The Food and Agriculture Organization’s (FAO) index of world food prices declined again in July, averaging 140.9 points versus 154.3 for June. Wheat prices fell 14.5 per cent, while corn fell 10.7 per cent. Even so, the July index is still 13.1 per cent higher than a year ago.
The FT warns that the world’s food crisis* is not over just because prices are falling. The newspaper is cautiously optimistic about Ukrainian supplies but worries that drought and climate change will keep costs high.
The first grain cargo to depart Ukraine since Russia’s invasion, carrying 26,000 mt of corn, has found a new buyer after the original Lebanese buyer refused to take the shipment due to quality concerns. The ship will unload 1,500 tonnes in Turkey and sail to Egypt with the rest.
Two more ships left Ukraine’s Black Sea ports on Friday, including one laden with wheat. Over the past two weeks, fourteen ships have left Ukraine, mainly carrying corn.
The Joint Coordination Centre (JCC), which oversees Ukraine’s export programme, agreed that grain vessels moving through the maritime corridor would be protected by a ten nautical mile circular buffer zone.
In July, Ukraine exported 412,000 mt of wheat, 183,000 mt of barley, 1.1 mln mt of corn, and 362,100 mt of sunflower seed. The country has an estimated three mln mt of grain in its ports, which could take until around mid-September to clear.
Russia has banned imports of agriculture products from 31 of 34 regions of Moldova following a dispute over payments for natural gas.
India’s government has warned it could scrap a 40 per cent duty on wheat imports – and cap the quantity of stocks traders can hold – to dampen prices. Some suggest that India could import wheat later this year, but domestic prices are currently a third lower than world prices.
Global wheat demand may be falling faster than expected as consumers switch to alternative crops, especially for animal feed.
Drought is ravaging crops across large parts of Europe, including Spain, southern France, central and northern Italy, central Germany, northern Romania and eastern Hungary. Corn, sunflower and soya bean yields are forecast to drop by about 8-9 per cent, with cereal yields expected to fall 2 per cent overall, compared with the five-year average. Water levels on the Rhine are at critical lows because of the drought.
Europe’s farmers may face difficulties sourcing fertiliser for their new crop. The cost to produce ammonia and urea is up about 60 per cent from a year ago due to high gas prices. ICIS estimate that as much as 40 per cent of European urea production may have been cut this year. Farmers may increasingly turn to manure instead.
Analysts are concerned about inclement weather’s effect on global rice production.
Seaweed is one crop that should never (never say never) be affected by drought. The BBC has an explainer on the state of the farmed seaweed sector.
Meanwhile, Dutch farmers are in an uproar over plans to curb animal numbers and cut nitrogen emissions. The government wants to reduce livestock numbers by a third in its goal to halve emissions by 2030. Farmers have blockaded roads, airports, and train stations and dumped slurry at the home of the minister in charge of the programme.
Ireland’s government is planning similar measures, committed to a 25 per cent cut in greenhouse gas emissions from agriculture by 2030. The agriculture sector is responsible for about 37 per cent of Ireland’s emissions.
Something similar is brewing in Canada, where the government proposes cutting fertiliser emissions by 30 per cent by 2030. Farmers say they may have to reduce grain output significantly if the measures are passed.
In company news, Cargill reported that its fiscal year 2022 revenue jumped 23 per cent from a year earlier to a record $165 billion.
UAE state investor Mubadala Investment Co and energy company Raizen are in the final round to acquire Brazilian ethanol joint venture BP Bunge Bioenergia. The company owns 11 producing units with 33 mln mt of sugar cane crushing capacity and could be worth $1.8 billion.
Plant-based meat company Beyond Meat posted a second-quarter net loss of $97.1 million and lowered its revenue outlook for the year. The CEO said consumers are reluctant to pay a premium for environmentally friendly products.
* I am not sure there is a global food crisis – at least not yet. The supply chain has multiple buffers if crops fail due to climate change or government GHG caps. Today only 55 per cent of the world’s crop calories feed people directly; the rest are fed to livestock (about 36 per cent) or turned into biofuels and industrial products (roughly 9 per cent).
Governments are beginning to try and reduce livestock production (see above), but the world is moving in the other direction on biofuels. The USA is looking to increase government support for the biofuels sector, while Indonesia is considering expanding the biofuel mix in domestic diesel from 30 to 40 per cent.
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