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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