Commodity Conversations Weekly Press Summary

Following in Austria’s footsteps, Germany’s cabinet agreed to progressively phase out the use of glyphosate and implement a total ban by the end of 2023. In France, some 20 mayors banned the weedkiller last month. This could be a game-changer for agriculture, as a farmer in Nebraska pointed out that glyphosate and Monsanto’s Roundup Ready seeds were probably the biggest labour-saver since the invention of the tractor. That same farmer, however, was one of the first farmers in Nebraska to file a lawsuit against Monsanto after being diagnosed with non-Hodgkin lymphoma.

Some of the major scientific institutions disagree on whether glyphosate is safe but three juries in California have already ruled against Bayer – the new owner of Monsanto. Experts note that the outcome of the legal challenges might not come down to science, but rather Monsanto’s efforts to manipulate the regulatory process. In France, the government is investigating a list of potentially influential individuals Monsanto compiled in order to control public opinion. Bayer conceded that the list was created but argued that it was not illegal. 

The Environmental Protection Agency in the US explained that relying on industry studies when assessing pesticides was a common practice because companies must cover the costs of approval. It highlighted, however, that the data is shared and often collected by outside labs. The comment was in response to a second lawsuit filed against the agency which claimed that the recently approved sulfoxaflor pesticide would threaten bees, beekeepers and the whole food supply. 

In France, a public consultation was opened on the proposal to ban the use of pesticides within 5-10 metres of houses, due to come into force in January 2020. Associations argue that the distance is too small, while some mayors have already implemented a ban than can be as wide as 150 metres. The agriculture ministry warned that enforcing a 150-metre pesticide free-zone would reduce the total crop area by 20-30%. 

Meanwhile, Malaysian palm oil exporters are expected to lose market share in India following the recent 5% hike in import duty. India said the higher levy would apply to refined palm oil to protect domestic refiners. In response to hostility towards palm oil and low prices, the Malaysian government announced a plan to promote the cultivation of food crops. Palm oil is currently grown on 5 million ha, out of the 7 million ha of total agricultural area, but crude palm oil prices more than halved in the last eight years. 

The Indonesian government, on the other hand, hopes it can address mounting palm oil inventories by promoting the use of biodiesel. It recently reported that a fleet of cars travelled 42,000km on biodiesel and reported no engine issues. The plan is to increase the current 20% blending mandate to 30% next year and possibly 100% in 2021. 

China approved 25 Brazilian meatpacking plants for exports this week at a time when European countries are increasingly worried about buying meat from Brazil amid the spike in deforestation rate. Brazil already exports most of its meat to China, where the African Swine Fever (ASF) has decimated the local pig herd. The trade war with the US is also impacting the supply of soybeans and China announced that it will allow the import of soybean meal from Argentina

China is stepping up efforts to deal with the ASF by boosting subsidies and has even started enforcing pork rations in some cities. Last week, the government said it would release emergency stocks of frozen meat if necessary. Some estimates say China lost 100 million hogs to the disease while Vietnam said it culled 4.7 million pigs to contain the outbreak. The disease has also made its first appearance in the Philippines, despite a ban on pork imports and reinforced quarantine procedures. 

ADM was the target of two separate antitrust lawsuits last week which accused the group of manipulating prices. The first one concerns its Golden Peanut subsidiary, along with another peanut sheller Birdsong Corp, which are accused by farmers of conspiring to fix unprocessed peanut prices. The two firms control 90% of the shelling industry. The second lawsuit accused ADM of manipulating the Argo ethanol market to benefit from its short position. Some traders had already complained to S&P Global Platts that ADM was selling large amounts of ethanol on the cash market just before the market closed.

Bunge revealed that it owned a 1.6% stake in Beyond Meat. The maker of plant-based meat alternatives recently reached a market capitalisation of USD 9.9 billion, more than Bunge. Kellog and Danone joined the long list of firms planning to launch meat alternatives, while the University of Cambridge said it has removed beef and lamb from its menu to reduce its carbon footprint. A less impressive announcement came from Unilver’s Country Crock with the launch of “Plant Butter”. People quickly realised it was pretty much margarine, but with a higher concentration of saturated fat.  

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Commodity Conversations Weekly Press Summary

Just when there seemed to be no limits to the possibilities of plant-based meat alternatives, the CEO of Whole Foods‘ warned that these alternatives were highly processed, rich in salt and fat and therefore not very good for you. Whereas he did concede that it was better than eating meat in terms of the environmental impact, a researcher at Oxford argued that it would be better still to consume unprocessed plants. He explained that “while [plant-based meat] products have about half the carbon footprint than chicken does, they also have 5 times more of a footprint than a bean patty.” And if this was making you think of waiting for lab-grown meat to be financially viable, a food anthropologist warned that it was not yet clear that this option would be much better for the environment either. 

Eating fruits and vegetables might not be as healthy as we think, according to a recent study published in the British Medical Journal. Researchers noted that, as expected, people who consume meat have a higher chance of reporting a coronary heart disease when compared to vegans and vegetarians, although it also found that vegans and vegetarians have a 20% higher stroke risk. The reasons are unclear, although experts said it could be linked to the lack of B12 vitamins in a vegetarian diet. Overall, dieticians argue that the healthiest diets involve eating a  wide range of foods.

We might also have to rethink whether buying unpackaged fresh food is better for the environment. A new study argues that the carbon footprint of food that wastes faster because it is not packaged is bigger than the environmental impact of the actual packaging. The solution, then, seems to be better packaging. 

The media backlash against Brazilian agriculture policy – which is being blamed for the fires in the Amazon – continues. ADM, Bunge and Nestle are some of the groups that have officially committed not to source from the newly deforested areas. They are using satellite data as well as ground teams to identify the affected areas. Some have blamed the Amazon fires on the US-China trade war which has led to a boost in exports from Brazil. However, Brazil’s soybean exports dropped to 5.3 million mt in August, a fall from over 8 million mt in the same month last year at the start of the trade war. On the other hand, Brazil exported a record high 7.65 million mt of corn in August, double what was exported in the same month last year.

In the US, Cargill tied up with White Dog Labs to work on a sustainable alternative to fishmeal in aquafeed using corn feedstock. It is also investing USD 75 million in Puris, which supplies plant-based meat companies such as Beyond Burger, to set up a new pea protein plant in Minnesota. 

In Ghana, the 20,000 certified cocoa farmers who supplied Cargill in 2018/19 benefitted from a combined USD 2 million in sustainability premium, an increase of 33% on year. The group buys directly from farmers who bring the cocoa to local warehouses where they are registered, allowing full traceability. Cargill also announced a USD 121 million investment in expanding its cocoa grinding plant in the Ivory Coast

As it continues to look for innovative solutions for the food and agriculture industry, Cargill announced the official opening of a research lab at the University of Illinois. Similarly, ADM said it would donate USD 2.5 million to the University of Illinois’ Feed Technology Center.

Bunge continues on its cost-cutting tracks and announced it was reducing headcount at its New York headquarters, which will be moving to St Louis as part of the company’s strategy to become more globally integrated. Analysts forecast that the group will probably look at selling its fertilizer business and could split the commodity trading side from food ingredients ahead of a possible sale. Glencore is seen as a potential acquirer, on the assumption that antitrust regulators would not approve a takeover or merger with ADM. 

Launched at the last G7, Danone is chairing a new initiative, Business for Inclusive Growth (B4IG), which aims to help all member companies encourage diversity and fairness throughout their supply chain. The program, which will be managed by the OECD, has already identified some 50 projects worth USD 1 billion in funding. The head of Mars, which also signed up, said, “It isn’t about philanthropy, but rather an understanding that a business can only be successful if it also enables all of its partners, community and the environment to thrive.” 

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Commodity Conversations Weekly Press Summary

The concerns over the Amazon fires continued to grow this week as some fear the environmental reputation of Brazilian food producers will be jeopardised for years to come. Norway’s Mowi, the largest salmon producer in the world, said it would source soy outside of Brazil unless the government addressed the fires, and the biggest meatpacker in the world, JBS, said it was closely monitoring its suppliers in the area using satellites. Although it admitted that monitoring indirect suppliers was challenging. Many other Brazilian agribusinesses, including from the paper and pulp sectors, argued that the President’s environmental stance has been ‘disastrous’ in terms of what was being communicated to the outside world. 

In contrast, the sugar union, UNICA, said the current government could not be blamed for the fires, adding that the environment minister was committed to protecting the forest. The CEO of Summit Agricultural Group, which owns a corn ethanol plant in Brazil’s Mato Grosso, argued that the media was not covering the Brazilian President’s response fairly and that sending in the army had been the right thing to do. 

The US President is also potentially facing a growing backlash from farmers for undermining the ethanol standard, a key political topic in Iowa where it involves at least 40,000 jobs. Most Democratic Presidential candidates for 2020 have come out in strong support of the ethanol industry, but environmental activists note that their stances often contradict earlier pledges. They also argue that supporting ethanol goes against the goal of completely phasing out fuel-based engines, as proposed in the Green New Deal.

The wavering support for the ethanol mandate, along with the damage caused by the trade war, pushed some to believe the President is losing farmer support. But this poll conducted at the end of July suggests the opposite, as 66.6% of farmers said they would vote to reelect the President, up from 59.6% at the same stage last year. Analysts suggested this could be thanks to the generous cash payouts he offered farmers. 

In Indonesia, the government is taking action to protect its palm oil industry by banning the use of  “palm oil-free” or “no palm oil” messages on food products. The government highlighted that the messages pushed consumers to think the product is not healthy, a claim that has not been proven. A similar move was implemented in Malaysia, the home of FGV Holding, the world’s largest producer of crude palm oil. FGV reported poor results for its second quarter, which it mostly attributed to the sharp drop in palm oil prices. The group is also looking to restructure its struggling sugar business, with Wilmar reportedly one of the investors interested in buying a stake. 

Still in Malaysia, Nestle reported a good growth momentum in the second quarter, as product innovations and portfolio enhancements sustained strong consumer demand. The same cannot be said about its tinned milk product in Australia – Nestle announced plans to close its tinned milk factory in northern Victoria. Consumers are less interested in the products and it cannot compete with cheap imports, the group said. In Europe, Nestle expanded its plant-based meat offer by launching Incredible Mince and renewing the recipe of its Incredible Burger.

Meanwhile, a recent survey in the US found that the proportion of people who identify as vegetarian or vegan has remained steady over the past 20 years and only represent a small portion of the population, at 5% and 3% respectively. But experts note that this hides the growing popularity of semi-vegetarian diets. Regardless, in Argentina, beef consumption is not dropping even after a 15-20% hike in prices. The depreciating currency has led to a recent surge in prices but consumers are reportedly willing to lower their budget elsewhere before cutting down on beef purchases. 

Japan’s second-largest beer company, Kirin, announced a plan to spend USD 1 billion to buy a 30% stake in Fancl, a maker of health foods and cosmetics, in order to deal with a shrinking local beer demand. In contrast, Coca-Cola will launch its first alcoholic drink ever in the country, a lemon-flavoured fizzy drink mixed with a grain-based alcohol called shochu. In India, Coca-Cola will launch a non-alcoholic malt-drink through its Barbican brand. Both products are seen as new alternatives amid a global shift away from soft drinks. 

The most exciting Coca-Cola innovation, however, comes from the UK, where the group will be testing the use of robots to deliver drinks in Alton Towers, a theme park resort. The self-driving robots will use AI technology to manoeuvre and deliver drinks to outlets across the park. 

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Commodity Conversations Weekly Press Summary

Last week, Nigeria’s President said he was “taking [the] focus on agriculture to the next level” as he banned the central bank from giving foreign exchange to all food importers. This policy started in 2015 when the President came to power and blocked foreign exchange access for 41 items, including rice, which was then extended to dairy products in July. An analysis by the BBC argues there is a lack of reliable data to assess the success of the policy but it did lead to domestic rice production increasing to 8.9 million mt in 2018, from stagnating around 7.1 million mt in the 2013-17 period. However, the policy also pushed domestic prices up and caused a surge in smuggling. Commentators argue that the idea is not a bad one but it needs to be accompanied by other measures, such as assisting farmers to increase yields. 

Farmers in the UK are facing a different kind of pressure – a target of net-zero emissions by 2040. They have placed their bets on several technologies, including battery-powered precision robots that would simultaneously reduce diesel used in tractors and allow targeted pesticides use. Keeping grass fed cows outdoors – instead of soybean fed livestock indoors – will also help reduce emissions while lowering soybean demand. 

In India, too, the Prime Minister has appealed to farmers to reduce their use of pesticides on crops by 10-25%, saying chemicals were hurting “Mother Earth.” He said that the government would soon launch a campaign aimed at ending the use of chemical fertilisers completely while sticking to its commitment to double farm income. However, the FICCI pointed out that Indians use 0.27kg/ha of chemicals, compared with 4.58kg/ha in the US. 

The International Maritime Organization (IMO) rule requiring all ships to switch to low-sulfur fuel from January 1, 2020, could be a game changer for wheat trade flows. The analysis by Platts quoted traders as saying that it was easy for big buyers, such as Indonesia, to switch between Australian, Black Sea and Argentinian origins as the quality was almost at par. As such, freight costs were usually the determining factor. The IMO2020 rules will make freight more expensive which means that Australia, which recently lost market share to the Black Sea, could become more competitive in Asia again. 

Another environmental concern that could affect tradeflow is the fate of the EU-Mercosur trade deal. Analysts warned that the Brazilian President’s stand on the environment – and notably his recent denial of deforestation data – could push some countries such as France not to ratify the deal. Brazil’s National Institute for Space Research (INPE) said it had tracked 72,843 fires in Brazil so far this year, including half of them in the Amazon region, an increase of 80% on year. Environmentalists have blamed the President’s policies on the increasing deforestation, while he, in turn, accused NGOs of starting the fires as part of a media campaign against him.

At the same time, Brazil is focusing strongly on China. The Brazilian delegation which recently went there came back with a USD 1.5 billion coffee deal. The Santa Monica group will be setting up to roasters in the country, distributing some 100,000 coffee vending machines and eventually open a series of coffee shops.  

After a successful pilot project in the US, Coca-Cola is rolling out on a national scale its Dasani PureFill water dispenser line. This is part of a move towards “package-free delivery at scale” as well as part of its commitment to scrap 1 billion virgin PET plastic bottles from its supply chain. The group will also start selling its Dasani water in aluminium cans and bottles, also in abid to reduce plastic use. 

Similarly, Nestle Waters North America launched an Instagram #NotTrash campaign to encourage consumers to ask, via the social media platform, if they need help to figure out how to recycle its Poland Spring bottled-water products. The company explained that consumers tend to be confused about recycling, which explains why only 30% of plastic bottles are recycled in the US. 

Bunge CEO said the company was focusing on improving risk management through better coordination with the commercial team and by doing more analysis. The company, which just moved headquarters from New York’s White Plains to Saint Louis in Missouri, is aiming to have completed its “portfolio transformation and optimization work” by the middle of next year. 

Meanwhile, data analysed by Bloomberg showed that the 125 family members who own Cargill received a USD 643 million payout this year, the highest since 2010 and over USD 5 million each. Some say that this will likely postpone any potential plan of going public despite diluting shares over time. Based on the share value of its publicly traded competitors, Cargill could be worth an estimated USD 50 billion. 

Last but not least, and we bet you didn’t see this coming, a global survey found that the UK has the healthiest packaged foods and drinks in the world, followed by the US and Australia. What is less surprising is that the survey also found that the poorest countries had the unhealthiest packaged foods.

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Commodity Conversations Weekly Press Summary

In the UK, around 17% of the population has been stockpiling food and medicine to prepare for an eventual no-deal Brexit in October, according to a survey by Premium Credit. The total cost of the stockpile is estimated at GBP 4 billion, which has affected the cash flow of both businesses and individuals. Nestle warned that a no-deal departure would lead to “major challenges” for the food industry. Back in 2018, the group already said it had increased stocks to prepare for the March 29 deadline. 

In contrast, the National Farmers Union welcomed comments by the new Prime Minister who mentioned allowing the production of Genetically Modified Organisms (GMO) in the UK. Researchers in aquaculture biotechnology also welcomed the move and mentioned that GMOs could help address some of the most pressing issues facing our food supply. Nonetheless, experts warned that seeds would have to be developed specifically for the UK, which would take time, while GMO exports to the EU would have to go through a lengthy approval process. 

The White House weakened the Endangered Species Act (ESA) this week in order to minimise its economic consequence and improve efficiency. Farmers will most likely be able to use more pesticides in at-risks habitats, which could be bad news for the bumblebee, a recent addition to the endangered list. A new study suggested that the growing use of neonicotinoids pesticides has increased the toxicity level of agricultural land 48-fold in the last 20 years, which threatens the wild bumblebee. Farmers have increasingly been using neonicotinoids instead of organophosphates as they are cheaper and safer for humans. In response to the study, Bayer and Syngenta, the makers of the top three neonicotinoid products, said the toxicity loading method used by the researchers oversimplified exposure levels. 

The US Environmental Protection Agency (EPA) said labels warning that glyphosate can cause cancer will no longer be approved. The head of the agency argued they were confident the product was not carcinogenic. California had looked into imposing warning labels on the herbicide but the proposal was blocked by a preliminary injunction. 

Cargill announced that it will no longer accept Canadian lentils that have been treated with glufosinate ammonium, distributed by BASF in its Liberty herbicide. Canadian growers were warned that the EU and Japan allowed the herbicide but under a very low maximum residue limit (MRL), while the US has not yet set an MRL. On the other hand, Cargill said it will start accepting soybean treated with fluoxastrobin fungicide after conducting a comprehensive scientific review. 

Singapore-based Olam saw profits in the first half of 2019 drop by 8.5% on year to USD 230 million, in part due to lower coffee prices. The CEO pointed out, however, that this was satisfactory given the current market conditions, adding that the group’s diversified portfolio was helping it cope well in the current scenario. Olam will continue on its path to diversify away from non-core businesses to be able to invest in areas of growth, such as its bid earlier this year to buy out Nigeria’s Dangote Flour Mills. 

Wilmar, on the other hand, reported a 52% drop in net profit to USD 151 million during the second quarter of the year as the impact of the African Swine Fever on soybean crush margins was bigger than expected. In contrast, the group’s sugar operations in Australia and Indonesia improved, along with the consumer products and oleochemicals sectors.

A Feed4Thought survey conducted by Cargill revealed that 55% of respondents thought the first priority of a farmer was to provide “safe, healthy, abundant and affordable food”, while 28% said the priority should be sustainability. A Cargill spokesperson noted that the two demands were not necessarily exclusive. The survey also found that most people viewed farmers in a positive light. In contrast, another study analysing social media conversations found that people were increasingly talking about sugar, albeit in a negative light. The study found that monk fruit and coconut sugar were among the most mentioned alternatives. 

The rising popularity of imposing a tax on sugar-sweetened drinks could lead the way to similar sin taxes being imposed on red meat, according to Fitch Solutions. Meat is increasingly being targeted for its impact on the climate, animal welfare and health. The idea has already been discussed in Denmark and Sweden, while a poll in Germany showed that a majority of respondents were in favour of imposing a tax on meat to promote better living conditions for animals. 

Subway announced that it will sell Beyond Meat’s plant-based meatballs in 685 restaurants across the United States and Canada. The news pushed up the share price of Beyond Meat, which has gained 545% since the IPO in May. While some are jumping on the plant-based meat bandwagon, this Australian chef is taking another direction by encouraging people to treat fish like meat. In his new cookbook, he introduces the Hot Smoked Fish Turducken: yellowfin tuna loin, wrapped in a cod fillet, wrapped again in a tail-on ocean trout fillet, and smoked for a few hours. 

This summary was produced by ECRUU

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Commodity Conversations Weekly Press Summary

This week, China pledged to stop all purchases of US farm goods, on top of considering new duties for products imported after August 3. This is in response to the new US tariffs due to come into force in September. Goldman Sachs said the latest escalation made a trade resolution unlikely before the US elections in 2020. The bank had earlier assumed that resolving the trade deal would be in the President’s interest ahead of the elections. 

This will make things harder for US farmers and ranchers who were already struggling to survive. However, the President hinted that the government could offer more aid to farmers, on top of the USD 28 billion already pledged. The comment contradicted an earlier message by the USDA which warned farmers that no further aid was planned.

The bad weather and delayed planting is also making the situation difficult for US livestock producers who are looking to alternative feeds amid surging corn prices, as the country is expected to harvest its smallest corn crop in four years. Alternatives feeds include wheat, outdated pet food, leftover bakery products and imported South American grain. 

Brazil’ agricultural sector is one of the winners in the trade war. China’s Cofco noted that tax and pensions reforms enacted by the new Brazilian government will encourage investments in the country by providing more predictability and stability. 

Unfortunately, efforts by the Brazilian government to attract investors has led to a significant increase in the deforestation rate, according to official data from the National Institute for Space Research. The deforestation rate now risks falling back to the levels seen in the early 2000s, which could impact the sustainability pledges made by large companies. Mondelez, for one, is using satellite data provided by Global Forest Watch Pro, nicknamed the “Google Maps of forests”, to monitor its suppliers in Brazil. 

The worsening environmental performance of Brazil’s farm sector could potentially threaten its ability to trade and jeopardise the new free trade agreement with the EU. The Brazilian agriculture minister argued that the country was able to maintain its high standards despite the accelerated pace of approval for agrochemicals. The country needs to “win the communication war”, she added. 

Another trade agreement at risk is the African Continental Free Trade Area (AfCFTA) which is being challenged by Nigeria’s protectionist stance. So far, all African countries but one – Eritrea – signed on. Also in Nigeria, Dangote Flour Mill (DFM) announced that it had received a final bid from Olam wishing to take over the firm for NGN 120 billion (USD 331 million). Now a global commodity group, Olam started in Nigeria as a cashew nut exporter 30 years ago.

A few weeks after launching a new chocolate made entirely from the coca fruit, Nestle announced a new range of Nescafe Gold which is entirely plant-based. Three new latte products will be launched: almond, oat and coconut coffees. Similarly, Marfrig Global Foods and ADM will collaborate to offer a plant-based burger in Brazil later this year. JBS SA also announced a plan to sell a plant-based meat patty, called Seara. 

In the aquafeed sector, the USDA has approved Cargill’s plant-based fish oil alternative for US cultivation. Using canola oilseed, Cargill is able to provide a source of long-chain omega-3 fatty acids, required in aquafeed, without putting pressure on wild fish stocks. 

The UN’s Intergovernmental Panel on Climate Change (IPCC) is due to release a new report this week analysing the relationship between land use and climate change. The main takeaway, researchers say, will be to repeat the call to switch to consuming less meat and dairy towards plant-based alternatives. 

Not all plant-based solutions are equal, however, as highlighted by this study of breakfast cereals published by the Union of Concerned Scientists. The paper recommends switching to oat-based cereals instead of corn-based cereals, because corn cultivation leads to nitrate runoff and water pollution, while oats are often grown as a cover crop which regenerates soils. 

Ever heard that the longer the soup cooks, the better it tastes? Well if that was true, this Bangkok restaurant would have the best soup on earth, as three successive generations have been stewing the same broth continuously for the past 45 years!

This summary was produced by ECRUU

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Commodity Conversations Weekly Press Summary

Bunge reported a net income of USD 205 million in Q2, compared to a loss of USD 21 million in the same period last year. This was thanks in part to gains in soybean crush hedging and despite weak demand out of the US due to the ongoing US-China conflict. Bunge also benefited from its 1.6% stake in plant-based burger company Beyond Meat (more on this below). Bunge’s CEO said that the trade war, as well as the killing of hogs in China due to the African Swine Fever, were two big red flags. However, analysts argued that Bunge would be better-shielded than its competitors thanks to its strong South American presence. 

COFCO International is planning to invest at least USD 200 million in Brazil within the next two years. The head of the company’s Brazilian branch explained that the focus would be on infrastructure, transport and especially storage, adding that it had been on the verge of making an acquisition which fell through. A lot will depend on making sure any investment is sustainable environmentally speaking, he added. He also expressed concern over the solvability of independent farmers – many of which are going broke – as well as the issues with the minimum freight rates. When asked about the impact of the African Swine Fever, he said that shipments of soybean to China had been within expectations for the group. 

Marubeni’s US-based Columbia Grain Trading, on the other hand, announced it completely stopped soybean sales to China. Marubeni’s Gavilon unit, however, will continue business as usual. The group is facing other issues; a huge pile of soybean stored in the open near one of its Missouri grain elevators has been burning since mid-July due to a heat-wave. The pile is inaccessible because of the surrounding floodwater so the company decided to let it burn.  

ADM, meanwhile, continues to believe in a near resolution of the US-China trade dispute and that China will soon resume buying significant amounts of US crops. An analysis by Morgan Stanley, however, argued that such an approach put the group at risk. The bank forecast that the second half of 2019 will probably continue to be tough for US origination. Separately, Cargill told Bloomberg it was focusing on cutting costs amid difficult times, while sources said that two senior executives have already left. The company said it was “reviewing [their] business plans.”

Nestle beat expectations when it reported a 3.5% increase in sales for the first half of 2019 reaching USD 45.83 billion – a 3-year high. The sales growth in developed markets was at a 7-year high of 2.4% thanks in part to pet products and drinks. Chinese sales were disappointing, on the other hand. In China, Nestle launched a competition with Tsinghua University to find the best alternative to current packaging with a focus on sustainability. In the UK, the group has switched to using biodegradable security seals on its transport fleet in a bid to reduce the estimated 200,000 seals that end up every year in landfills. Both moves are part of the company’s target of only using recyclable and reusable packaging by 2025. 

Nestle’s CEO said that in the three years he’s been in the position, the main challenge has been to become much faster and flexible when innovating and launching new products to compete with new smaller companies. He pointed to two areas of significant growth and prospects for the group: plant-based foods and retailing Starbucks products. The plant-based market has attracted a lot of interest from investors although Nestle does not see it as replacing meat products but rather as a way of offering a wider choice to consumers. 

On the subject of investor interest in plant-based alternatives, Beyond Meat’s share value increased 775% since the group’s IPO (which was already the biggest in a decade) three months ago. Analysts were quick to point out, however, that the company is not even making a profit yet. 

Danone’s sales in the first half of the year were up 1.2% to USD 14.119 billion, driven in big part by the Essential Dairy and Plant-based Protein segment. The CEO said that plant-based beverages were a key driver, while the group continued to focus on innovation as well as expanding geographically. In New Zealand, Danone is investing USD 26 million to make its spray drying plant – which processes raw milk into powder – carbon neutral by 2021. The group is aiming to be completely carbon neutral by 2050 across its supply chain – from farm to fork. 

Mondelez, meanwhile, is planning to cash in on changing consumption patterns in rural India. Chocolate demand in India was 15% higher on year last year due to a reduction in sales tax from 28% to 18% but also because villagers are becoming richer. Mondelez said they will be doubling their presence within three years from 50,000 villages in 2018. It also launched a Dairy Milk bar with low sugar last month in India. Similarly, it launched its Dairy Milk with 30% less sugar last week in the UK. It took several years to nail the formula, the company said.  

Several NGOs have started a petition against the EU’s proposal to ban the use of meat and dairy names for plant-based products, such as ‘steak,’ ‘sausage’ or ‘cheese.’ They argue that consumers buy these products specifically because they are plant-based and that changing the labelling was pretty much an “insult to the public’s intelligence.” Taking it one step further, a councilwoman in NYC has sponsored a bill to completely ban foie gras on animal welfare grounds. 

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Commodity Conversations Weekly Press Summary

Iran is threatening to source its food supply, especially corn, away from Brazil if Petrobras continues to refuse to refuel its government-owned vessels that are stranded outside Paranagua port. Some of the ships had brought petrochemicals and were planning to go back carrying corn. Petrobras says it won’t sell them fuel because of US sanctions and the Brazilian President said he is aligned with US policies on the matter. The Iran-Brazil Chamber of Commerce had earlier said that both governments were looking into a barter system to cope but the situation is now escalating. 

Bunge and BP confirmed a plan to merge their Brazilian cane milling businesses this week. The joint-venture, BP Bunge Bioenergia, will be the third biggest milling group in the country and will focus on ethanol and electricity. Bunge said this was a “major portfolio optimization milestone.” 

Olam bought the remaining 25% shares in Rusmoloko, a major dairy producer in Russia, becoming the group’s only owner. This makes Olam the biggest foreign investor in the country’s dairy industry, followed not far behind by Vietnamese group TH. Olam plans to double the group’s milk production in three years. 

Cargill announced a new initiative, BeefUp Sustainability, which aims to reduce the group’s North American beef supply chain’s greenhouse gas emissions by 30% by 2030. The company will be working with The Nature Conservancy as well as joining the Manure Challenge, a US-based competition to find the best ways to deal with manure through cross-industry collaboration. 

Meanwhile, sources said that Louis Dreyfus is yet again making internal changes, including appointing several new heads of department and merging palm and oil businesses into one, among other changes. 

Coca-Cola reported net revenues of USD 10 billion in Q2, up 6% on year thanks to a 4% volume growth. The CEO said this was thanks to a growing demand for their no-sugar drinks and smaller packages. Reformulated and new products now bring in a quarter of the group’s revenues, from 15% in 2017. Similarly, sales of healthy snacks, sparkling water and smaller packaging helped Pepsi’s net income increase to USD 2.04 billion in Q2, from USD 1.82 billion in the same period last year. PepsiCo said it will be spending USD 1.7 billion to buy South Africa’s Pioneer Foods as part of a plan to expand in sub-Saharan Africa. The strategy includes growing the sustainable farming program in the region. 

Coca-Cola and PepsiCo both left the Plastics Industry Association, a move which was hailed a victory by Greenpeace. Several companies have left the lobbying group over the past year amid concern over sustainability issues and reducing plastic use. Greenpeace argued the association was responsible for lobbying for laws in 15 US states that prevent local governments from banning or taxing plastic bags. Tyson Foods, meanwhile, is being sued for false advertising about its environmental commitments. The organisations behind the lawsuit argue that, with hundreds of wastewater violations and ongoing use of dangerous chemicals, the organisation is misleading consumers. 

A new report by the World Resources Institute said it was necessary to increase the use of genetically modified (GM) crops to feed the estimated 10 billion people the world will have in 2050. It forecast that the world needs to produce 56% more food than in 2010, for which it would need an additional 1.48 billion acres of land all the while meeting the Paris agreement greenhouse gas emissions targets. At the moment, only 12% of the world’s agriculture is genetically modified. 

Intergovernmental bodies met with NGOs and members of the private sector in Geneva last week to discuss a strategy to fight illicit trade. Smuggling and adulteration of food are major obstacles to reaching the UN’s Sustainable Development Goals, including traceability and sustainability in the supply chain, according to a recent report

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Commodity Conversations Weekly Press Summary

Cargill reported operating profits of USD 476 million in the Mar-May quarter, a 41% drop on year due to the ongoing trade war with China, poor weather in the US and the African Swine Fever. The group’s financial services unit was the only segment to see higher earnings. Cargill had to close several feed mills in China due to the swine fever – some of which it is not planning to reopen. A company official said it would take two to three years for the hog population to recover. In the US, meanwhile, Cargill announced it was ‘swapping’ some of its Indiana grain elevators against ADM’s Illinois elevators in a bid for both companies to become more efficient. 

Looking forward, Cargill’s CFO warned that the trade war with China could have long-lasting effects in terms of shifting trade flows. The situation is particularly hard on US farmers who are struggling to get financing. Higher volatility due to the weather and political uncertainty are expected to be the ‘new normal,’ he added. ADM’s CFO agreed, saying that China would, from now on, ensure it is no longer dependent on the US for its soybean – or any other origin for that matter. He forecast that China will be focusing on boosting domestic production by improving yields. He added that this was also an opportunity for US agriculture to reduce its dependence on China. At any rate, a US-based agriculture economist argued that any trade deal with China would take years. He suggested it would be much simpler – and quicker – to reverse the new tariffs. 

If Cargill’s woes were not enough, the NGO Mighty Earth accused it of being ‘The Worst Company in the World.’ In its report, it argued that Cargill contributed to deforestation and was not doing enough to fight child labour, among other things. Another company facing heat is Nestle. Users of the popular website Reddit (so-called ‘Redditors’) have been calling for a boycott of the company via a compilation of humorous memes. 

Wilmar announced that the IPO for its China operations was on track for the fourth quarter this year after the Securities Regulatory Commission accepted to list its Yihai Kerry Arawana Holdings on the Shenzhen Stock Exchange. Wilmar said the IPO should help grow the group’s market share by making it more visible. COFCO, meanwhile, said it had secured a USD 2.1 billion loan from various international and Chinese banks with margins linked to the group’s environmental sustainability performance. 

Sources reported last week that Bunge has been in talks with BP about a possible joint-venture for its Brazilian sugar and ethanol assets. Bunge has been looking for ways to offload these assets for a while now and if this deal does happen, the JV would have a combined crushing capacity of 32 million mt of cane spread over 11 mills. 

The US Environmental Protection Agency has extended the use of the pesticide sulfoxaflor to several new crops for the first time, such as alfalfa, corn, cocoa and grains. The agency recognised that the pesticide is very toxic for bees but noted that it had issued guidelines to ensure that the negative effect on the bee population is limited. The EPA also said that farmers were facing tough times and needed the pesticide to reduce crop losses. Environmentalists condemned the move, arguing that it would be impossible to monitor whether farmers respected the guidelines. They also criticised the USDA’s decision to end the program to track bee populations. The Bee Informed Partnership pointed out that this program had been one of the only remaining ways to monitor the bee population, adding that the loss of honeybees this winter had been 7% above the previous year. 

Well financed multi-restaurant delivery apps such as Uber Eats and GrubHub are heavily subsidising the cost of food delivery, making customers believe that delivery costs are much cheaper than they really are, according to the CEO of Domino’s Pizza. He explained that these apps were very disruptive and were, in part, responsible for the company’s disappointing sales growth. However, he argued that the way these apps functioned was probably not viable in the long run. Instead, the group is focusing on what it calls “fortressing” – opening more franchises in a concentrated area to shorten delivery times. Delivery app GrubHub, meanwhile, could be facing a federal investigation for setting up as many as 20,000 fake websites with the names of its customer restaurants – a practice called “cybersquatting.” It is also being accused of overcharging for phone orders. 

A survey by the World Health Organisation found that baby and children products sold in Europe often contain too much sugar. Some products are labelled as suitable for children under six months, which is authorised by the EU but goes against the WHO recommendation that babies under 6 months old should only consume breast milk. This was probably good timing for Nestle to announce the launch of chocolate made entirely from the coca fruit and without adding refined sugar thanks to a new pulp extraction process. The chocolate will first be sold in 70% chocolate KitKat bars in Japan.

This summary was produced by ECRUU.

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Commodity Conversations Weekly Press Summary

Austria will soon become the first EU country to ban the use of glyphosate, the world’s most commonly used weedkiller, after a favourable vote in the lower house of parliament. The upper house is also expected to approve the ban in a vote next week. In response, the farmers’ union Copa-Cogeca urged the EU to declare the provision as unlawful, considering that the European Commission approved the herbicide up to 2022. The cooperative suggested alternative ideas to legally limit its use, such as reducing private applications. 

In the US, on the other hand, a federal judge said he said he was planning to reduce the USD 80 million fine a California verdict imposed on Bayer. The group – which sells glyphosate as Roundup since it purchased Monsanto – has lost three cases concerning Roundup so far. One was already reduced from USD 289 million to USD 78.5 million, while Bayer is planning to challenge the third which involved USD 2.055 billion in compensation. A total of 13,400 people are currently suing Bayer over Roundup.  

American pork producers think they can deal with diseases such as the African Swine Fever with a novel technique: using genetic modifications to develop animals resistant to diseases. Although the technology is still a few years away, the FDA reiterated that it will not let the USDA regulate the approval of genetically engineered (GE) animals, despite calls from farm lobbyists who argue that the FDA is too slow. The FDA has only approved one GE animal so far: the AquAdvantage salmon, developed to grow faster. 

The commodity groups with the most soybean crushing assets in China are expected to be the hardest hit by the swine fever outbreak, while demand is expected to grow in other regions as livestock producers will boost their output to meet the extra demand from China. The head of Bunge noted that only 15% of its crushing capacity was in China, compared to 33% in South America and 27% in Europe. In contrast, ADM with its 25% stake in Wilmar – one of the largest soy processors in China – might be more exposed. Nonetheless, the EU and South America will not be able to produce enough pork to meet the demand from China, which consumes half of the world’s pork. US exports will be needed – even with tariffs. So in the longer term, ADM and Cargill, who have most of their assets in the US, might also benefit

ADM is launching a new system to improve the performance of shrimp farms in Asia, called BIOSIPEC. Through controlled feed and aeration mechanisms, farmers can improve environmental performance and boost profits, the firm said. In Europe, Univar signed an agreement to distribute seaweed ingredients developed by Seaweed & Co. Seaweed products are gaining in popularity because they meet a number of consumer trends: sourced sustainably in the Scottish Outer Hebrides and with six EU approved health claims. Seaweed is being used in various foods and beverages as a salt replacement, flavour booster or nutritional source. 

People with a high consumption of sugar-sweetened beverages, including fruit juices and sweetened tea, have a higher chance of developing cancer, according to a paper by the Universite Sorbonne published in the British Medical Journal. The researchers noted that no causal link was identified and that other factors, such as lifestyle, could be the reason for the higher risk. They did suggest that the impact on blood sugar levels could be part of the explanation, as they called for more to be done to tackle sugar consumption. 

Eating candy has just become slightly more environmentally friendly after Nestle launched a new paper wrapper for its Yes! Snack bar that is recyclable. The firm committed to using only recyclable or reusable packaging by 2025. Similarly, Coca-Cola announced that it will use plastic bottles in Australia that are 100% recycled. Other beverage makers, such as  Lucozade Ribena Suntory have been using 100% recycled bottles for a while, but Coca Cola highlighted that it was much harder for carbonated beverages because of the pressure involved. 

Pepsi is taking a different direction and will start selling its Aquafina water in aluminium cans in the US. Some argue that aluminium can be more environmentally friendly than plastics because a lot more of it is recycled. On the other hand, critics say the impact of the open-pit mines needed to source bauxite, along with the energy-intensive aluminium extraction, cancel out the effect. In the end, however, experts say that nothing beats tap water. 

The most exciting Coca-Cola news this week came from McDonalds who started selling Coca-Cola chicken wings in China. Apparently, cooking chicken wings in Cola is not uncommon in China. 

This summary was produced by ECRUU.

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