Major food merchants surprised market experts this week by publishing surprisingly robust quarterly earnings. Both ADM and Bunge were able to seize on the volatility created by the US-China trade war and the coronavirus pandemic to improve the results of their trade desks. Another factor that seems to have helped was the weak Brazilian Real, combined with a strong demand from China. Some of the strategic bets made by the firms also seem to have paid off, like ADM’s decision to invest in probiotic nutrition, or Bunge’s cost-cutting strategy.
Similarly, Cargill performed very well in the year ending in May, data analysed by Bloomberg suggested – since the firm recently stopped publishing its full financial results. The volatile environment and the focus on animal protein paid off, as net income grew 17% on year to the fourth-highest ever. As a result, the 125 family members received a record USD 1.13 billion in dividends.
Global trade flows remain at risk of coronavirus disruptions, however, as demonstrated by recent interruptions at Argentina’s major export hub in Rosario. COFCO, Bunge and Vicentin all reported disruptions after workers tested positive for COVID-19. Nevertheless, the three firms said they were diverting products to other facilities which should avoid creating significant delays.
The global pandemic poses less of a threat to the UK’s food supply than Brexit does, a report by the Environment, Food and Rural Affairs Committee argued. The country is due to leave the EU on December 31 and is yet to ensure that food supply will remain steady. A third of the UK’s food is imported from the EU, some of it on a “just-in-time basis”. In Northern Ireland, grocers are already warning that they might have to increase prices or leave the region entirely because of the added costs created by Brexit. Since Northern Ireland will follow the EU’s customs rule in 2021, UK grocers like Tesco will need to produce extra documentation when shipping animal products.
On top of all that, the EU’s food supply is being threatened by the dry weather. Rainfall in France was 25% below normal in July, making it the driest month in 60 years. The corn harvest and beet crops were at risk as a result, while the country’s soft wheat production could drop 25% on year to a 20-year low. Production in the UK could be 30% lower and Romania expects a 6-year low harvest. On the other hand, recent rains helped the crops in Germany and Poland.
The overall food trend over the next few decades, however, points towards abundant and cheap food, according to a group of economists disputing the idea that we are facing a potential food crisis with a growing population. Climate change could seriously challenge our ability to make food beyond 2050, but the main causes of concern for now remain conflict and poverty. In the meantime, more countries should actually consider paying farmers to turn crop land back into forests or grasslands, they argued.
The fastest growing food sector in the world is aquaculture and half of all sea-food currently consumed is farmed. The sector holds great potential because of its unparalleled nutrient efficiency but is at risk of creating environmental damages if operations are not made more sustainable, a paper in Nature Food highlighted. Researchers laid out a series of improvements to address issues like the reliance on antibiotics or the use of wild-caught fish as feed.
While Nestle’s sales for the first half of the year were down 9.5% on year, some product segments performed much better and the firm expects full-year organic sales to grow 2-3%. The pet food brand Purina and Nestle Health Science performed particularly well in the period. And the launch of new plant-based products allowed the segment to report a 40% growth in sales. To get into the mind of Nestle’s marketing genius, check out this story on how a psychoanalyst helped get Japanese people to drink coffee. By focusing on childhood and launching coffee flavoured KitKats, Nestle was able to create an emotional bond with coffee.
Sales of fast food products in the US are surging with the reopening of some states and major fast food chains are now going on hiring sprees. Chipotle Mexican Grill, McDonald’s, Starbucks and Taco Bell all unveiled plans to hire thousands of workers, as half of all restaurant workers were laid off in Mar-Apr. The most exciting fast food news of the week, however, came with the launch of a fashion brand by Chipotle Mexican Grill. If you’re new to the world of fast food fashion, you need to check out KFC Crocs!
This summary was produced by ECRUU
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