggle with volatile weather patterns and unpredictable trade development, a new tool appeared to help them generate more income: YouTube. The website revealed that farming videos have seen their popularity grow twice as fast as cosmetic videos. While some channels focus on sustainable or organic practices, the most popular YouTubers are young, large-scale, conventional farmers. We particularly liked this video on how to farm Rice Krispies. 

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Commodity Conversations Weekly Press Summary

The US is looking at resetting its tariff commitments under the WTO’s Government Procurement Agreement (GPA), or even exiting it altogether, according to sources who spoke with Bloomberg. The administration is reportedly blaming the WTO’s most-favored-nation (MFN) system for its trade deficit with areas like the EU and China but some analysts warn that US businesses could be hurt if they lost access to GPA tenders.  

The USDA launched its “Science Blueprint” this month, a 5-year plan designed, among other things, to mitigate the effects of climate change on agriculture. Some advocacy groups welcomed the news, saying that the simple act of mentioning climate change was a step forward. However, critics have been quick to point out that it will not be easy to undo the efforts to undermine the USDA’s scientific research over the last few years which led to around two-thirds of agency researchers quitting. 

The situation at the USDA seems to reflect what is going with the general public in the country. A survey by Yale University found that only 30% of Americans talked about the environmental impact of what they eat, while the rest said they didn’t know they should eat more plant-based food. Over half, however, said they would be willing to adjust their diets if they got more information on the topic. 

An ongoing lawsuit in Texas might help with that. The National Press Photographers Association sued the Department of Public Safety over a ban on taking photographs of feedlots with drones. Separately, an investigation by the Food & Environment Reporting Network found that residents of Texas’ cattle feedlot belt say they are suffering from “fecal dust storms” when the wind blows on the millions of tons of manure produced by the cattle, sometimes thick enough to create smog-like conditions. The haze, as well as the amonia, could cause health problems such as asthma. However, Texas’ “right to farm” law, which was initially designed to protect farmers from growing cities, protects the feedlots from any legal action from local residents. 

Nestle reported a net profit of CHF 12.6 billion (USD 12.89 billion) in 2019, up 24% on year and beating forecasts. The organic growth was up 3.5%, driven in part by strong demand for their Starbucks and Nescafe products. The group said it was working hard to guarantee a stable supply of food in China where most of its 30 factories have started operating again. It is still too early to assess the impact of the coronavirus, however, as China represents 8% of its global sales.
Looking forward, the CEO warned that organic growth would likely slow in 2020, adding that the group was planning more acquisitions in high-margin and “trendy” segments. The plant-based meat segment represents a “once in a generation opportunity,” he added, saying that plant-based tuna would be released later this year. On the other hand, Nestle may look to dispose of its US frozen food and water businesses which have not been doing well. In Nigeria, the company is due to start domestic production of milk following pressure from the government to reduce imports. 

Unilever said it would stop advertising its food and beverage products to children below 12 years to help reduce child obesity. It will also launch a “Responsibly Made for Kids” logo for products with lower calories and sugar content. Similarly, the UN is calling on regulating ads to children, especially fast food ads on social media. 

A report by the International Maritime Organization (IMO) analysed by The Guardian suggests that the cleaning systems (known as “scrubbers”) installed in ships to meet 2020 IMO pollution regulations, could result in more pollutants being released in the sea instead, contaminating seafood in the process. Some environmentalists have urged the IMO to ban the use of scrubbers until data, which the IMO says is currently insufficient to really assess risk, is clearer. The WWF, meanwhile, found that the Philippines, Thailand, Indonesia, Malaysia, China and Vietnam were responsible for 60% of the world’s annual ocean pollution, noting that Malaysia was the biggest consumer of single-use plastics. 

In Ukraine, the government gave the green light to Bunge, ADM, Cargill, Louis Dreyfus and Glencore to get together and create TechCo, a company designed to digitise documents related to the sale of agricultural products. There are no concerns about competition as this will only affect post-sales, it said. Something similar is happening in the sugar industry where Dubai-based sugar refiner Al Khaleej Sugar, Universa Block Chain and DMCC Tradeflow signed an agreement to collaborate over the development of a platform designed to boost international sugar trade volumes in Dubai. 

This summary was produced by ECRUU

Commodity Conversations Weekly Press Summary

Bunge reported a net loss of USD 51 million in the last quarter of 2019, an improvement from a loss of USD 65 million the previous year. This was in part thanks to higher sales and margins out of South America and farmers in Argentina selling their crops early in anticipation of the increase in export taxes. The CEO said the company was benefiting from becoming more “nimble” as well as implementing a “more rigorous approach to risk management.” Overall, however, the group reported total net losses for 2019 of USD 1.28 billion, from an income of USD 267 million in 2018. The CEO warned that there remained a lot of uncertainty for US origination in terms of the US-China trade deal in 2020, in addition to the African Swine Fever and Coronavirus. 

Olam, on the other hand, said it should see a net one-time post-tax gain of USD 52 million for the last quarter of 2019 as a result of the company’s restructuring, which included the sale of a number of assets and shares. 

Similarly, ADM was able to deliver a solid fourth quarter, with net earnings of USD 504 million, despite the challenging market environment. The company published its OutsideVoice Protein Perception & Awareness Study which suggested that plant-based food will continue to see impressive growth in 2020. The study found that 44% of US consumers now identified as flexitarian. In anticipation, ADM will expand its non-GMO soy protein factory in Europoort, Netherlands.

The decision might be particularly well-timed as members of the EU Parliament discussed a proposal to impose a tax on meat as part of the integrated food policy Farm to Fork (F2F) under the EU Green Deal. A recent report argued that a meat tax was essential to reach carbon neutrality and lower healthcare costs. Nonetheless, the farmer’s union Copa-Cogeca said the tax would impose a terrible burden on farmers, especially if it was only implemented in the EU. 

Environmentalists added that the overall F2F effort would be jeopardised if the EU continued to negotiate new trade deals with countries like Brazil and the US. Some activists are concerned that the EU will not be able to stand up to pressure from the US, which recently threatened to target Germany’s auto industry with tariffs to push for concessions on agricultural trade. 

Scientists continue to show evidence that eating red meat is linked to a small but increased risk of developing cardiovascular disease, such as this JAMA Internal Medicine paper which gathered data on 30,000 people over 30 years. Government guidelines against over-eating beef – which started as early as 1977 in the US – could have contributed to the growth of the chicken nugget, now infamous for being one of the most highly processed meat products. Right on cue, KFC and Beyond Meat launched Beyond Fried Chicken. Early reviewers say they are quite good, but food critics also note that “everything tastes like chicken”.

Besides, the Rothamsted Institute warned that tofu could actually have a bigger environmental impact than meat products in terms of protein content because it is highly processed and not as digestible. Danone is also reviewing how it is marketing its plant-based alternative to whippable cream after a Swedish group awarded the company the top prize for “food bluff of the year”. The product, called Alpro Cuisine Soya Whippable, only contains 2% soy but 25% palm oil. In response, Danone said it would change the packaging to highlight the palm oil content, pointing out that the palm oil was certified under the Roundtable on Sustainable Palm Oil and one of the most sustainable sources of oil. 

California-based Farmers Business Network (FBN), a small start up hoping to disrupt the agricultural world, complained to Canadian authorities that big commodity groups were abusing their dominant position to block its growth. FBN launched an online marketplace for farmers to buy agricultural inputs, thus cutting out the traditional middleman. The Canadian Competition Bureau confirmed it was investigating the case and had extended the claim to include Cargill and Bayer. In the EU, meanwhile, the Commission said it was looking into whether Mondelez had abused its dominant position by restricting the cross border trade of certain products, in breach of the EU’s Single Market rules. 

This summary was produced by ECRUU

Commodity Conversations Weekly Press Summary

Two weeks after the signature of a phase one trade with China and one week after the approval of the USMCA, the price of US crops has been mostly down reflecting the impact of the coronavirus. China was not expected to meet the US import targets before the virus outbreak but, as a futures broker put it, now “they have a good excuse at least.” Instead, the country has been importing grains from Brazil, Australia, Canada and France where prices are lower. The CEO of ADM remained optimistic, however, expecting imports to pick up in the second half of the year when prices drop with the start of the US harvest. 

In response to the virus outbreak, North Korea reportedly closed its borders and stopped almost all cross-border travel. While the country’s focus on self-reliance means it produces a lot of items like snacks or clothes, the raw materials mostly come from China and the border closure would have a significant impact on the economy if they have to remain closed for a while. 

Pork producers around the world are still watching out for the African Swine Fever (ASF) and hoping they can protect their livestock from the disease. The Philippines reported the first case in the Mindanao province and the disease is now spreading through Eastern Europe. In Germany, the state of Brandenburg built a 12km electric fence on its border with Poland to stop wild boars from infecting the local livestock. Germany has been able to benefit from the uptick in demand so far as exports to China surged 43% in Jan-Jul 2019. However, a German producer warned that the spread was inevitable, which could push China to stop German imports. 

The CEO of Cargill noted  that consumers are increasingly focused on the need to change animal agriculture. Cargill recently purchased Delacon, a producer of animal feed additives, and Diamond V, who makes animal supplements from fermented ingredients. Diamond V also launched a human supplement brand that focuses on gut health. A Cargill scientist said “probiotics, prebiotics, postbiotics and phytogenics” could all play a role, while the CEO argued that the “the future is micro ingredients”.

For its part, Nestle announced that it will add USD 200 million to its investment in the pharmaceutical company Aimmune Therapeutics, bringing its total investment to USD 473 million. Aimmune Therapeutics recently received approval for a therapy to lower allergic reactions to peanuts in children. Nestle also announced a partnership with Burcon and Merit Functional Foods, two Canadian vegan protein manufacturers. The head of Burcon noted that the recent craze surrounding plant-based products “has been a wild ride.”

The response from some meat producers has been less enthusiastic, however. The Maryland Farm Bureau expressed its support for a proposal to ban the use of the word “meat” for plant-based or lab-grown products. Missouri passed a similar law in 2018. In Florida, Burger King argued that it never advertised the “Impossible Whoppers” as vegan. The comment was in response to a lawsuit complaining that the plant-based burgers were cooked on the same grills as other burgers. 

Food manufacturers like Nestle, Mondelez and Danone, have made impressive strides in reducing the environmental impact of their own operations but are struggling to address the impact of their supply chain. S&P Global Market Intelligence suggested that the cost of environmental damage as a proportion of revenue of these three firms has been increasing since 2015, after six years of decline. In essence, major corporations have “outsourced their environmental impact to their supply chains”, an expert commented. 

The idea of using agricultural crops to help lower the emissions of aviation and marine transport has been gaining ground as other alternatives like electricity remain a distant prospect. Sustainable Aviation, a group representing the UK’s aviation industry, has set a target to become carbon neutral by 2050, thanks to carbon offset programs, the use of bio-jet fuel, also called sustainable aviation fuel, and carbon pricing. The group hopes to achieve the goal despite a 70% expected growth in air passengers and the opening of a third runway in Heathrow. 

Similarly, Maersk said it was hoping to move to phase two of its project to develop a new fuel to lower the emissions of its shipping fleet. Researchers at Copenhagen University are studying a drop-in heavy biofuel blend made from lignin and ethanol called LEO. And the Abu Dhabi National Oil Company said it was testing the use of biofuels to help meet new emissions standards set by the International Maritime Organization (IMO).

The most creative way to transform food this week comes from an international team of researchers who announced the discovery of a modified sugar molecule with broad-spectrum antiviral properties. An expert said the result could mark a new way to fight viruses without harming humans, with potential applications to combat the coronavirus, or other viruses such as the Zika or HIV viruses.

This summary was produced by ECRUU

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Commodity Conversations Weekly Press Summary

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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