Commodity Conversations Weekly Press Summary

Olam saw better results in the first quarter with net profit 6.9% higher than the same period last year, helped by a strong performance in the edible nuts and cocoa segments. In the quarter, the group acquired Indonesia’s largest cocoa processor and made a proposal to buy Nigeria’s Dangote Flour Mills, while it closed its sugar, fundamental fund and wood product businesses.

Wilmar also reported good results with earnings increasing 26% compared to last year thanks to better performance in the sugar and tropical oils business units. The oilseeds and grains segment did not perform as well, in part due to the African swine fever outbreak in China. Nonetheless, analysts suggested that Wilmar was in a good position to deal with trade tensions and that it would continue to see good results.

In contrast, experts argued that ADM was in a vulnerable position amid the breakdown in talks between the US and China. The firm weathered the trade disruptions with a better-than-expected performance last year, but this year has seen the added effects of the Midwestern floods and a struggling ethanol market. In response, the CEO highlighted that ADM was looking at acquisitions in the speciality ingredients sector, while possibly spinning off its ethanol business.

The market reacted abruptly to news of the US escalating tariffs and China’s retaliation but analysts estimate that commodity tradeflows should not be affected as most products were already under some tariffs. In addition, traders were already limiting new shipments between the two countries amid the uncertainty. Nonetheless, the viability of long term investments is now being questioned as the dispute could last for years.

US farmers are particularly worried because they expected the situation to be resolved by now, while recent weeks saw more floods affecting the Mississippi River. The government had offered growers compensation for the trade war last year, and the President mentioned that the state might spend up to USD 15 billion to buy crops this year which could be sent as international aid. The reaction from experts was quick and unanimous: buying crops to send to developing nations will backfire by upsetting world markets, and would be ineffective because the crops concerned – mainly soybeans and corn – are not for human consumption.

Moreover, dairy farmers in the US could feel the impact of the African swine fever in China for years, according to Rabobank. A lot of livestock feed is made from milk, such as whey permeate, whey powder and lactose, and the hog population in China could take years to fully recover. Exports of US whey and permeate already dropped by about 60% in March.

While some countries are busy imposing new tariffs, Chad announced this week that it removed all the import duties on major food staples like rice, flour, cooking oil and dates. The move is seen as a means to preempt shortages and the possibility of protests, such as the ones that led to the removal of Sudan’s President. Another trade news surprised the market this week, as Australia reportedly imported a shipment of wheat from Canada. Usually one of the biggest wheat exporters, Australian prices surged because of the prolonged drought.

The Australian agriculture minister recently told reporters that the country produced “the most environmentally and ethically sustainable food and fibre in the world”. However, AAP FactCheck ruled that the claim was false. The Food Sustainability Index (FSI), published by The Economist Intelligence Unit, ranks Australia as 13th out of 67 most sustainable, while the Yale Centre for Environmental Law and Policy ranks Australia as 53rd out of 177.

After the recent successful IPO of Beyond Meat, firms have been quick to announced new investments in the sector. Cargill invested in Israel’s Aleph Farms, which makes steaks from cattle cells in a lab, Impossible Food raised a further USD 300 million which valued the company at USD 2 billion and McDonald’s will start selling a new vegan burger made by Nestle in Germany.

Among all the excitement, some plant-based food producers are starting to worry about the availability of a key protein source: peas. Analysts estimate that global pea demand could quadruple by 2025 as firms moved away from soy as a protein source. Northern countries such as Canada, France, Belgium and Germany could become major pea growers, although activists are now highlighting that peas contain just as much herbicide residues as other crops. A food producer also noted that pea protein was nothing special and that it could be substituted for mung bean, brown rice, mustard seeds or lentils.

Burger King also announced that it was expanding sales of Beyond Meat Whoppers in the US. But it made a much more exciting announcement in Mexico as it started to deliver burgers to people stuck in their cars in traffic. It now plans to test the project in Sao Paulo, Los Angeles and Shanghai.

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Commodity Conversations Weekly Press Summary

Bunge reported a net profit of USD 45 million in the quarter ending March 31, up from a loss of USD 21 million last year, mostly thanks to better margins in the oilseeds segment. The firm appointed a new chief financial officer as part of another restructure – the second in less than two years. The aim, the CEO said, is to integrate regional operations into a global model which will allow faster decision making.

Louis Dreyfus is reportedly engaged in talks with investors interested in buying equity stakes. Sources say the potential investors might include China’s COFCO or Japanese trading houses. This is part of an effort to move closer to the consumer and focus on emerging markets such as Asia. COFCO, meanwhile, could see some transformations as China is working on a plan to reorganise state-owned commodity companies. Under the change, Sinograin assets could be transferred to COFCO – making it the biggest soy processor in the country.

Still in China, Cargill announced it was building a new premix plant in the Jiangxi Province, another in a series of investment in the country’s feed industry. The plant will focus on young animal nutrition and antibiotic growth promoter-free solutions. This comes at a time when the country is struggling with African swine flu. China’s pig population should fall by some 134 million heads this year, almost 30% of the country’s total population and more than the number of pigs in the US. ADM forecast that China will have to import a lot of meat to compensate, causing prices to surge in places like the US, Europe and Australia. An analyst at INTL FCStone argued this could also force China to make efforts to please the US and settle on a trade deal.

But so far it doesn’t look like this is the case. The US has threatened to impose new import tariffs on Chinese products by the end of the week after the latter went back on some of its earlier commitments. A source said the issue was that China now wanted to make the policy changes through administrative and regulatory actions instead of making legal changes. A policy expert argued this would weaken the deal and make it hard to implement.

The WTO ruled in favour of the US last week on a 2016 case against China’s tariff-rate quotas for corn, rice and wheat. China said it would look into the decision and aim to follow WTO rules but trade analysts are increasingly concerned about the WTO’s ability to ‘handle’ China. Some are even suggesting the organisation should change their rules to deal better with the country and its state-owned enterprises. Brazil, meanwhile, is hopeful that China won’t renew anti-dumping measures on sugar when they expire next year.

One of Olam’s palm plantations in Gabon, which it manages in a joint venture with the government, has been certified by the Roundtable on Sustainable Palm Oil (RSPO). The tradehouse, which aims to certify all of its Gabon plantations by 2021, added that this was Africa’s first certified oil palm plantation to be completely on grassland. In the EU, some environmentalists are worried that the Commission’s ban on palm oil is likely to stall recent efforts to make the palm oil supply chain more sustainable. Producers, namely Malaysia and Indonesia, will likely look for new buyers in homes such as China and India where there is less concern about sustainability.  

The European Commission, meanwhile, is implementing a common food waste measurement methodology so that each member state can accurately assess the amount of food that is being wasted every year. In turn, each country will be able to use this information to achieve the EU’s Circular Economy Action Plan to halve per capita food waste by 2030.

The UN warned in a new report that, on top of threatening the existence of some 1 million species, the poor state of our soil could mean that within 60 years most land will be too barren to grow enough crops to feed the world. Some suggest that creating carbon farming tax credits would be a good way to encourage farmers to switch to methods which regenerates the soil’s nutrients. However, some of these methods, such as ‘no tillage’ and using ‘cover crops’, are already spreading as farmers say they lower machine and labour costs and use fewer chemicals. The bonus is that the restored soil can, in turn, absorb significant quantities of greenhouse gas. Bill Gates, meanwhile, is working on a type of crop that could store more carbon.

Vegan meat company Beyond Meat was valued USD 3.8 billion on the first day of its IPO last week – making it the highest US listing since the financial crisis. Analysts argued that part of the hype was thanks to the support of Hollywood celebrities, adding, however, that the company reported losses of USD 30 million in 2018.

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Commodity Conversations Weekly Press Summary

The impact of the bad weather across the US Midwest and Great Plains was worse than initially expected for ADM, who reported a 41% fall in net quarterly earnings. The sweeteners, starches, ethanol and bioproduct segments all reported lower results. The company is even looking at splitting off its ethanol business, including several of its dry mills, as a result. On the positive side, the firm said it expected to see a resolution in the US-China trade war soon, which would significantly boost demand.

ADM, along with other specialty ingredient firms like Ingredion, will be competing with Tate & Lyle for new acquisition targets, analysts noted. The head of Tate & Lyle said acquisitions in the sector will be their main priority over the next 18 months. Tate & Lyle’s specialty ingredients business, which makes sugar alternatives such as stevia and sucralose, has seen a very strong growth last year. For the moment, however, the primary product branch, which makes starch-based sweeteners in North America, remains the largest segment.

In a similar vein, Cargill inaugurated a new corn processing plant in Brazil. It is designed to produce up to 30 different starch products adapted to meet changing consumer demand. The plant will be able to make non-genetically modified corn starch, as well as variants that can change food texture. Cargill reported a 15% growth in its annual profit in Brazil last year and intends to invest USD 127 million in the country in 2019.

In Southeast Asia, Louis Dreyfus Company (LDC) announced that it bought a stake in one of the region’s largest poultry producers, Malaysia-based Leong Hup International, during a recent IPO. This marks LDC’s first investment in livestock and is part of an effort to “diversify further downstream”, the CEO explained. In addition, the group will also look to purchase a stake in China’s Luckin Coffee in an upcoming IPO.

Now that two US courts ruled against Bayer in glyphosate cases, analysts are saying the firm faces a potentially serious threat. Bayer reported that the number of cases related to the weedkiller had reached 13,400. The firm could absorb up to USD 5 billion in settlement costs but a settlement expense of USD 20 billion could severely impact its credit rating, experts warned. Fortunately for them, Monsanto’s purchase helped Bayer increase core earnings by 45% to USD 4.67 billion in the past quarter.

Another Monsanto project is facing legal headwinds, as activists published a paper arguing against the spread of genetically modified (GM) chestnut trees in North America. A fungal infection wiped out millions of trees in the 1900s and Monsanto helped develop a GM tree resistant to the disease which could be planted in the wild. But activists argue that the trees could spread into indigenous territory and violate tribal belief in nonintervention. Researchers, however, say the spread of the tree would be easy to keep under control.

Two major food producers, Hershey and Mondelez, said the strategy to increase prices has paid off in the first quarter. Hershey is increasing the price of 20% of its products by 2.5% this year, while Mondelez hiked the price of North American products by 2% last year, a strategy also followed by Kraft Heinz and General Mills. Hershey also benefited from a fall in cocoa costs which helped increase profit margins, while Mondelez said results were impacted by higher costs and currency fluctuations.

Mondelez International pledged this week to source 100% of its cocoa through its Cocoa Life program by 2025. About 43% of its cocoa is currently sourced through the program which offers farmers financial and educational support. However, the firm said it was already witnessing some cost inflation and crop variability due to climate change. Similarly, Nestle announced that 77% of its agricultural commodities were now deforestation-free, with the goal to reach 100% by 2020. Nestle is monitoring its entire palm oil supply chain using satellites and plans to extend the verification to pulp and soy.

Mars Inc released an unusual snack in India this week, called GoMo Dal Crunchies, which is a yellow square made from yellow peas. The launch is part of Eat Right India campaign and will be marketed with the help of Tata Trusts. While it does not sound as appetising as traditional Mars snacks, consumers are reportedly buying it for its rich iron, protein, vitamins and micro-nutrients content.

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Commodity Conversations Weekly Press Summary

Cargill is planning to invest twice as much in China in the next five years with a focus on soybean and animal protein. The company is building a Sino-US Cargill Biotech Industrial Park in partnership with the Jilin provincial government, where it also announced an investment of USD 112 million to expand its corn processing plant. The industrial park should be able to process 2 million mt of corn by 2020, will include several warehouses and house an R&D and training centre for farmers.

Olam is hoping to use some of the USD 1.6 billion it saved when it closed several business units recently – such as its sugar desk – to buy Nigeria’s Dangote Flour Mills for which it bid USD 360 million. If successful, the acquisition would double the group’s capacity in Nigeria and allow it to capitalise on the fast-growing demand for wheat-based products.

Danone’s baby food company, Bledina France, has been certified B-Corp, a certification awarded to profit-making companies that aim to have a positive social and environmental impact. Danone now has 10 B-Corp companies representing 20% of its global sales. The CEO said the goal was for the whole group – the first multinational company ever – to be B-Corp certified. In North America, Danone launched its One Planet One Health Initiative which will give out grants to create community-based projects working on designing sustainable food systems.

Unilever North America has committed to making at least half of its plastic packaging from post-consumer recycled content and making all of its plastic reusable or recyclable by 2025. Similarly, Nestle Waters North America is targeting to use 50% recycled plastic by 2025, up from 7% in 2017. The CEO said that there needed to be better systems to encourage collection, such as bottle deposits. Nevertheless, thanks to technology, he expects that achieving 100% packaging recovery is a feasible goal.

After reviewing Burger King’s plant-based Whopper burger, an official from the Missouri Farm Bureau said that it was almost impossible to tell the difference with real meat. He said, “If farmers and ranchers think we can mock and dismiss these products as a passing fad, we’re kidding ourselves.” Luckily for them, Missouri has already banned plant-based meat from being advertised as meat. A proposal in the EU could take things even further and only allow the use of terms such as ‘sausage’ or ‘burger’ for real meat on the basis that it would otherwise be misleading.

In a US class action lawsuit, cattle ranchers are suing Tyson Foods, Cargill, JBS and National Beef Packing, accusing them of colluding in offering low prices for meat since 2015. The ranchers are hoping to stop these meat packaging companies, which represent some 80% of the US fed cattle market, from exerting control over independent cattle producers and driving them out of business.

Several institutions, including the Rockefeller Foundation, have teamed up to create the Consortium for Innovation in Post-Harvest Loss & Food Waste Reduction. The aim will be for all stakeholders, from industries to NGOs and farmers, to work together on finding the best solution to reduce the estimated 1.3 billion mt of food lost every year. The director of the Rockefeller Foundation added that the consortium would work on encouraging plant-based diets as well as increasing yields, which should help reduce agriculture’s carbon emissions.

However, a recent global survey by Cargill showed that over 60% of respondents plan to continue eating just as much animal protein – if not more – and 80% are looking into adding plant-based products too. What the survey showed, according to Cargill, is that consumers believe that animal protein can be part of a healthy and environmentally conscious diet.

Similarly, a professor from the School of Aquatic and Fishery Sciences argued that it would be environmentally better to have a ‘selectively pescatarian’ diet rather than scrapping meat altogether. He explained that a lot of the plant-based alternatives need to be shipped over long distances and, such as in the case of soybean, have a heavy carbon footprint. He added that “the lowest impact thing you could do is step outside your door and shoot a deer, eating native animals is really low impact.”

Finally, in Australia, some 40 well-known chefs have pledged to only use sustainable seafood as part of the Australian Marine Conservation Society’s Good Fish project. One of the chefs said it was important that his restaurant had a ‘clean’ menu.

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Commodity Conversations Weekly Press Summary

China is reportedly looking to shift anti-dumping tariffs on US agricultural products to non-farm products under a trade deal which would see China buy some USD 30 billion/year more US farm goods. Sources say that China would only be shifting the tariffs – and not scrapping them – because the US is not planning to remove the duties on their end at all.

The deal is expected to help the US President gain farmer support but soybean farmers worry that purchases from China under such an agreement would still be below those seen before the trade war started. And farmers who grow other crops facing duties, such as cherries, pears and apples, are pushing for a comprehensive trade deal that would remove all duties, instead of just focusing on soybeans and pork. Some major sticking points are slowing down trade negotiations between the two countries, however, including China’s reluctance to accelerate the approval of GMO crops. US farmers lost up to USD 5 billion over the last five year because of the slow process, although China approved five varieties developed by Bayer and DowDuPont back in January.

As part of the current negotiations, China and the US are also working to set up a mutual “enforcement mechanism” according to which each side could impose trade sanctions unilaterally and waive its right to challenge any of these actions at the WTO. A number of experts warned, however, that this was the equivalent of putting each side in charge of assessing whether they had honoured the deal instead of relying on a neutral outside observatory. In fact, this would be the first bilateral trade agreement without any third party arbitrator, according to a former WTO judge. She added that this threatened the future of the trade organisation. But the US President, who has also been blocking the appointment of new WTO judges, is said to believe that self-interest will be a much more efficient way of getting both parties to stick to the deal.

Another one struggling to sort out trade deals is the UK. The delay in Brexit is causing further uncertainty for the British food industry. Many export and import orders have been cancelled and are unlikely to be restored given the lack of clarity on the situation. In addition, food companies say they will need to continue stockpiling, which will affect their revenues.

Talking of stockpiling, Switzerland made a controversial announcement last week as it proposed to remove coffee from its emergency stock program. The country has been accumulating stocks of food staples since the end of WWI and suggested that coffee should be removed because it “is not essential for life”. Some 15 firms, such as Nestle, are currently stockpiling 15,300mt of coffee and most are reportedly against the proposal.

Danone reported a slow growth in sales during the first quarter, including in Morocco where a boycott continues to lower sales volume. The group said it will continue to focus on local and healthier diets, such as plant-based, probiotic and low-sugar products. In the US, yoghurt consumption has been dropping steadily since 2014 and firms are looking for new products that will appeal to consumers. For one, sales of Skyr – an Icelandic yoghurt – grew 24% in the past 12 months. One of the main attractions of Skyr is that it is high in protein and low in sugar. Dairy farmers welcomed their growing popularity as these yoghurts require four times the amount of milk compared to traditional yoghurt.

The new “added sugars” labels that will be rolled out in the US in 2020/21 should lead to a saving of USD 31 billion in healthcare costs and USD 62 billion in societal costs by reducing heart disease. A new study suggested that savings could be higher still if more companies decided to reformulate their products. However, an official at Mars pointed out that it was not easy to remove sugar as it also helped with texture and volume. Reformulating for soft drinks is easier but some companies such as Coca-Cola in the UK have decided to keep the sugar unchanged in their classic soda despite the sugar tax. Pepsi, meanwhile, reported strong sales in the first quarter, which it attributed to good demand for sparkling water and low-sugar sodas.

France’s Carrefour is collaborating with Nestle and IBM to sell a pack of mashed potato with a QR code that consumers can scan to see the whole supply chain, including “the varieties of potato used, the dates and places of manufacture, information on quality control, and places and dates of storage”. The information will be stored and accessed on a blockchain developed by IBM’s Food Trust which was designed to work without a native cryptocurrency.

Also on the technology front, Olam Cocoa announced that it will start using pocket spectrometers developed by Consumer Physics, called a SCiO device, to help local traders and growers instantly assess the moisture content of their cocoa beans. This will help with quality assessment and guarantee growers a fair price, the firm explained.

Finally, Societe Generale announced that it will close its commodities and trading businesses because of the low profitably and growing burden from financial regulations. The bank joins a number of groups which have made similar moves recently, such as BNP Paribas, Koch Supply & Trading, and several hedge funds.

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Commodity Conversations Weekly Press Summary

ADM said this week that, contrary to rumours, it was not selling its grain handling business. On the other hand, it is planning on scrapping some roles as part of a restructure to focus on being a nutrition company. The group opened a new high-tech livestock feed facility in Illinois – another addition in a long list of recent investments in animal nutrition. The CEO said that “animal nutrition is one of our key growth platforms.” ADM also invested in food-tech fund Cultivian Sandbox which just raised USD 135 million. A director at Cultivian Sandbox said they were witnessing a “democratization of technology in food” which is helping smaller groups disrupt the establishment.

Cargill too, which just announced new leadership for its Animal Nutrition segment and agricultural supply chain, is building a premix and animal nutrition plant in China. Separately, the group said it will be the first to use Rainforest Alliance Certified coconut oil to use in ice cream and confectionaries. Under the program, farmers in the Philippines and Indonesia will be trained in the sustainability standards which will also help them increase their income. A company official involved in the project said that “ethical brand positioning is an increasingly important driver.”

Cargill is expected to be one of the parties interested in buying Nestle’s Herta meat business, according to a source, which the former is looking to sell as part of its strategy to focus on healthy products. In the same vein, Nestle bought shares of Swiss-based start up Amazentis which is working on using a substance from pomegranates to create anti-ageing nutrients and dietary supplements.

In Hong Kong, Nestle has come under fire for continuing to use vanilla flavourings in baby milk powders even though it advertised as otherwise and had earlier committed to phasing out vanillin in baby products. A spokesperson for UNICEF argued that better regulations were needed, even though the WHO already bans marketing that suggests baby formula is as good as breast milk.   

Nestle announced it was buying a small stake in Europe’s largest veterinary services Independent Vetcare Group International to gather more information about pets and their owners’ needs. This comes at the same time as Nestle said it stopped procuring dairy from Martins Farms in Pennsylvania after an undercover investigation by Compassion Over Killing (COK) revealed severe animal abuse and cruelty. COK complained, however, that this was not enough to address the abuse issues.

Animal welfare activists are concerned the situation will only get worse. The US government announced it would cut the work force of federal hog plant inspectors by 40% and scrap time limits on the slaughter line. The plants themselves will be made responsible for identifying diseases and contamination, while beef plants are expected to soon follow suit. The USDA’s head vet criticised the plan, saying that the same safety de-regulations in the aircraft industry are now being blamed for the Boeing crashes.

Tesco supermarkets in the UK will follow in the footsteps of competitor Sainsbury’s and start selling vegan and vegetarian options in the meat aisle. Tesco said that changing consumer habits, including a 21% drop in UK families’ meat consumption, is forcing retailers to adapt. Another study, however, found that meat demand in the UK only dropped by a marginal 0.2% in 2018. Part of the problem is that consumers are used to cheap food, spending less than 10% of their household expenditure on food, down from 20% in the 1960s and compared to 60% in Nigeria. An organic beef farmer suggested taxing industrial meat to make it more expensive.

Another retailer adapting to consumer pressure is IKEA. The furniture king announced a plan to make all of its franchises self-sufficient in salad and herbs. It already started growing salad in a hydroponic soil-free container in Sweden, a system that uses 90% less water and half as much area as traditional farming.

Finally, a group of Georgians have responded to a NASA challenge and are working on finding ways to grow grapes – and therefore make wine – on Mars.

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Commodity Conversations Weekly Press Summary

Kellogg announced that it has sold its biscuits, snacks and ice-cream businesses to Ferrero for about USD 1.3 billion as it seeks to focus on its core cereal brands. Nestle had also sold its US confectionery business to Ferrero in 2017, as many firms struggle with the fast-changing demand in the packaged food sector. In contrast, Ferrero’s snack division is reporting solid growth and the family-owned business has made four purchases in the US alone in the past two years.

Ferrero was rumored to be one of the firms interested in buying Australia’s Arnott’s biscuit brand and Denmark’s Kelsen Group from Campbell Soup but sources are saying that Mondelez is now the sole bidder. The deal could be worth up to USD 2.5 billion and would add to Mondelez’ growing biscuit portfolio as the firm has been purchasing fast-growing snack brands around the world.

Consolidation is also expected to happen in the agricultural trading world, although nothing has been announced so far. The head of Glencore Agri said last week that the sector needed to consolidate because it was facing a fragmented overcapacity. At the same event, the CEO of Louis Dreyfus said the firm would look to purchase regional partners and set up joint ventures in Asia.

Meanwhile, a Commodity Futures Trading Commission (CFTC) study looking at end-of-day prices between 2013 and 2018 found that the increase in algorithmic trading had not caused an increase in volatility, confirming the group’s decision to shelf a plan to regulate automated trading. The CME president said that algorithmic trading was “a natural evolution” which made the market more efficient.

In an attempt to refinance part of its existing debt, Olam announced that it has secured a three-year credit facility of USD 350 million, which will be linked to the firms “digital maturity score” in what is being called the world’s first “digital loan”. The process is being handled by the Boston Consulting Group which will assess the score based Olam’s digital growth.

Cargill reported USD 566 million in net earnings for the past quarter, up 14% on year as spending cuts helped offset lower revenues as a result of the ongoing US-China trade war as well as the swine fever in China. The CEO said the firm was benefiting from a push to grow in the protein business which will help make it less reliant on its trading business.

The plant-based protein segment saw some big announcements this week as Burger King announced that it will start selling Whoppers with a meatless burger made by Impossible Foods in the US. Just a day later, Nestle announced that it will start selling its plant-based burger in Europe this month, called the Incredible burger. It will launch a slightly different version, called the Awesome Burger, in the US before the end of the year. Big firms are racing to reach the market first, and get FDA approval. Beyond Meat, supported by Bill Gates, is already selling in the US, while Unilever recently purchased the Vegetarian Butcher.

Plant-based meat alternatives are seeing a rise in popularity as they are believed to have a much smaller carbon footprint, a theory this recent study confirms. The Union of Concerned Scientists found that US families were able to reduce their greenhouse emissions without affecting their nutritional intake when switching to plant-alternatives. On the other hand, they noted that red meat might still be very popular among low-income families because it remains the cheapest source of protein. The study supports the fact that individuals can make a difference, which goes against the argument that the whole food system needs to be completely overhauled for changes to be felt.

But the most surprising scientific discovery announced this week, if not ever, is that cheese will taste better if it has been aged while hip-hop music was playing in the background. Experts found that the cheese texture evolved differently when it was contained in a box with speakers. They all agreed that hip-hop cheese tasted better than rock n roll and jazz cheese.

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Commodity Conversations Weekly Press Summary

Louis Dreyfus reported a net profit of USD 355 million in 2018, up 12% on year, thanks in large part to the US-China trade war which boosted demand for Brazilian soybean. Analysts suggested that the group is recovering, especially after the majority shareholder managed to buy out other family members. She earlier said the company was looking into “strategic partnerships” but the CEO dismissed any major buyouts or tie-ups. He argued that the main trading houses – the ABCDs – all had very different businesses now which would make any synergy unlikely. On the other hand, he expects that acquisitions or joint ventures at regional levels will continue to make a lot of sense.

ADM created a new board committee on sustainability and corporate responsibility. The CEO explained the board would help ensure that sustainability remained at the core of the group’s strategy. Separately, the group said the floods in the US Midwest were likely to reduce Q1 operating profits in its Origination and Carbohydrate Solutions units by USD 50-60 million, due to disruptions in ethanol and corn processing. Also in the US, ADM started producing organic wheat flour to meet the growing demand for organic packaged foods.

After a successful pilot project in China, Cargill and Heifer International announced the launch of the Hatching Hope Global Initiative which aims to help smallholder farmers improve their economic situation while helping feed the world by promoting the production of poultry. The CEO of Heifer argued that chicken and eggs provided valuable nutrients and were more affordable than other meat proteins thanks to their fast-growing cycle.

Earlier this month, the Commodity Futures Trading Commission (CFTC) asked market participants to come forward if they have been involved in or witnessed acts of briberies in other countries. The CFTC said it will be working with the US Justice Department. The focus at the moment seems to be on the oil and gas sectors, with several investigations already underway, but bankers suggest this could force trade houses to re-evaluate the role of agents across commodities, traditionally used to create access and help them get beneficial deals.

Greenpeace activists are urging Nestle to step up and reduce its use of single-use plastic, said to be used for 98% of its product offering. Nestle has admitted they needed to do something, the NGO said, arguing, however, that they were not moving fast enough. In the US, Nestle Waters North America announced the acquisition of beverage-delivery service Diamond Springs. Nestle is also building an R&D centre in China, its second biggest market, so that it can develop and commercialise new products faster. The CEO said that China was one of the “fastest-changing food and beverage markets in the world.”

Another company banking on China is Starbucks, where the coffee group opens a new store every 15 hours. The CEO explained that the tie-up with the Alibaba delivery platform has been key for the group’s growth, adding that it had also partnered with Uber in the US to that same end. The group is also investing USD 100 million in a new food start-up venture fund, as well introducing greener cups and developing disease-resistant coffee trees.

The US Environment Protection Agency said last week that it was looking at overruling the power of states to curb the use of pesticides that have been approved at the federal level. The agency is being sued by pesticide companies that argue their products fulfil federal requirements and therefore should not be limited anywhere in the country. The American Association of Pesticide Control Officials, however, said it intended to fight any attempt by the EPA to undermine “states’ right to protect their environment.”

This comes at the time a new study by EWG found that 70% of fruits, nuts and vegetables in the US have traces of pesticides, with strawberries having the highest. Even worse, 90% of people have traces of pesticides in their bodies. On the other hand, the UN Food and Agriculture Organisation (FAO) forecast that yield losses of the major crop staples due to pests is expected to increase by 10-25% for each degree of global warming, in addition to the 20-40% of the world’s crops yields that are already lost to pests every year. The FAO explained that climate change was making it harder to fight pests whose location and behaviour was changing.

The chemical pesticides’ industry slowed by 6% last year to USD 64 billion, according to International Bio Intelligence (IBO). On the other hand, the world’s biological pest control market has grown by 17% in 2018 to reach USD 3.8 billion and is expected to reach USD 11 billion by 2025. Farmers told the IBO that, unlike chemical pesticides, the dosage requirements for biological pesticides actually dropped over time. Brazilian agribusiness group Agrosalgueiro said that this was revolutionising agriculture, especially as it could be used to fight diseases for which there existed no chemical pesticides.

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Commodity Conversations Weekly Press Summary

The Presidents of Brazil and the US met this week to discuss the possibility of signing new trade deals, although experts noted that the trade between the two countries was already well-balanced. The US wants to expand ethanol exports but Brazil said it would only consider the move if it can export more sugar to the US, and few expect either side will make significant concessions.

The Brazilian President did mention the possibility of expanding trade relations with China. Having already invested USD 2 billion in Brazil’s agriculture, China is now interested in investing in the ethanol sector as the country prepares to meet its 2020 ethanol mandate. China absorbed 36% of Brazil’s agricultural exports and spent some USD 35 billion to buy Brazilian agricultural products in 2018, up 33% on year.

The EU and the US hit a roadblock during talks on a new trade agreement as the EU does not want to include agriculture. The EU did offer concessions, such as giving the US a share of its duty-free import quota of hormone-free beef, in an attempt to convince the White House to remove anti-dumping duties. Previous concessions included buying more soybean or classifying US soy as a sustainable biofuel feedstock. Australia and Uruguay – who took advantage of the beef quota when it was first opened in 2009 – could challenge this latest move at the WTO.

The US-China trade war was expected to have a long term impact on global agricultural tradeflows but the spread of the African swine fever outbreak in China could now counteract some of these changes. The crisis is helping US pig farmers as China imported huge amounts of pork over the past two weeks despite the 62% tariff recently imposed. However, the US is being very careful to protect its pig population from the virus and the USDA recently seized 450mt of contraband pork products from China, the largest seizure of contraband food in US history.

An expert suggested that the outbreak will continue to lower Chinese demand for soybean for years as feed demand will drop, although US soybean could be diverted to feed the pigs exported to China. Nonetheless, US soybean area will stay almost constant this year as farmers have no viable alternative – other grains such as sorghum and corn are also subject to Chinese duties. Farmers also hope the government will resolve the trade dispute or offer another aid package.

In Japan, Nestle announced that it will expand its range of KitKat ruby chocolates after a successful launch in 2018. Ruby chocolate was developed by Barry Callebaut and is supposed to be the fourth kind of chocolate – after dark, milk and white chocolate. The firm said it had been surprised by the speed and scale of social media reactions, which was more efficient than any marketing campaign. It added that chocolate trends were now made in Asia, as Asian tends to be more open to new foods. In the US, the biggest chocolate market, ruby chocolate still has not received government approval. Specialty ingredients makers, such as Denmark’s probiotic and enzyme maker Chr Hansen Holding and England’s Tate & Lyle, which makes non-sugar sweeteners and texturizers, are also expected to benefit from these new consumer trends.

ADM announced that it has agreed to purchase one of the biggest citrus ingredient maker in Europe, Ziegler Group. The firm recently purchased another citrus firm, Florida Chemicals, and highlighted that it was positioning itself to be a leader in the fast-growing citrus flavour sector.

Euromonitor warned that image recognition might start to drop as consumers switch to healthier food. For the moment, however, packaged foods remain very popular. Some 41 out of Euromonitor’s Top 100 Megabrands in 2019 were packaged food items, with Coca-Cola, Pepsi, Nescafe and Lay’s taking the first four positions of most valuable brands. An unexpected brand, Google, is making a foray into the food world by promoting Refresh, a working group it founded to promote artificial intelligence and machine learning in agriculture.

We know that the food we eat has a huge influence on our lives, but researchers are now saying that food might even change the way we speak. The birth of agriculture meant farmers could make softer food – think cheese and porridge – which affected the shape of our teeth and jaws, according to this new paper. As a result, people were better able to make the ‘f’ and ‘v’ sounds which started to spread along with agriculture.

This summary was produced by ECRUU

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Commodity Conversations Weekly Press Summary

Cargill will soon be opening a non-medicated premix production facility in Ohio, USA, as part of its efforts to find a solution to healthy livestock without antibiotics. The head of the group’s Premix and Nutrition business explained that nutrition was a key part in the transition away from drugs, adding that a healthier animal produced better meat and dairy. “Consumers really drive the supply chain,” he said, adding “The environment forces us to branch out far beyond just nutrients and ingredients.” Taking the move into ‘agtech’ one step further, Cargill has opened its first beauty lab in Shanghai, China, which will use the group’s expertise in food to develop sustainable and nature-derived products for the Asian market. In Russia, Cargill invested RUB 1.8 billion (USD 27 million) to expand the production of fats, oils and animal feeds in the Tula region as well as to set up a technology cluster.

Separately, Cargill has developed a new technology to give chocolate products the ‘right’ colour by using fewer chemicals, allowing to get previously difficult to obtain reddish and yellowish tones. The company explained that colour was very important for consumers and that this new method would make it much easier for food companies. Mondelez’ venture arm SnackFutures, meanwhile, has invested in a startup called Uplift which makes so-called “gut-healthy” foods and ingredients. Mondelez’ CEO said the aim was to re-invent snacks so that they have an active health component, “something that does not exist today.”

Olam reiterated its commitment to restore forests and fight deforestation as part of the Cocoa & Forests Initiative (CFI) across its supply chain, with a focus on West Africa. The company already used its supplier mapping to distribute 1.2 million trees in Cote d’Ivoire and Ghana. The aim is to “re-imagine the future of global agriculture where prosperous farmers (…) and healthy ecosystems can coexist,” the company said. The initiative fits well in the UN’s Decade on Ecosystem Restoration launched earlier this month. It hopes to restore 350 million ha of degraded land by 2030 to enhance food security and biodiversity.

In the same vein, China’s President said last week that he would not compromise the country’s health and environment for short term economic gain. The state market regulatory administration announced a new policy which made officials liable for issues around food safety, a major move to crackdown on the number of recent food scandals and improve the current food and drug safety standards.

The US’ Food and Drug Administration (FDA) and the US Department of Agriculture (USDA) announced they have finally agreed on a way to deal with cell-cultured meat. The FDA will regulate the collection and growth of cultured cells while the processing of those cells into meat, as well as labeling, will come under the USDA. While some wonder whether cell-cultured meat is commercially viable yet, some environmentalists have questioned whether the fuel used to power the labs is much better than the methane released by livestock. Regardless, the anti-meat trend seems to be getting increasingly popular. New York City’s mayor just announced “Meatless Mondays” for schools starting 2019/20. The program should reach out to almost a million students.

The US is set to get its first GMO seafood after the FDA gave AquaBounty the green light last week to start raising GMO salmon eggs in the country. The company, which is already implanted in Canada, had been blocked from the US market because of issues around labeling. The USDA’s bioengineered labeling guidance released in December will allow consumers to differentiate but opponents say the labels aren’t enough. AquaBounty’s CEO, on the other hand, pointed out that their salmon would be much fresher than the imported kind.  

A study by the University of California found that fish stocks of the most commercially consumed fish had on average dropped by 4% between 1930-2010 but some areas, notably in the North Sea, had lost close to 30% of their stocks. Overfishing, warming temperatures and acidification of the ocean are to blame. The black sea bass in the Atlantic, however, seems to be thriving in the warmer water. In a bid to make fishing more sustainable, US group Bumble Bee Foods has tied up with a German technology company to launch a platform tracking yellowfin tuna using blockchain technology. Consumers will have access to the whole supply chain by scanning a QR code on the retail package and see for themselves that the products conform to the International Seafood Sustainability Foundation.
Finally, winemakers are looking into replacing the traditional cylindrical glass bottles with Garçon Winesflat bottles made from recycled PET. The startup said that it can pack 10 bottles in the space of 4 traditionally sized bottled and that each bottle is 87% lighter, thereby reducing carbon emissions by 500g/bottle.

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