Commodity Conversations Weekly Press Summary

Wilmar International’s Apr-Jun (Q2) net profit soared five-fold to USD 229.93 million from USD 42.87 million in Q2 2017 on the back of the oilseeds and grains divisions which recorded higher volumes and crush margins. The company’s chairman said that the US-China trade war had improved crush margins in the short term but in the long-term the dispute will not be beneficial. Wilmar is mulling an initial public offering for A-share listing in its China operation – which contributed around 60% of the agribusiness’ pretax profits – in the first half of 2019.

 

The group also obtained a USD 100 million loan from DBS bank with the interest linked to its performance on environmental, social and governance benchmarks. Similarly, Wilmar had earlier switched its USD 150 million loan from ING to a sustainability-linked loan in November 2017, which was a first in the palm oil industry. It also took a loan of USD 200 million from OCBC Bank whose interest rate is linked to sustainability key performance indicators.

 

Olam‘s net profit declined by 36% on year to USD 68.14 million in Q2 due to a decline in earnings for coffee, edible oils and peanuts. The CEO said that current markets were particularly uncertain due to the economic and political situation but that its diversified portfolio should help reduce risks.

 

In its recently published annual report, Cargill said it was moving towards sustainable agricultural practices and would focus on origination and processing segments in the coming year. The group has spent on technology to improve the connection of its global operations and has set up a corporate sustainability hub to focus on better use of land and water resources, fighting climate change, making farmers prosperous and cutting food wastage.

 

In Canada, Cargill has produced 1 million pounds of beef under its Beef Sustainability Pilot in the last quarter, double the quantity from the previous quarter. More and more farmers are registering so that they can benefit from the credit payment which is financed by the retailers and food companies involved in the project. In Indonesia, meanwhile, it opened an aquaculture innovation center to bring best practice to freshwater fish farmers. The company now has 12 such centers around the world. Finally, in Brazil, there is talk that Cargill is holding preliminary discussions with potential buyers for its Cevasa sugar and ethanol plant located in Sao Paulo.

 

Chinese demand for soybean combined with low sugar prices and the closure of sugar mills is encouraging Brazilian farmers to switch from growing cane to soybean. Government data shows that soybean area in Brazil increased by 2 million ha while cane area dropped by 400,000ha over the last 2 years. Brazil exported 10.2 million mt of soybean to China in July, up 46% on year as the latter slapped an import duty on US origin. A Chinese diplomat even suggested soy processing joint ventures between companies of the two nations should be set up to boost Brazil’s processed soymeal exports to China. He argued that a processing unit in Brazil would cut transportation costs and offer a more financially viable option for China.

 

The relationship between both countries could even be delaying the Mercosur-EU free trade deal. Although the deal has been in talks for over two decades, an EU policy paper suggested that Mercosur’s focus on strengthening trade relations with China was affecting talks with the EU.

On the other hand, some 60 cane mills have closed in just 5 years in Center South Brazil because of low sugar and ethanol prices. Sugar and ethanol mills have been encouraging the planting of soybean as a rotation crop but are worried about farmers switching completely. Some mills are even looking at paying them a premium to ensure they continue growing cane.

This summary was produced by ECRUU

Commodity Conversations Weekly Press Summary

Glencore logged a record USD 8.3 billion in net profit for the first half of 2018 despite its legal issues with the US Department of Justice, mostly thanks to strong commodity prices. The CEO noted, however, that protectionist US policies and doubts surrounding Chinese growth might add volatility in the second half of the year. Cargill also cited the uncertain global environment in its 2018 annual report, where it assesses its corporate responsibility performance, although the firm logged some of its best results in 2018.

While ADM and Cargill have profited significantly from the China-US trade war and Bunge was on the wrong end of the situation, the majority of S&P 500 companies say they have not really been affected by the change in trade tariffs and they don’t expect it will be the case.

On a similar note, Nestle said this week that it was not affected by the US re-imposing trade sanctions on Iran. The firm has two factories there and noted that it only imports a small number of products. Otherwise, Nestle has been testing a blockchain system developed by IBM, called Food Trust, to assess whether it can be used for global food traceability.

Five months after the new CEO of Nestle USA was appointed, he laid out his plan to help the food giant survive amid growing competition from smaller players and fast changing consumer trends in this Washington Post interview. The plan is to focus on the most popular brands, keep moving into high growth categories and develop in-house products to quickly respond to new trends.

Cotton producers in Tchad have expressed their gratitude to Olam for revitalising the local cotton industry. The trading group took over 60% of CotonTchad from the government earlier this year as it was struggling to keep the industry afloat. It is planning to invest USD 41 million over 5 years to revamp old mills and build two new ones. It hopes to produce 300,000mt within 3-4 years, up from 25,000mt in 2017/18.

Coca-Cola India and the Indo-Dutch Horticulture Technologies propose to jointly set up 110 orchards in India to grow apples and produce pulp. The move is in line with the company’s plan to grow fruits, to source locally and to diversify its portfolio with healthy drink options. It also plans to boost productivity – India’s apple acreage is the second highest in the world but the yield is low.

Pet food company Wild Earth has raised an additional USD 450,000 from a PayPal co-founder, taking its funding to nearly USD 5 million. The green, animal-friendly food maker plans to make a plant-based alternative to cat and dog food using koji, a type of fungus eaten by humans. Most of the food is currently produced from corn and wheat. It will launch koji-based dog food in 2019.

Kraft Heinz is targeting to make all its package recyclable, reusable or compostable by 2025. However, the CEO said that most of the company’s emissions are due to processes outside its direct operations.

Recent medical analysis found that, overall, consuming omega-3 pills made little – if any – difference to the risk of heart and coronary disease. Omega-3 is one of the most commonly consumed supplements, while the fish oil industry represents an estimated USD 30 billion business. The author of The Omega Principle argues that while fish oil pills are very well marketed, they are an inefficient use of valuable marine resources. He argues that, instead, we should consume it directly as a protein which would solve two things: reduce emissions caused by livestock and help us be healthier by reducing our meat consumption.

A study of Minnesota residents revealed that 67% of those surveyed cannot afford to feed their families and rely on food banks at least once a month. Around 53% of them said they depend on food shelves for more than half their monthly food needs. Data from 2015 showed that 15% of US citizens have been through food insecurity at some point. The situation seems to be getting worse – people went into Minnesota food banks an estimated 3.4 million times last year, which is a record high. The survey also showed a growing demand for healthy food at these food banks, going against the perception that demand is higher for junk food.

This summary was prepared by ECRUU

Commodity Conversations Weekly Press Summary

As the ongoing trade dispute between the US and China escalates, some major food merchants are taking advantage of the trade dislocations to boost their profit margins. After Cargill mentioned the change in dynamics in its latest earning, ADM reported a two-fold increase in its second quarter net profit and said it was benefiting from the trade disruptions. The tensions propelled China’s grain demand from South America, where supply is already low because of a drought, while forcing other buyers to source grains from the US.

Bunge was not so lucky. The group posted a USD 26 million loss in the quarter, including USD 24 million linked to hedges in the grains market. The CEO explained they had – wrongly it turns out – gone long on Chicago soybeans on the expectation that the trade war between China and the US would be of short duration. They are hoping to do better in the second half of the year, however, despite the uncertainty linked to the new Brazilian freight rates and lower exports from the US. Bunge’s sugar and bioenergy groups reported a USD 40 million loss in the quarter, and the group explained it was partly a result of preparations to exit that business. Bunge added that it decided to postpone a potential IPO.

In Russia, meanwhile, the KSK terminal at the Novorossiysk port, which is a joint venture between Cargill and Delo Ports, could export 6-7 million mt/year of grains by July 2019. The manager said that in the last five years, KSK has increased exports three-fold, from 1.5 million mt in 2015 to 4.9 million mt in 2017.

Coca-Cola has been trying to cash in on the fact that students tend to carry a bottle of water on campus by installing self-service water stations at US universities. The idea is that the water is free but you can get additional bubbles or flavours at a cost. A test trial showed that students opted for the add-ons 10-20% of the time. The company wants to install more machines across the country’s university campuses. The timing may be right, especially as Coca-Cola had to increase prices this year because of higher import duties.

Starbucks’ US sales increased by a mere 1% in the last quarter, which the company blamed on health-conscious customers. In China, the company has joined hands with Alibaba’s meal delivery unit Ele.me to start door deliveries as local rivals eat into its shares. The company registered a 2% drop in comparable store sales in Apr-Jun but still hopes to triple its revenue in China over the next five years.

In Europe, Nestle lost an 11-year long court battle after the EU’s highest court rejected its trademark claim on Kit Kat’s four-fingered shape. Nestle had obtained a European trademark in 2002, which was challenged by Cadbury five years later.

There was a lot of talk about genetically modified (GM) food last week after the European Court of Justice decided to categorise gene editing in the same bracket as GM. The announcement was criticised by the biotech and chemical industries. Some farmers also criticised the decision, saying it will deny consumers access to high-quality farm products which use fewer pesticides.

In India, a survey of packaged food, including imported products, found that 32% had GM ingredients but 65% of them did not disclose it on their labels. This is despite the fact that Indian laws ban importing of GM food without approval. In Brazil, on the other hand, sugar and ethanol producer Copersucar says cane productivity can rise to 21mt/ha in 2025, from 11mt/ha in 2015, by using GM cane and better seeds.

In the US, the USDA has received a slew of suggestions from industry representatives on the National Bioengineered Food Disclosure Standard which is likely to be implemented from January 1, 2020. The Grocery Manufacturers Association wants refined ingredients to be excluded from disclosure norms as 90% of corn, soybean and cane are genetically modified. This, it said, will prune the list of products by 78%.

Environmentalists are hoping that China will direct some of its focus on cutting emissions to its livestock sector and its growing meat consumption instead of only looking at the power and transport segments. Chinese demand for feed is being blamed, in part, for deforestation in South America while the meat industry is a significant contributor to pollution.

On the subject of climate change, Cuba is looking into whether it needs to change its sugar harvest and planting calendar. The government said climate change had affected the weather, seasons and that the harvest timings may need to be adjusted accordingly.

Finally, a survey found that people in the UK are increasingly concerned about wastage as well as sugar content in food, but less so about prices. Over half of those surveyed put food wastage as a top concern, compared to 42% three years ago.

This summary was prepared by ECRUU

Commodity Conversations Weekly Press Summary

The US-China trade spate has resulted in the doubling of the premium for Brazilian soybeans in one month, as China may have to replace some 4 million mt of US soybean imports in the fourth quarter with Brazilian origin. An analyst at Rabobank said that the EU, which is the world’s second largest importer of the crop, is likely to shift to the cheaper US origin as a result, after buying mainly from South America for the past few years. 

Meanwhile, traders in Brazil are worried that the recently implemented minimum road freight rates will push commodity prices higher. The minimum rates were put into place after a countrywide strike by truck drivers. Cargill has warned that trade houses might have to start buying grains delivered at port, instead of ex-farm or from elevators as is currently the case.

Sources say that Bunge is in talks to sell parts of its sugar trading unit to Wilmar. The talks are apparently focusing on the Asian trading unit, which would give Wilmar better access to Thailand’s exports. In Argentina, meanwhile, Bunge is reportedly going to close down its soybean mill complex at the Ramallo port, according to the mill’s workers’ union. The trade house did not confirm the news, but the union has threatened to strike at some of the other port complexes as a result.

ADM announced it will buy premium vanilla producer Rodelle in Madagascar. The company said that Rodelle was unique in that it had a vertically integrated supply chain which allowed it to supply large scale volumes of certified organic vanilla at lower costs. ADM also said it was keen to secure vanilla supply, especially as a shortage of the product lead to a recent surge in the price of vanilla extract.

Separately, ADM and Vedan have got together to create tapioca starches and tapioca maltodextrin ingredients for manufacturers that are non-GMO and organic. The company said food companies were increasingly looking for plant-based and ‘clean’ ingredients in response to changing consumer demands.

China’s State Development and Investment Corp (SDIC) will become the majority shareholder in Arab Potash Co after it buys an additional 28% stake from Canadian fertilizer supplier Nutrien. This will help China – the world’s main consumer of potash – to guarantee supply.

Staying on the topic of fertilisers, an estimated 58% of the nitrogen applied to crops runs off from farms and emits nitrous oxide, which in turns produces half of the greenhouse gas in the US agriculture sector. However, a recent report suggested that switching everything to organic farming was not the solution. Part of the reason is that all manure – whether organic or synthetic – releases more nitrogen than the plants can absorb. The answer would be to focus on developing more efficient ways to use nitrogen so that we need to use less of it. 

Starbucks and McDonald’s have announced a NextGen Cup Challenge through which they have invited ideas to create fully recyclable and compostable cups. The rival companies will contribute USD 5 million to the winners of the challenge to create a prototype, which will then be replicated across their stores. The two companies intend to phase out plastic cups within the next three years.

In Canada, meanwhile, McDonald’s plans to purchase beef from farms and ranches which are Canadian Roundtable for Sustainable Beef (CRSB) certified. The company serves over 20 million Angus burgers every year.

Major meat and dairy producers such as JBS, Fonterra, Dairy Farmers of America, Tyson Foods and Cargill could account for 81% of the world’s emissions by 2050 if they make no changes to their supply chain and continue growing at the same pace. That would be more than emissions from oil producers Exxon, Shell and BP. The findings were published in a report which said it was difficult to find the data to make these assessments because of the lack of reporting. Only 14 out of the 35 companies analysed said they were planning to reduce emissions, but less than a third of those included emissions from the whole supply chain.

Similarly, a Food FW survey found that 53% of the UK companies surveyed did not carry any sustainability information on their websites, and only 7% of the companies in the sector have made investments in sustainability. The report conceded that companies may be hesitant to disclose their sustainability strategies as it could be held against them. However, it added, that mentioning sustainability credentials would benefit the company in the long run.

Finally, in Indonesia, the government has had to intervene as domestic egg prices in June-July rallied to a 2-year high. The price rise was due to the high consumption of instant noodles with eggs during the FIFA football World Cup. A poultry farmers association secretary-general added that the price was also influenced by lower egg supply as farmers sold their hens because the demand for meat was higher.

This summary was prepared by ECRUU

Commodity Conversations Weekly Press Summary

Cargill logged adjusted operating earnings of USD 3.2 billion in 2017/18 – a record high – as the global demand for beef and animal feed boosted its revenue by 7% to USD 30.4 billion. The animal nutrition and protein unit remained the top earner for the second year on the trot. The finance director said, meanwhile, that Cargill is being more nimble-footed in moving grains because of the tariff wars between the US and its trading partners such as China, Mexico and the EU. The trade disputes may force the company to delay investments or redo its functioning, he added.

The World Bank estimates that global demand for aquaculture feed production will increase from the current 77 million mt to 94 million mt in 2030. Cargill, which currently produces 3.5% of the world’s output, is convinced it can play a key role in boosting aquaculture production whilst meeting sustainability goals. The group is working in reducing greenhouse gas emissions and sourcing most of its ingredients (such as soy and palm oil) so that it will only be using Marine Stewardship Council (MSC) certified marine ingredients by 2025. Cargill also launched a new technology application centre in Vietnam to provide the latest innovations to aquaculture farmers.

Danone, Mars, Nestle and Unilever got together to form the Sustainable Food Policy Alliance. Commentators say this is another sign that the food industry is responding to changing demand from consumers and that the new alliance is expected to be more aggressive than the Grocery Manufacturers Association which several of the main food companies left last year. As a start, the alliance has asked the Environmental Protection Agency to keep the Clean Power Plan, it also wants the Obama-era Nutrition Facts panels, a reduction of salt in processed foods and clearer GMO labeling.

The Roundtable on Sustainable Palm Oil (RSPO) reinstated Nestle’s membership, which was suspended on June 27 after Nestle did not submit a report stating its action plan to produce 100% RSPO-certified sustainable palm oil by 2023. In New Zealand, meanwhile, the company announced it had arrived at a conditional agreement to sell six of its confectionery brands as it intends to concentrate on its chocolate, baking and other businesses.

In the UK, Nestle and Unilever joined the likes of Tesco and Ocado as users of the data management service ProductDNA. Created by the UK Retail Grocery Advisory Board, the application creates a transparent catalogue of product data between suppliers and retailers verified by a third party.

Coca-Cola European Partners (CCEP) said their large PET bottles will use 40% recyclable PET (rPET) in 2018 as the company wants 50% of its PET portfolio to be recyclable. The sustainability head said the company is changing the branding on its bottle closures by imprinting messages urging consumers to recycle. Such closures are currently on 500ml bottles of Coca-Cola and Coca-Cola Zero sugar and the company aims to include them across its entire portfolio on about 900 million bottles. It plans to expand the deposit return scheme currently available in Scotland to England.

In Mexico’s Chiapas, however, Coca-Cola has been blamed both for the rise in diabetes as well as for the water shortage. Soft drinks are more easily available than water in the province and the local plant consumes over 300,000 gal/day of water. As a result, there is a local movement asking to shut down the plant.

The world’s food import bill reached USD 1.43 billion in 2017, three times what it was in 2000, according to the latest UN Food and Agriculture Organisation (FAO) report. The situation is worse in the poorest countries whose import bills have increased on average five times as they depend increasingly on the world market. The FAO argues that such countries could help improve their trade deficit by exporting more of the so-called “minor tropical fruits” like jackfruit and mangosteen. Only 10% of their global production is exported but demand is rising as a result of increasing health concerns. Jackfruit is even being used to replace meat.

This summary was produced by ECRUU

Commodity Conversations Weekly Press Summary

Louis Dreyfus just launched its new Soy Sustainability Policy which will seek to limit the environmental impact of soy cultivation and guarantee a fair wage for farmers. The firm said that ensuring its supply chain was managed sustainably had become urgent amid strong growth in the soy industry. In Australia, Zoos Melbourne announced it would no longer sell Nestle products until the company gets its Roundtable on Sustainable Palm Oil (RSPO) certification back. The RSPO suspended Nestle’s membership at the end of June for lack of reporting.

Nestle has developed an infant formula made from potato protein for children who suffer from cow milk allergy. Most formulas are made from cow milk and a lot of the current alternatives, such as protein from soy or rice are inadequate. Meanwhile, Cargill launched Satiagel Seabrid, a carrageenan extract made from sustainably cultivated seaweed, which can be used to improve the texture of dairy products.

The CFTC found that block trading in the CME’s agricultural futures and options contracts – which was only allowed in January this year – occur mostly in the nearby contracts. This came as a surprise given that block trading was introduced with the aim of boosting the liquidity in the little-traded forward contracts and there is now a concern that it is in fact taking liquidity away from the nearby contracts. Many participants have welcomed block trading, saying it helps execute big trades without affecting prices. Others, however, argue it leads to a lack of transparency even though the CFTC found that these traded at a “fair and reasonable” price.

As the rhetoric around the US-China trade war escalates, many businesses are already facing a difficult choice following the imposition of tariffs on both sides: absorb the increase in cost, pass it on to consumers, or find other suppliers. A Chinese meat importer said only luxury restaurants would be willing to pay a higher price for American beef, while a natural fabric producer said he might move production to another Southeast Asian nation.

A potentially breakthrough experiment found that introducing seaweed to cow feed could lead to a significant drop in their methane emissions. The scientists at the University of California still need to find a way to make the taste of seaweed less disruptive, as cows reportedly ate less feed, but the good news is that their milk tastes just as good. In a report released earlier this year, the Environmental Protection Agency found that cows were responsible for around 25% of the methane emissions caused by human activities in the US.

More than half of all fish consumed by humans today are farmed, according to a new FAO report. But the amount of fish caught in the wild has not fallen, as the world’s growing population relies on fish for a good portion of its food intake. The report warned that farmed fish can negatively harm the environment as they are often fed with wild-caught sardines or anchovies. In the wild, over a third of all fish caught never makes it to the plate, mostly because of poor refrigeration and storage.

The war on sugar continues in the US. After California banned cities and counties from allowing sugar taxes on soda last week, the Yes! To Affordable Groceries campaign has submitted a petition to the state secretary’s office asking for a measure to stop local governments from introducing new taxes on sugary beverages or other grocery items during the November ballot. However, the petition, if approved, would not stop the legislature from introducing a statewide soda tax. Also, it would not scrap existing taxes like the soda tax in Seattle. In any case, people say that the Seattle initiative failed to curb sugar consumption as the tax raised USD 4.446 million, nearly USD 1 million more than predicted.

Still on sugar, food makers like Nestle and Hershey want labels to mention ingredients from genetically-modified (GM) sugar crops but farmers oppose it, saying that the sugar no longer has the modified gene when it is used to make processed food.

A London-based startup called Binkabi is setting up a decentralised agricultural commodity network which aims to use blockchain technology to link farmers and consumers in Nigeria and neighbouring countries directly via the use of tokens. The company hopes to boost agriculture commodity trading across borders which it says is currently undermined by the absence of trust and a lack of appropriate market infrastructure.

Talking of new technology, more and more people in Argentina are having to resort to barter clubs to find food amid high unemployment and inflation rates. Facebook groups have been set up to facilitate the barter system, with one such group setting a 1kg flour bag at a reference price of ARS 30 (USD 1.09) or the equivalent of 1 point. With 2 points you can get sunflower oil or a pair of jeans.

This summary was produced by ECRUU

Commodity Conversations Weekly Press Summary

ADM and Cargill announced they had successfully launched SoyVen. The Egyptian soyoil and soybean joint venture runs a soy crushing plant which was recently expanded to double its capacity. ADM also received the regulatory greenlight for a joint venture with Russia-based Aston Foods and Food Ingredients to run a corn wet mill and sell the sweeteners and starches produced. The JV will be called AKP. In France, ADM is planning to buy animal and aquaculture feed maker Neovia for USD 1.78 billion.

Nestle has been suspended from the Roundtable on Sustainable Palm Oil (RSPO) after it failed to submit the required progress reports. As of the end of July, the company’s certificates won’t be valid anymore. This comes at a time when an activist and hedge fund investor is putting public pressure on the group, accusing it of moving too slowly and struggling to adapt to changing consumer tastes. However, via its brands Herta, Buitoni, Wagner and Maggi, Nestle has committed to improving the quality of life of chickens. A company official explained this was in response to consumer demand for a sustainable food chain with high animal welfare standards.

Meanwhile, sources say that Nestle is looking at buying a majority stake in Champion Petfoods, a Canadian premium pet food company, for an estimated USD 2 billion. The pet food industry is expected to boom, as a report showed that pet ownership in China alone doubled last year. But pet owners are increasingly switching to more premium, meat-based, pet food, and environmentalists are concerned about the increasing “pawprint” – the carbon footprint associated to pet ownership. Close to one quarter of the negative environmental impact of meat production now comes from the pet-food industry. In response, pet food makers are looking at alternatives, such as koji proteins, lab grown meat or crickets, although designing a meat-free diet for dogs, and especially cats, is proving to be a difficult challenge.

The second largest yogurt maker in the US, Chobani, has ended its partnership with the TPG private equity firm and has entered a long term agreement with the Healthcare of Ontario Pension Plan. The creator of the brand said the new investor would allow it to regain more control, and simplify its balance sheet.

Olam’s Farmer Information System (OFIS) is helping bridge both ends of the supply chain – the farmer and the consumer – through technology. A cocoa farmer in Ghana said he was able to increase production and reduce pesticides use thanks to the connections and information made available through the app. On the other hand, Olam uses the app to buy directly from farmers as well to track the product from the moment it leaves the farm.

The blockchain technology is expected to bridge this gap even further and help farmers secure loans. Farmers in Russia have already been using a cryptocurrency called the kolion.

Traders are having to resort to loading Russian wheat on ships in the Sea of Azov, the shallowest seas in the world, because of backlog at Black Sea deepwater ports. The grain is then transferred to bigger ships in deeper water – a method often used for oil and gas but relatively new for grains. Last year, 20% of the countries’ grains were exported like that, up from just 3% five years ago.

A 2014 Vermont law which imposed the mandatory labelling of GMO products apparently did not have any significant impact on consumer attitudes, according to this new study. The authors argued that the intense lobbying efforts against the law by the food industry might have been an overreaction. If anything, consumers trusted the labelled products more, as it suggested that they had nothing to hide. A nation-wide labelling law, which nullified the Vermont law, was passed in 2016.

Woolworths had to backtrack on its decision to roll out early a ban on single-use plastic bags after cases of “bag rage” from customer unhappy about the policy. The chain conceded that people needed more time to adjust adding, however, that it would not tolerate any further violent acts against its staff. Four out of six Australian states have banned single-use plastic bags as of July 1.

Global warming is affecting the sugar level in wines, making it too high in France’s Bordeaux region. Another issue is that increasingly health-aware consumers are reportedly looking for lower alcohol degrees. As a wine is planted for 40 years, it is not easy to experiment with new grape varieties and producers are having to test one plot at a time.

Talking of too much sugar, the California governor approved a law which forbids any local government from levying a sugary drinks tax until 2030. This development marks a major win for Big Soda.

This summary was produced by ECRUU

Commodity Conversations Weekly Press Summary

Wilmar announced it stopped sourcing palm oil from Indonesia’s Gama. Greenpeace had earlier called on the tradehouse to break ties with the producer saying that it was clearing rainforest and violating Wilmar’s No Deforestation, No Peat, No Exploitation policy. Greenpeace had pointed out that Gama was started by members of the family which owns Wilmar. The latter said, however, that it did not have any decision making power on Gama. In Nigeria, Wilmar entered into a joint venture with palm oil plantation PZ Cusson to set up a mill and oil palm plantations. The group also launched a Pilot Out growers Scheme to help farmers grow sustainable oil palm.

A recent report by the International Union for Conservation of Nature found that, in terms of deforestation, there was little difference between the oil palm plantations there were sustainably certified and those that were not. One expert admitted that the concept was still new and therefore would take longer to make a significant impact. He argued, however, that it needed more support from consumers. The report also warned that replacing palm oil with another source of vegetable oil would not help. Palm is the most efficient oil-producing plant. Any alternative would require much more land – and therefore potential deforestation – to produce the same amount of oil.

In a bid to reduce the waste of fresh fruit and vegetables – which make up 40% of all wasted food in the US – a startup called Apeel has found a way to double the shelf life of avocados with a plant-based film that strengthens the fruit’s skin. The technology could replace the wax that producers currently use. It won’t even cost more because the shops will save by reducing waste.

After testing blockchain for a year, a group of 11 companies including Walmart and Nestle have launched the Food Trust consortium. Using the technology across their supply chain, Food Trust should help them identify issues with food and be more efficient at recalling contaminated foods. Walmart’s vice president called it the “FedEx tracking for food.”

Danone’s investment fund plans to invest in 20 to 25 food startups by 2020 with a focus on the health sector and alternatives to animal protein. The managing director explained that the new companies would help them capture the fast changing consumer tastes – something difficult to do for a group their size. The fund will also look to invest in subscription-based business models and home delivery. The announcement comes at a time when France Danone is facing issues with its Moroccan operations where it lost over half of its fresh milk market share following a consumer boycott. To change consumer perception the company said it was considering selling milk at the cost of production without making a profit.

In the US, Cargill has been facing protests from animal activists demonstrating in front of its plant in High River asking the company not to kill cattle. Similarly, butchers in France have had to ask for the government’s help against militant vegans who have attacked meat shops and caused a slump in meat sales. Food companies are also thinking about changing the terminology on packages and getting rid of words like “steak”, “fillet” and “sausage” for non-meat products even though less than 3% of the population is vegetarian.

The UK is facing a CO2 shortage which is affecting the delivery of frozen foods, the meat industry (animals are killed with carbon dioxide guns) and the supply of the fizz in carbonated drinks. Coca-Cola even had to stop one of its production lines as a result. The shortage is mainly due to seasonal factory maintenance. However, increasing natural gas prices and falling world ammonia prices have encouraged the local fertiliser industry to import ammonia, in turn affecting the output of CO2 which is a by-product of the fertiliser industry.

At a time when there is increasing pressure to curb pesticides use – with the EU recently banning neonicotinoids use and granting glyphosate a shorter renewal period – Syngenta‘s CEO warned that the world was running the risk of facing food shortages within 20 years if pesticides and GM crops were banned. He argued that agricultural technologies were essential to increasing food output from less land and to tackle climate change. However, last year the UN argued it was a myth that the world needed pesticides to be fed.

Finally, a shared-production model called Community Supported Agriculture in which local residents fund organic farmers and give inputs in food production is becoming increasingly popular in Brazil. Consumers pay a farmer on a monthly basis to produce seasonal vegetables and fruits and in the event of a crop failure, they share the costs.

This summary was produced by ECRUU

Commodity Conversations Weekly Press Summary

Following the group’s decision to close their sugar trading desk, Bunge is in talks with various trade houses to sell all of its Brazilian sugar production this season. The VP for Bunge South America explained that, previously, 70% of its output was marketed by other tradehouses while the remaining 30% went to its own trading desk. The announcement follows news last week that Bunge will delay the initial public offering (IPO) of its Brazilian operations. Some even say that the IPO could be canceled after recent rumours that the Brazilian government was looking into subsidising fuel again, making ethanol less competitive.

Trade houses are having a difficult time with increasing regulations – MiFID II in Europe – and the trade war between US and China which could lead to defaults. An analysis by Bloomberg argues that companies like Cargill and ADM are expected to be hurt given that a major part of US export to China are crops and food products. On the other hand, a consultant argued that the disruptions would create trading opportunities. He added, however, that risks are bigger because of the huge volumes involved as trade houses have had to scale up in order to become more competitive amid thin margins. Cargill has been voicing its support to global trade in Washington DC last week, asking people to fight to protect global trade which it argues helps equality and the environment.

This week, Cargill published its first corporate responsibility report for its ocean transportation business in which it announced a commitment to reduce its CO2 emissions by 15% by 2020. It already reduced emissions by 5.7% in 2017. The company charters some 650 dry bulk and tanker vessels every year, making it one of the biggest bulk vessel operator in the world. The head of Ocean Transportation also explained that food and beverage companies were increasingly looking at the whole agricultural supply chain, and not just production at the farm level. “The biggest driver, in the end, is the consumer,” he said.

In Belgium, Cargill will invest in liquid chocolate production at its chocolate plant. The company said that demand for premium chocolate was growing fast and that consumers wanted non-GMO, organic and sugar-free products.

On the other hand, a judge in the US has allowed six plaintiffs to sue Cargill and Nestle for child labour slavery, a 6-year old case in which six cocoa workers say they were captured from Mali as children and forced to work on Ivory Coast cocoa plantations. Both Nestle and Cargill denied the case, saying they were fighting hard against slave labour in their supply chain.

The Mars company, meanwhile, won against a class action which tried to force them to warn on chocolate product labels that child slave labour may have been used in the cocoa picking process. The California court ruled that disclosure could only be forced if the quality of the product was affected.

Nestle is working with XPO Logistics on a state-of-the-art warehouse in the UK. Referred to as the “digital warehouse of the future,” the distribution centre will use advanced automation, artificial intelligence and predictive data, among other things, to be as fast and efficient in its distribution as possible. It will also have environmentally friendly features such as rainwater harvesting.

McDonald’s has committed to replacing the 1.8 million plastic straws it uses every day in the UK with the paper version. The company said customers had pushed for the change in part after programs such as the BBC’s Blue Planet II series highlighted the situation in oceans. Paper straws cost 50% more than the plastic ones but McDonald’s hopes to more than offset the additional cost through positive public perception, the company said.  

This comes at a time when the UK has been looking for other countries to export its plastic waste after China started restricting the import of waste at the beginning of the year. Environmentalists point out that the waste is instead being exported to Malaysia, Vietnam and Thailand which are among the biggest ocean polluters in the world. The investigation, which was carried out by Greenpeace, also warned that these countries too are starting to put curbs on the import of plastic waste which means that the UK will have to reduce waste “at the source.”

Finally, you probably didn’t see it coming but Coca-Cola has tied up with Korean company The Face Shop to launch its first makeup collection. The items are packaged in Coca Cola’s signature red and smell like the drink. You can buy your very own here.

This summary prepared by ECRUU

Commodity Conversations Weekly Press Summary

Forbes published its 2018 Global 2000 list, where it ranks the largest firms based on a composite score, and Anheuser-Busch, the Belgian-Brazilian brewer, took the top spot among food and beverage companies, with a global rank of 41. They overtook Nestle, now ranked as the second largest F&B firm after dropping 14 ranks to number 48, followed by Pepsico at number 102. Coca Cola was the third largest F&B firm although it dropped from number 56 in the global rank last year to 209 this year.

Pepsi said it closed its distribution centre in Guerrero, Mexico, about three months after Coca-Cola Femsa did the same. The company cited violence, extortion and unsafe environment for its employees as the reasons behind the closure. In Japan, meanwhile, Coca-Cola introduced a zero calorie lemon drink, called Coca-Cola Clear, which was developed in Japan and contains sucralose and acesulfame K as sweeteners.

A Cargill executive said during a Washington conference that global trade was being disregarded and villainized, which could plunge the world into a period of isolationism. She highlighted that Cargill generates 10% of its global revenues through NAFTA. And in case you missed it, the CEO of Cargill explains his vision on how to survive the disruptions brought about by the digital age and consumers demand for product differentiation in this in-depth Bloomberg article. He says he recognises that the era of making large profits by being the middleman between producer and consumer is over, as he outlines a plan to become an integrated food company, starting with beef and aquaculture.

The speech come as China temporarily imposed hefty deposits of 18.8%-38.4% on Brazilian chicken imports from June 9, after an investigation revealed that Brazil accounted for nearly 50% of China’s chicken meat imports in 2013/16. The announcement coincides with the US pressuring China to allow US poultry imports. In 2017, 9% of Brazil’s chicken exports went to China, according to Brazilian industry group ABPA.

French farmers plan to block the refineries and fuel depots of Total SA to protest against the company’s decision to import palm oil for its biorefinery in La Mede. The union FNSEA said the move was also directed at the government over trade agreements recently signed which permit imports from countries that do not maintain the same standards as France. The beet grower’s union CGB expressed its support.

The state-owned Gecamines from the Democratic Republic of Congo will be getting a USD 150 million settlement from Glencore, after it agreed to end proceedings which seeked to dismantle Kamoto, a joint venture between the two firms. Analysts noted this was a small price to pay and that the conversation had remained rational and commercial, while it should also remove some uncertainty in the cobalt markets where prices are hovering around historical highs.

In South Africa, Glencore and the local investor group Public Investment Corp are the lone joint bidders to purchase a 75% stake in Chevron’s assets in the region for USD 1 billion. The assets on sale include a refinery in Cape Town producing 100,000 bbl/day and 800 fuel stations in South Africa and Botswana.

A team at Oceana has devised an interactive mapping tool called Global Fishing Watch, in partnership with Google and SkyTruth, to catch illegal fishing operations. The tool uses satellite data and monitors over 70,000 fishing vessels via an Automatic Identification System installed in most large vessels. Anyone can now help monitor the activities of commercial fishing vessels in real-time.

The Dutch laser technology firm Eosta thinks it has found a solution to avoid plastic packaging for  organic food products: a laser mark imprinted directly on fruits and vegetables which has no impact on taste, look or durability. However, it can only be done on products with hard shells.

And do you remember the discredited 2013 scientific paper which argued that a Mediterranean diet high in fruits vegetables, nuts and olive oil, significantly reduced the risk of heart diseases? The authors of the paper, originally published in the New England Journal of Medicine, decided to retract the article and re-analyse their data. The core criticism against the paper concerned the lack of randomness in the trials, and the authors re-adjusted the data for 1,044 people, out of the 7,447 participants. After a year, they submitted their paper again, but with the same result: the Mediterranean diet is good for the heart. Nonetheless, many experts maintained their scepticism and highlighted how difficult it is to accurately and scientifically keep track of people’s diets.

This summary was produced by ECRUU