Media Monitor

The world is waiting to see if Russia extends the Ukrainian grain export corridor beyond its 19th November expiry date. Russia’s President has accused Ukraine of using the programme to commit terrorist acts. A Russian official said the deal’s extension depended on the West easing Russia’s agricultural and fertiliser exports. The UN is confident the agreement will be extended.

There were market rumours that the Great Odesa ports would soon be blocked because it takes 20-25 days for vessels to be processed and loaded.  A total of 160 ships currently await inspection in Istanbul. Only 14 vessels a day are being inspected, and Russia’s inspectors seem reluctant to speed up the process.

Russia may set a grain export quota at 25.5 mln mt next year, twice that set this year. It will not have a market impact as this year’s grain quota of 11 million mt was not fully used. The country has harvested a record grain crop this year, with wheat production already reaching 104 million mt and total grain output expected to reach 150 million mt.

Despite wet weather and missile attacks, Ukraine’s farmers have sown 2.78 million ha of winter grains, or 58.4 per cent of the planned area. Farmers planted 2.44 million ha of winter wheat or 61.4 per cent of the planned area.

The UK Consumer Price Index (CPI) increased 10.1 per cent in annual terms in September. Food prices rose by 14.5 per cent, the most significant jump since April 1980.

However, shoppers appear to accept rising prices, with Nestlé and P&G reporting better-than-expected sales.

Nestlé reported an increase in organic sales of 8.5 per cent in the nine months to end-September, driven by higher prices. The company reported exceptionally high sales growth in its coffee businesses. It also announced the acquisition of Seattle’s Best Coffee brand from Starbucks for an undisclosed sum.

Nestlé’s CEO expects inflation to continue into 2023, and the FT warns that shoppers may reduce spending or switch to own-brand goods. Bloomberg agrees, even though the CEO of Mondelez believes the problems lie elsewhere.

In an example of high prices being the best cure for high prices (by bringing in new production), Central Australia is harvesting its first wheat crop in 45 years.

India’s rice farmers are struggling with the country’s water crisis, finding it hard to wean themselves off subsidies. The government “seems to have given up” trying to persuade farmers to grow less water-intensive crops.

New Zealand’s livestock farmers continue to protest the government’s “burp and fart” tax.

In a sign of the future of shipping, a Chinese company has taken delivery of a new supertanker with four large sails that should cut fuel consumption by nearly 10 per cent. Meanwhile, container ship operators are removing capacity and laying up ships as they rationalise their networks in the face of falling demand.

The USDA will write off $1.3 billion in debt for about 36,000 US farmers who have fallen behind on loan payments or face foreclosure. It will fund the programme from the $3.1 billion in the Inflation Reduction Act.

Global fertilizer prices fell further as farmers cut back on their use. Brazil’s fertilizer prices are down by almost half from April’s highs, although they are still above long-term averages.

The Alliance for a Green Revolution in Africa (AGRA) has published its (119-page) 2022 Africa Agriculture Status Report that lays out the steps needed to reach zero hunger on the continent. The Africa Centre for Strategic Studies argues that conflict remains the dominant driver of Africa’s food crisis. More than 80 per cent of the record 137 million Africans facing acute food insecurity are in conflict-affected countries.

Climate change poses an “existential threat” to the UK potato industry. The sector is urgently trying to develop new varieties to cope with rising temperatures.

French cereal farmers are experimenting at scale with covering crops with solar panels to produce food and energy simultaneously.

Drought is slowing the seeding of Argentina’s corn crop.

Mississippi River water levels may fall over the next two weeks, further restricting barge traffic. Around 500 mln mt of goods – mainly agricultural products – move along the Mississippi River each year. The Mississippi River Basin produces more than 90 per cent of US agricultural exports and nearly 80 per cent of the world’s grain exports.

Could large-scale seaweed farming help curb climate change?

The FT asks whether the Brazilian presidential election has accelerated deforestation in the Amazon. It also asks if the world can feed itself sustainably. The newspaper presents seven graphs that suggest that providing food to 10 billion people doesn’t have to cost us the Earth.

The Guardian believes food is already costing us the Earth. The latest (60-page) Pesticide Atlas reports that pesticide use has increased by 80 per cent since 1990, responsible for 11,000 human fatalities and the poisoning of 385 million people yearly. It adds that their use caused a 30 per cent fall in populations of field birds and grassland butterflies.

The WWF’s Living Planet Report 2022 (also 60 pages) reveals an (even more alarming) 69 per cent reduction in species populations since 1970. It warns that “we face the double, interlinked emergencies of human-induced climate change and the loss of biodiversity, threatening the well-being of current and future generations.”

The UN FAO celebrated World Food Day on 16th October.  You can watch the (cool) music video here.

Talking of videos, the FT has a 45-minute one that shows “how neoliberal economic thinking has broken our food supply chains.” (Whatever.) It also has a shorter one on organic regenerative farming in the UK.

Many of the above links require subscriptions. Please support quality journalism.

© Commodity Conversations ® 2022

Media Monitor

The FAO World Food Price Index fell 1.1 per cent in September but remains 5.5 per cent higher than a year ago. Vegetable oil prices led the decline, falling by 6.6 per cent over the month to reach their lowest level since February 2021. Malaysia’s rising palm oil inventories helped drive the fall in veg-oil prices.

However, the US consumer food price index rose 0.8 per cent in September, bringing the 12-month increase to 11.2 per cent. The wider CPI rose 0.4 per cent in September, bringing the 12-month inflation rate to 8.2 per cent.

The number of vessels waiting to sail to or from Ukrainian ports under the UN-backed grain deal reached a record high of 120 at the end of last week due to a shortage of inspectors. Ukraine has shipped more than 6.9 mln mt of grain and oilseeds since the deal came into force on 1st August.

Russia’s renewed bombing campaign drove wheat prices higher early in the week on fears Russia may not continue the deal when it expires in November. Russia’s Geneva UN ambassador added fuel to the fire when he told Reuters on Thursday that Moscow may not renew the agreement unless it addresses its demands on food and fertiliser exports.

Russia is considering abolishing its grain export quota due to a bumper crop. The county’s farmers have already harvested 103 million mt of wheat, up 36 per cent yearly.

China has set its 2023 grain import quota at the same level as last year, with wheat at 9.636 mln mt, corn at 7.2 mln and rice at 5.32 mln. China may import corn from Brazil as early as December to reduce its dependence on the US and replace supplies from Ukraine.

Argentina may tighten restrictions on wheat exports after drought reduced crop estimates from 19 mln mt to 16 mln.

US farmers are planting winter wheat through a third straight year of drought. Weather forecasts suggest dry conditions could stay. A lack of rain and snow has withered summer crops like tomatoes and onions and threatened leafy greens grown in the winter.

Heavy rainfall in India has damaged crops just before harvesting, raising fears that the government may impose additional restrictions on food exports.

A strong US dollar, high commodity prices and rising interest rates are destroying demand for grains and oilseeds in developing countries. Cargill’s head of trading told Bloomberg that, as a result, global trade flows might fall by 5-6 per cent for wheat and 2-3 per cent for corn and soybean meal.

Higher world wheat prices and a weak yen are already encouraging Japan’s food producers to promote domestic consumption of rice flour-based products. Domestic rice consumption has been falling over the years as more Japanese turn to bread and noodles.

Foreign Policy Magazine dedicates its autumn issue to food supply chains, arguing that “the solution to the global food crisis isn’t more food.” The FT also has a long read on the future of farming and regenerative agriculture.

In company news, Bloomberg questions why Cargill is so successful. (Spoiler: it’s private ownership.)

Brokers expect dry bulk freight rates to strengthen slightly into year-end and to weaken in 2023. However, 2023 could see net zero growth in the world’s dry-bulk fleet, while 2024 could see more tonnage exit the fleet than enter. Meanwhile, container rates have fallen to pre-pandemic levels despite operators removing tonnage.

Brazil’s so-called “Ethanol King” is hedging his ethanol investments and has bought a minority share in Vale, the Brazilian mining company. Vale is a major supplier of nickel, a key ingredient in electric-vehicle batteries.

Honeywell International will commercialise technology using ethanol to produce sustainable aviation fuel (SAF). The company says its technology can cut GHG emissions by 80 per cent compared with petroleum-based jet fuel.

In environmental news, US food producers are removing “best before” labels that account for seven per cent of US food waste — or four mln mt annually.

The UK government could lose farm votes if it abandons plans to replace EU land-based subsidies with environment-based ones.

Environmentalists have criticised the UK government over a plan to ban solar panels on farmland. The ban could threaten planned investments of £20 billion.

Even so, pilot projects in Spain show that solar panels can help farmers by creating shade and reducing water loss.

There was good news from India where farmers in Punjab are moving away from burning paddy rice stubble and ploughing it back into the land, where it breaks down and acts as a natural fertiliser.

There was bad news this week for alt-meat producers. A survey of Generation Z – people born after 1996 – found that just 14 per cent said they consume plant-based meat, and 23 per cent of those who do, say they plan to eat less plant-based meat in the future.

The plant-based Beyond Meat company may further reduce staff levels as rising inflation drives consumers toward less-expensive animal proteins.

National Geographic does a deep-dive into the future of alt-meat, asking if it will ever satisfy the US hunger for the real deal.

New Zealand plans to tax agricultural emissions from livestock and introduce an “agricultural emissions-pricing system” in 2025.  The country’s farming federation is “deeply unimpressed

Finally, a Turkish livestock farmer has fitted virtual reality (VR) headsets to his cows, transporting them to virtual pastures. It boosted milk yields.

Many of the above links require subscriptions. Please support quality journalism.

© Commodity Conversations ® 2022

Media Monitor

16th September 2022

Hurricane Ian has forced Florida fertiliser maker Mosaic Co. to halt operations and raised fears about supplies. The storm could also severely impact Florida’s citrus farmers, and orange juice futures traded higher.

Russia’s farmers have harvested a record 100 mln mt of wheat even as export taxes and logistical issues have slowed export flows. Farm associations warn that Russia’s partial mobilisation of reservists could disrupt the final stages of the harvest and the planting stages of the next crop.

Afghanistan’s ruling Taliban has signed an agreement with Russia to import two mln mt of wheat a year (until an unspecified date) at a ‘special discount’, payable in roubles.

The CEO of Russia’s VTB Bank, which owns stakes in major Russian grain export hubs, has asked President Putin to prohibit companies belonging to “persons related to unfriendly states” from buying grain and oilseeds from Russian farmers.

Ukraine has expressed doubts as to whether the Black Sea export corridor will be extended. Russia’s mobilisation and war escalation could increase risks to world food supplies.

Ukraine’s wheat harvest finished at 19 mln mt, leaving it with at least 11 million mt for export. Next year, the country expects to produce 50-52 million mt of grains and 15-17 million mt of oilseeds. Ukraine’s winter wheat sowing campaign is 15 per cent complete.

The US administration held a one-day conference on hunger, nutrition, and health – the first since 1969 – to make America a stronger, healthier nation. Corporations and non-profit groups have pledged more than $8 bn to help achieve that goal.  (Click here for a summary of the event.)

France held a meeting on the margins of the UN General Assembly in New York to discuss the global food crisis. The head of the World Food Programme has urged donors to help tackle the fertiliser supply crisis.

EU vegetable farmers, particularly in northern Europe, are considering halting production due to rising energy costs. Supermarkets may have to source more supplies from North Africa.

Drought-affected harvests may lead to EU politicians loosening rules on gene-editing techniques like CRISPR.

Drought is not limited to Europe. The San Francisco Chronicle looks at what some describe as the ‘desertification’ of the state’s rice farming areas.

The Dutch government continues to struggle with their plans to reduce farm GHG emissions.

A study published in Nature argues that changes in global food production systems have enabled affordable diets but have had less favourable outcomes for nutrition, environmental health, inclusion, and equity. A separate study in Nature argues that declining crop yields will limit the potential of biofuels.

US farmers are urging the US government to challenge a looming Mexican ban on GM corn and glyphosate.

The UK government is rethinking plans for England’s post-Brexit farm subsidies. Environmentalists say the revised plans are an attack on nature.

Food inflation and tight budgets may encourage consumers to eat less meat, which some argue could end world hunger.  Even so, McDonald’s has pulled their McPlant burger in the US after disappointing sales, and retail US plant-based meat sales are also falling. Shares in Beyond Meat are down more than 75 per cent this year, and CNN asks whether the company is worth saving. Some question whether plant-based meat is better for the environment than real meat. One recent study claims it is, but the debate continues.

The cost of moving container freight has halved in the past three months and is the lowest in two years. Analysts expect further contractions in the coming weeks before a bounce-back later in the year.

Malaysian palm oil futures have fallen to a near 20-month low as recession fears hurt demand. Indonesia says it will maintain the Domestic Market Obligation (DMO) policy that requires producers to supply the domestic market before they export.

Confectionary News reports on the recent European Cocoa Forum amid fears that EU plans to make companies responsible for human rights abuses and environmental harm in their supply chain will put EU processors at a disadvantage to competitors in Asia and the US. Olam Food Ingredients has called for a level playing field.

In company news, Louis Dreyfus Company has bought Australian grain trader and bulk handler Emerald Grain. Cargill has opened a new corn wet milling plant in Indonesia. ADM has inaugurated a Science and Technology Centre at the University of Illinois. Nestlé and Samsung have joined forces to launch a digital health platform. Unilever’s CEO has said he will retire at the end of 2023. And in Switzerland, Lindt has won the ‘chocolate bunny battle’ after a court ordered Lidl to stop selling imitation bunnies.

ETC Group – an NGO – reports that ten companies dominate agricultural commodity trading. COFCO is the world’s second-biggest, behind Cargill, with ADM the third. The NGO says that the commercial seed market is even more concentrated, with two companies controlling 40 per cent of the market, compared with ten companies 25 years ago.

Finally, good news for all coffee lovers: a new study has found that coffee lowers the risk of heart problems and early death. (I think we already knew that!)

Many of the above links require subscriptions. Please support quality journalism.

© Commodity Conversations ® 2022

Media Monitor

Ukraine’s grain harvest could fall by 50 per cent next year, with the pace of winter-crop sowing three times slower than last year. As of 3rd October, farms had sown 1.1 mln ha of winter wheat compared with 3.1 mln planted on the same date in 2021.

Russia’s farmers have accelerated winter wheat sowing after recent rain, planting grains on 9.4 mln ha compared with 10.7 mln ha a year ago. Winter wheat typically accounts for 70 per cent of Russia’s crop. The country’s Agriculture Ministry expects Russia’s grain harvest will grow by about five mln mt next year following the annexation of four (predominantly agricultural) Ukrainian territories.

France’s drought-hit farmers predict their corn harvest will produce about ten mln mt, the lowest in 30 years.

Due to low water levels, the cost of transporting grains and oilseeds down the Mississippi river has soared nearly 80 per cent since the beginning of September and over 150 per cent since August.

Last week, the largest Mississippi barge operator declared force majeure, warning customers it won’t be able to make good on deliveries because of low water levels. A logjam of vessels threatens to bring river traffic to a halt.

Canada is also facing problems transporting its wheat because of a shortage of railcars.

A shortage of US dollars has resulted in up to 900,000 mt of wheat building up in Egyptian ports. Egypt has been increasing import spending, leaving the central bank short of foreign currency.

Kenya has lifted its ban on importing and producing GM crops following the country’s worst drought in 40 years. The authorities hope the move will improve crop yields and food security.

Some analysts expect the EU soon to lift its ban on genetically modified and gene-edited crops. The EU official handling the issue said, “we must ensure the technology is safe. Somehow, we must get the balance right.”

Others would prefer that we plant ancient grains like amaranth, quinoa, chia, bulgar, millet, sorghum, and Kamut, a grain found in King Tutankhamen’s tomb.

Brazil should produce a record ten mln mt of wheat this season, up from a previous estimate of 9.67 mln. Brazil is currently a net wheat importer, but the government hopes to be a net exporter in ten years.

Brazil imported a record quantity of fertilisers this year. Their silos are full, and prices are sliding as farmers reduce applications. European farmers are looking at reducing fertiliser use, planting less acreage or switching crops. Even livestock farmers could be negatively affected.

The EU Commission has reduced the residue limits for two neonicotinoid pesticides, clothianidin and thiamethoxam, a move which may limit EU food and animal feed imports. The new rules come into force early in 2023, but third countries will have up to three years to adapt to the new regulations.

JBS, the world’s biggest meat producer, has pulled the plug on its US plant-based meat division Planterra Foods, maker of the OZO brand, closing a factory it opened in Denver in 2021. The company will keep its plant-based operations in Brazil and Europe. Is it a bad sign for plant-based meat? Do consumers consider fake meat too woke?

Beyond Meat doesn’t think so. It is sticking to its mission of making animal-based meat obsolete with innovations, such as its forthcoming vegan steak. Meanwhile, US firms eagerly await US government permission to start marketing lab-grown meat. They expect an announcement soon.

Plant-based milk may also be coming off the boil.

Tesco, the UK supermarket chain, has accelerated its plans to halve food waste in its operations, bringing the deadline forward from 2030 to 2025. The company has linked directors’ bonuses to achieving the goal.

Rising food prices could encourage consumers to waste less but ditching “best before” labels could also help. Wired Magazine believes the solution lies in eating your garbage – making enticing dishes out of the food you would otherwise jettison.

In shipping, Cargill plans to boost its use of biofuels in its fleet and to order methanol-fuelled ships as part of its plans to cut emissions.  Maersk has ordered a further six ocean-going container vessels with dual-fuel engines able to operate on green methanol, bringing their total order to 19 ships.

Maersk recently raised its full-year profit forecast from $24 to about $31 billion. The consultancy Drewry estimates that the entire container-shipping industry will make an operating profit of $270 billion this year, more than ten times the profit of $26 billion in 2020.

Nestlé was in the environmental news last week. The company pledged to spend more than CHF 1 billion by 2030 to source coffee sustainably, more than double the previous pledge. In a revolution for UK chocolate lovers, Nestlé will ditch the foil wrappers it has used for Quality Street for the past 86 years in favour of more environmentally-friendly paper.

The company has also scrapped the gold foil on its KitKat bars, replacing them with wrappers made with 80 per cent recycled plastic. It has also said it will stop sourcing from an Indonesian palm oil producer accused by environmental groups of land and human rights abuses.

On the financial side, Nestlé’s CEO said in an interview that the company is ready to make acquisitions in any of its business lines.

John Deere plans to build a world of fully autonomous farming by 2030, while Huawei believes smart farming is the start of sustainable food. Some argue that the future lies in vertical farming, where yields are higher than in traditional farms.

A coalition of farming and environmental groups have asked the UK government for a level playing field for food and animal welfare standards in future post-Brexit trade deals. The call follows a bitter row over the Australian deal, which the National Farmers Union (NFU) called a “betrayal” of British farmers.

As if the UK is not going through enough (many self-inflicted) difficulties, the country is suffering its worst avian flu outbreak in history. There are fears of a Christmas turkey shortage.

Many of the above links require subscriptions. Please support quality journalism.

© Commodity Conversations ® 2022

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.

Many of the above links require subscriptions. Please support quality journalism.

© Commodity Conversations ® 2022

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.

Many of the above links require subscriptions. Please support quality journalism.

© Commodity Conversations ® 2022

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.

© Commodity Conversations ® 2022

Many of the above links require subscriptions. Please support quality journalism.

Comment

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.

© Commodity Conversations ® 2022

Many of the above links require subscriptions. Please support quality journalism.

Comment

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.

© Commodity Conversations ® 2022

Many of the above links require subscriptions. Please support quality journalism.