Commodity Conversations Weekly Press Summary

While many small independent farmers have been able to benefit from the impact of the coronavirus so far, an expert argued that “the current boom is a sweet illusion; the bust is coming fast”. A US survey revealed that many small operations would not survive the year. Part of the issue is that the pandemic seems to have reversed the previous trend where consumers were moving away from processed food to focus on eating local and fresh products. An executive at a large food firm noted that “people aren’t cooking, they’re reheating”, as he highlighted that processed food has gotten much better both in terms of taste and health. The result is that the disease could open the door for large multinationals to take over smaller operations. 

Right on cue, Nestle announced that it will invest USD 100 million to grow its presence in China. The plan includes building its first plant-based meat factory on the continent, expanding a pet food plant and a biscuit factory. In Brazil, Bunge said it will purchase two soy processing plants from Imcopa for a combined USD 9.16 million. The move would cement Bunge as one of the largest soy processors as it currently operates 12 facilities in the country, compared to Cargill’s eight plants. 

Others are seizing on the crisis as an opportunity to highlight sustainability goals. Danone, for one, will add the commitment to produce healthy and environmentally-friendly food to the company bylaws. The key aspect to sustainability is transparency when it comes to gaining consumer trust, according to Cargill’s latest Feed4Thought survey. The Global Salmon Initiative (GSI) has taken the idea to heart and published its Sustainability Report outlining the performance of salmon farming. Salmon farms have a lower carbon footprint and more efficient use of feed when compared to land-based operations, the report claims. 

Meanwhile, the price of food in US grocery stores saw its biggest monthly jump in 50 years in April with the outbreak of the coronavirus. Data from the Bureau of Labor Statistics revealed a 2.6% overall price hike in retail food prices when compared to the previous month. The situation is similar in Latin America where rising food prices and shortages led to some violent protests. In Chile, the President argued that supply remained plentiful, although he pledged to accelerate the distribution of food packages. 

The extraordinary measures taken by the EU to alleviate the impact of the coronavirus are increasingly clashing with the bloc’s long-term sustainability efforts. For example, countries like France have relaxed rules on the use of pesticides, while a draft proposal by the European Commission outlined a plan to reduce the use of chemical pesticides by half by 2030. Similarly, the Agriculture Commissioner expressed his concern at the call from France and Poland asking citizens to buy local products instead of items imported from other EU nations. The idea could threaten fair competition in the common market, he said. 

The Commissioner also expressed concern at the amount of direct aid offered by some governments. The EU recently increased the limits on state aid but he argued that this would give wealthier countries an unfair advantage. Most of the direct aid so far has been offered by Germany and the Netherlands. A solution presented by Poland would be to increase the CAP budget to make it more resilient in times of crisis. 

A key piece of legislation is due to be published this week with the release of a draft Farm to Fork (F2F) strategy, a central component of the European Green New Deal. The bioenergy policy will also see a major rewrite and will focus on minimising the use of food and feed crops, while reconsidering whether biomass feedstock is carbon neutral. In response, Bioenergy Europe said it was concerned about the decision to impose arbitrary restrictions that do not reflect the scientific consensus.

In the meantime, official data from the EU showed that supermarket food and beverage sales surged in March when compared to February, most notably in Luxembourg, Ireland and Belgium where food sales were up 20%, 14% and 13% respectively. More dramatic was the surge in demand for Trappist Westvleteren 12 ale made by monks in Belgium. Their website crashed after being opened for just four hours because of what they called a “tsunami of visitors”. In the UK and Scotland, prime barley usually used to make scotch and beer might have to be used as pig feed. 

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Commodity Conversations Weekly Press Summary

Uber is looking to buy US delivery company Grubhub to cash in on the surge in home food deliveries, according to sources who spoke with Bloomberg. The rumour comes just a week after Uber said it was closing its UberEats operations in 8 countries where it didn’t think it could become a major player, although it said that its business in the US grew 54%, helping in part to offset an 80% fall in the ride side of the business. A Bloomberg analyst noted that most of the food delivery giants were unprofitable, however, while a merger of UberEats and Grubhub may not be allowed as it would represent a 55% share of the US market

Restaurants have been complaining about some of these delivery companies, however, accusing them of listing without their consent or charging very high fees. In response, the Mayor of Chicago (where, incidentally, Grubhub is based) announced that, as of next week, third-party delivery services would have to be more transparent about their cost and break down what they charged in receipts to customers. Chicago would be the first city to do so. DoorDash and Grubhub both opposed the measures, saying it was “overreaching regulation” and would confuse customers. 

One industry which, apparently, has extensive food production and delivery networks is airlines. A New York NGO has been working with airline caterers to deliver meals to people in need in 11 cities in the US. The founders of Project Isaiah said they were able to tap into the nationwide network of kitchens and distribution that airlines use. Meanwhile, companies that specialise in buying surplus stocks, such as Imperfect Foods, have been selling surplus airline snacks. In Japan, an Olympic athlete made the headlines by enrolling for a food delivery job. He said that, with the Tokyo Olympics delayed, this was a good way to make money while staying fit. 

Restaurants in the UK are blaming a 25% surge in food wastage on “unpredictable ordering patterns” during the coronavirus lockdown. The research, done by the Sustainable Restaurant Association, also found that in 2019 close to 10% of all ordered food ended up in the bin in people’s homes. One of the most wasted items, surprisingly, is chips.

The US meat processing industry was described this week as “the most narrow bottleneck in US agribusiness.” A small scale farmer told the Eater’s Digest that most of the livestock has been bred for “feed conversion” which means they have a low immune system and are not designed to outlive their slaughter date. The scale of the problem is such that the US is looking into financial assistance to put down some 7 million pigs because of the closure of meat plants. What to do with the carcasses is also a major environmental headache

But even if the industry wasn’t operating at a reduced rate, most of the meat is usually shipped in boxes that are close to 1mt, which cannot be sold to supermarkets. And in any case, the quality of food destined for the industrial chain is often of lower quality than that sold in supermarkets. This is also why a lot of vegetables, which don’t meet the higher specification for supermarkets, have not been harvested. In Florida, three-quarters of the lettuce crop has reportedly not been harvested, along with sweet corn and squash. 

An analysis by Bloomberg suggests that the main meatpackers will likely make some operational changes that will result in more expensive meat. Investment in automation is already happening, although it will be limited by the fact that the industry is a low-margin one. Similarly, more dairy producers are investing in making lactose-free milk, as demand saw a 30% increase in March, growing faster than plant-based alternatives. 

A famous consultant to the livestock industry noted that “Big is not bad, it is fragile.“ She expects that there could be some interest to shift to a more localised or distributed supply chain, even if it is more expensive, as it is less prone to disruptions. However, a study from Oxford University found that transport only accounted for 10% of carbon emissions in the global food supply. That’s because most of the food is transported by sea, and not by plane as many people believe. In other words, the main researcher explained that “It’s what you eat, not where it comes from, that really has an impact.”

Talking of where you eat, the Michelin star restaurant The Inn at Little Washington, which is already known for its theatricality and eccentricity, announced it would set up mannequins at empty tables to make social distancing less awkward when it reopens. 

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Commodity Conversations Weekly Press Summary

The latest quarterly results of the major agricultural groups show that the most significant impact of the coronavirus pandemic, so far, has been on the meat and biofuels industries. ADM reported a 2.2% drop in revenue, although it performed better than the market was expecting, while Bunge logged a loss and lowered its 2020 outlook. Both firms struggled with the collapse in biofuel consumption and the drop in corn or soybean demand, along with the closure of US meat plants and lower feed demand. For its part, Cargill decided to postpone its earnings release amid the uncertainty. Brazil was the only silver lining in the period, thanks to a weak Real and a recovery in demand from China. 

The failure to quickly implement containment measures in US meat plants could actually be boosting margins, especially after the President signed an order to keep them open which should protect them from lawsuits. With 22 plants closed, meat prices went up while the price of livestock collapsed. An expert estimated that the margin for cattle went from USD 74 in 2014 to USD 726 now. In response, ranchers are asking the government to correct the disparity in profit, while some lawmakers are already looking to block mergers to avoid creating more food giants and monopolies. 

Despite the recent White House order, Cargill is still closing meat plants across the US, such as in Wisconsin and Nebraska. The situation is more complicated in Canada as workers are legally allowed to refuse to work if they think it is still too dangerous. A union filed a lawsuit to block Cargill from reopening a plant in Alberta arguing that working conditions were still not safe enough. 

The supply disruptions forced Wendy’s to stop selling beef items at over 1,000 of its stores, while Costco is now rationing the sale of beef, pork and poultry products to three items per customer. The supply disruption is forcing people to change their habits, by buying chicken from small independent farms, for example. Unlike food giants like Perdue and Tyson, small poultry operations have seen little disruptions and some reported a 300% increase in retail sales. One farmer said he expected that large firms will keep struggling and that this was just “the tip of the iceberg”.

Beyond Meat is seizing the opportunity by offering discounts and large value packs to increase its market share. The higher meat price is eroding the premium for the plant-based meat, which was previously 2-3 times more expensive than ground beef. Moreover, the difficulties faced by the meat sector is protecting alternative-meat producers as shoppers would normally focus on cheaper goods amid an economic downturn. Nielsen data suggested that US sales of plant-based meat were up 200% in the week ending April 18 when compared to the same week last year. In Asia, plant-based meat is also gaining in popularity as the coronavirus outbreak was linked to the consumption of animal-based products, the World Economic Forum suggested. 

In India, Kashmiris are also struggling to find enough meat because the lockdown is slowing imports from other states. Consumers are not worried, however, as they are simply eating more locally grown vegetables, like haakh. Vegetables are not seen as a suitable substitute by everyone, however, and some regions in the US noted a spike in hunting and fishing permit requests. 

Agencies are warning of severe supply disruptions in Africa because of pests. The restriction on cross border trade and global air freight is hampering efforts to combat the worst locust outbreak in decades in East Africa, according to the FAO. The coronavirus containment measures are limiting the supply of pesticides ahead of the key planting season, which could jeopardise the production of key crops

A sudden change in lifestyle was also responsible for new consumer habits. Sales of sugar in British supermarkets were up by 46% over the four weeks up to mid-April, mainly because shoppers were reportedly doing more baking. In Sweden, a leading candy manufacturer reported a sharp drop in sales of pick & mix candy, as people are worried about touching the shovels to select their candy.

The coronavirus pandemic has created an unusual and sometimes painful sight: producers forced to destroy food crops because of the drop in restaurant demand, combined with a worrying increase in hunger as more people lose their jobs. The obvious solution is to divert some of the food to food banks. For example, Kroger said it will donate 200,000 gal of milk, as the Dairy Farmers of America estimated that 2.7-3.7 million gal/day of milk will need to be dumped. Even luxury products are going to food banks, such as these USD 60 prime 10 oz American Wagyu steaks from Snake River Farms. The meat usually goes to high-end restaurants but the farm donated 35,000 steaks, worth USD 2 million, to the San Francisco-Marin Food Bank.

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Commodity Conversations Weekly Press Summary

The US President ordered meat plants to remain open this week, using an executive order under the war era Defense Production Act. This came after the head of Tyson warned of an upcoming domestic meat shortage because of plant closures. According to USA Today, about a third of the country’s biggest meatpacking plants are in areas with high infection rates and over half of them have already reported infections. To make things worse, some 100 USDA health inspectors who have been touring the country inspecting plants have been diagnosed with the virus, causing concern that they may have contributed to the spread. The President also suggested that, under the act, companies would not be liable if workers get infected, although some say that only judges can make that call. 

About a quarter of the beet and pork production capacity is currently closed, creating a bottleneck in the country’s meat supply chain. The price of meat in supermarkets was up 5-7% on year at the start of the month despite ample supply of livestock. The timing is particularly bad as the US hog population is at record high because producers had planned to cash in on a surge in demand from China. In a bid to cope, factories have been given waivers to accelerate their slaughter pace. The Food Safety Inspection Service and producers said the faster pace is still safe, but the Food & Water Watch warned that the measure would compromise food safety and workers are worried this will facilitate a spread in the virus. There is also a concern that the outbreak of diseases like salmonella could soar as a result. 

Plants that produce eggs for the industrial sector have been euthanising chicken en masse due to the collapse of the demand from the restaurant sector. On the other hand, the wholesale price of eggs reached USD 3/dozen as of the start of April, a threefold increase within one month, as suppliers are struggling to meet the surge in demand. The Chicken & Egg Association noted that it was expensive for industrial egg producers to switch to selling to the retail market because of the equipment required. Further up the chain, this is affecting feed suppliers, and therefore corn and soybean farmers. 

The whole coronavirus situation pushed a group of US lawmakers to call on a global ban on “wet markets,” something which many animal welfare organisations have been advocating for a while. However, an analysis in The Guardian warns against the West’s negative bias against these markets, which are basically open air markets (the term “wet” comes from the water splashed on vegetables to keep them fresh). Many wet markets in Asia do not sell any meat, and small farmers depend on them to sell their produce. The sale of wildlife meat mainly happens in the unregulated markets, and is therefore unlikely to disappear under a blanket ban. And in any case, an expert noted that consumers are increasingly keen on buying from supermarkets, adding that wet markets could slowly disappear by themselves. 

The news of a potential shortage of meat in the US pushed the shares of plant-based meat company Beyond Meat, which has been struggling from the closure of restaurants and food chains. The company announced it was launching its products in China in a deal with Starbucks. The coffee chain has reopened almost all of its stores in the country. 

Nestle reported an organic growth of 4.3% in the first quarter, the highest in almost 5 years. Sales were driven in large part by pet food, as people panic-bought feed and are now spending more time with their pets – and therefore spoiling them. Nestle’s retail coffee products with Starbucks, Nespresso and Nescafe also performed well. The company is keeping an eye out for acquisition opportunities, the president said. 

The CEO of Danone noted that consumers are switching away from trendy niche products and returning to older, more established, and even sometimes old fashioned, brands. Campbell Soup and Kraft Heinz Oscar Mayer hot dogs are seeing a revival, while the UK is witnessing a growing demand for Smash instant powdered mashed potatoes. This is in part because it has been easier for these bigger groups to ensure supply amid the current restrictions but it could also be that consumers may be looking for reassurance in known products, which also happen to often be cheaper than the new, trendy ones. 

Many brands are even relaunching products popular in the 90s which were discontinued. A journalist noted that these brands have a strong nostalgic appeal. For example, Kraft is launching new flavour of Planters Cheez Balls, originally discontinued in 2006, General Mills is bringing back Dunkaroos and Coca-Cola is relaunching Surge. Most of these products were discontinued when consumers moved away from unhealthy ultra-processed products but an author noted that “there’s always going to be a few million people who are just in it for the craving and the fix”. 

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Commodity Conversations Weekly Press Summary

The spread of the coronavirus is shining a spotlight on the weakest links in the global food supply chain. This could have long-term implications on how we feed ourselves. Most dramatically, some people are facing a heightened risk of famine. The UN’s World Food Programme (WFP) warned in a new report that “we could be facing multiple famines of biblical proportions within a short few months,” because of the virus. The head of the WFP remained optimistic, however, saying this could be avoided by acting quickly and wisely. 

The alarming number of Covid-19 cases in US meat packing plants is also highlighting what labour unions are calling long-standing problems in the sector, like worker exploitation. A BBC piece analysed the case of the huge Smithfield meat plant in South Dakota – responsible for 4-5% of the total pork production in the country – which was forced to close after 644 employees contracted the disease. Efforts by the USDA to stabilise the food supply only made things worse. It removed speed limits on a lot of meat plants, forcing employees to work closer together, heightening the contamination risk which could then force the whole plant to close. 

Labour unions see a silver lining, however, as the whole country turns its attention to the previously ignored but essential role of the food worker. For one, companies are accelerating efforts to protect employees. A food union recently announced that JBS agreed to increase wages and reinforce safety precautions. Nevertheless, some argue that companies are offering too little too late – around 12 meat plants in North America are reportedly closed or idled. The situation is similar in Canada where Cargill agreed to slow production to protect employees at an Alberta plant but only after dozens of employees caught the disease. 

These meat packing plants are often located in Midwestern states where the quarantine orders are the weakest. Many Governors of the so-called Corn Belt have refused to issue stay-at-home orders but local officials warn that infection numbers are starting to soar. Despite a growing concern, the head of the USDA reassured that the meat and dairy supply was so far not affected. He added that the agency will support the sector by buying and stocking products. 

For the most part, governments around the world are working hard to make sure the poorest are still able to buy enough food and medicine. However, the informal sector has also been stepping in to help. In Italy, well-known mafia members have been seen distributing food parcels, while armed narco-traffickers in Mexico were traveling across the country to supply the poorest households with food. Some recognised the daughter of El Chapo handing out packages advertising her company “El Chapo 701”. In response, the Mexican President urged the groups to focus on reducing violence instead. 

In Croatia, the government is urging the young and unemployed to consider working in the agricultural sector to help address a labour shortage. The crisis helped “enhance” the importance of the sector, a minister said. The Austrian agriculture minister, meanwhile, asked consumers to help support the livelihoods of local farmers by buying more goods produced in their regions. She also encouraged supermarkets to offer discounts on local products. In the same vein, the British Nature Friendly Farming Network (NFFN) urged people to buy more locally and sustainably produced goods, and to consider working or volunteering on a farm. 

Changing consumer habits are helping rural grocery stores in the US which witnessed a surge in interest as people try to avoid crowded supermarkets. Nevertheless, grocers are worried that the trend will not last, as experts predict that online retailers will benefit the most. Online sales have been a lifesaver for many small coffee shops, although that might not be enough to stop many shops from closing. The Counter even wonders whether “Starbucks will be the last one standing”. Independent coffee operations remain hopeful, however, noting that the 1918 Spanish Flu was followed by the Roaring Twenties, a “transformative” time for coffee. 

Another sign that food is gaining in visibility is that Americans are using most of the USD 1,200 they are receiving from the government to buy groceries. But shoppers are looking at food items differently in these times, as this Quartz survey of 27,244 readers showed. Respondents now prioritise boxed wine and vodka over beer and whiskey, or spam over strawberries. You can see below the difference between the pandemic popularity of some items and their everyday popularity:

Quartz food survey

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Commodity Conversations Weekly Press Summary

The lockdown measures are expected to help a lot of alcoholics overcome their addiction, according to a research centre in Thailand. However, some  are so severely dependent that suddenly stopping drinking could be dangerous. In India, there have even been reports of people committing suicide due to alcohol withdrawal symptoms. So much so that two states are reopening liquor stores, saying that more people are dying from withdrawal than from the coronavirus. In Kerala, the government is issuing “passes” to alcoholics to allow them to buy drinks. The price of alcohol in the black market has surged, as well as break-ins into the closed liquor stores. “How to make alcohol at home” has also become a very popular Internet search in India, according to Google Trend. 

The WHO, however, had to issue a notice clarifying that drinking alcohol would not help against the coronavirus. This was after a major news channel in Iran reported that close to 4,000 people had died from trying to treat the coronavirus by drinking adulterated alcohol. 

We previously talked about the closure of US ethanol plants as a result of the collapse in fuel demand, causing a surplus of corn in the US. The other consequence of the plant closures is that food companies are running out of CO2 for their refrigerators. This could slow down the production of food, notably meat, the Compressed Gas Association said. The price of dried distiller’s grains, an ethanol by-product used in animal feed, has also shot up. Feedlots are stuck between rising costs and a fall in demand following the closure, or slowing, of meat processing plants. 

After idling a meat processing plant in Pennsylvania, Cargill has interrupted production at its egg factory in Minnesota because of a collapse in demand as it mainly catered for the restaurant and food chain markets. The company warned it would also be slowing meat processing in Canada. 

The animal protection agency PETA, upon hearing the news, sent a letter to Cargill urging them to take this opportunity to make vegan products instead. PETA argued that eating meat was responsible for causing the swine flu and the coronavirus epidemics in the first place. However, several scientists interviewed by The Counter pointed out that there was currently no evidence that neither SARS-CoV-2 nor CoVID-19 were foodborne illnesses. However, they warned that the supply chain of wild animals destroyed geographical and ecological barriers which, combined with the proximity to people, facilitated the transmission of diseases. Overcrowding animals is also an issue in animal husbandry, especially with the use of antibiotics. One of the scientists warned that “antibiotic resistant bacteria are globally, perhaps, the most important source of disease emergence.” 

Nestle noted a 50% increase in demand for frozen food products since the coronavirus containment measures started in the US, notably for frozen pizza, as well as a surge in demand for baking products. However, while #quarantinebaking has been trending on social media, supermarkets have been struggling to source retail-size bags of flour. Data from the North American Millers Association showed that, up until the coronavirus crisis, only 4% of the US’ flour production was used by home bakers. 

This could also signal a turnaround in grains consumption which has been falling steadily over the past decade, according to an analysis by The Counter. And while the bigger milling groups have been struggling to adjust to the switch in demand, consumers have turned to local grain suppliers instead. A local farmers’ market in New York City, for instance, reported a 50% increase in the sale of organically grown whole grains, flours, and beans in the Jan-Mar period. 

Ports in Asia are struggling under the growing number of containers that are piling up because the coronavirus measures have significantly slowed down the pace at which the containers can be cleared. Besides, Alphaliner estimated the equivalent of 9% of the world’s container capacity had been idled as of the end of March,, due to low demand. Overall, global trade could fall by up to 32% in 2020 because of the virus, according to the WTO. Exporting countries like Brazil, meanwhile, are struggling to get containers. Maersk said it was taking empty containers there to help deal with the shortage. 

In a bid to streamline domestic logistics, Bunge announced the launch of its trucking app, Vector, which it has been testing since the start of the year. Bunge noted that, in addition to accelerating and simplifying the process, it also significantly reduced contact between people and was therefore a crucial tool in the times of the coronavirus. The group said exports were moving well despite the containment measures. 

Cargill and Agrocorp, with the help of Rabobank, used blockchain technology to settle a USD 12 million wheat shipment from North America to Indonesia. The stakeholders said the technology helped them shorten the trade deal to 5 days, compared to sometimes as much as a month. The platform, dltledgers, has seen USD 3.3 billion in deals traded over the past 18 months. 

Going back to our beverage news, bars in Washington DC have been exceptionally allowed to cater to the takeout market. One of them, called Dirty Water, has been lowering buckets of cocktails from the third floor of the building where it is located. But you can’t beat this Maryland winery which is using dog delivery. 

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Commodity Conversations Weekly Press Summary

The initial impact of the coronavirus outbreak on demand has pushed down food prices. The FAO reported that its March food price index was down 4.3% when compared to February. The agency said the prospect of an economic recession, combined with the strong US Dollar, pushed down the price of most crops. Experts further argued that food prices will continue to fall, especially for crops used to make biofuels, like sugar and vegetable oils, because of the collapse in oil prices. 

In reality, however, the food industry is not facing an overall drop in demand but rather a shift of how people buy their food. The sector is rushing to reorganise the supply chains which used to clearly separate industrial users, such as restaurants or distributors, and grocery stores. In the US, the government is helping by waiving some requirements and manufacturers can now sell packaged foods without nutrition labels. 

For the moment, the extra demand in grocery stores is not making up for the drop in restaurant consumption, however, and many farmers are struggling with mounting stocks. In the Netherlands, up to 1 million mt of potatoes remains unbought, while a US dairy producer said the sector was struggling to react to the “supply chain breaking down”. Canadian media reported that Ontario farms were instructed to dump 5 million L of raw milk every week in order to lower supply and support prices. Ironically, dairy farms had recently been asked to boost supply to account for panic buying. 

As the virus and containment measures continue to spread across the world, the situation could reverse. The price of a few basic crops, like rice and wheat, have already been rising because of logistical disruptions caused by lockdowns. The situation could be exacerbated by government efforts to limit exports, like in Russia, Kazakhstan and Vietnam, along with some government stockpiling goods, like in Algeria, Turkey and Tunisia. So far, however, experts say the food supply remains perfectly adequate, as they note that firms will only pass on higher commodity prices to consumers if they remain elevated for a sustained period. 

For their part, producers are doing their best to contain the virus while maintaining a steady food supply, although some plants are already facing problems. ADM announced that workers at an Iowa corn plant were placed in quarantine after testing positive for the coronavirus, while Olam unveiled new health precautions in its processing facilities across the world. In more serious cases, Cargill, Tyson Foods and JBS USA had to close meat processing plants in the US to contain the virus. Unilever said it could not guarantee the supply of all goods as it decided to prioritise large and popular food products. It will focus on canned meat and soups, ice cream, and only sell the largest mayonnaise jars. 

Governments around the world are also rushing to protect the food supply chain from coronavirus disruptions by addressing labour concerns and restrictions on the cross-border movement of workers. For one, Germany announced that it will relax travel restrictions and allow seasonal workers from Eastern Europe to come in and help with the fruit and vegetable harvests. The country will also look to find local workers, such as people recently made redundant because of the coronavirus. In the same vein, Australia extended the visas of workers already in the country to make sure farmers were able to pick and pack all of their crops. 

Another option considered by nations to avoid shortages or price volatility is to create food stocks. In the EU, the Commission was asked by French farmers to fund private food stocks to avoid waste and help farmers. Government stocks can eventually help deal with disruptions, like in China where Sinograin unlocked a second batch of 500,000mt of soybeans to be crushed by COFCO. Sources mentioned that the reserves were released only to deal with delays in Brazilian imports. Qatar, meanwhile, hopes to guarantee supply by removing all import duties on food and medicinal items for a period of six months. 

The crisis is shining a light on the countries most reliant on food imports, like Singapore which can only meet 10% of its own food needs because of the scarcity of land. To address the issue, the city-state is launching a new drive to encourage rooftop gardening. Citizens around the world are also looking to grow more vegetables themselves, a move nicknamed “panic planting”. Some are calling their projects “Corona Victory Gardens”, inspired by the campaign to create “Victory Gardens” to feed the UK in WWI. 

Bread-making has become a very popular option for people stuck at home wishing to make more of their own food. Unfortunately, this has led to a shortage of active dry yeast. The solution for many is to make a sourdough starter, although it can be a lengthy and tricky process. In order to help, bread-makers in San Francisco are leaving samples of their active starters hanging from trees for others to take. One starter was left under a sign which read: “Starter name: ‘Freddie, Son of Godric’”. 

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Commodity Conversations Weekly Press Summary

Last week, we talked about the importance of supermarket workers in countries that are under lockdown; this week the emphasis has moved higher up the supply chain to truck drivers and labourers. Exporters in Brazil are saying there aren’t enough trucks to bring commodities to the ports, which in turn is causing demurrage costs. Truck drivers say they are struggling because the usual amenities they require, such as highway stops and restaurants, are closing down. In India, labourers are reportedly worried about their working conditions and refuse to work unless they are provided with proper equipment to protect them from the coronavirus. This labour shortage has forced most Indian ports to declare force majeure, while industries such as sugar mills are struggling to finish the harvest. 

The global sugar market has been particularly affected by the coronavirus outbreak as Brazilian mills, which can choose whether to make ethanol or sugar with their cane, are maximising sugar output given the collapse in fuel demand. Whereas a few months ago many analysts had forecast a global deficit of sugar, the switch in Brazil means the world is likely to see a sugar surplus instead, causing a collapse in sugar prices. 

The price of coffee has soared, on the other hand, with coffee roasting nations looking to bring supply forward in anticipation of further logistic disruptions. Packaged coffee sales in the US surged 25% over the past month, according to Nielsen. Coffee producers in countries such as Brazil and Colombia are getting near-record high prices for their coffee in local currency. A lack of containers, as well as labour shortages, are expected to exacerbate the situation. 

The Ivory Coast said it won’t be selling any more cocoa to major exporters like Cargill and Barry Callebaut, which have already bought more than they had contracted. This is to ensure there is enough supply for smaller buyers amid a lower crop. The smaller, mainly domestic, exporters had earlier asked for support from the Coffee and Cocoa Council to help them compete as they cannot afford to pay the same level of premiums as bigger companies. 

Cocoa importers in the US, meanwhile, have been asked by customs to fill in a questionnaire to identify forced child labour in their supply chain from the Ivory Coast. However, the World Cocoa Foundation said there were only few instances of forced child labour in the country’s cocoa industry, adding that potential restrictions, or even an outright ban, on cocoa imports would be counterproductive and end up hurting farmers who are already very poor. 

Barry Callebaut argued that helping farmers out of poverty was key to ending deforestation. The group said it was on track with its cocoa sustainability targets, having mapped 220,000 farms it sources cocoa from in the Ivory Coast and Ghana, an area of 160,000sq km. It has also helped plant 750,000 native trees to shade cocoa trees and protect them from the weather. Similarly, Nestle said it had managed to map three-quarters of the 120,000 farms it sources cocoa from in the Ivory Coast and Ghana, with the remaining quarter expected to be mapped by October this year. It has also planted 560,000 shade trees. 

Olam said it had spotted over 7,000 instances of child labour in its cocoa supply chain, following a partnership with the Fair Labor Association to monitor 7,000 suppliers in Cameroon. It said it had solved two-thirds of the issues identified by using revenues from the sustainable premium cocoa to build schools. On the other hand, Olam has been accused of failing to prevent deforestation in its palm oil plantations in Gabon. Olam denied the allegations, which will be investigated by the Forest Stewardship Council. 

Environmentalists are worried that deforestation could surge in Brazil’s Amazon as Ibama, the environment protection agency, said it had to reduce enforcement personnel on the ground because of the coronavirus outbreak. Around 30% of Ibama’s workforce is in the most vulnerable age group, it explained, adding that budget cuts had not made it possible to hire younger people.  

In the UK, the Global Resource Initiative Task Force is urging the government to make deforestation targets in the supply chain legally binding by 2030. The taskforce, which has the support of McDonald’s, Tesco and Cargill, among others, also recommends compulsory due diligence. 

Did you know? This week marked the 128th anniversary of the birth of Coca-Cola. The drink, which was initially designed to be a hangover cure, was advertised as a “brain tonic.”

This summary was produced by ECRUU

Commodity Conversations Weekly Press Summary

The spread of the coronavirus is making us rethink the world’s food supply chain. We have, suddenly, come to realise how important supermarkets employees and cashiers are. So much so, in fact, that the US states of Minnesota and Vermont decided to classify food distribution workers as “essential” workers, putting them on par with health professionals and making them eligible for free child care. 

For the elderly, sick or disabled consumers, food delivery staff act like emergency first responders. According to this opinion piece, people working for services like Instacart, DoorDash or UberEats are shouldering the health risks involved with shopping and are often badly compensated, with poor or no health insurance. With the government yet to recognise their role, the onus might be on the companies to protect their workers. This is especially so given that food delivery firms are reaping huge financial returns from the surge in demand. The value of the meal delivery company Blue Apron is now seven times higher than it was last week, while shares jumped as much as 198% in one day. 

Further along the supply chain, containment measures like lockdowns are starting to have an impact on transport logistics. The FAO warned that the biggest issue at the moment was making sure products can be quickly transported from origin to destination. Experts say food prices will inevitably go up if quarantine measures are extended for more than two months. The outbreak is revealing that the food distribution system is “more fragile than we think it is”, a professor at Purdue University said. 

Countries that rely on imports are the most at risk, while some countries play an outsize role in producing a single crop, like Russia’s growing importance as a wheat exporter. The whole situation could escalate even further if countries start to hoard food. Kazakhstan and Serbia, for example, recently banned the export of some food products. 

Eventually, food production itself could take a hit due to the shortage of workers, especially with borders closing down. Rural populations face a higher risk because they often have pre-existing conditions, while rural hospitals are less equipped. In the UK, farmers are calling on the government to help retrain workers who lost their jobs because of the virus to help with food production. The sector faces a potential shortage of 80,000 workers and needs a “land army” to ensure the food supply remains stable, unions said. In some sectors, like Brazil’s and Australia’s sugar industry, the switch to mechanised harvesting will help maintain supply, although other operations like plant maintenance could be affected. 

Most government’s containment measures include clear exemptions for essential products like food and drinks. The problem is that there is a lot of confusion. In Brazil’s Mato Grosso, the city of Rondonopolis forced all facilities to close, including plants owned by Bunge and COFCO. The agriculture ministry said the decree did not comply with federal guidance and called on firms to sue the local government. Nestle also fell victim to the confusion over a lockdown in India. The group, which operates eight facilities in the country, said it suspended or slowed operations while it was engaged in talks with the government over an exemption to the lockdown. 

For the most part, however, agricultural groups are not reporting any major disruptions so far. In the US, ADM, Anderson and Bayer mentioned that they were able to maintain operations as usual ahead of the crucial planting season. Cargill said it had noted a slight increase in net demand although the food service sector now only represents 15% of sales, compared to 55% a week ago. A global recession could change consumption patterns and reduce the global meat demand, a Cargill director said, although supply issues could support prices. In the meantime, he said the group was “making decisions by the hour.” 

On a brighter note, corn futures were supported by news that China had bought the most amount of US corn since 2013, a sign that the country is on the road to recovery. China had been expected to increase imports only in the second half of the year. Cargill also reported that it was now operating its Chinese poultry plant at 80% capacity, compared to 30-40% during the worst of the outbreak. 

The lockdown is also forcing people to spend more time cooking at home. Some, like the Silicon Valley crowd, are struggling more than others. Check out this new recipe from San Francisco – cooking frozen tater tots in a waffle iron – called a totwaffles.

This summary was produced by ECRUU

Commodity Conversations Weekly Press Summary

As more countries go into lockdown to fight the coronavirus outbreak, the impact on agriculture and food is still very unclear. There has been a lot of talk of lost consumption, especially with the closure of restaurants, but some analysts point out that people are likely to eat just as much – if not more – while they are confined at home. 

Governments are urging citizens not to resort to panic buying, arguing that it was a bigger threat to the food supply than the coronavirus itself. A Spanish official explained that with one supermarket for 1,000 people or less, the country was well equipped to keep everyone supplied. Labour shortage is an issue, however, especially in Italy where most of the food is transported in trucks. However, Italian consumers have reportedly responded well to a call from the authorities to focus on buying local products to support local farmers and businesses. 

In the UK, where almost half of all the food is imported, the government confirmed that there would be no shortages as planes and ships continue to supply the country. Having said that, a food policy expert warned that UK supermarkets had stopped storing significant quantities of food in the last few decades in favour of a “just in time approach” which could easily be disrupted. As such, supermarkets have started rationing what people can buy. One online shopping service, Ocado, had to interrupt operations as it could not deal with the huge demand. 

Psychologists have been attributing panic buying in supermarkets to people’s need to regain control in a situation where they have little to no control. An expert at University College London explained that toilet paper had become, quite literally, an “icon of mass panic” because people tend to look for “value and volume” when panic buying and toilet paper definitely fits the bill. In Turkey, meanwhile, thousands of people rushed to buy lemon cologne. But what’s probably more telling is what is being left behind. In the UK, buyers have focused on the cheapest options, like baked beans and ready-made meals. Premium products, which often include low sugar and fat versions, tend to still be on the shelves. Similarly, the gluten-free aisles continue to be full. 

Beverage alcohol companies have offered to supply hospitals and governments with ethanol amid sanitiser and disinfectant shortages. Greek customs are planning to transform confiscated bootleg alcohol, for instance. In Sweden, Absolut offered to supply alcohol, as did France’s luxury brand LVMH. There have been multiple warnings, however, not to use vodka directly to wash hands because the alcohol content is too low to kill the bacteria. Talking of alcohol, those stuck at home have come up with new cocktails, including the Quarantini which seems to have gone viral. 

In the US, the closure of restaurants and schools is having a catastrophic impact on small farmers, many of which supply these establishments directly. The impact of the virus could be especially devastating for the farm community given that over one-third of farmers are above 65 years old. Besides, farmers are struggling to get the labour they need, a situation that is expected to get worse. 

On the other hand, the fall in fuel prices will help lower costs of production, especially for farmers who are just starting to plant. However, farmers who grow biofuel feedstocks, notably corn, are very concerned about the ramification of the collapse in oil prices and demand. Some say that the US ethanol demand could fall by as much as 40% this year, which would mean a lot of unused corn. The effects could be felt for years and many ethanol plants, which are reeling from several years of hardship, might have to permanently close down. 

Brazilian farmers, on the other hand, are already benefiting. The Real dropped to a record low last week, falling below the BRL 5/USD level and almost 20% below its value at the start of 2020, which is translating into record-high prices for farmers. As such, farm exports from Brazil in March and April are expected to surge. 

There was a moment of panic, however, when workers in Brazil’s Santos port announced a strike because of the exposure risk to the coronavirus. A state official pointed out that the worker union’s decision to gather several hundred people to decide on whether they should strike completely defeated the point of reducing the exposure risk. He warned that the government would declare a state of emergency which would scrap their right to strike as so much of the economy is dependent on ports operations. In the end, port operators managed to find an arrangement, including avoiding large gatherings during operations. 

In China, the agricultural sector could end being the least impacted by the virus outbreak. The government has released millions in subsidies to help farmers acquire machines and tools to ensure they can start planting and harvest again as soon as possible. For instance, agricultural drone maker XAG expects revenue to go up fourfold this year. Smaller farmers are expected to be worse hit, however, which could lead to a wave of consolidation. 

The other good news coming out of China is that food consumption is coming back, with a vengeance. A consumer survey in Jiangsu Province showed that 90% of respondents aimed to catch up on consuming what they had missed out as business goes back to normal. Restaurants that reopened reported a surge in bookings, with one barbeque shop saying it had consumers ordering the entire menu. Another tea shop reported one consumer ordering 77 cups of tea. 

This summary was produced by ECRUU