Commodity Conversations News Monitor

Food inflation looks like it will be with us for some time, and food processors are passing on the higher prices to consumers. Unilever has increased prices by 4.1 per cent in the third quarter, the fastest rate since the start of 2012, passing on extra costs for commodities such as palm oil and soybean oil, as well as shipping costs.

Danone has forecast that inflation in milk, packaging and transport costs could worsen next year, leading the company to shift price increases to consumers and seek more cost savings. The company says its cost inflation will accelerate to 9 per cent in the second half of their financial from 7 per cent in the first part of the year.

Procter & Gamble has also warned that rising commodity and freight costs are eroding profitability with $2.3 billion in after-tax expenses this fiscal year versus a prior expectation of $1.9 billion.

Nestle has raised its full-year sales target by raising prices on its products ranging from pet food to bottled water. The company expects input prices in 2022 to increase even more than the 4 per cent rise seen in 2021.

There seems little sign that food prices will cool anytime soon. Fertilizer prices are surging as numerous nitrogen fertilizer plants in Europe have shut as gas prices soared. Some suggest that European farmers might reduce plantings as a result. There are concerns that some European fertilizer plants may shut permanently, relocating production to countries where energy costs are lower.

High fertilizer prices could affect Brazilian corn production. Brazil spot prices for phosphate fertilizer more than doubled during the past year, while potash and urea tripled in the same period. The Brazilian President had previously said that the country faces the risk of fertilizer shortfalls next year. In the US, high fertilizer prices could lead US corn profits to drop by about a quarter – from $500 an acre to $430 an acre – next year, potentially motivating farmers to shift to soybeans which could earn $500 an acre. Earlier this month, The Green Market Index of North American fertilizer prices soared past their 2008 peak to set the highest level since the index started in 2002.

Fertilizer supplies could tighten further with Chinese authorities imposing new hurdles for fertilizer exporters. Some Chinese fertilizer cargoes ready to be shipped are being delayed by local authorities for additional checks or obtaining new export certificates. China is a crucial supplier of urea, sulphate and phosphate, accounting for about 30 per cent of world exports.

Not all food prices are rising. Australian avocado prices have halved this year on a record crop and reduced demand due to the country’s Covid lockdowns.

While avocado prices may be falling, the head of Europe’s largest meat processing company has warned that climate concerns could mean beef becoming a luxury product like champagne and only consumed on special occasions. He is more optimistic about pork consumption. (Bacon and avocado toast, anyone?)

But you could face difficulties if you plan on drinking Colombian coffee with your brunch. Reuters reports that coffee traders and roasters face significant losses as Colombian coffee producers take advantage of higher prices and default on sales contracted at lower levels. One solution might be lab-grown coffee. Fortunately for the world’s coffee growers, it currently tastes more like tea than coffee and could take many years of development before it reaches your coffee machine.

Bloomberg Green calls out the US National Cattlemen’s Beef Association (NCBA) for arguing that American cattle ‘may not be contributing much at all to global warming.’ A research scientist at Texas A&M University – paid by the NCBA – says the US beef industry may have had zero impact on climate change since 1986. There’s even a chance, he says, that American beef may have reduced the planet’s warming.

The Guardian is similarly unconvinced and calls on public development banks to stop financing factory farms. At the same time, the BBC questions the UK government’s reluctance to nudge consumers into eating less meat.

California’s pay-to-pollute climate-change policies have resulted in cow manure now worth more than milk. Farmers find that selling cow methane to local energy companies is so profitable that they are increasing their herds. Milk has become the by-product of manure production.

Meanwhile, the Brazilian government is increasingly concerned over meat exports to China. The country voluntarily suspended shipments to China six weeks ago after confirming two cases of mad cow disease in separate meat plants. Still, there is little sign that China is in a hurry to resume imports.

In company news, Bunge has agreed to sell its seven Mexico wheat mills to Grupo Trimex for an undisclosed sum. ADM is selling its ethanol production complex in Peoria, Illinois, to BioUrja Group as part of its strategic review of its dry mill ethanol assets. The plant has an annual capacity of 135 million gallons. Cargill is expanding its partnership with BASF to develop enzymes for animal nutrition, adding research and development capabilities to the partners’ existing feed distribution agreements.

Bumper production and a record corn demand from China mean 2021 is a good year for US farmers. The USDA estimates that US farm income from crops will jump 20 per cent to $230.1 billion in 2021, the second-highest ever after the record set in 2012.

The Counter writes that farming is a profession and that the future of agriculture does not lie with smallholdings. It notes, ‘stop trying to build a more resilient and equitable food system on a foundation of an unproven (or disproven) small family farm ideal, especially when a very real set of alternatives is available.’ The USDA estimates that off-farm income contributed an average of 82 per cent of total revenue for family farms in 2019.  In contrast, large farms earned only 7 per cent of their total income from off-farm sources. The FT is concerned that we might be approaching the end of family farms in the UK. The number of farms in the country declined by 35 per cent between 2005 and 2016 to just over 185,000.

Britain’s Shockingly Fresh is set to begin its first harvest at its naturally lit vertical farm and plans to build 40 more units. Unlike most vertical farms, which use fully enclosed systems with heating and artificial LED light, Shockingly Fresh uses only natural light.

Wired looks at African Swine Fever and the effect that it could have on US pork production. The disease has already arrived in Haiti and the Dominican Republic. The Guardian has a longer article on the subject and explains why US pig farmers are panicking at the prospect.

Bloomberg’s Port Congestion Tracker shows that the world’s ports are becoming even more gridlocked after a typhoon in Asia resulted in at least 107 container ships waiting off Hong Kong and Shenzhen. RBC Capital Markets reckons 77 per cent of ports around the world are experiencing abnormally long turnaround times.

Globally, there are 584 container ships stuck outside ports, nearly double the number at the start of the year, with the backlog the worst in Southern China. The delays have pushed the average global price of shipping a 40-foot container to close to $10,000, three times higher than at the start of 2021 and almost ten times pre-pandemic levels.

Maersk is diverting some ships from Felixstowe, the UK’s largest container port, because of a shortage of truck drivers both in the harbour and outside.  The backlog is preventing new loads from being landed.

Finally, if you have time, I recommend this long read from the BBC on regenerative farming.

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Commodity Conversations News Monitor

The FAO Index of world food prices rose 1.2 per cent in September to hit a decade long high.

Grains rose 2 per cent, driven by wheat, while vegetable oils rose 1.7 per cent on strong demand for palm oil and concerns about worker shortages in Malaysia. An FAO economist told Bloomberg, “It’s this combination of things that’s beginning to get very worrying. It’s not just the isolated food-price numbers, but all of them together.”

Reuters writes that global food prices were 32.8 per cent higher in September than one year ago. CBS reports that US wholesale food prices jumped 8.3 per cent from August this year compared to August 2020 — the most significant gain for more than a decade. An industry analyst told CBS, “We haven’t seen anything yet. Prices are going to continue to go up for a good year and a half.”

Fertilizer prices hit record highs last week, suggesting further food price increases. The cost of natural gas, the primary feedstock for most nitrogen fertilizer, has soared in Europe and China, and some manufacturers have shut plants or reduced production, resulting in shortages.

Cotton hit the mainstream media last week when CNN reported that prices had hit a ten-year high after droughts and heat waves damaged US cotton crops. US clothing prices climbed 4.2 per cent last year, and there are concerns that they will rise even faster next year.

There is some good news on the freight front. AgWeb quotes data from Shifl that show China/U.S. spot container rates dropped by $9,000 – down 51 per cent between September and October. Demand could be down with China slowing production due to a power crisis, but AgWeb warns that issues remain due to a growing backlog of unfulfilled orders.

The FT believes that container rates could fall further despite continuing port congestion on the US West Coast. Business Insider feels that the world’s supply chain problems are easing, while FreightWaves believes we haven’t yet seen the worst.

Meanwhile, bulk rates are rising again, pulled up by increased demand for coal shipments. Spot rates for Capesize vessels have topped $80,000 per day for the first time since 2009, and Supramax rates have risen above $35,000 per day.

Maersk is working on improving the fuel efficiency of their ships and may introduce Silverstream’s Air Lubrication System, which creates a carpet of microbubbles that coat the entire flat bottom of the vessel, reducing friction and resistance between the hull and the water. Silverstream says it reduces fuel consumption by 5-10 per cent. Maersk may use the system on their recently ordered methane-powered vessels. (All we need now is to find a way to capture the methane from cows and use it as fuel!)

The FT explains why cows have risen to the forefront of the debate over global warming and what farmers do to alleviate the problem. The newspaper writes that the 1.5 billion cattle on the planet produce seven gigatonnes of GHG emissions per year, or 60 per cent of livestock emissions, with almost 40 per cent coming in the form of methane, which is about 28 times more potent than carbon dioxide in global warming.

In a separate article, the FT explains what Brazilian farmers are doing to improve their environmental footprint. It highlights the role of ag-tech start-ups in precision agriculture, biological replacements for pesticides and fertilizers, and methane reduction from cattle.

Democrats in the US Congress have introduced new legislation, the FOREST Act of 2021, to reduce illegal deforestation globally by restricting the trade of certain agricultural commodities, such as palm oil, cocoa, soy and cattle products, and rubber and wood. The legislation has attracted little Republican support and is unlikely to pass.

Nestlé is launching plant-based substitutes for eggs and shrimp to complement the company’s existing vegan product line that includes plant-based tuna, burgers, and sausages. The egg substitute contains soy protein and omega-3 fatty acids and can be scrambled or used as an ingredient in cakes and cookies. A Nestlé official told the BBC, “We think less meat and dairy is good for the planet, but it’s also good for diet and health, and it is also a big commercial opportunity.”

Bloomberg Green has a long read on the fuel versus food debate, focussing on India’s ethanol policy. The news agency argues that it’s a vital issue in a country where about 209 million Indians, or about 15 per cent of its population, were undernourished between 2018 and 2020.

Indonesia has conducted its first test flight using a jet fuel containing 2.4 per cent of palm, flying more than 100 km from Jakarta to Bandung. The country has the mandate to increase the palm oil content in aviation fuel to 5 per cent by 2025. Indonesia also has a mandatory biodiesel programme for road transport with 30 per cent palm oil content. The government is keen to expand the use of vegetable oil for energy and slash fuel imports.

And in Kenya, Reuters looks at the benefits of using locally produced sugarcane ethanol for cooking rather than the traditionally used charcoal, kerosene and liquefied petroleum gas.

Forbes interviews the founder of RePlant Capital about her fund for regenerative agriculture.

Last week we reported on the biggest greenhouse in Europe. This week, CNN reports on the biggest greenhouse in the US, situated in the foothills of the Appalachian Mountains. Built in 2020 and set across 60 acres, the greenhouse yields 30 times more per acre than open fields while using 90 per cent less water.

Finally, global warming might mean we can one day drink coffee from the world’s most northern coffee plantation in Sicily. Unfortunately, the project will take years before it can reach large-scale production. Farmers first tried to grow coffee on the island more than 100 years ago, but a cold winter in 1912 killed the trees.

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Commodity Conversations Media Monitor

Environmentalists question whether the US and the EU’s Global Methane Pledge can achieve its objective of slashing methane emissions by 30 per cent by 2030 without more of a focus on agriculture. Food production is responsible for 25 per cent of global methane emissions every year. In the US, agriculture accounts for 36 per cent of the country’s methane, surpassing the coal and gas industry, which generates 30 per cent.

The Economist goes as far as asking whether we should treat beef in the same way as coal – presumably phasing it out. The Guardian takes a more optimistic stance and highlights farmers’ efforts to reduce their methane emissions.

However, the anti-meat lobby continues its media campaign in Time Magazine, writing:

‘Producing food through animals is inefficient, wasteful and dangerous. Today, animal agriculture, including many kinds of meat and dairy, as well as fish farming, uses roughly 80 per cent of all arable land and 41 per cent of all freshwater. It also produces nearly 60 per cent of agricultural emissions, and it is the leading cause of wildlife extinction, deforestation and loss of biodiversity, yet it produces less than 18 per cent of all calories consumed globally. It is also the cause of zoonotic diseases such as COVID and a root cause of antibiotic-resistant diseases.’

Sadly, farmers in the UK face the prospect of culling 120,000 pigs due to a shortage of abattoir workers. The FT writes that one solution may be to slaughter and cut each animal into six pieces for export to Asia, reducing the need for skilled workers. The newspaper also warns that a shortage of field workers may lead to a lack of pumpkins at Halloween. Meanwhile, due to high fertilizer prices, UK farmers may reduce field applications, possibly leading to a drop in yields next year.

Ironically, the UK’s inability to slaughter and process domestic animals, including Christmas turkeys, could lead to a surge in meat imports from the EU. Right on cue, the Guardian interviews the CEO of Higher Stakes, a company looking to produce lab-grown bacon. And in a video, the FT poses a similar question to the UK’s Good Food Institute. Not wanting to be left out of the debate, CNN asks whether there is a future for plant-based seafood. Their answer is a resounding yes.

France has accused the UK of breaking its Brexit commitments on fishing rights. Earlier this year, Britain and France deployed warships to the isle of Jersey amid protests about curtailing the ability of French boats to fish in British seas.

As well as possibly buying the UK produced six-cut pork, China is already buying increased quantities of US beef – up to $1 billion worth this year. China has cut back on Australian imports following a political tiff after Australia called for an independent investigation into the origins of the coronavirus.

The Jones Food Company (JFC), the owner of Europe’s largest vertical farm, has announced plans to build the world’s largest vertical farm. When completed in 2022, it will have 148,000 square feet of growing space and supply 1,000 tonnes of fresh produce to UK supermarkets per year. The Economist is in favour of vertical farming.

Because of Brexit, the UK may soon ease restrictions on gene editing in agricultural research. The EU will continue to apply the same rules on gene editing as on gene modification.

The Philippines has become the first country to approve the commercial production of nutrient-enriched Golden Rice. The International Rice Research Institute (IRRI) developed Golden Rice to help curb vitamin A deficiency in developing nations. Even so, some environmental NGOs continue to lobby actively against Golden Rice because it is genetically modified.

Food Navigator reports on how Unilever is addressing environmental and social sustainability issues through regenerative agriculture. Cargill is also promoting regenerative agriculture with RegenConnect. The company manages a pilot programme that in 2020 ran on nearly 10,000 acres and paid farmers $30-45 per acre to adopt regenerative agriculture practices. Cargill plans to advance regenerative agriculture practices to 10 million acres in North America by 2030.

An op-ed in Aljazeera calls for scientists to work together to end global hunger by 2030. The outlet writes, ‘With almost 768 million people facing hunger in 2020, up some 118 million from the previous year, the global food system is in trouble.’

Meanwhile, the Guardian warns that the recent spike in coffee prices is just a taste of what is to come with global warming affecting coffee growing areas. The Guardian also writes about the difficulty in certifying the smallholder palm oil farmers who account for 40 per cent of global palm oil production.

Port congestion is negatively affecting container shipment schedules while encouraging container ships to increase sailing speeds – and, as a result, emissions. Coca-Cola is working around container tightness by switching business to bulk carriers. Meanwhile, barge rates on the Mississippi River are soaring because of the damage caused by Hurricanes Ida and Nicholas.

Finally, Bloomberg has two reports on the problems farmers face in Brazil and China – and how food prices could soar as a result.

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Commodity Conversations News Monitor

The question is, ‘Why are supply chains so messed up?’

Last week we wrote that more than 60 container ships are stuck off Los Angeles and Long Beach, but there are more than double that number — 154 as of Friday — waiting to load export cargo off Shanghai and Ningbo in China. There are now 242 container ships waiting for berths countrywide.

There is disagreement as to the percentage increase in container traffic this year compared to last year. Clarksons projects global container trade will reach 206.8m teu in 2021, up 6.3 per cent year-on-year. Maersk estimates that global trade volumes will grow 7 to 8 per cent this year compared with 2020. The container advisory CTI Consultancy put the annual figure in the 8 to 9 per cent range while Alphaliner predicts 5.8 per cent year-on-year growth.

Overall, the top 20 container ports handled 13 per cent more twenty-foot boxes in the first six months of 2021 compared to the same period in 2020. Still, the most startling figures come from the US, where Los Angeles/Long Beach and New York/New Jersey recorded a year-on-year throughput growth of 41 and 31 per cent, respectively.

A crane has collapsed at an export facility in Aberdeen on the US West Coast that handles about 20 per cent of US soybean exports. The damage could take months to repair, further complicating shipping logistics.

In this video, Cargill’s CEO argues that current high food prices are transitory. Many of the world’s central bankers agree. However, LDC’s CEO has warned that commodity markets face a period of intense volatility due to COVID-19, shipping congestion, and question marks over when the US Federal Reserve will start tapering monetary support. Hedge funds are taking advantage of this volatility to make good profits, particularly in niche commodities. Unfortunately, as the WSJ points out, price volatility can make it difficult for smaller traders to finance their everyday business.

The UN held its long-anticipated Food Systems Summit last week to set the stage for a transformation in global food systems to achieve the UN’s Sustainable Development Goals by 2030. The world’s media seems largely to have ignored the meeting.

Some indigenous farmers’ organizations had previously criticized the event, claiming it had been hijacked by the agro-industrial sector. Some scientists, researchers, and academics boycotted the event, afraid that it would put profits before people by focusing too heavily on technology such as digitalization, gene editing and precision agriculture. This article (in French) explains the reasons behind the boycott.

The UN defended the summit in a press release, writing that almost 300 Indigenous Peoples organizations participated.

Bill Gates, who knows something about technology, has invested in Iron Ox. This Silicon Valley-based start-up believes robots powered by artificial intelligence could farm more sustainably than traditional agriculture. The company says its mission is to make the global agriculture sector carbon negative.

Technology doesn’t have to be complicated or expensive to have an impact. In this long read, Bloomberg describes how a tiny piece of plastic is revolutionizing drip irrigation. Meanwhile, the Swedish company Volta Seafeed wants to make a seaweed-based cattle feed supplement that will reduce cows’ methane emissions by up to 80 per cent.

And while we are talking about meat, the Counter doesn’t believe the hype around cultured meat, arguing that it isn’t scalable economically. Impossible Foods is rolling out its plant-based meatless pork in Hong Kong, Singapore, and the US, and McDonald’s is pushing ahead with their plant-based product, a vegetarian burger called the McPlant, launching it in the UK.

Brazil’s coffee farmers have harvested 30.7 million bags of arabica this year, compared to 48.8 million last year, down nearly 40 per cent and the smallest crop since 2009. Brazil’s robusta harvest is, however, at a record. But while Brazilian coffee farmers struggle with the weather, climate change means that US farmers can now grow the crop. I can’t wait to taste some!

In an FT opinion piece, SovEcon warns that Russian government intervention in the domestic wheat market will disincentivize growers and cost the country its leading position as an exporter.

Reuters reports that the US Environmental Protection Agency (EPA) is proposing cuts in the amount of biofuel that must be blended into fossil fuels. The news agency obtained a document that suggested that the EPA would reduce 2020 and 2021 requirements to about 17.1 billion gallons and 18.6 billion gallons, respectively, compared to 20.1 billion gallons in 2020. The level for 2022 would reportedly be at 20.8 billion gallons. The EPA sets the 2020 and 2021 mandates retroactively. Administration officials cautioned that the numbers are not final and still subject to revisions

Indonesia has said that it will use existing laws to deal with issues around sustainable palm oil production after a moratorium on new plantation permits ended on 19th September.

Finally, the Guardian’s long-read this week is about an ‘ecofeminist movement’ in Africa, Nous Sommes la Solution (NSS), that wants to revolutionize African agriculture by promoting ‘sustainable agroecology’.

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The UN FAO has published a new report urging reform of the world’s $540bn in farming subsidies.  The FAO estimates that subsidies account for 15 per cent of agriculture’s total production value globally, with the figure expected to more than triple to $1.8tn by 2030.

The report finds that converting land to agricultural use has led to a 70 per cent reduction in global biodiversity. Food production generates about a quarter of all greenhouse gases. The UN estimates that these hidden costs to public health and the environment total about $12tn a year: $6.6tn in health problems caused by obesity, undernutrition, and pollution; $3.3tn from agriculture’s effects on the climate and the environment; and $2.1tn due to wasted food and fertiliser leakage.

The Guardian adds that while $100bn is spent each year on climate change measures and $5bn for deforestation, governments annually provide $470bn in farm support that negatively impacts the world’s climate and biodiversity.

Bloomberg warns that climate change could negatively affect food supplies. It says that yields of staple crops could decline by almost a third by 2050 unless emissions are drastically reduced in the next decade.

The US and the EU have agreed to try and cut methane emissions by about one-third by the end of this decade. Their agreement targets the energy, agriculture and waste industries.

A report in Nature argues that agriculture is responsible for 35 per cent of global GHG emissions, with the meat industry accounting for 57 per cent of all food production emissions, with 29 per cent coming from the cultivation of plant-based foods. The rest comes from other crops like cotton or rubber. Beef alone accounts for a quarter of emissions produced by raising and growing food.

When asked about meat’s contribution to GHG emissions, most people will quote the FAO figure of 14.5 per cent. Another new report, however, claims that this figure is out of date and that the minimum estimate for animal agriculture’s emissions should be updated to 16.5 per cent.

The Guardian writes that one solution might be to potty-train livestock to poo and pee in designated areas where their waste can be better managed.

The FT writes that PR agencies working for the alt-meat sector may be behind some of the anti-meat articles in the media. The newspaper argues that lab-grown meat is not about sustainability. They write, “Ultimately, lab-grown meat is not about saving the planet, it’s not really even about food. It’s about IP.”

Meanwhile, ADM plans to launch its first US plant-based meat portfolio in a joint venture with Brazilian beef producer Marfrig Global Foods SA. According to ADM, more than half of conventional meat-eaters are diversifying to alternative proteins.

Nestlé SA has announced a three-pronged plan to invest approximately $1.3 billion over the next five years to help its farmers and suppliers transition to using regenerative agriculture practices. Agriculture accounts for nearly two-thirds of Nestle’s total greenhouse gas emissions, with dairy and livestock making up about half of that. The company hopes to halve its emissions by 2030 and achieve net-zero emissions by 2050.

With a certain irony, a shortage of CO2 used to stun pigs and chickens before slaughtering could impact UK meat supply chains. The CO2 used by the meat industry is a by-product of fertiliser production, but two large UK fertiliser factories have recently suspended operations due to soaring gas prices. The UK’s biggest poultry supplier has said the CO2 shortage could result in a lack of turkeys for traditional Christmas dinners.

Meanwhile, the UK retailer Marks & Spencer is closing eleven of its French stores because of problems supplying them with fresh and chilled foods since Brexit. The UK government has promised an investigation into how labour shortages, Brexit and surging commodity prices are hurting the country’s food industry.

Governments in other countries are also looking at their food supply chains as shortages bite, and prices rise. Global food prices were up 33 per cent in August from a year earlier. Bloomberg thinks that the situation is unlikely to improve as extreme weather, soaring freight and fertiliser costs, shipping bottlenecks, and labour shortages compound the problem.

In China, the government has said it will continue efforts to stabilise commodity prices using various measures, but with a particular emphasis on the use of market instruments (presumably the management of reserve stocks).

The Danish shipping giant Maersk has upgraded its profit expectations for a second time this year to between $22bn to $23bn. At the start of this year, they had forecast profits between $8.5bn and $10.5bn. Freight rates have jumped 26.6 per cent from a year earlier, the sharpest increase since February 2006, based on figures from Cass Information Systems. The gain followed a 23.8 per cent increase in July. A record 65 container ships are waiting to offload in the ports of Los Angeles and Long Beach. Of those, a record 23 are drifting because anchorages were full.

In long reads, the Guardian writes that new forensic testing techniques are helping to reduce food fraud, particularly in terms of origin. Bloomberg Green takes a long look at how even the best-intentioned agricultural companies can fail to live up to investor expectations regarding sustainability and human rights.

Lastly, the FT looks at how investors can use ETFs to profit from the commodity super-cycle, but, in this excellent podcast, a seasoned trader asks whether there is a super-cycle at all.

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The world’s food supply chain is buckling due to staff shortages, soaring transport costs and other disruptions caused by coronavirus. Agricultural workers lack across the globe, from Malaysia’s palm plantations, Vietnam’s shrimp farms and Italy’s tomato orchards. As a result, food prices have risen 40 per cent over the past 15 months.

Developing countries feel the effects more than developed countries. People in poorer countries spend a larger proportion of their income on food: 45 per cent in India compared to 10-15 per cent in the US and less than 2 per cent in Japan and Germany.

Palm oil prices have risen more than for other foodstuffs. It is a problem for India, which imports 60 per cent of its cooking oils. More than half of those imports are of palm oil from Malaysia and Indonesia. The Indian government wants to boost domestic palm oil production by targetting high rainfall areas in the northeast of the country and the eastern archipelago of the Andaman and Nicobar Islands. Ecologists are worried that palm plantations might harm the local ecosystems.

The cost of shipping a 40-foot container from Shanghai to Los Angeles reached $11,569 in the past week, nearly eight times higher than pre-pandemic levels. One shipping line, France’s CMA CGM, has decided to cap rates through to the end of January, “prioritising its long-term relationship with customers in the face of an unprecedented situation in the shipping industry.” The Economist argues that the rising cost of container shipping could have a long-term structural effect on trade flows.

The International Chamber of Shipping, which represents more than 80 per cent of the world’s merchant fleet, has submitted a plan to the International Maritime Organization to impose a levy on carbon dioxide emitted by vessels. They would use the proceeds to close the price gap between zero-carbon and conventional fuels and to “deploy the bunkering infrastructure required in ports throughout the world to supply fuels such as hydrogen and ammonia”.

Maersk has bought a minority stake in a green fuel start-up as part of a broader strategy to commit funds toward developing green energy. Maersk consumes about 12 million tons of marine oil per year, roughly equal to all the oil produced in the world in a single day.

Ecologists in Sweden hope that the replica of an 18th-century wooden sailing ship will become an ambassador for a sustainable maritime industry. The ship will set sail in April 2022 from Sweden to Shanghai and will be partly powered by biodiesel made from rapeseed oil.

But what about electric ships? Apparently, they won’t have much of an impact. Electric tractors could, however, have a rosy future. As for planes, a consortium of Indonesian companies, regulators and a university has begun a series of tests on an aviation fuel containing a 2.4 per cent share of biofuel made from refined palm oil.

Chevron and Bunge have joined forces to boost soy oil production to meet the demand for renewable diesel. Bunge will contribute soybean processing facilities in Louisiana and Illinois, and Chevron plans to put about $600 million into the venture. The two companies anticipate doubling the combined capacity of Bunge’s facilities from 7,000 tons per day by the end of 2024.

The FT is worried about how biofuel demand – especially for renewable diesel – will affect food prices. They call the debate Doughnuts versus Diesel. The newspaper is also concerned about how the Russian government may use grain exports as a political and diplomatic weapon.

A group of European non-profits has published the Meat Atlas 2021, a critique of the world’s meat industry. The report finds that the world’s five biggest meat and dairy companies emit the same volume of greenhouse gases as ExxonMobil and that twenty livestock companies are responsible for more greenhouse gas emissions than either Germany, Britain or France.

Technology helps to reduce livestock’s impact on the environment. Euronews reports on the dairy farm in Rotterdam’s harbour where robots milk cows fed, among other things, on grass clippings from football fields and golf courses. The floating farm processes the manure into garden pellets.

Even so, Dutch politicians are considering plans to cut the country’s livestock numbers by 30 per cent to reduce ammonia pollution. The government may force farmers to sell emissions rights or their land to the state.

The Dutch nutrition company Royal DSM NV is making progress with their feed additive, Bovaer, which cuts methane emissions from livestock. The Brazilian government has authorised its use after a trial on Brazilian beef showed it cut methane emissions from cows’ stomachs by as much as 55 per cent. DSM is trying to get permission for the product in the EU, the US, and New Zealand.

Brazil, meanwhile, has suspended beef exports to China after confirming two cases of mad cow disease. China and Hong Kong buy more than half of Brazil’s beef exports and have limited alternatives. As such, analysts expect the export ban to be short-lived.

Indonesia has ended a deal with Norway to reduce carbon emissions from deforestation, citing a lack of payment after the country met its commitment to cut greenhouse gas emissions in the 2016-2017 period.

CNBC interviews Nestlé’s CEO on how the company is winning the hearts and minds of the younger generation on sustainability. One key quote: “Basic rule No. 1 in consumer goods marketing and food and beverage marketing is never, ever lose the younger generation.”

Finally, in a blow to children around the world, there is news this week that a shortage of hazelnuts threatens the supply of Nutella. Will millions of breakfasts – and days – be ruined?

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Weekly Media Monitor

Shipping is hitting the headlines with news that Maersk has ordered eight new flex-fuel vessels that can run on traditional bunker fuel and carbon-neutral methanol. Hyundai Heavy Industries will build the ships that carry 16,000 containers each and deliver them in 2024. Maersk has also included an option for four more vessels in 2025. The new ships will replace older ones rather than add new capacity.

Clean methanol is currently twice as expensive as fossil-based fuel oil. Doubling the fuel price could translate to about a 15 per cent increase in container rates, but Maersk believes that enough of its customers will be willing to pay that extra to ensure carbon-free shipping.

The company intends to produce green methanol for its first vessel in cooperation with REintegrate, a subsidiary of the Danish renewable energy company European Energy. The Danish facility will supply about 10,000 tonnes of carbon-neutral e-methanol, using green hydrogen combined with carbon emissions captured from burning bioenergy such as biomass.

Maersk’s biggest challenge will be to secure enough green methanol for the vessels. If it can’t and continues to power its fleet of ships with fuel oil, nothing will change. The company accepts the challenge while admitting, “We need a significant ramp-up in production. We do feel there has been a lot of chicken and egg. So, we find by going out with this announcement that we can break this cycle.”

Meanwhile, a Norwegian company has created the world’s first zero-emission, autonomous cargo ship. The ship, capable of carrying 103 containers and a top speed of 13 knots, will make its first journey between two Norwegian towns before the end of the year and will be the world’s first fully-electric container ship.

The container-shipping industry is financially well-placed to invest in new ships. Maersk was expected to make around $4.5 billion in 2021 but may now make $14.5 billion. It is not the only shipping company making record profits. Container lines could make up to $100 billion in profits this year, fifteen times typical earnings.

Soaring freight rates are not restricted to containers. Rates in the dry-bulk sector hit 11-year highs last week, with further strength expected. Clarkson predicts that the dry bulk trade will rise 4.2 per cent in 2021 and 1.7 per cent in 2022. Fleet growth is likely to lag the increase in cargoes, with capacity expanding by 3.3 per cent this year and 1.4 per cent next year.

GHG emissions are not just hitting the headlines in shipping; they are also becoming a political hot potato in the upcoming US elections. Democrats are worried that they will lose rural votes in agricultural states like Iowa and Wisconsin if they try to limit methane emissions from the livestock industry.

They are also a political issue in India. The predominantly agricultural northern state of Uttar Pradesh will likely drop legal proceedings against farmers accused of burning crop waste. The ruling Bharatiya Janata Party wants to placate growers ahead of state assembly elections next year.

Politics is also entering the food supply in the UK, where farmers blame the government’s new immigration policies for an acute shortage of truck drivers, fruit and vegetable pickers, and meatpackers.  Meat processors have asked the government to allow the sector to use prison labour to make up for the shortage. Britain’s meat processing industry, which is two-thirds staffed by non-UK workers, is currently missing about 14,000 people out of a total of 95,000 usually employed in the sector.

However, the UK government has turned down a request to temporarily ease visa requirements for truck drivers and instead asked the industry to train the domestic workforce. The sector argues that it will take too long and short of 90,000 drivers right now. The labour shortages are already impacting supply with UK McDonald’s restaurants running out of milkshakes.

Bloomberg takes the conversation back to climate change and makes the environmental case for fish farming. It writes that seafood is the only significant source of protein that humanity is still harvesting in the wild and that almost 90 per cent of global fish stocks are exploited or overfished. Farmed fish should surpass the volume of traditional fishing by 2024, and the global aquaculture market could exceed $245 billion by 2027, up from $180 billion today.

Reuters, meanwhile, looks at how climate change prompts coffee growers in Brazil to produce more robusta (known as conilon) and less arabica. Robusta coffee is more heat tolerant than arabica and can be grown at lower altitudes. Conilon yields in Brazil now match Vietnam’s, and roasters are using more robusta in their blends.

Finally, a few stories on technology. Bloomberg writes about electric tractors and the challenges of vertical farming. Wired asks whether AI and robots will transform farming into an ecological utopia or dystopia, and Greenbiz examines the role that Google is playing in regenerative agriculture.

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Weekly Media Monitor

Chinese authorities have closed the Meidong Container Terminal at the Port of Ningbo after a dock worker tested positive for COVID. There are five container terminals in Ningbo, the third-largest container port in the world after Shanghai and Singapore.

The closure leads to concerns that the rapid spread of the delta variant will lead to a repeat of last year’s shipping nightmares. It could lead to even higher freight rates. The benchmark cost of shipping a container from Shanghai to Los Angeles has tripled over the past year. The F.T. writes that the world’s ports face the most significant disruption since the start of container shipping 65 years ago, with 353 container ships stuck outside ports, more than double the number from earlier in the year.

Last week, we reported that Maersk, the world’s largest container shipping firm, had reported profits for their second quarter of $5.1 billion, up 200 per cent from the $1.7 billion in the same period last year. This week, Hapag-Lloyd reported a net profit for the six months to June of €2.7 billion, compared to a total net profit of €977m in the previous ten years. Hapag-Lloyd’s average freight cost per 20ft container rose 46 per cent to $1,612 in the first six months of the year.

The Guardian reports on the growing momentum behind a shift to regenerative agriculture in the U.K. The country’s National Farmers’ Union has set out an ambition for U.K. farming to be climate neutral by 2040.

The global market for agricultural robots for seeding, harvesting and environmental monitoring is expected to increase from $5.4 billion in 2020 to more than $20 billion by 2026.  Robots can help reduce soil disturbance, which can contribute to erosion, and allow farmers to reduce or even eradicate the use of herbicides.

Indonesia’s three-year ban on new palm oil permits ends in September, and conservationists urge the country to extend or make it permanent. A separate moratorium on new forest clearance for palm or logging, covering about 66 million hectares of primary forest and peatland, remains in place.

The worst drought since 1977 has devasted the wheat harvest in eastern Washington state. Bloomberg warns that poor wheat crops in Canada and Russia will lead to higher bread prices and food inflation. Bloomberg is also worried that California’s current drought could become permanent.

Farmers in eastern Canada may have to euthanize and dispose of more than 130,000 hogs due to a strike at the pork processing facility in Vallee-Jonction, Quebec. The plant usually slaughters 36,000 hogs each week but has been shut since end-April.

This week, there was more discussion on the effect of the alt-meat movement on livestock farmers and the roughly half a million people employed in the U.S. meat processing industry. Meat processing is the top-ranked manufacturing industry by employment in the U.S.

CNN reports on Perfect Day, a California-based start-up that uses fungi to make dairy protein “molecularly identical” to the protein in cow’s milk. The company grows the fungus in fermentation tanks to produce whey protein. They then filter and dry it into a powder for use in products including cheese and ice cream.

Olam International has picked London for the IPO of food ingredients business, Olam Food Ingredients, with a secondary listing in Singapore.  OFI last week reported earnings before interest of S$316m ($233m) for the six months to June with sales of S$6.8 billion.

Wilmar International has reported earnings of US$750.9 million for the first half of 2021, up 23 per cent year on year. Revenue was up 30.4 per cent to US$29.5 billion.

A California appeals court has refused to overturn a 2019 verdict that awarded more than $2 billion to a couple who claimed they fell ill after using the herbicide Roundup but left intact a ruling that reduced the award to $86.7 million. It is Bayer’s third consecutive appeals court loss over Roundup.

Bayer has other woes with Corteva Agriscience’s announcement that it plans to sell Enlist, their biotech soybean seeds, in Brazil in competition to Bayer AG’s Intacta genetically modified soy technology. Corteva’s Enlist beans have already captured 35 per cent of the U.S. soy area.

Cargill’s CEO has given an interview to Time magazine. It is too wide-ranging to be summarized, but I did like his answer to a question as to the best way to feed the world’s growing population. “Make sure that you can travel across borders. Don’t erect trade barriers. Don’t use food as a weapon. Practice comparative advantage. Use your natural resources of your region, grow what is best suited for the soil, the climate, the access to water.” (Well said!)

And finally, you will be familiar with arabica and robusta coffee but have you tried liberica coffee. It accounts for less than one per cent of world coffee production, is expensive to grow and harvest, but I, for one, would love to try it!

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Weekly Media Monitor

The United Nations Intergovernmental Panel on Climate Change (IPCC) has published a new report on global climate change. One of the authors has warned that ‘If we do not halt our emissions soon, our future climate could well become some kind of hell on Earth.’ The last decade has been hotter than any period in 125,000 years. Atmospheric CO₂ is at a two-million-year peak, while methane and nitrous oxide levels are the highest for at least the last 800,000 years. Methane has a ‘warming potential’ more than 80 times that of CO2.

However, all is not lost. The Guardian writes that ‘everything we need to avoid the exponential impacts of climate change is doable. But it depends on solutions moving exponentially faster than impacts.’ Planting trees is apparently, not going to solve the problem. In a new report, Oxfam argues that an over-reliance on tree-planting to offset carbon emissions could push food prices up 80 per cent by 2050.

With the meat industry blamed for being part of the problem, people are increasing shining the spotlight on alternative meat (alt-meat) products (both plant-based and cultured meat)

In a new report (that a friend of mine calls ‘science fiction’), Rethinx predicts that the US cattle farming industry will be bankrupt by 2030. The think tank adds that ‘all other commercial livestock industries worldwide will quickly follow the same fate, as will commercial fisheries and aquaculture.’

The report authors argue that Precision Fermentation (PF) will make protein production five times cheaper by 2030 and 10 times cheaper by 2035 than existing animal proteins. They write that ‘foods made with them will be higher quality, safer, more consistent, and available in a far wider variety than the animal-derived products they replace.’ They add that the new PF foods will be up to 100 times more land efficient, 10-25 times more feedstock efficient, 20 times more time-efficient, and ten times more water-efficient. They will also produce far less waste.

Impossible Foods CEO is on the same message and wants to end all animal farming by 2035. Meanwhile, the CEO of Beyond Meat sees his company working to make this ‘the first generation of humans to separate meat from animals.’

If they are correct, what will the end of animal farming mean for producers and the rural communities they support?  In a series of 37 interviews, the Breakthrough Institute has tried to answer just that question. The conclusion? The situation for meat producers and meatpackers is not unlike that for coal miners and oil workers before natural gas, wind energy, and solar power took over a big chunk of the market.

Bloomberg joins the conversation with a video that argues that the alt-meat sector will only take significant market share once it develops whole cuts rather than burgers. In another article, Bloomberg claims that cell-cultured meat will be doomed if it doesn’t get its marketing right. They suggest that the sector should stop calling it lab meat.

The world is not just switching away from meat. It is also moving away from dairy. The Guardian interviews the self-proclaimed Queen of Vegan Cheese about the growing demand for non-dairy products and how farmers can make the switch. Figures from Euromonitor show that the dairy alternatives market is the fastest-growing sector among packaged foods and worth £2.5bn in western Europe in 2020-21. The UK market has grown by 69 per cent over the past five years, with non-soya-based milk increasing by 129 per cent.

But what about seafood – are we also moving towards fishless fish? The answer, it seems, is that alt-fish will be the ‘next big thing’, not just among vegans but among all fish-lovers. The sector is already growing strongly, if from a small base. Plant-based fish is a minnow in the alt-protein space, with 2020 sales estimated at $12 million. It compares to alt-dairy at $2.5 billion and alt-meat at $1.4 billion- Alt-meat is growing the fastest at 45 per cent compared to 20 per cent for alt-milk and 23 per cent for alt-fish.

Neither Cargill nor Continental Grain seems convinced that the move to alt-meat will happen quickly. Both companies are reportedly interested in buying Sanderson Farms Inc, the third-biggest chicken farmer in the US, producing about 13.6 million chickens a week. The price discussed is $4.5 billion.

Cargill was also in the news last week for record annual profits of nearly $5 billion. Why is it acceptable for Apple or Google to report record profits from mobile phones or advertising, but it is somehow seen as morally wrong when a trading company makes record profits from food?

To put those Cargill profits in perspective, Maersk, the world’s largest container shipping firm, has reported profits for their second quarter of $5.1 billion, up 200 per cent from the $1.7 billion reported in the same period last year. Revenues were up almost 60 per cent to $14.2 billion. Maersk earned in one quarter what Cargill earned in a year and expects to earn between $18 billion and $19.5 billion over the whole year.

Sky-rocketing freight rates have been driving Maersk’s profits. The spot rate per container on the China-US East coast route has climbed to nearly $20,000, while rates on the China-EU route are flirting with $14,000. The price graphs are astounding. China-US rates have jumped by almost a third in a month and are up by more than three quarters over the year so far. China-EU rates have jumped by nearly 50 per cent on the month and 120 per cent year-on-year.

Demand is not driving these spiking rates. Maersk estimates that global container shipping demand was up only 2.7 per cent in the second quarter versus the same period two years ago, before the pandemic. Instead, the company blames covid-related bottlenecks and congestion.

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The USDA warns that 1.2 billion people in the world will be food-insecure this year, up from 761 million people pre-Covid. The USDA blames the increase on a pandemic-induced drop in disposable income. Asia, particularly Bangladesh, India, Pakistan, and Indonesia, will see the most significant rise in hunger. At the same time, Yemen, Zimbabwe, and Congo are projected to have the highest prevalence of hunger, with more than 80 per cent of the population going hungry.

Argentina has declared a six-month state of emergency for the Parana River after water levels dropped to their lowest in 77 years. The river – often described as a grain superhighway – transports about 80 per cent of Argentina’s agricultural exports. Bulk carriers are currently loading 21 per cent less grain at Rosario ports due to the low water levels and could face a 40 per cent load reduction by end-September. The collapse of a grain silo at a Bunge facility in Argentina’s Up River hub has added to difficulties with activity suspended amid fears of injuries to personnel.

Authorities in Brazil are concerned about how the drought and global warming will affect their agricultural exports. They will publish a risk assessment document on the subject later this month.

While Argentina has too little water, China has too much. Flooding in Henan province, which grows about 25 per cent of China’s wheat, has led to concerns over mycotoxin contamination.

There is also concern that global warming and pesticide resistance could lead to a worldwide crop pandemic similar to Covid-19.  China is already limiting disease, particularly ASF, by isolating their pigs in multi-storey ‘hog hotels’.

On the subject of pigs, California shoppers may not be able to bring home the bacon from the beginning of next year when the state enforces a new law that requires more space for pigs, egg-laying chickens and veal calves. Veal and egg producers are optimistic they can meet the new standards, but only 4 per cent of hog operations now comply with the new rules.

The Guardian argues (in a long-read) that lab-grown meat, rather than hog hotels, would provide a more sustainable food system. It could, they claim, be “a monumental win for animals and the environment.”

Meanwhile, ADM continues to invest in plant-based meat. The company recently purchased Sojaprotein, the largest plant-based protein provider in southern Europe. China is also dipping its toes into plant-based meat.

ADM continues to expand its soybean crushing operations in North America, backed by solid demand for both meal and oil. The company forecasts North American soy meal demand to grow 2-3 per cent per year. It expects US green diesel demand to grow at a higher growth rate, increasing by about one billion gallons per year and reaching 5 billion gallons by 2025. The company plans to open a new crushing plant every couple of years.

Wilmar International is listing its joint venture, Adani Wilmar, through an initial public offering worth up to 45,000 million Indian rupees ($605.19 million). The company is a 50-50 joint venture between Wilmar and the Adani Group.

Hedge funds are investing more money into commodities. Still, smaller trade houses find it difficult to access finance amid a flight to quality in trade finance.

Coffee was in the news this week with the publication of a 72- page report by the Columbia Center of Sustainable Development that finds that coffee roasters fail to guarantee a living income for coffee farmers.

Coffee may be bad for your brain and good for your heart. Nutritional Neuroscience published a study that found that six or more cups of coffee per day may impact brain health, potentially increasing the risk of neurological diseases like dementia. Another study, however, found that coffee is good for your heart.

One of the world’s largest freight brokers has warned that a “dramatic lack of capacity” for ships, trucks, trains, containers, and warehouse workers will continue into 2022. He told Bloomberg, “There’s not any point in the supply chain that is not experiencing some sort of dislocation or issues. I don’t think there’s any sign that it’s going to get better.”

The founder of Freight Right Global Logistics is even more pessimistic. He told Freightwaves,

“I don’t expect demand to curtail or the dynamics to change probably until mid-next year, and even that may not hold. It isn’t even an ocean capacity issue; it’s an infrastructure capacity issue.”

The FT agrees that port congestion is now the primary driver of these higher freight rates and is worried about their effect on inflation.

As part of their series on sustainable agriculture, the FT writes of the difficult choices farmers face when trying to produce food sustainably. In one article, the newspaper focuses on carbon emissions from peatlands, arguing that they may not be suitable for agricultural production. In a second article, the FT looks at ways of measuring sustainability.

Looking forward, we expect the media to shine an increasingly bright spotlight on the food supply chain ahead of next month’s controversial UN FAO Food Summit in New York. Experts and lobbyists have begun to outline their positions and expectations, while the USDA believes science and technology are essential.

Lastly, Mongabay takes a deep dive into deforestation and illegal land deals in the Amazon.

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