In the joy of others, I find my own

 A conversation with Kiran Wadhwana

 Good morning, Kiran. How would you describe what you do?

 I am an origin broker active in the Indian export market for physical sugar. I act as a middleman between a mill wanting to sell physical sugar for exports and a trader looking to export that sugar. I earn a commission on any trades that I put together.

 Why do traders need origin brokers in addition to their own local offices?

When you have your own office, people move in and out, getting promoted or changing firms. It means that most relationships are with the company and not with the individual – and they could be weaker as a result. An origin broker builds up personal relationships with suppliers over a long period.

Origin brokers will have a detailed understanding of what is happening in their procurement areas regarding crop prospects and industrial processing capacity. For example, have any mills increased capacity or added a refining end?

As an origin broker, I keep my ear to the ground, and with my long-term relationships, I can get a good feel of the moves and trends in the local market – perhaps better than if a company has its own office.

There is also the issue of counterparty risk. As an origin broker, I must know the financial condition of clients. I must evaluate the risk that they may default on a contract if the market moves against them.

Do traders pay for you to bring the offers and put the trade together, or do they pay you for your market information?

It is a good question. The answer is probably ‘both’. In addition to broking, I also double up as a consultant for both local mills and international trading companies. Some take me on a retainer. I help domestic mills understand the world market and help international traders understand the local market.

I send out a weekly report that covers crop progress, government policy, industrial capacities, and trading issues. I also cover ethanol policy; it is critical to the sugar market.

Government policy is probably the toughest. It is also critical. India’s government can’t just look at one commodity. It must look at the total domestic food supply. We have such a vast population it would be impossible for other countries to supply our needs.

You could say that I am a bridge between the domestic and international markets, with information flowing in both directions.

Who pays you on a brokerage deal?

I structure my business such that the sellers, rather than the buyers, pay the commission. That may or not be the same for other brokers.

I usually charge 50 rupees per tonne, but some brokers charge double that.

Are there lots of origin brokers in India for sugar?

Yes. India has a large domestic sugar market. Last year we exported about 12 million tonnes, while the domestic market is 27 million. Most brokers only work in the domestic market, although some double up and do exports. A domestic broker may not understand the export market. I am probably one of the few who works exclusively in the export market. I don’t do any domestic broking.

There are probably 15-20 brokers active in the export market.

There is a thin line in India between a broker and a trader. One day someone may be broking, and the subsequent day trading. I think I am the only one who only does broking. I do not trade.

Could you describe a typical day?

I am lucky to have worked from home for the past 20 years, and there is no distinction between home and office life. It may sound good – and it is – even if it means that I work all the time!

I get up at around 5 am, do my morning exercises, and then read the overnight futures, physical market, and analytical reports. I use this quiet time to check recent trades’ logistical and execution details. I also do any administrative tasks that need to be done.

At around 8 am, I receive the overnight reports from New York. By then, my Indian clients have begun to contact me on WhatsApp, asking questions, exchanging market information, looking to buy or sell physical sugar, or checking on execution issues. I used to do everything by telephone, but it has now moved to WhatsApp.

European clients wake up at around 2 pm my time. It starts to get busy as they are either looking for sugar or trying to keep abreast of any policy developments that may have occurred overnight in India. That goes on until around 7 pm, when the New York futures market becomes more active. I advise some Indian clients on pricing their export sales on the futures exchange. The moves in flat price can also generate new physical business.

My day ends around 8.30 pm. It sounds like a long day, but I don’t have to commute. The line between home and office is, well, thin. I am a few years from retirement, and I don’t have to put as much effort into my business to get the same result as I used to. I like that.

What skills and experience do you need to be an origin broker?

An essential skill is getting on with people and managing relationships with clients. To do that I think that you must like people and social interaction. You must also be prepared to accept ‘no’ as an answer and realise that markets can be calm for extended periods.

Working in India, I must keep a keen eye on government policy. We have a new policy every year. I try to understand the workings of domestic politics and anticipate what policy may be and how it might affect the markets.

Perhaps experience is more important than any skill set. Over my career, I have been a farmer, a miller, a trader, a futures broker, and a consultant. It has allowed me to understand both domestic and international markets.

My grandfather started the family in the sugar business and founded the company ITC – International Trading Company – under which I still operate. He was a trader, but now I only do broking and consulting.

Tell me about your time as a farmer and mill owner.

When I finished my MBA in the US in 1985, my father said, “Well, you have been educated in the best universities in the world. I will buy a sugar mill, and you will run it for me!”

The mill came with the 4,000-acre farm, and I became one of India’s largest sugarcane growers. I learned the business from the ground up, even if I was a gentleman farmer.

So, you were not in the field with a machete cutting the cane?

I went to the fields in a jeep but didn’t have a machete!

Out of all the hats you have worn, which is the one that has taught you the most?

 My time as a gentleman farmer and miller helped me enormously. If I had not had that experience, I would not have such a good understanding of the underlying issues in the market – nor would I have been able to have such a good relationship with the mills. You can only understand the psychology of a farmer if you have been a farmer. The same applies to milling. I did both for more than 20 years.

What happened to the farm?

It is still there but under litigation with the government. The Urban Land Ceiling Act, passed in 1976, limits the amount of land a farmer can hold is 75 acres unless the farm is mechanised. Our farm is mechanised, but we are still fighting the issue in the courts. Local people have encroached on the land. It is still in our name, but local people live there and farm it.

The farm has an issue with water. The local government has diverted the farm’s water supply to urban areas as the population has grown.

The farm has become more of a liability than anything else.

What about the mill?

It is still there, but it has been closed for 20 years. We built a school in the factory area that we run along with two other schools we opened in local villages – a total of 1,400 students from nursery to year twelve.

We also built a religious temple on the mill site for the local population.

Which is the hardest job in your supply chain?

Farming is by far the hardest. It is the most complex and risky part of the sugar supply chain. Although Indian farmers receive a fixed price for their cane, many other factors can affect their crops: climate, weather, and insect infestations (sometimes from neighbouring farms).

New technology may make farming more accessible, but it remains risky and complex. Sitting here in an air-conditioned office is far easier than being out there in the fields.

What is the worst thing about your job?

When people default on a contract.

There are two types of defaults. The first can result from an adverse market move; for example, if a mill sells you sugar at one price, the market price increases, and the mill sells the same sugar at a higher price to another buyer. Knowing your client and helping them manage their sales can reduce counterparty risk from adverse market moves.

The second type of default can occur because of a change in government policy, for example, if the government restricts exports.

I find the second the most stressful. It can result in huge losses for both millers and traders.

Is government policy – and changes in government policy – the biggest challenge you face?

Government policy is OK. Policy changes – or the delays in announcing policy – cause problems. Mills need to sell their sugar three months in advance, but the government thinks that once they reveal the policy, the mills can export the next day. It doesn’t work like that. Mills are industrial units that must plan at least six months ahead.

Do you need different skills as a broker compared to being a trader?

The trader looks at a deal in terms of what it means for his bottom line – how he can make money from it. A broker aims for a win-win for both sides. When I sell sugar for a mill, I need to understand the miller’s costs, their concerns and what other options they have. But I also know that the trader must make money, or they won’t do the business. I tell the trader he must leave some money on the table for the mill, or he won’t return to you next time – and vice versa.

I am constantly looking to achieve a balance – that’s what makes you a proper independent broker.

When I was broking, I found that I was always trying to keep people happy. Broking suited my personality as I tend to avoid conflict. Traders often find themselves in a conflictual situation where they must fight for their margin. Does that apply to you as well?

Very much so! I work to bring people together. I avoid conflict.

Conflict avoidance is not just a question of personality. It makes sense from a business perspective. The only raw material I have is my time. I must use it wisely. If you get into a conflict, you waste too much time trying to solve a problem rather than doing any productive work. So, if you can nip a conflict in the bud – not let it develop – you will have more time to do more deals while keeping your existing customers happy.

Your brother works as a trader for a trade house. It is interesting that in the same family, we have two brothers, one a trader and the other a broker. How does your brother’s character differ from yours – and how do your skillsets compare?

 My brother is more of a risk-taker than I am. He has a higher appetite for risk.

As a trader, he may do business with a financially weak mill and take a chance on the counterparty to get a good deal. That is something I would fear doing. I prefer to have a financially strong counterparty and not get into a conflict over contract performance.

My brother doesn’t look at the physical volume of the business he does but rather the profitability of each trade he does. I have a fixed commission per tonne, and I will try to maximise volume while simultaneously ensuring that the counterparties are strong and that there is no risk of default.

Is your brother braver than you?

He takes risks that I wouldn’t be willing to take. It is also a question of age. As you grow older, you become more risk averse. I am 5-6 years older than him.

How does that affect your ego?

Markets have a way of beating the ego out of you, whether you are a broker, analyst, or trader! We can all get things wrong. Humility is an asset. No one is always correct, and, in your career, you will get things wrong.

What is your favourite thing about what you do?

Making money!

And your second favourite thing?

I am constantly learning. I learn something new every day. I learn from my clients and from people who ask me questions. My clients teach me everything.

I love to train younger people. When I teach them, I learn from them.

What advice would you give to a young person starting in the business?

Understand what drives production! If you don’t understand production, you will never understand your market.

Last question – what would your 20-year-old self think of you now?

Funnily enough, I recently asked myself that same question.

My 20-year-old-self would never have imagined the path I followed. I was in the US when I was twenty, finishing my undergraduate course in Houston, Texas, and applying for an MBA at the University of Michigan, ANN ARBOR.

There were six of us from India on the MBA course. Four stayed in the US and two, including me, came back to India. I keep in touch with the four who remained in the US. They are all successful and certainly have more money than I have. So, if you judge success purely on money, they are all more successful than me.

Religion plays an integral part in my life. As I mentioned, we built a temple on the site of our mill, and I am a trustee of the Akshardham temple in Delphi – the biggest Hindu temple in the world.

The guru who built the temple, Pramukh Swami Maharaj, always said, “In the joy of others, I find my own.” I have applied that motto in both my private and business life.

So, when it comes to life quality and philosophy, I am satisfied with – and proud of – the life I have led. I think my 20-year-old-self would be too!

Thank you, Kiran, for your time and input.

This conversation is part of the Commodity Professions – The People Behind the Trade series.

© Commodity Conversations ® 2022

Media Monitor

India has banned broken rice exports and imposed a 20 per cent duty on exports of various grades of rice, excluding parboiled and basmati rice. India accounts for over 40 per cent of global rice shipments, exporting a record 21.5 mln mt in 2021, more than the combined shipments of the world’s next four biggest exporters: Thailand, Vietnam, Pakistan, and the US. Rice loading has stopped, and nearly one mln mt of rice is trapped in the ports as buyers refuse to pay the export levy.

The move caught markets by surprise as monsoon rains, delayed in parts of India’s northern and eastern rice-producing regions, have improved over the last couple of weeks, boosting crop prospects.

Russian President Vladimir Putin wants to revisit the UN-brokered Ukrainian grain export deal, saying it has “cheated” developing countries.  He claimed that only two out of 87 ships, carrying 60,000 mt, have gone to developing countries. He added that he wants to limit grain and other food export destinations.

However, the data shows that a significant percentage of the more than two mln mt of grains shipped under the agreement has gone to developing countries, with 400,000 mt shipped to Africa and more than 600,000 mt going to Asia and the Middle East.

Even so, Turkish President Tayyip Erdogan said Putin was right to complain that grain from Ukraine was going to wealthy rather than emerging countries.

Rather than being worried that Ukrainian shipments aren’t going to developing countries, Russia’s gripe is that Western sanctions restrict Russia’s ability to export grain and fertilizers. UN and Russian officials discussed the issue at a meeting last week in Geneva.

Russia’s foreign minister called for the removal of “logistic sanctions that prevent the free access of Russian grain and fertilizers to world markets.” He said, “Our Western colleagues are not doing what the UN Secretary-General promised us.” President Erdogan will meet President Putin next week to discuss the issue.

Ukraine says Russia has no grounds to review the Black Sea grain deal.

Last Sunday, Ukraine dispatched its biggest convoy of grain vessels under the deal after 13 ships carrying 282,500 mt of agricultural products left the Black Sea ports of Odesa, Chornomorsk and Pivdennyi.

However, at the current rate of exports, it will take around six months to ship the rest of the grain from Ukraine’s last harvest. The dangers of sending ships into the heavily mined Black Sea, along with a lack of large vessels, means volumes transported are well below Ukraine’s goal of doubling farm exports to at least 6 million tonnes by October. Ukraine’s farmers have already begun to sow their winter crops.

The Washington Post (via yahoo) has a good round-up of the toll that hot weather and drought have inflicted on US farmers.  CNN looks at how Europe’s drought could mean a one-third drop in Spain’s olive oil production. (Spain is the world’s biggest producer of olive oil.)

Some European farmers are shutting down operations and reducing production because of the energy crunch. There are worries that high energy prices will lead to food shortages this winter, mainly fruit and vegetables.

The FT has a long read on Japanese agriculture that argues the case for reform. But reform is not easy. Holland’s Agriculture Minister resigned this week, indicating that the government is losing its battle to reform agriculture and reduce emissions. (The Netherlands is the world’s second-largest exporter of agricultural goods.)

Could meat go the same way as tobacco and sugar? The Dutch city of Haarlem certainly hopes so. It will become the first city in the world to ban meat adverts from public spaces.

Plant-based meat might not be the climate saviour that some predicted. Food Navigator writes that it is becoming the biggest category failure in food history. Plant-based meat does not live up to its hype, and manufacturers aren’t delivering the taste and texture consumers need to repeat purchases.

Will bean-free coffee and chocolate have more success?

Yara, the Norwegian fertilizer giant, is close to acquiring Petrobras’ fertilizer unit, known as UFN-III, based in Mato Grosso do Sul state. It could cost less than $100 million as the unit is not yet operational. Yara already owns five plants and 24 mixing facilities in Brazil.

Reuters reports that US ethanol plants produce more than double the GHG emissions per gallon of fuel production capacity than oil refineries. Meanwhile, carbon capture could give a new lease of life to algae biofuel.

The current downturn in the Capsize freight index is the sharpest since 2008. Average cape rates are under $6,000 daily, less than half of operating expenses.

Meanwhile, the container shipping industry may be heading for a hard landing after making more money in the last three years than in the previous six decades.

Finally, there has been some talk of imposing windfall taxes on food traders, but no one has mentioned the big investment banks. The big banks made record profits trading agricultural commodities in January-June this year – an estimated $600 million, twice the $300 million they made in 2021. However, this compares with the estimated $6.6 billion they made in oil and gas markets and the $3.1 billion they made in metals.

Click here for Bloomberg’s take on the past week’s food and agriculture stories.

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Media Monitor

The UN FAO world food price index fell for the fifth month in a row in August, averaging 138.0 points versus a revised 140.7 in July. The index has fallen from 159.7 points in March but is still 7.9 per cent higher than a year earlier.

As a hopeful sign, fertilizer prices are easing (a little). Even so, Forbes argues that farmers still need to up their N-game and use fertilizers more efficiently.

Freight rates are also falling. Container rates have fallen 40-46 per cent from last year, while Capesize time charter rates have dropped below $1000/day on the transatlantic route,  beating a March 2016 record low of $1,015 per day.

By the end of August, 62 ships had left Ukrainian ports, transporting about 1.5 mln mt of grains and oilseeds. However, the UN warns that Ukraine must ship millions of tonnes of grain from its previous harvest to make room in their silos for the new crop.

To facilitate shipments, Ukraine will allow merchant sailors to leave Ukraine if they receive approval from their local military administrative body. The government bans men aged 18-60 from leaving the country.

A new 320-nautical-mile route for shipments from Ukraine’s ports of Odesa, Chornomorsk and Pivdennyi/Yuzhny may also facilitate shipments.

The UN has scaled down its talk of a food crisis and says the problem is affordability, not availability. Business Insider disagrees. It predicts that next year’s food crisis will be worse than this year’s due to a drop in production, particularly in Ukraine. It quotes a McKinsey report that estimates Ukraine’s grain production will drop by 35-45 per cent next harvest.

As of 25th August, Ukrainian farmers had harvested 25.3 mln mt of new crop grain, including 18.8 mln mt of wheat. The Food Ministry expects grain and oilseed production to reach 65-67 mln mt this year.

The FAO has lowered its forecast for global cereal production in 2022/23 to 2.774 billion mt, down 1.4 per cent from last season. The agency pegs world cereal use at 2.792 billion mt, leading to a projected 2.1 per cent fall in global stocks.

The USDA estimates US agricultural exports for the fiscal year 2023 at $193.5 billion, down from a record $196 billion in 2022. The USDA sees lower exports of cotton, beef, and sorghum partially offset by higher exports of soybeans and horticultural products.

For the past 30 years, the average return on US farmland, adjusted for inflation, has been around 5 per cent, making it an attractive investment. The USDA estimates that non-farming landlords own 30 per cent of the country’s farmland.

Canada’s wheat production will increase 55 per cent this year to 34.6 mln mt as yields improve amid better moisture and more moderate temperatures, making 2022 the third best harvest since records began in 1908. Last year’s drought-stricken crop was the worst since 2007. Canadian farmers will harvest more canola, barley, oats, soybeans, and corn in 2022 compared to last year.

Malaysia’s palm oil industry fears a significant drop in production this year due to a shortage of around 120,000 workers. Producers expect to leave six mln mt of fresh fruit bunches unharvested, equal to one mln mt of vegetable oil.

This year, drought and extreme heat have decimated Texan cotton production, costing farmers at least $2 billion.

Politico argues that the 350 companies that account for more than half of the world’s food and agriculture revenue are not doing enough to adapt to climate change.  It writes that many companies are continuing to operate as if it’s business as usual.

In an exception that proves the rule, wine producers may benefit from hotter and drier climates.

China is investing heavily in overseas agriculture.  Goldman Sachs reports that Chinese grain yields are 40 per cent lower than in the US, putting production costs about twice as high as America’s. It takes Chinese farmers between 6 and 26 per cent more grain to produce a kilo of pork or chicken than it does their American counterparts.

The UK’s Agriculture Minister has told the FT that British farmers have nothing to fear from newly signed trade agreements with Australia and New Zealand.

The container-shipping line AP Møller-Maersk has completed its $3.6bn acquisition of LF Logistics, announced in December. Maersk and other container shipping lines are reinvesting record profits to build integrated supply chains.

Synthetic milk, produced using fermentation, may threaten the dairy industry.  Unlike artificial meat – which can struggle to match the complexity and texture of animal meat – synthetic milk is touted as having the same taste, look, and feel as regular dairy milk.

Brazilian Presidential candidate Lula has pledged to step up the conservation of the Amazon rainforest by bolstering the environmental protection agency Ibama and increasing enforcement.

A new report finds that the US government drastically underestimates the social cost of carbon dioxide emissions. The US currently puts that cost at around $51/mt, but new research puts the figure at $185/mt.

Scientists are studying the effect of ozone pollution on crop yields and are working on new crop varieties.

Finally, Sifted questions whether vertical farming will survive a recession. Will people buy vertically grown basil in a cost-of-living crisis?

You can find Bloomberg’s weekly food supply summary here.

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Media Monitor

Hot and dry weather in much of Europe will substantially reduce crop production, particularly corn, soybeans, and sunflowers.

The European Drought Observatory reports drought is affecting a staggering portion of Europe, with 47 per cent of EU land under the level of “warning” and 17 per cent at the more severe “alert” status.

French farmers are asking their government for billions of euros in compensation for crop and livestock losses.

Politico believes that European farmers have little choice but to adapt to climate change. On the same theme, the Guardian suggests five crops that could feed a climate-changed world: amaranth, fonio, cowpeas, taro, and kernza. (No, I hadn’t heard of them either.)

The world’s cotton crops are suffering from hot, dry weather, with yields falling in India, Brazil, and China. Drought has killed the cotton crop in Texas, but higher cotton prices could spark a revival of cotton in wetter Louisiana.

With almost all of Texas in drought, ranchers are sending more cattle off to slaughter.

Corn prices moved higher this week on evidence that the drought across the US Midwest would reduce yields.

The drought in China is threatening food production, prompting the government to order local authorities to take all available measures to ensure crops survive the hottest summer on record.

China is particularly concerned about its rice crop. The six worst-affected regions, Sichuan, Chongqing, Hubei, Henan, Jiangxi, and Anhui, account for almost half of China’s rice output.

More than 70 days of extreme temperatures and low rainfall have wreaked havoc along the basin of the Yangtze, which supports a third of the country’s crops. The government is using drones and chemicals to seed rainclouds.

The government warns that the country’s temperatures are rising faster than the global average and says it is a sensitive region in global climate change.

India announced restrictions on wheat flour exports. Wheat flour exports jumped 200 per cent after India banned wheat exports last May. There is talk that the country may import wheat and abolish its 40 per cent import tax.

Ukraine has exported almost ten mln mt of agricultural products since Russia invaded, including nearly two mln mt since the beginning of August.

Citing fake shipping documents, Turkey said it will re-impose phytosanitary certification requirements for imports from Ukraine.

Ukraine has restored a rail link to Moldova after a 23-year hiatus. The connection could carry ten mln mt of freight a year.

The UN is working with the EU and the US to overcome obstacles to Russian food and fertiliser exports.

Yara, one of the world’s largest fertilizer makers, is slashing ammonia production due to soaring gas prices. The company announced a 50 per cent cut to its ammonia-based urea and nitrogen fertilizer production in Europe, citing record high gas prices. There are worries that soaring fertiliser prices will deepen Africa’s food crisis

The closure of the UK’s biggest ammonia fertilizer plant could lead to a shortage of CO2, a by-product used in the beer and soft drinks industry and by abattoirs to stun animals before slaughtering them. The plant closure could result in beer shortages and pig pileups, causing alarm among the bacon and beer-loving British.

It is ironic that the world should suffer a shortage of CO2 when there is too much in the atmosphere. At the same time, global methane emissions are rising. The FT warns, “If you think of fossil fuel emissions as putting the world on a slow boil, methane is a blow torch that is cooking us today.”

On a more optimistic note, Brazil’s presidential frontrunner Luiz Inacio Lula da Silva said his country does not need to cut a single tree to plant more soybeans and sugarcane or raise cattle. He promised to restore law enforcement in the Amazon rainforest to curb deforestation.

The Boston Consulting Group has published a report on alternative proteins, writing that investing in the sector is the most efficient way to reduce global GHG emissions.

The Guardian has called for a windfall tax on food companies. The newspaper erroneously reports that the four ABCD companies – ADM, Bunge, Cargill and LDC– control 70-90 per cent of the global grain trade. (Seven companies – ABCD+ Wilmar, Viterra, and Olam – account for an estimated 45 per cent of the seaborne trade in grains and oilseeds.)

Earlier this year, the UK charity Oxfam also called for a windfall tax on food companies. They made a similar call in 2011 during the last food crisis. (I had forgotten that we had a food crisis in 2011.)

In 2015, the USDA, EPA and FDA set a goal to reduce food loss and waste by 50 per cent by 2030. They still have a long way to go, but new technology, such as an artificial ice cube, could help.

Finally, Bloomberg asks if sail is the future of commercial shipping. The news agency reports that adding a sail to an existing cargo ship can reduce GHG emissions by 20-30 per cent. You can find Bloomberg’s weekly food and agriculture summary here.

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The UN estimates that retail establishments and the food service industry waste around 931 mln mt of food each year worldwide. If food waste were a country, it would be the third biggest source of greenhouse gas emissions, accounting for nearly 10 per cent of global GHG emissions.

Media Monitor

Deforestation in the Amazon reached a new record high in the first seven months of this year, up 7.3 per cent from last year. Environmentalists blame President Jair Bolsonaro for rolling back environmental protections. Luiz Inacio Lula da Silva believes he has a solution in subsidized “green” farm loans to spur planting in the Cerrado. However, the FT argues that Cerrado agriculture has reached critical levels.

Wheat prices fell this week to the lowest levels since Russia’s invasion of Ukraine on bearish news ranging from rising Ukrainian shipments to falling US export sales.

Ukrainian grain exports are moving more quickly and fluidly than I had expected. Five more ships have left Ukrainian ports carrying corn and wheat, three from Chornomorsk and two from Pivdennyi.

Although one of the ships was carrying humanitarian food aid for Africa, some people are disappointed that the first cargos have not all gone to the world’s neediest people. Corn has gone to the UK and Ireland, while Italy has received sunflower seeds and soybeans shipments.

The first vessel to leave Ukraine under the deal, the much-followed Razoni, was initially destined for Lebanon but arrived in Syria with its cargo of corn.

Ukrainian officials are working on releasing a detained vessel carrying wheat for Egypt following investigations over its alleged Russian owner.

Ukraine’s grain exports so far in this season are down 46 per cent last year at 2.65 million tonnes. Ukraine exported 948,000 tonnes in the first half of August, down from 1.88 million tonnes in the first 15 days of August 2021.

Russia is exporting wheat at a “painfully slow” rate and lags 28 per cent behind last year, despite a bigger crop. Analysts blame logistical and financial constraints, with some banks and shipping companies opting to shun the region.

With Ukrainian grain exports now flowing, the media is turning its attention to the weather as a factor driving the world food crisis. Politico reports that the drought in the Horn of Africa is worsening, while, in the US, 60 per cent of West, South and Central Plains are experiencing severe drought or higher this year. Plunging water levels on the Rhine River make transporting cargo harder in Europe. France’s drought threatens local biodiversity in the River Loire, and rocky beaches have emerged in Italy’s Lake Garda.

Some of the tributaries running into the Yangtze River are dry in China. The river winds through some of China’s most productive agricultural regions, and the lack of rain threatens crop development during harvest. Drought is also negatively affecting Syria’s pistachio crop.

Some French farmers are adjusting to climate change by experimenting with sorghum rather than wheat. Meanwhile, regulators worldwide are becoming more comfortable with GM drought-resistant crops. Brazil and the US are expected to approve GM drought-resistant wheat soon.

Even the Guardian is on board, with a report that soybeans genetically modified to absorb light more efficiently produced a 25 per cent greater yield. The newspaper called it “an advance that could significantly boost global food supplies when nearly 10 per cent of the world population was hungry last year.” (It fails to mention that 99 per cent of soybeans are fed to animals, not humans.)

The energy crunch has curtailed a quarter of Europe’s nitrogen fertilizer capacity, and there are fears that the situation will worsen. Faced with higher prices and tighter supplies, farmers may cut global fertilizer usage by as much as 7 per cent next season.

Economic mismanagement has led to a food crisis in Sri Lanka. The ousted government sought to improve its balance of payments crisis by banning the import of fertilizer, which led to the destruction of half the country’s rice crop. Fuel shortages are slowing a recovery.

Political mismanagement in the UK has led farmers to throw away up to £60 million of fruit and vegetables due to a shortage of workers. The UK’s post-Brexit visa scheme allows only three-fifths of the needed workers to enter the country.

The UK’s government-appointed food tsar said it must reduce meat and dairy intake to meet its climate goals. Surprisingly, organic pasture-grown beef and lamb are some of the worst foods for GHG emissions.

The UK has more than 1,000 CAFOs (Concentrated Animal Feeding Operations), some holding as many as a million animals, according to a new book called Sixty Harvests Left – How to Reach a Nature Friendly Future.

Marketwatch has an excellent round-up of the current state of the alt-meat market, writing that the “crusade to replace meat” has slowed. Meanwhile, Uruguay’s cattle industry is booming.

The BBC asks whether eating fish can be a sustainable option. The answer is that it can be, but you must choose the right fish.

The Guardian asks whether vertical farms could be a solution. Some believe so, while others argue that their future will be limited to growing “lettuce for rich people.”

If your local supermarket has run out of lettuce, here’s what to buy instead. Finally, here is why you can no longer find Dijon mustard.

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In a two-week experiment (reported in May), the BBC tracked the carbon emissions of vegetarian, vegan, and omnivore diets. The results were in line with expectations. Vegan CO2e emissions were 9.9kg per week, vegetarian 16.9kg per week and omnivore 48.9kg per week. Some takeaways:

  • Waste less. Emissions stop if you eat food but continue until the food has decomposed if you throw it away.
  • Focus on what you eat rather than its geographical origin. Transport makes up a small percentage of GHG emissions in the food chain
  • The GHG emissions vary depending on how you cook the food. Batch cook and only use your oven on special occasions.

ComCon News Monitor

The Food and Agriculture Organization’s (FAO) index of world food prices declined again in July, averaging 140.9 points versus 154.3 for June. Wheat prices fell 14.5 per cent, while corn fell 10.7 per cent. Even so, the July index is still 13.1 per cent higher than a year ago.

The FT warns that the world’s food crisis* is not over just because prices are falling. The newspaper is cautiously optimistic about Ukrainian supplies but worries that drought and climate change will keep costs high.

The first grain cargo to depart Ukraine since Russia’s invasion, carrying 26,000 mt of corn, has found a new buyer after the original Lebanese buyer refused to take the shipment due to quality concerns. The ship will unload 1,500 tonnes in Turkey and sail to Egypt with the rest.

Two more ships left Ukraine’s Black Sea ports on Friday, including one laden with wheat. Over the past two weeks, fourteen ships have left Ukraine, mainly carrying corn.

The Joint Coordination Centre (JCC), which oversees Ukraine’s export programme, agreed that grain vessels moving through the maritime corridor would be protected by a ten nautical mile circular buffer zone.

In July, Ukraine exported 412,000 mt of wheat, 183,000 mt of barley, 1.1 mln mt of corn, and 362,100 mt of sunflower seed. The country has an estimated three mln mt of grain in its ports, which could take until around mid-September to clear.

Russia has banned imports of agriculture products from 31 of 34 regions of Moldova following a dispute over payments for natural gas.

India’s government has warned it could scrap a 40 per cent duty on wheat imports – and cap the quantity of stocks traders can hold – to dampen prices. Some suggest that India could import wheat later this year, but domestic prices are currently a third lower than world prices.

Global wheat demand may be falling faster than expected as consumers switch to alternative crops, especially for animal feed.

Drought is ravaging crops across large parts of Europe, including Spain, southern France, central and northern Italy, central Germany, northern Romania and eastern Hungary. Corn, sunflower and soya bean yields are forecast to drop by about 8-9 per cent, with cereal yields expected to fall 2 per cent overall, compared with the five-year average. Water levels on the Rhine are at critical lows because of the drought.

Europe’s farmers may face difficulties sourcing fertiliser for their new crop. The cost to produce ammonia and urea is up about 60 per cent from a year ago due to high gas prices. ICIS estimate that as much as 40 per cent of European urea production may have been cut this year. Farmers may increasingly turn to manure instead.

Analysts are concerned about inclement weather’s effect on global rice production.

Seaweed is one crop that should never (never say never) be affected by drought. The BBC has an explainer on the state of the farmed seaweed sector.

Meanwhile, Dutch farmers are in an uproar over plans to curb animal numbers and cut nitrogen emissions. The government wants to reduce livestock numbers by a third in its goal to halve emissions by 2030. Farmers have blockaded roads, airports, and train stations and dumped slurry at the home of the minister in charge of the programme.

Ireland’s government is planning similar measures, committed to a 25 per cent cut in greenhouse gas emissions from agriculture by 2030. The agriculture sector is responsible for about 37 per cent of Ireland’s emissions.

Something similar is brewing in Canada, where the government proposes cutting fertiliser emissions by 30 per cent by 2030. Farmers say they may have to reduce grain output significantly if the measures are passed.

In company news, Cargill reported that its fiscal year 2022 revenue jumped 23 per cent from a year earlier to a record $165 billion.

UAE state investor Mubadala Investment Co and energy company Raizen are in the final round to acquire Brazilian ethanol joint venture BP Bunge Bioenergia. The company owns 11 producing units with 33 mln mt of sugar cane crushing capacity and could be worth $1.8 billion.

Plant-based meat company Beyond Meat posted a second-quarter net loss of $97.1 million and lowered its revenue outlook for the year. The CEO said consumers are reluctant to pay a premium for environmentally friendly products.

*  I am not sure there is a global food crisis – at least not yet. The supply chain has multiple buffers if crops fail due to climate change or government GHG caps. Today only 55 per cent of the world’s crop calories feed people directly; the rest are fed to livestock (about 36 per cent) or turned into biofuels and industrial products (roughly 9 per cent).

Governments are beginning to try and reduce livestock production (see above), but the world is moving in the other direction on biofuels. The USA is looking to increase government support for the biofuels sector, while  Indonesia is considering expanding the biofuel mix in domestic diesel from 30 to 40 per cent.

The other buffer is food waste: a third of the world’s food is wasted. Spain is trying to do something about it.

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Media Monitor

Ag traders are waiting eagerly for the outcome of talks between Turkey, Ukraine, Russia, and the UN that may allow Ukraine to restart exporting grain from its Black Sea ports. Turkey is confident they can reach a deal, but Ukrainian officials remain cautious. They are not convinced by the offer of safe passage and are also demanding a commitment that Russia will not attack its ports.

Turkey’s President says he wants the deal in writing (although the expression ‘not worth the paper it is written on’ comes to mind.)

Ukraine has been struggling to export its grain, although shipborne exports via Rumania increased after the country retook Snake Island. Germany’s State-owned rail company Deutsche Bahn is planning to transport grain by freight train from Ukraine to Germany’s ports.

In the meantime, Ukraine’s farmers try to find storage for the new harvest. Not being able to sell or ship their grain has created a severe cash flow problem for farmers; they are running out of money to harvest and will have difficulty financing new crop plantings.

Unsurprisingly, food security and rising food prices dominated discussions at the G-20 meeting last week, although there was no clear consensus as to what, if anything, could be done. Delegates heard that food shortages and high prices could kill more people than the estimated 15 million killed by the Covid pandemic. *

Indonesia has removed its levy on palm oil exports until end-August. High stocks have forced mills to limit purchases of palm fruits, and farmers complain their unsold fruits are rotting. Palm oil prices have fallen by about 50 per cent since late April to their lowest in over a year.

The CEO of Norway’s Yara, one of the world’s biggest fertiliser producers, warns of continuing shortages of nitrogen-based fertilisers due to high gas prices. Better news comes from the miner BHP, accelerating its move into fertiliser production with the start of a $5.7 billion potash project in Canada.

Vox has a well-balanced long-read on Sri Lanka’s move to organic farming and its role in the country’s financial and political crisis. The agrochemical import ban led to a 20 per cent drop in rice production in its first six months, while tea production fell by 18 per cent. (Most Sri Lankan farmers supported the ban but wanted more than one year to make the transition.)

And if you still have time to spare, the Guardian has a long read on wind-powered cargo ships. They describe them as “a little bit of utopia”.

The Guardian writes that smallholder farmers and charcoal producers are deforesting Congo’s rainforest. Deforestation is also a problem in Colombia, while a new report argues that Brazilian authorities do little to prevent illegal logging.

Finally, if you find the news is getting you down, try eating Marmite. Scientists have found that Vitamin B6 – a yeast extract nutrient–may help reduce feelings of anxiety and depression.

Click here for Bloomberg’s weekly round-up of their top food stories, including why this might (finally) be the year of the mushroom.

* Others believe the situation is even worse. In his book, The End of the World is Just Beginning, Peter Zeihan predicts that two billion people will starve to death over the next 20 years due to climate change and a breakdown in global supply chains – reduced to one billion if everyone stops eating meat. (The book is a New York Times bestseller, but I don’t recommend it.)

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Media Monitor

Russia, Ukraine, Turkey, and the United Nations may sign a deal next week to resume Ukraine’s grain exports. (It is not a done deal.) As part of a deal, the US will reassure banks, shipping and insurance companies that Russian exports of food and fertiliser will not breach Washington’s sanctions.

Ukrainian grain shipments have started to pick up through the Danube to Romania. Sixteen vessels are waiting to load, while more than 130 are awaiting their turn in Romania’s Sulina canal.

Russia looks set to bring in a big harvest with yields 0.1-0.2 mt/ha higher than last year, but Ukraine’s farmers are facing their most challenging harvest since independence. With the Russian incendiary bombing of Ukraine’s wheat fields, the country’s harvest has become a battlefield.

If there is one good thing to come out of Russia’s invasion of Ukraine, it is that consumers in the western world no longer take food for granted. Russia’s blockade of Ukrainian ports has launched a global awareness of where food comes from and how it ends up on your plate.

Much press coverage is critical of the systems that keep (most of) the planet fed. For example, an opinion writer on CNN writes, “The war in Ukraine is showing us how badly the food system provides for people and the planet.”

In an interesting report, the environmental NGO Replanet argues that governments should lift bans on GM crops, ditch biofuels and persuade their citizens to eat less meat. More interestingly, it wants governments to stop promoting organic farming. The NGO argues that the EU mandate to triple the area under organic production will reduce the bloc’s grain harvests by 20 mln mt.

I find the suggestion on organic farming particularly interesting. Time writes that the Sri Lankan government’s ill-thought-through move to organic agriculture precipitated the country’s economic collapse after a more than 30 per cent drop in rice yields. (Other newspapers are finally beginning to mention it.)

The ‘food versus fuel’ issue is an emotional one. This blogger may have a point when he questions the rationality of using biofuels to fuel planes once you calculate the additional cropland required. But could farmers survive without biofuels?

They can’t in Indonesia. The government is increasing the palm oil content in its domestic diesel from 30 to 35 per cent and testing a 40 per cent mix. It is another example of government intervention going wrong: the country is struggling with excess palm oil supplies following an earlier export ban.

And on GM crops, China could soon finally allow GM corn imports, allowing Brazil to export to China before the year-end.

So, what is the future of agriculture? Carbon credits may provide farmers with an alternative income to biofuels, but there is still the issue of fertiliser use and its contribution to GHG emissions. Vertical farming plays a role in growing some crops (let them eat lettuce).

Until then, the weather will continue to be the second most significant price driver for commodity crops (after price, in a feedback loop. Government intervention comes third.)  To emphasise the point, the worst drought in 70 years has put a third of Italy’s agricultural output at risk. (You can read the FT’s take on the issue here.) Drought has also led to a global shortage of mustard and hummus.

However, favourable weather conditions and high-quality seeds have led to a one per cent increase in China’s wheat output this year. (The BBC has a piece on the role of satellites in predicting future harvests.)

Finally, Bloomberg argues, “Commodities can make for great trades, but they are often lousy investments.” (Excellent advice!) The agency has again published a summary of its leading food and agriculture stories.

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Commodity News Monitor

The prices of palm oil, wheat and corn have fallen back to levels seen before Russia invaded Ukraine, easing fears of a global food crisis and proving, once again, that high prices are the best cure for high prices.

But how much damage has already been done? In a recent report, the UN says the number of people going hungry worldwide rose to 828 million last year, an increase of about 46 million from the previous year. The Guardian quotes the director of the UN World Food Programme as warning that the food crisis will result in “global destabilisation, starvation, and mass migration on an unprecedented scale.” He adds that 50 million people in 45 countries are just one step from famine.

Africa’s indigenous crops could be a long-term solution, but in the short term, Yemen is running low on wheat and is pinning its hopes on imports from India.

Brazilian fertilizer imports jumped 18.6 per cent in June to reach 4.15 mln mt, suggesting that the country’s farmers will have adequate supplies for summer crops.

Turkey’s president is close to brokering a deal between Russia and Ukraine to reopen Black Sea shipping lanes to grain exports from Ukraine (as opposed to Ukrainian grain exports from Russia).

Ukraine is trying to convince Turkey to arrest vessels that it believes carry stolen grain. There were reports early in the week that Turkish authorities had detained one ship, but they have since allowed it to leave port. Ukraine summoned the Turkish ambassador to complain.

The FT writes that annual food inflation in Turkey is 80 per cent. The newspaper warns, “There is no government that an empty cooking pot cannot bring down.”

Ukraine’s government has unveiled a $5 billion plan to improve road, rail and border checkpoints for the country’s agricultural exports. The country has appealed for private financing for the scheme. Meanwhile, Romania has reopened a Soviet-era rail line, and the Polish port of Gdansk is upping its throughput of Ukrainian grain.

Japan has donated $17 million to the UN FAO to help Ukraine store crops in plastic sleeves and modular storage containers. Ukraine still has 18 mln mt of last year’s harvest in storage, and the country is expecting to harvest another 60 mln mt in the current season. Around 30 per cent of its granaries are full as the harvest picks up pace.

Meanwhile, Russia is trying to convince Africa that the war is not responsible for the continent’s food shortages.

UK farmers may have no choice but to leave crops unpicked this harvest due to a shortage of foreign workers. The situation could lead to ‘catastrophic food waste’. UK food exports to the EU have fallen significantly since Brexit.

The WWF has called for a transformation of the UK’s food system, arguing that farmers use 40 per cent of the country’s arable land to grow wheat and barley to feed farm animals instead of people.

Barry Callebaut has suspended production at its manufacturing site at Wieze in Belgium after detecting salmonella. Ferrero recently faced a similar problem at Arlon in Belgium.

On the environmental front, Dutch police have fired on farmers protesting nitrogen emission cuts that could require farmers to use less fertilizer and reduce their livestock numbers.

Cargill is equipping some of their vessels with sails to see if they can cut GHG emissions. Researchers have found that feeding cows asparagopsis, a seaweed native to Australia, cuts cows’ methane emissions by 90-95 per cent. The FT asks what carbon labelling on food packaging might mean for the sector.

Finally, wheat lovers may be interested in the recent book “Oceans of Grain”, which examines the role of wheat in the rise and fall of empires.

Click here for Bloomberg’s excellent weekly roundup of their food and agriculture stories.

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ComCon News Monitor

At this week’s G7 meeting, the world’s wealthiest nations committed $5 billion to fight global hunger. Activists said that the sum falls short of what is needed, with millions of people on the brink of starvation.

Germany and the UK pushed the G7 meeting for a temporary waiver on biofuel mandates, but the proposal didn’t make it to the final communique.

The UN warns that the world faces an unprecedented hunger crisis, with a risk of multiple famines this year. There are worries that global crop problems could result in years of high food prices.

Talks continued this week to allow Ukraine to restart grain exports, but no one is optimistic about their outcome. Russia has accused the West of lying about the reasons for food shortages but at the same time bombed grain terminals in the Ukrainian port of Mykolaiv.

Egypt has bought 180,000 mt of wheat from India and is looking to add potato flour to subsidised bread. India is turning to rice bran for vegetable oil and animal feed.

Parts of Italy are suffering their worst drought for 70 years, with saltwater incursion adding to farmers’ problems. Heatwaves and fires threaten Tunisia’s grain harvest. Dry weather is impacting crops in Argentina.

The BBC reports that UK farmers are cutting production due to high fuel and fertiliser input costs.  High fertiliser prices are an acute problem in Africa, where up to 20 million people in the Horn of Africa could go hungry. Farm input shortages are also negatively impacting production in the US.

Malaysian authorities are encouraging palm oil producers to keep supplying factories despite a 22 per cent drop in palm prices over the past month. Times are also challenging for Indonesian palm oil farmers.

The US FDA has approved Argentine biotechnology firm Bioceres’ GM wheat. The USDA still needs to approve the drought-resistant HB4 wheat before it can be sold in the US.

The Guardian writes that farmers “are beholden to a handful of big corporations who set commodity prices” and “have little leverage to implement more sustainable practices.”

In a separate article, the newspaper asks why we feed crops to our cars when people are starving. It cites a report from the NGO Green Alliance.

The newspaper also worries that climate change is responsible for a shortage of (randomly) mustard, chilli peppers, coffee, and wine.

On the good news front, the Guardian cites a recent study that shows farmers can achieve high yields with less fertiliser. The newspaper wonders whether ‘peecycling’ could be a solution to the world fertiliser shortage. (Each of us produces enough pee a year to fertilise 145kg of wheat.)

Research by the University of Cambridge finds that intensive farming may reduce the risks of pandemics.

Nestlé and Unilever have promised to remove deforestation from their supply chains.

Finally, the FT has an excellent review of recent books looking to reinvent agriculture. They are all written by non-farmers (except for one writer who took up farming four years ago). Perhaps farmers don’t have time to write books.

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