Some pension fund managers are disappointed with the returns from commodities, especially given the equities market are going through a bull run. For one, Fidelity Investments Commodity Strategy Fund has lost 38% or USD 3.26 billion since 2012 from its investments in futures contracts as energy, gold and silver prices dropped and sugar and coffee supplies increased. The fund, however, said it was sticking with the commodity strategy as its managers take a long-term view. It has already reduced the share of commodities in its Freedom Funds to from USD 12 billion to USD 4 billion, or about 2% of net assets.
The US grains market has been through a tough year. Ethanol manufacturers and private grain handlers are now worried that the new tax law giving farmers a 20% deduction on grains sold to cooperatives will drive them out of the market. While Cargill and ADM said they were still evaluating the provision, many farmers are already exploring ways to sell grains kept at private elevators to cooperatives.
Meanwhile, cocoa traders are concerned about an impending crisis in Ivory Coast, where the Coffee and Cocoa Council (CCC) has reportedly resold some 100,000mt of cocoa export contracts that were going to be defaulted on. Because of falling prices, exporters have been struggling to get the financing to buy the beans for their export commitments. Last year, already, the CCC lost some USD 355 million because it had to resell cocoa at a loss.
On the other hand, the NAFTA trade negotiations could get a big boost from recent figures which showed total trade between the US and Mexico in Jan-Nov 2017 gained 6.4% and reached USD 512.2 billion. Mexico reported a surplus of USD 65.68 billion, the highest since 2007. Analysts said this was a sign that the private sector of both nations would be able to convince the White House to continue the NAFTA program, although the growing surplus in favour of Mexico could add to tensions.
Talking of revisiting trade arrangements, the UK government is likely to pay EU-like farm subsidies for five years up to 2024 during the transition period when Britain exits the bloc in March 2019. British farmers get about USD 4.06 billion in subsidies as a part of EU’s Common Agricultural Policy, and the government aims to match this amount until it comes up with a new system.
Sources say Italy-based Ferrero could be buying Nestle’s US chocolate business as early as this week, paying as much as USD 2.8 billion and outbidding rival Hershey. This would follow another acquisition – that of Ferrara Candy back in December – as Ferrero tries to gain more US market share while Nestle focuses on healthier segments. Another European group to eye the US market is French dairy company Lactalis which will buy US-based Siggi’s. Siggi’s manufactures Icelandic style yogurts, reportedly based on a recipe prepared by the founder’s mother.
Still in the US, Hershey and Cargill have quit the Grocery Manufacturers Association, joining Campbell Soup, Dean Foods, Mars, Nestle, Tyson Foods and Unilever who previously left the association. While none of the companies gave a clear cause for leaving, many of them wanted the lobby group to change its stance on a host of issues including GMO labelling.
In an interesting twist, Japan’s government has designated Coca-Cola Plus as a “Foods for Specified Health Uses.” Also known as the forshu stamp, consumers widely view the endorsement as a sign the product is healthy. The drink, recognisable by its while label, contains indigestible dextrin which acts as a laxative. Two other sodas, Kirin Mets Cola and Pepsi Special, also received the government’s health seal of approval.
China seems to be tightening its grip on food safety. The government has removed from stores 1,400 baby formula products which were not registered with the Food and Drug Administration. The move will open up the country’s USD 20 billion baby formula market to other players, a market which is expected to grow 5% annually as a result of the easing of the one-child policy.
Scientists may have found a cause behind the declining honey bee population. A recent study showed that honey bees are attracted to some types of fungicides, such as the herbicide glyphosate. The University of Illinois explained that this was likely leading to increasing levels of fungicide contamination in hives.
The UK’s Prime Minister has committed to an end to plastic waste by 2025. The plan would extend the charge on plastic bags to more shops as well as tax things like takeaway wrappers. A latte levy on disposable coffee cups and a ban from 2023 if these cups are not recycled were also proposed to try to reduce the 2.5 billion disposable coffee cups used annually. However, several environmental groups said the plan would need to be legally enforceable to have any impact.
Olam‘s CEO has taken charge as the chairman of the World Business Council for Sustainable Development. The co-founder of Olam International is the first person from the agri sector as well as the first Asia-based and Asian CEO to head the council.
Finally, the CME Group, which owns CBOT and Chicago Mercantile Exchange, has allowed block trading in all its agricultural markets as of January 8. These privately negotiated deals are permitted in its other markets such as Black Sea wheat and Eurodollars. Futures International explained the company was trying to create more liquidity in deferred futures spreads and create some transparency. However, the National Grain and Feed Association complained block trading will decrease transparency by taking business out of the public marketplace.
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