Commodity Conversations Weekly Press Summary

Cargill reported operating profits of USD 476 million in the Mar-May quarter, a 41% drop on year due to the ongoing trade war with China, poor weather in the US and the African Swine Fever. The group’s financial services unit was the only segment to see higher earnings. Cargill had to close several feed mills in China due to the swine fever – some of which it is not planning to reopen. A company official said it would take two to three years for the hog population to recover. In the US, meanwhile, Cargill announced it was ‘swapping’ some of its Indiana grain elevators against ADM’s Illinois elevators in a bid for both companies to become more efficient. 

Looking forward, Cargill’s CFO warned that the trade war with China could have long-lasting effects in terms of shifting trade flows. The situation is particularly hard on US farmers who are struggling to get financing. Higher volatility due to the weather and political uncertainty are expected to be the ‘new normal,’ he added. ADM’s CFO agreed, saying that China would, from now on, ensure it is no longer dependent on the US for its soybean – or any other origin for that matter. He forecast that China will be focusing on boosting domestic production by improving yields. He added that this was also an opportunity for US agriculture to reduce its dependence on China. At any rate, a US-based agriculture economist argued that any trade deal with China would take years. He suggested it would be much simpler – and quicker – to reverse the new tariffs. 

If Cargill’s woes were not enough, the NGO Mighty Earth accused it of being ‘The Worst Company in the World.’ In its report, it argued that Cargill contributed to deforestation and was not doing enough to fight child labour, among other things. Another company facing heat is Nestle. Users of the popular website Reddit (so-called ‘Redditors’) have been calling for a boycott of the company via a compilation of humorous memes. 

Wilmar announced that the IPO for its China operations was on track for the fourth quarter this year after the Securities Regulatory Commission accepted to list its Yihai Kerry Arawana Holdings on the Shenzhen Stock Exchange. Wilmar said the IPO should help grow the group’s market share by making it more visible. COFCO, meanwhile, said it had secured a USD 2.1 billion loan from various international and Chinese banks with margins linked to the group’s environmental sustainability performance. 

Sources reported last week that Bunge has been in talks with BP about a possible joint-venture for its Brazilian sugar and ethanol assets. Bunge has been looking for ways to offload these assets for a while now and if this deal does happen, the JV would have a combined crushing capacity of 32 million mt of cane spread over 11 mills. 

The US Environmental Protection Agency has extended the use of the pesticide sulfoxaflor to several new crops for the first time, such as alfalfa, corn, cocoa and grains. The agency recognised that the pesticide is very toxic for bees but noted that it had issued guidelines to ensure that the negative effect on the bee population is limited. The EPA also said that farmers were facing tough times and needed the pesticide to reduce crop losses. Environmentalists condemned the move, arguing that it would be impossible to monitor whether farmers respected the guidelines. They also criticised the USDA’s decision to end the program to track bee populations. The Bee Informed Partnership pointed out that this program had been one of the only remaining ways to monitor the bee population, adding that the loss of honeybees this winter had been 7% above the previous year. 

Well financed multi-restaurant delivery apps such as Uber Eats and GrubHub are heavily subsidising the cost of food delivery, making customers believe that delivery costs are much cheaper than they really are, according to the CEO of Domino’s Pizza. He explained that these apps were very disruptive and were, in part, responsible for the company’s disappointing sales growth. However, he argued that the way these apps functioned was probably not viable in the long run. Instead, the group is focusing on what it calls “fortressing” – opening more franchises in a concentrated area to shorten delivery times. Delivery app GrubHub, meanwhile, could be facing a federal investigation for setting up as many as 20,000 fake websites with the names of its customer restaurants – a practice called “cybersquatting.” It is also being accused of overcharging for phone orders. 

A survey by the World Health Organisation found that baby and children products sold in Europe often contain too much sugar. Some products are labelled as suitable for children under six months, which is authorised by the EU but goes against the WHO recommendation that babies under 6 months old should only consume breast milk. This was probably good timing for Nestle to announce the launch of chocolate made entirely from the coca fruit and without adding refined sugar thanks to a new pulp extraction process. The chocolate will first be sold in 70% chocolate KitKat bars in Japan.

This summary was produced by ECRUU.

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Commodity Conversations Weekly Press Summary

Austria will soon become the first EU country to ban the use of glyphosate, the world’s most commonly used weedkiller, after a favourable vote in the lower house of parliament. The upper house is also expected to approve the ban in a vote next week. In response, the farmers’ union Copa-Cogeca urged the EU to declare the provision as unlawful, considering that the European Commission approved the herbicide up to 2022. The cooperative suggested alternative ideas to legally limit its use, such as reducing private applications. 

In the US, on the other hand, a federal judge said he said he was planning to reduce the USD 80 million fine a California verdict imposed on Bayer. The group – which sells glyphosate as Roundup since it purchased Monsanto – has lost three cases concerning Roundup so far. One was already reduced from USD 289 million to USD 78.5 million, while Bayer is planning to challenge the third which involved USD 2.055 billion in compensation. A total of 13,400 people are currently suing Bayer over Roundup.  

American pork producers think they can deal with diseases such as the African Swine Fever with a novel technique: using genetic modifications to develop animals resistant to diseases. Although the technology is still a few years away, the FDA reiterated that it will not let the USDA regulate the approval of genetically engineered (GE) animals, despite calls from farm lobbyists who argue that the FDA is too slow. The FDA has only approved one GE animal so far: the AquAdvantage salmon, developed to grow faster. 

The commodity groups with the most soybean crushing assets in China are expected to be the hardest hit by the swine fever outbreak, while demand is expected to grow in other regions as livestock producers will boost their output to meet the extra demand from China. The head of Bunge noted that only 15% of its crushing capacity was in China, compared to 33% in South America and 27% in Europe. In contrast, ADM with its 25% stake in Wilmar – one of the largest soy processors in China – might be more exposed. Nonetheless, the EU and South America will not be able to produce enough pork to meet the demand from China, which consumes half of the world’s pork. US exports will be needed – even with tariffs. So in the longer term, ADM and Cargill, who have most of their assets in the US, might also benefit

ADM is launching a new system to improve the performance of shrimp farms in Asia, called BIOSIPEC. Through controlled feed and aeration mechanisms, farmers can improve environmental performance and boost profits, the firm said. In Europe, Univar signed an agreement to distribute seaweed ingredients developed by Seaweed & Co. Seaweed products are gaining in popularity because they meet a number of consumer trends: sourced sustainably in the Scottish Outer Hebrides and with six EU approved health claims. Seaweed is being used in various foods and beverages as a salt replacement, flavour booster or nutritional source. 

People with a high consumption of sugar-sweetened beverages, including fruit juices and sweetened tea, have a higher chance of developing cancer, according to a paper by the Universite Sorbonne published in the British Medical Journal. The researchers noted that no causal link was identified and that other factors, such as lifestyle, could be the reason for the higher risk. They did suggest that the impact on blood sugar levels could be part of the explanation, as they called for more to be done to tackle sugar consumption. 

Eating candy has just become slightly more environmentally friendly after Nestle launched a new paper wrapper for its Yes! Snack bar that is recyclable. The firm committed to using only recyclable or reusable packaging by 2025. Similarly, Coca-Cola announced that it will use plastic bottles in Australia that are 100% recycled. Other beverage makers, such as  Lucozade Ribena Suntory have been using 100% recycled bottles for a while, but Coca Cola highlighted that it was much harder for carbonated beverages because of the pressure involved. 

Pepsi is taking a different direction and will start selling its Aquafina water in aluminium cans in the US. Some argue that aluminium can be more environmentally friendly than plastics because a lot more of it is recycled. On the other hand, critics say the impact of the open-pit mines needed to source bauxite, along with the energy-intensive aluminium extraction, cancel out the effect. In the end, however, experts say that nothing beats tap water. 

The most exciting Coca-Cola news this week came from McDonalds who started selling Coca-Cola chicken wings in China. Apparently, cooking chicken wings in Cola is not uncommon in China. 

This summary was produced by ECRUU.

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Commodity Conversations Weekly Press Summary

The EU and Mercosur nations – Argentina, Brazil, Paraguay and Uruguay – announced that they have finalised a draft Free Trade Agreement (FTA), a deal 20-years in the making which could potentially create one of the largest free trade areas on earth. One of the biggest winners would be Brazil and Brazilian meatpackers as beef, along with poultry, pork, sugar, cheese and honey exports would see lower tariffs when entering the EU. The country is also hopeful this will encourage investments in its agriculture industry. 

Commentators say, however, that the draft is likely to face further hurdles before it gets approved. The French agriculture minister already said the country would not sign on to the deal. The foreign minister added that the government would wait until it could see the final text, although it would remain vigilant to ensure that French farmers do not face unfair competition. And some European producers urged their governments not to sign the treaty, such as the sugar association CEFS. It argued that it was unfair to EU producers who are forced to follow much stricter environmental and social standards. Similarly, the European Renewable Ethanol Association said the EU industry needed to act quickly and find new markets in order to deal with competition from imports. 

Another positive trade news was announced by the US President who said he would postpone additional tariffs on Chinese goods after China committed to buying more US agricultural products at the G20 meeting in Japan. However, market participants are sceptical that China can really buy more given the current anti-dumping tariffs and rising corn prices in the US. In addition, the US Agriculture Secretary pointed out that China had not fulfilled an earlier commitment to buy more US products.

In contrast, China banned all meat imports from Canada as it found that a pork shipment received in June used counterfeit health certificates. The investigation initially started because the pork was found to contain ractopamine, a feed additive banned in China. While Canada confirmed that counterfeit certificates were used, the ban comes amid deteriorating relations between the two countries following the arrest of the Huawei CFO in Canada. The ban comes at a particularly frustrating times for Canadian producers as the meat demand in China is surging because of the African Swine Fever.  

Analysts warned that the swine flu is expected to impact the performance of Wilmar’s oilseeds and grains business, which is responsible for 49% of the group revenue, because of the drop in soybean-based animal feed from China. However, the pain will be short as the demand will normalise once the swine herd recovers, while Wilmar is otherwise well placed to gain market share in the country. The firm is focusing on packaged food, rice and flour, which is in line with current Chinese consumption patterns, the analysts added. 

Nestle published further details on its project to track the supply chain of products through a blockchain, which will start with milk shipped from New Zealand to the Middle East. A previous test used IBM Food Trust’s blockchain solution but Nestle will now use a system called OpenSC developed by the World Wildlife Fund (WWF) and The Boston Consulting Group Digital Ventures. Auchan, Albert Heijn and Carrefour already handle products with a QR code linked to a blockchain. 

Digital technologies like blockchains or Artificial Intelligence (AI) are among the five megatrends in the food sector as identified by the president of Syngenta Seeds and North America region. He listed the growing population, technology, new farm structures and sociopolitical pressures as the other trends. Meanwhile, experts participating in a farm and tech summit in the US noted that the living standards of food producers in rural communities will need to improve to guarantee basic food security. 

When the sale of organic celery in some US stores skyrocketed earlier this year, shopkeepers were confused at first. But this investigative piece uncovered the mystery: a single book published by someone with no medical background claimed that drinking celery juice was very healthy. While the trend was quickly picked up by major celebrities, experts insist there is no scientific evidence backing the health claims. It just goes to show that some nutritional facts last even when they have clearly been contradicted by rigorous studies, such as the idea that fish oil reduces heart risk which was disputed in this study involving 12,500 people. The New York Times put together a list of some of these strangely enduring ideas.  

This summary was produced by ECRUU.

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Commodity Conversations Weekly Press Summary

The Brazilian government is looking at boosting agricultural exports by raising some USD 58 billion in funds to finance farmers. The loans will mainly be issued in US Dollar via debt certificates but the agriculture minister said they are looking for other sources too. The Agriculture Ministry, meanwhile, will not be responsible for demarcating indigenous land as proposed by the Brazilian President last month. Congress rejected the decree ruling that the Ministry of Justice will continue to manage it. This will likely slow the President’s plan to open up indigenous lands to agriculture and mining. 

The International Olympic Committee announced that the Chinese Dairy giant Mengniu Dairy, whose largest shareholder is COFCO, and Coca-Cola will be joint beverages and dairy sponsors from 2021 to 2032 – a sponsorship deal unofficially estimated at close to USD 3 billion. While the deal is widely seen as a much needed financial boost for the Olympics, Mengniu Dairy said this would help “build the positive reputation of Chinese food and beverage brands among consumers globally.” However, another Chinese dairy giant, Yili Industrial Group, said this agreement violated its own arrangement to be the sole dairy sponsor of the 2022 Winter Olympics in Beijing. Yili threatened to withdraw its sponsorship as a result

Euromonitor says China will beat the US as the world’s largest dairy market as early as 2022. This can appear surprising for a country where as much as three-quarters of people suffer from some form of lactose intolerance. But this is because the older generation was not used to consuming dairy products, something that government policies are reversing very fast thanks to measures such as introducing dairy in schools and recommending a higher dairy intake. Meanwhile, China’s dairy farms are reportedly cashing in on the African swine fever and selling some of their cows for beef. The price of beef has risen considerably and beef imports were up 75% year on year in April. 

Talking of milk, the US startup Perfect Day, which has been working with ADM, said they have managed to make lab-grown milk protein from microflora, effectively providing a vegan and lactose-free alternative to milk protein. The protein is only part of what is in cow’s milk, and some say that replicating milk fat may be even harder. But the company says the protein can be used as an ingredient in processed dairy or in the many other foods that use modified milk ingredients such as hot dogs. The shift away from traditional meat could happen much faster, however. A report by AT Kearney forecast that by 2040, 60% of the world’s meat consumption will either be from meat grown in labs or from plant-based alternatives. 

This might be timely. A new report by the ethical investor network Farm Animal Investment Risk and Return (Fairr) found that the aquaculture industry, which is currently the world’s fastest-growing food production sector – and a highly profitable one – has major negative environmental impacts. It is also a victim of climate change: aquaculture farming in south-east Asia could fall by 30% within the next 30 years due to the rising water temperature and acidification of the oceans. 

In a bid to solve some of these issues, Cargill tied up with French group InnovaFeed on sustainable feed options, with a focus on fish feed made from insects. In Brazil, Cargill is acquiring swine feed producer Beckers, which supplies over half of the country’s swine output. In Singapore, the company has opened a new innovation centre, its third in the region, to work with customers on reformulating products to make them healthier while keeping the same taste. 

Bunge Centerfield, the joint initiative between the group and its US farmers to collect farm-level data, announced it would be integrating Field to Market’s Fieldprint Platform which tracks various sustainability indicators. Bunge said this would enable farmers to analyse and compare their sustainability, while the information would also be available to downstream customers. COFCO International’s 2018 sustainability report, meanwhile, showed the company reduced its freshwater consumption globally by 4% and increased its energy consumption from renewable sources from 82% to 88%. 

ED&F Man is looking to sell some of its under-performing sugar assets as the agri-industrial segment reported another loss for the six months ending March 31, according to sources. The group’s latest annual report showed that it closed a refinery in Israel, a factory in Chile and idled a plant in Ukraine. Other sugar players, such as Biosev and Bunge, are also reportedly looking to sell some sugar assets. 

The US Commodity Futures Trading Commission (CFTC) said it had given USD 2.5 million to the whistleblower who reported Cargill in 2017 over some swap violations. Cargill had been fined USD 10 million at the time, and the CFTC added the whistleblower would have been given more money had he not delayed the reporting. Cargill, meanwhile, issued a statement saying they had made the necessary changes and that they continued to support the government’s whistleblower initiative. 

How much would you pay for your coffee? There is a growing trend of coffee aficionados ready to pay up to drink unique coffee. One place in the US is selling an award-winning coffee from Panama called Elida Geisha for USD 75 per cup, officially the world’s most expensive coffee.

This summary was produced by ECRUU.

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Commodity Conversations Weekly Press Summary

China’s COFCO is reportedly looking to purchase a 25% stake in Russia’s KSK grain terminal in Novorossiysk, Krasnodar, for USD 400 million. The facility is the third largest Russian grain terminal in the Black Sea and would allow COFCO to boost the purchase and exports of Russian grains to Africa, the Middle East and eventually China. Cargill already purchased a 25% stake in the terminal back in 2013.

Neovia, which was bought by ADM earlier this year, will slow its acquisition rate, after purchasing 20 firms over the past four years. The animal feed producer, which has operations in the EU, Southeast Asia and Latin America, will focus on consolidating operations and growing organically.  

A company that isn’t slowing down, meanwhile, is Cargill as it announced a USD 48.8 million investment in building a new plant to expand its protein production business in China’s Anhui Province. The integrated poultry facility will be able to trace the origin of any goods in the production process within two hours, Cargill highlighted. In a recent blog post, the group CEO conceded that the industry was unlikely to meet its goal of eradicating deforestation from the beef, soy and palm oil supply chains by 2020. Some USD 30 million will be invested to accelerate efforts, he added, as he called for more cooperation in the sector to achieve the goal.

Similarly, Barry Callebaut and Unilever, are piloting the Field to Market and Sustainable Agriculture Initiative Platform Equivalency Module to better monitor the sustainability performance of US farmers. The groups hope the initiative will help align different agricultural sustainability initiatives.

Amid the growing backlash over the safety of glyphosate, Bayer is planning to spend USD 5.6 billion to identify new ways to fight weeds. The future of glyphosate is uncertain as the EU might not renew it after 2022 but the firm said the investment was not linked to the discussions around the controversial weed killer. Analysts noted that Bayer could not openly admit it was looking for alternatives without undermining the idea that glyphosate is safe.

Despite some encouraging news that the US and China will hold trade talks later this month, agricultural companies have been vocal in urging the White House not to escalate tensions by imposing new duties. The US Meat Export Federation noted that the US was missing out on the surge in pork demand caused by the African Swine Fever outbreak in China due to the 62% retaliatory tariffs.

But it’s not all bad news for US farmers, as the country will be guaranteed 80% of the EU hormone-free beef import quota over 7 years. The increase was only possible after other exporters, Australia, Argentina and Uruguay, agreed to lower their shares. Moreover, an increasing number of US farmers are looking into cultivating hemp, which can potentially generate much higher profits than corn or wheat, according to a processor. Vote Hemp estimates that the total acreage could double in 2019, although the USDA is yet to regulate the plant which leaves states responsible for drafting rules.

In the short term, however, the American Farm Bureau Federation expects the White House might have to offer farmers a third bailout package as the upcoming elections could make the negotiations of new trade deals unlikely. This could be a problem as several countries, including China and the EU, are already questioning whether the farm subsidy package of USD 16 billion is within the amount allowed under WTO rules. They have asked for more information on the program, which the US is yet to officially notify. Similarly, India is facing questions at the WTO about how it intends to fulfil its promise of doubling farm incomes by 2022 and its various farm subsidies.

To address the issue around subsidies, the US and the EU are supporting a proposal by Japan to overhaul the way each WTO member country reports its subsidy policies. The proposal would either suggest a single subsidy threshold for all countries (instead of the 5% for developed countries and 10% for developing countries) or a change in the formula used to calculate it. The proposal will be discussed at the next G20 meeting.

Finally, the rocket scientist behind the popular Youtube channel Smarter Every Day explains the incredible science involved in grain bins, in this video called Farmers are Geniuses.

This summary was produced by ECRUU

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Commodity Conversations Weekly Press Summary

The US President signed an executive order this week to simplify and accelerate the process to approve genetically modified livestock and seeds. According to the order, the Food and Drug Administration (FDA) and the Environmental Protection Agency (EPA) need to set up “common sense regulations.” Earlier, the US Department of Agriculture had already proposed to significantly relax genetically engineered rules in a bid to make it cheaper for companies to develop new crops and for farmers to have more options. The idea was that companies would no longer need the FDA and EPA approvals for genetically engineered crops that are similar to crops that could be made through traditional breeding – leaving it up to the companies to determine whether this was the case or not.

An area where US farmers do want more regulation, on the other hand, is to limit foreign ownership of US land. As of 2016, the USDA estimated that some 2.3 million acres of land was in foreign hands, including 190,000ha under Chinese investments. However, some say the numbers are inaccurate and could be higher. This is also expected to be an issue in the presidential race with at least one candidate proposing to ban foreigners from buying farmland at a federal level.

In an interview with Forbes, Cargill’s recently appointed chairman of Asia Pacific (the group’s first board-level executive not to be based in the US) said that Asia was increasingly important as a home for food grown in the US where yields are growing faster than consumption. He said the group was focusing on developing “Asian run” businesses and was looking to build more partnerships with both governments and private organisations.

Cargill’s Aqua Nutrition is 43% on track to being entirely Marine Stewardship Council certified, a goal it has set for 2025. The division, which produces almost 5% of the world’s aquafeed, managed to reduce its freshwater usage by 15% and its greenhouse gas emissions by 6% in 2018. Cargill also managed to cut CO2 emissions from its chartered shipping fleet by 12.1% in 2018, on track to reach 15% in 2020 and part of the International Maritime Organisation’s target of a 50% reduction by 2050. The head of the ocean transportation business said, however, that “we must do more.”

In the US, Cargill has launched several high-protein low-carb meat snacks after a survey showed that almost everyone snacks during the day, with some people eating 4-5 snacks a day. Close to half of those surveyed are looking – and ready to pay a premium – for healthier options.

Wilmar is looking for opportunities in China’s struggling animal feed market – in part due to the African swine fever – to invest in building new soybean crushing plants. A source said the strategy was to focus on poultry feed instead of hogs as chicken demand is growing faster. The group could also be looking at setting up an oilseed plant in Vietnam. In Australia, Wilmar, which is Queensland’s third largest rail network owner-operator, has installed cameras on all the sugarcane trains so that footage can be used in case of an accident with pedestrians.

Via its Prize for Innovation in Food Security award, Olam is investing in Innovation Mapping for Food Security (IM4FS), a technology that is being developed to help small farmers work out which is the best crop to grow on a field at a given time. Olam’s CEO said this was exactly the kind of technology required at a time of climate change and biodiversity loss.

Global chocolate producers are likely to miss their 2020 deadline to eradicate child labour from their supply chain, the fourth time they miss the deadline after trying in 2005, 2008 and 2010. A report in the Washington Post said that none of the main chocolate producers could guarantee that their supply chain was child labour free and that they felt the existing certification agencies were insufficient. Part of the problem is that traceability from farms is a major challenge and that small farms often found a way around the certification criteria. Similarly, most companies’ “no deforestation” pledge by 2020 deadline is going to be missed, with Greenpeace estimating that 50 million ha of forest has been lost in the last 10 years. However, with the Global Forest Watch platform launching a real-time platform using satellite imagery to track deforestation, “there are no more excuses,” the organisation said. They added that companies like Cargill and Louis Dreyfus are already using it for a wide range of commodities, including beef.

A new study found that the average adult in America ingests at least 50,000 microplastic particles every year through food, with actual numbers likely to be close to three times that amount. The worst is for those who drink water from plastic bottles, which have 22 times more microplastic than tap water. No one really knows how bad the plastic is, however, and some scientists say the risk could be overplayed. But better be safe than sorry – the Canadian government is apparently going to ban single-use plastics by 2021. That would include straws, cotton swabs and single-use cutlery, among many other things. Plastic is also a major issue in organic farming which uses more plastic mulch to compensate for not using weed killers. One organic farmer in the US said that the plastic film used on a 30-acre plot would spread over 58km in a straight line, all of which ends up in landfills later on.

Last but certainly not least, a Mongolian NGO is re-introducing the traditional guard and shepherd Bhankar dog which was phased out during the Soviet era. The number of livestock in the grasslands has increased threefold in the last 17 years in part because herders want to anticipate the loss of animals to predators. This, in turn, accelerates desertification. Bhankar dogs are such a source of pride that some families who had moved to the city are reportedly being convinced back into herding life just to be given one. Check them out here.

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Commodity Conversations Weekly Press Summary

Louis Dreyfus Company (LDC) announced that it has renewed a USD 750 million loan which will be linked to how the company performs based on a number of sustainability goals. The interest rate will be based on its carbon emissions, waste disposal and electricity and water consumption. The concept is gaining in popularity, especially in Europe, and Moody’s estimated that a total of USD 36 billion worth of sustainable loans were issued last year. Starbucks and Mercon Coffee Group announced similar loans earlier this month, as they noted that the coffee supply chain was particularly vulnerable to climate change.

In China, LDC has partnered with Guangdong Haid Group to produce high-end aquatic feeds and fermented soybean meal, the first investment by LDC in the aquafeed sector. The Haid group is currently the largest aquafeed producer in the world and will help LDC take advantage of the growing demand for healthy protein, LDC’s chairperson noted. Similarly, sources reported that Nutreco NV, an aqua-feed supplier, was looking to purchase the assets of South Korea’s CJ CheilJedang Corp for USD 1.7 billion. Most of the major players in agricultural commodities are investing in the sector, following the advice given by Cargill’s CEO to “go long [on] fish and short [on] pork”.

In contrast, large export companies will be less interested in investing in Ukraine’s grain industry following the fraud and ensuing bankruptcy of the Agroinvest Group, the head of the Ukrainian Grain Association warned. Bunge Ukraine might lose up to 20% of its market share in the sunflower seeds market, while agribusinesses have lost up to USD 200 million because of the Agroinvest Group case, the association estimated.

Ukraine’s leading food maker, Chumak, was purchased by Delta Wilmar, a joint venture between Wilmar International and Delta Exports. A Wilmar spokesperson said the acquisition will help move further downstream into the high value-added food processing sector. Otherwise, analysts warned that low palm and palm kernel oil prices should affect the performance of plantations companies in the first half of 2019, although Wilmar reported better than expected results thanks to the tropical oils and sugar segments.

In Malaysia, the world’s largest producer of crude palm oil, FGV Holdings, said it was looking at ways to reduce its dependency on palm oil, as high stocks levels and the competition from alternatives oilseeds like soybean and sunflower were expected to continue to push down prices. Nonetheless, the biodiesel mandate in Malaysia was increased which could help draw down inventories, the group noted.

Banana experts are gathering this week in Miami to discuss some of the major issues facing the world’s most popular fruit. One of the main concerns remains the Panama disease which threatens to wipe out the Cavendish variety, the single most popular banana type grown as a monoculture around the world. But people are pointing to another less obvious problem: bananas are too cheap. Surveys estimate that it is the cheapest product on the fresh food aisle, which is a mystery considering how fast they rot and how far they have to travel. One explication, according to Equal Exchange, is that the real price is being paid for by the environment and labour forces. Only cotton has a more damaging impact on the societies where it is grown, the group estimates.

The FDA in the US published a new guidance on expiry dates which will hopefully reduce the amount of food that is unnecessarily wasted. The agency recommends that the food industry uses the term “Best If Used By” to illustrate that labels are placed for quality and not safety purposes. A majority of food products can be consumed safely beyond the date indicated on the packaging and the law only imposes a sell-by date for safety reasons on one product: infant formula. For more information, check out this video which explains that even if products are expired and smell really bad, like milk, they are still completely safe to consume.

The drive by supermarket chains to reduce the amount of plastic used is facing a major obstacle: consumers often choose convenience over sustainability. In the UK, Morrisons launched a program to encourage people to use their own containers for meat purchased at fresh food counters, but some chains like Tesco are now completely removing fresh food counters. The decision comes as consumers increasingly look to purchase products that are already sealed and ready to scan. One solution could be to work towards a middle way, such as shifting to recyclable aluminium trays which provide all the convenience of plastic packaging with a smaller environmental impact.

This summary was produced by ECRUU

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Commodity Conversations Weekly Press Summary

Wilmar topped a 50-company list as the Singapore-based public company with the highest human rights disclosure standards. The group was ranked second – right after Sime Darby – in the ASEAN category. Wilmar’s chief sustainability officer pointed out that several of the highest ranking companies were involved in the palm oil business which showed that the industry was responding to consumer concern and becoming more sustainable.

Olam has issued USD 120 million in five-year fixed-rate notes to nine private investors and will use the funds to service its debt, among other things, the company said. Meanwhile, Cargill announced it was investing in cultured meat startup Aleph Farms, marking its third investment in the non-animal protein business after investing in Memphis Meats and Puris.

Nestle Brazil will be launching 25 new projects in 2019 and continues to look for potential acquisitions with a focus on organic and healthy products. A company official added that producing organic food on a large scale was a challenge, however.

In the US, organic food sales reached a record USD 48 million in 2018, up 6% on year. The Organic Trade Association said that thanks to millennials and social media the USDA Organic seal was becoming increasingly important. “Organic is now considered mainstream… In 2018, there was a notable shift in the mindset,” the association said. Interestingly, the organic market is also affected by the shift to vegetable protein with sales of organic animal protein almost stagnant.

In the UK, the ice cream brand Wall’s has tied up with two NGOs to launch a “Vanilla for Change” program to support sustainable vanilla production in Madagascar, help the farmers involved in growing the crop as well as support education in the UK. Each ice cream will have a “Track Your Impact” bar code that consumers can scan to get more information on the program. “Vanilla for Change is the first step to demonstrate our commitment to fairness across our supply chain,” Wall’s said.

Coca-Cola Amatil will be setting up some 10,000 rooftop solar panels across its bottling plants in Australia. This will help the group reduce carbon emissions but also save some AUD 1.3 million in electricity costs. By 2020, the aim is for 60% of the energy used to be from renewables or from low-carbon sources, up from 56.3% in 2018. Separately, Netflix has tied up with Coca-Cola to promote the former’s new season of Stranger Things as well as the latter’s relaunch of its New Coke. There won’t be any straightforward Coke ads on Netflix, however. Instead, the brand’s presence will be felt in the series.

US-based sustainable agriculture group Indigo Ag is working on building a ‘living map’ of the global food supply through satellite imaging and geospatial intelligence. The company said that the aim was to improve forecasting and market transparency to reduce the volatility and uncertainty of farming. The startup topped CNBC’s list of most disruptive companies last week.

A new study found that even if you’re careful when choosing your pre-prepared meals and look out for items that are low in sugar, falt and salt, you’re still likely to be consuming 500 calories per day more when eating ultra-processed foods. This is because the body produces fewer appetite suppressing hormone when ingesting processed food which means people tend to eat more of it. The scientists are not sure why this is the case, although they guessed it could be because processed food is easier and faster to eat, making it harder for the brain to register the quantities. Romania is one country looking to actively get people to shift to a healthier diet. The government just announced it would reduce the Value Added Tax (VAT) on healthy and local fresh foods from 9% to 5% to promote local agriculture and help reduce rising obesity rates.

The US Food and Drug Administration is set to start looking at how to regulate the cannabis component CBD in food on a federal level at the end of this month. Some food companies, such as Mondelez, already said they were looking into adding it to snacks and the substance is becoming increasingly popular in drinks and sweets. A Rabobank report argued that the new trend was blurring the line between the pharmaceutical and food markets. But with a 2018 study suggesting that almost half of Americans were keen to try edible cannabis, the market is expected to grow exponentially.

This summary was produced by ECRUU

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Commodity Conversations Weekly Press Summary

Olam saw better results in the first quarter with net profit 6.9% higher than the same period last year, helped by a strong performance in the edible nuts and cocoa segments. In the quarter, the group acquired Indonesia’s largest cocoa processor and made a proposal to buy Nigeria’s Dangote Flour Mills, while it closed its sugar, fundamental fund and wood product businesses.

Wilmar also reported good results with earnings increasing 26% compared to last year thanks to better performance in the sugar and tropical oils business units. The oilseeds and grains segment did not perform as well, in part due to the African swine fever outbreak in China. Nonetheless, analysts suggested that Wilmar was in a good position to deal with trade tensions and that it would continue to see good results.

In contrast, experts argued that ADM was in a vulnerable position amid the breakdown in talks between the US and China. The firm weathered the trade disruptions with a better-than-expected performance last year, but this year has seen the added effects of the Midwestern floods and a struggling ethanol market. In response, the CEO highlighted that ADM was looking at acquisitions in the speciality ingredients sector, while possibly spinning off its ethanol business.

The market reacted abruptly to news of the US escalating tariffs and China’s retaliation but analysts estimate that commodity tradeflows should not be affected as most products were already under some tariffs. In addition, traders were already limiting new shipments between the two countries amid the uncertainty. Nonetheless, the viability of long term investments is now being questioned as the dispute could last for years.

US farmers are particularly worried because they expected the situation to be resolved by now, while recent weeks saw more floods affecting the Mississippi River. The government had offered growers compensation for the trade war last year, and the President mentioned that the state might spend up to USD 15 billion to buy crops this year which could be sent as international aid. The reaction from experts was quick and unanimous: buying crops to send to developing nations will backfire by upsetting world markets, and would be ineffective because the crops concerned – mainly soybeans and corn – are not for human consumption.

Moreover, dairy farmers in the US could feel the impact of the African swine fever in China for years, according to Rabobank. A lot of livestock feed is made from milk, such as whey permeate, whey powder and lactose, and the hog population in China could take years to fully recover. Exports of US whey and permeate already dropped by about 60% in March.

While some countries are busy imposing new tariffs, Chad announced this week that it removed all the import duties on major food staples like rice, flour, cooking oil and dates. The move is seen as a means to preempt shortages and the possibility of protests, such as the ones that led to the removal of Sudan’s President. Another trade news surprised the market this week, as Australia reportedly imported a shipment of wheat from Canada. Usually one of the biggest wheat exporters, Australian prices surged because of the prolonged drought.

The Australian agriculture minister recently told reporters that the country produced “the most environmentally and ethically sustainable food and fibre in the world”. However, AAP FactCheck ruled that the claim was false. The Food Sustainability Index (FSI), published by The Economist Intelligence Unit, ranks Australia as 13th out of 67 most sustainable, while the Yale Centre for Environmental Law and Policy ranks Australia as 53rd out of 177.

After the recent successful IPO of Beyond Meat, firms have been quick to announced new investments in the sector. Cargill invested in Israel’s Aleph Farms, which makes steaks from cattle cells in a lab, Impossible Food raised a further USD 300 million which valued the company at USD 2 billion and McDonald’s will start selling a new vegan burger made by Nestle in Germany.

Among all the excitement, some plant-based food producers are starting to worry about the availability of a key protein source: peas. Analysts estimate that global pea demand could quadruple by 2025 as firms moved away from soy as a protein source. Northern countries such as Canada, France, Belgium and Germany could become major pea growers, although activists are now highlighting that peas contain just as much herbicide residues as other crops. A food producer also noted that pea protein was nothing special and that it could be substituted for mung bean, brown rice, mustard seeds or lentils.

Burger King also announced that it was expanding sales of Beyond Meat Whoppers in the US. But it made a much more exciting announcement in Mexico as it started to deliver burgers to people stuck in their cars in traffic. It now plans to test the project in Sao Paulo, Los Angeles and Shanghai.

This summary was produced by ECRUU

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Commodity Conversations Weekly Press Summary

Bunge reported a net profit of USD 45 million in the quarter ending March 31, up from a loss of USD 21 million last year, mostly thanks to better margins in the oilseeds segment. The firm appointed a new chief financial officer as part of another restructure – the second in less than two years. The aim, the CEO said, is to integrate regional operations into a global model which will allow faster decision making.

Louis Dreyfus is reportedly engaged in talks with investors interested in buying equity stakes. Sources say the potential investors might include China’s COFCO or Japanese trading houses. This is part of an effort to move closer to the consumer and focus on emerging markets such as Asia. COFCO, meanwhile, could see some transformations as China is working on a plan to reorganise state-owned commodity companies. Under the change, Sinograin assets could be transferred to COFCO – making it the biggest soy processor in the country.

Still in China, Cargill announced it was building a new premix plant in the Jiangxi Province, another in a series of investment in the country’s feed industry. The plant will focus on young animal nutrition and antibiotic growth promoter-free solutions. This comes at a time when the country is struggling with African swine flu. China’s pig population should fall by some 134 million heads this year, almost 30% of the country’s total population and more than the number of pigs in the US. ADM forecast that China will have to import a lot of meat to compensate, causing prices to surge in places like the US, Europe and Australia. An analyst at INTL FCStone argued this could also force China to make efforts to please the US and settle on a trade deal.

But so far it doesn’t look like this is the case. The US has threatened to impose new import tariffs on Chinese products by the end of the week after the latter went back on some of its earlier commitments. A source said the issue was that China now wanted to make the policy changes through administrative and regulatory actions instead of making legal changes. A policy expert argued this would weaken the deal and make it hard to implement.

The WTO ruled in favour of the US last week on a 2016 case against China’s tariff-rate quotas for corn, rice and wheat. China said it would look into the decision and aim to follow WTO rules but trade analysts are increasingly concerned about the WTO’s ability to ‘handle’ China. Some are even suggesting the organisation should change their rules to deal better with the country and its state-owned enterprises. Brazil, meanwhile, is hopeful that China won’t renew anti-dumping measures on sugar when they expire next year.

One of Olam’s palm plantations in Gabon, which it manages in a joint venture with the government, has been certified by the Roundtable on Sustainable Palm Oil (RSPO). The tradehouse, which aims to certify all of its Gabon plantations by 2021, added that this was Africa’s first certified oil palm plantation to be completely on grassland. In the EU, some environmentalists are worried that the Commission’s ban on palm oil is likely to stall recent efforts to make the palm oil supply chain more sustainable. Producers, namely Malaysia and Indonesia, will likely look for new buyers in homes such as China and India where there is less concern about sustainability.  

The European Commission, meanwhile, is implementing a common food waste measurement methodology so that each member state can accurately assess the amount of food that is being wasted every year. In turn, each country will be able to use this information to achieve the EU’s Circular Economy Action Plan to halve per capita food waste by 2030.

The UN warned in a new report that, on top of threatening the existence of some 1 million species, the poor state of our soil could mean that within 60 years most land will be too barren to grow enough crops to feed the world. Some suggest that creating carbon farming tax credits would be a good way to encourage farmers to switch to methods which regenerates the soil’s nutrients. However, some of these methods, such as ‘no tillage’ and using ‘cover crops’, are already spreading as farmers say they lower machine and labour costs and use fewer chemicals. The bonus is that the restored soil can, in turn, absorb significant quantities of greenhouse gas. Bill Gates, meanwhile, is working on a type of crop that could store more carbon.

Vegan meat company Beyond Meat was valued USD 3.8 billion on the first day of its IPO last week – making it the highest US listing since the financial crisis. Analysts argued that part of the hype was thanks to the support of Hollywood celebrities, adding, however, that the company reported losses of USD 30 million in 2018.

This summary was produced by ECRUU

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.