Commodity Conversations Weekly Press Summary

The US is looking at resetting its tariff commitments under the WTO’s Government Procurement Agreement (GPA), or even exiting it altogether, according to sources who spoke with Bloomberg. The administration is reportedly blaming the WTO’s most-favored-nation (MFN) system for its trade deficit with areas like the EU and China but some analysts warn that US businesses could be hurt if they lost access to GPA tenders.  

The USDA launched its “Science Blueprint” this month, a 5-year plan designed, among other things, to mitigate the effects of climate change on agriculture. Some advocacy groups welcomed the news, saying that the simple act of mentioning climate change was a step forward. However, critics have been quick to point out that it will not be easy to undo the efforts to undermine the USDA’s scientific research over the last few years which led to around two-thirds of agency researchers quitting. 

The situation at the USDA seems to reflect what is going with the general public in the country. A survey by Yale University found that only 30% of Americans talked about the environmental impact of what they eat, while the rest said they didn’t know they should eat more plant-based food. Over half, however, said they would be willing to adjust their diets if they got more information on the topic. 

An ongoing lawsuit in Texas might help with that. The National Press Photographers Association sued the Department of Public Safety over a ban on taking photographs of feedlots with drones. Separately, an investigation by the Food & Environment Reporting Network found that residents of Texas’ cattle feedlot belt say they are suffering from “fecal dust storms” when the wind blows on the millions of tons of manure produced by the cattle, sometimes thick enough to create smog-like conditions. The haze, as well as the amonia, could cause health problems such as asthma. However, Texas’ “right to farm” law, which was initially designed to protect farmers from growing cities, protects the feedlots from any legal action from local residents. 

Nestle reported a net profit of CHF 12.6 billion (USD 12.89 billion) in 2019, up 24% on year and beating forecasts. The organic growth was up 3.5%, driven in part by strong demand for their Starbucks and Nescafe products. The group said it was working hard to guarantee a stable supply of food in China where most of its 30 factories have started operating again. It is still too early to assess the impact of the coronavirus, however, as China represents 8% of its global sales.
Looking forward, the CEO warned that organic growth would likely slow in 2020, adding that the group was planning more acquisitions in high-margin and “trendy” segments. The plant-based meat segment represents a “once in a generation opportunity,” he added, saying that plant-based tuna would be released later this year. On the other hand, Nestle may look to dispose of its US frozen food and water businesses which have not been doing well. In Nigeria, the company is due to start domestic production of milk following pressure from the government to reduce imports. 

Unilever said it would stop advertising its food and beverage products to children below 12 years to help reduce child obesity. It will also launch a “Responsibly Made for Kids” logo for products with lower calories and sugar content. Similarly, the UN is calling on regulating ads to children, especially fast food ads on social media. 

A report by the International Maritime Organization (IMO) analysed by The Guardian suggests that the cleaning systems (known as “scrubbers”) installed in ships to meet 2020 IMO pollution regulations, could result in more pollutants being released in the sea instead, contaminating seafood in the process. Some environmentalists have urged the IMO to ban the use of scrubbers until data, which the IMO says is currently insufficient to really assess risk, is clearer. The WWF, meanwhile, found that the Philippines, Thailand, Indonesia, Malaysia, China and Vietnam were responsible for 60% of the world’s annual ocean pollution, noting that Malaysia was the biggest consumer of single-use plastics. 

In Ukraine, the government gave the green light to Bunge, ADM, Cargill, Louis Dreyfus and Glencore to get together and create TechCo, a company designed to digitise documents related to the sale of agricultural products. There are no concerns about competition as this will only affect post-sales, it said. Something similar is happening in the sugar industry where Dubai-based sugar refiner Al Khaleej Sugar, Universa Block Chain and DMCC Tradeflow signed an agreement to collaborate over the development of a platform designed to boost international sugar trade volumes in Dubai. 

This summary was produced by ECRUU

Commodity Conversations Weekly Press Summary

Bunge reported a net loss of USD 51 million in the last quarter of 2019, an improvement from a loss of USD 65 million the previous year. This was in part thanks to higher sales and margins out of South America and farmers in Argentina selling their crops early in anticipation of the increase in export taxes. The CEO said the company was benefiting from becoming more “nimble” as well as implementing a “more rigorous approach to risk management.” Overall, however, the group reported total net losses for 2019 of USD 1.28 billion, from an income of USD 267 million in 2018. The CEO warned that there remained a lot of uncertainty for US origination in terms of the US-China trade deal in 2020, in addition to the African Swine Fever and Coronavirus. 

Olam, on the other hand, said it should see a net one-time post-tax gain of USD 52 million for the last quarter of 2019 as a result of the company’s restructuring, which included the sale of a number of assets and shares. 

Similarly, ADM was able to deliver a solid fourth quarter, with net earnings of USD 504 million, despite the challenging market environment. The company published its OutsideVoice Protein Perception & Awareness Study which suggested that plant-based food will continue to see impressive growth in 2020. The study found that 44% of US consumers now identified as flexitarian. In anticipation, ADM will expand its non-GMO soy protein factory in Europoort, Netherlands.

The decision might be particularly well-timed as members of the EU Parliament discussed a proposal to impose a tax on meat as part of the integrated food policy Farm to Fork (F2F) under the EU Green Deal. A recent report argued that a meat tax was essential to reach carbon neutrality and lower healthcare costs. Nonetheless, the farmer’s union Copa-Cogeca said the tax would impose a terrible burden on farmers, especially if it was only implemented in the EU. 

Environmentalists added that the overall F2F effort would be jeopardised if the EU continued to negotiate new trade deals with countries like Brazil and the US. Some activists are concerned that the EU will not be able to stand up to pressure from the US, which recently threatened to target Germany’s auto industry with tariffs to push for concessions on agricultural trade. 

Scientists continue to show evidence that eating red meat is linked to a small but increased risk of developing cardiovascular disease, such as this JAMA Internal Medicine paper which gathered data on 30,000 people over 30 years. Government guidelines against over-eating beef – which started as early as 1977 in the US – could have contributed to the growth of the chicken nugget, now infamous for being one of the most highly processed meat products. Right on cue, KFC and Beyond Meat launched Beyond Fried Chicken. Early reviewers say they are quite good, but food critics also note that “everything tastes like chicken”.

Besides, the Rothamsted Institute warned that tofu could actually have a bigger environmental impact than meat products in terms of protein content because it is highly processed and not as digestible. Danone is also reviewing how it is marketing its plant-based alternative to whippable cream after a Swedish group awarded the company the top prize for “food bluff of the year”. The product, called Alpro Cuisine Soya Whippable, only contains 2% soy but 25% palm oil. In response, Danone said it would change the packaging to highlight the palm oil content, pointing out that the palm oil was certified under the Roundtable on Sustainable Palm Oil and one of the most sustainable sources of oil. 

California-based Farmers Business Network (FBN), a small start up hoping to disrupt the agricultural world, complained to Canadian authorities that big commodity groups were abusing their dominant position to block its growth. FBN launched an online marketplace for farmers to buy agricultural inputs, thus cutting out the traditional middleman. The Canadian Competition Bureau confirmed it was investigating the case and had extended the claim to include Cargill and Bayer. In the EU, meanwhile, the Commission said it was looking into whether Mondelez had abused its dominant position by restricting the cross border trade of certain products, in breach of the EU’s Single Market rules. 

This summary was produced by ECRUU

Commodity Conversations Weekly Press Summary

Two weeks after the signature of a phase one trade with China and one week after the approval of the USMCA, the price of US crops has been mostly down reflecting the impact of the coronavirus. China was not expected to meet the US import targets before the virus outbreak but, as a futures broker put it, now “they have a good excuse at least.” Instead, the country has been importing grains from Brazil, Australia, Canada and France where prices are lower. The CEO of ADM remained optimistic, however, expecting imports to pick up in the second half of the year when prices drop with the start of the US harvest. 

In response to the virus outbreak, North Korea reportedly closed its borders and stopped almost all cross-border travel. While the country’s focus on self-reliance means it produces a lot of items like snacks or clothes, the raw materials mostly come from China and the border closure would have a significant impact on the economy if they have to remain closed for a while. 

Pork producers around the world are still watching out for the African Swine Fever (ASF) and hoping they can protect their livestock from the disease. The Philippines reported the first case in the Mindanao province and the disease is now spreading through Eastern Europe. In Germany, the state of Brandenburg built a 12km electric fence on its border with Poland to stop wild boars from infecting the local livestock. Germany has been able to benefit from the uptick in demand so far as exports to China surged 43% in Jan-Jul 2019. However, a German producer warned that the spread was inevitable, which could push China to stop German imports. 

The CEO of Cargill noted  that consumers are increasingly focused on the need to change animal agriculture. Cargill recently purchased Delacon, a producer of animal feed additives, and Diamond V, who makes animal supplements from fermented ingredients. Diamond V also launched a human supplement brand that focuses on gut health. A Cargill scientist said “probiotics, prebiotics, postbiotics and phytogenics” could all play a role, while the CEO argued that the “the future is micro ingredients”.

For its part, Nestle announced that it will add USD 200 million to its investment in the pharmaceutical company Aimmune Therapeutics, bringing its total investment to USD 473 million. Aimmune Therapeutics recently received approval for a therapy to lower allergic reactions to peanuts in children. Nestle also announced a partnership with Burcon and Merit Functional Foods, two Canadian vegan protein manufacturers. The head of Burcon noted that the recent craze surrounding plant-based products “has been a wild ride.”

The response from some meat producers has been less enthusiastic, however. The Maryland Farm Bureau expressed its support for a proposal to ban the use of the word “meat” for plant-based or lab-grown products. Missouri passed a similar law in 2018. In Florida, Burger King argued that it never advertised the “Impossible Whoppers” as vegan. The comment was in response to a lawsuit complaining that the plant-based burgers were cooked on the same grills as other burgers. 

Food manufacturers like Nestle, Mondelez and Danone, have made impressive strides in reducing the environmental impact of their own operations but are struggling to address the impact of their supply chain. S&P Global Market Intelligence suggested that the cost of environmental damage as a proportion of revenue of these three firms has been increasing since 2015, after six years of decline. In essence, major corporations have “outsourced their environmental impact to their supply chains”, an expert commented. 

The idea of using agricultural crops to help lower the emissions of aviation and marine transport has been gaining ground as other alternatives like electricity remain a distant prospect. Sustainable Aviation, a group representing the UK’s aviation industry, has set a target to become carbon neutral by 2050, thanks to carbon offset programs, the use of bio-jet fuel, also called sustainable aviation fuel, and carbon pricing. The group hopes to achieve the goal despite a 70% expected growth in air passengers and the opening of a third runway in Heathrow. 

Similarly, Maersk said it was hoping to move to phase two of its project to develop a new fuel to lower the emissions of its shipping fleet. Researchers at Copenhagen University are studying a drop-in heavy biofuel blend made from lignin and ethanol called LEO. And the Abu Dhabi National Oil Company said it was testing the use of biofuels to help meet new emissions standards set by the International Maritime Organization (IMO).

The most creative way to transform food this week comes from an international team of researchers who announced the discovery of a modified sugar molecule with broad-spectrum antiviral properties. An expert said the result could mark a new way to fight viruses without harming humans, with potential applications to combat the coronavirus, or other viruses such as the Zika or HIV viruses.

This summary was produced by ECRUU

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Commodity Conversations Weekly Press Summary

The growing implications of the Wuhan coronavirus in China make it very unlikely that the country will be able to meet its commitment to double the purchase of US agricultural products under the Phase One trade deal. Analysts, who were already sceptical about the targets before the virus outbreak, say that demand in the country, which is effectively shut down, will drop significantly. 

China’s industrial and agricultural supply chain is also likely to be affected given the importance of the river port in Wuhan. Industry experts have been trying to draw comparisons with the SARS outbreak in 2002 and point out that the country’s supply chain is now much more integrated and depends hugely on river freight. Basically, investors expect the situation is likely to get worse.  

In the US, the President has moved on to his next big goal: reforming the WTO – which he considers to be another “worst trade deal ever.” He said he had talked with the WTO chief in Davos about making “dramatic” changes in the organisation. Bloomberg argued that the strategy the US has been using so far to renegotiate trade deals may not work in a multilateral organisation like the WTO. 

The head of the WTO, for his part, cautioned that changes would probably take a long time to happen but he welcomed the approach. The EU Agriculture Commissioner, meanwhile, urged the US Agriculture Secretary to uphold the WTO to protect farmers from trade disputes. The US Agriculture Secretary responded by saying that EU farmers were running the risk of becoming uncompetitive on a global scale because of the ban on gene-editing technology and other limiting regulations. 

Cargill is concerned about the lack of agricultural purchases from China, warning that US farmers were struggling as the Asian giant had kept most import tariffs in place. In Indonesia, the company complained that conflicting regulations, as well as patchy implementation, were making it difficult to compete. It called on the government to make sure it implements regulations fairly among all stakeholders. Back in the US, Cargill increased the production capacity of its Iowa animal health products plant and invested in cultivated meat company Memphis Meats Inc. The start-up, which raised USD 161 million in funding, will be focusing on commercialising cultivated meat. The CEO, meanwhile, said that Cargill had no plans to go public but was looking at selling assets. 

Glencore is reportedly poised to take over Argentina’s agricultural giant Vicentin. Sources told Reuters that a sale would save the group, which has some USD 1.3 billion in debt, from declaring bankruptcy. Experts warned that bankruptcy could cause a social and economic crisis, including for its main creditor the National Bank. Vicentin already sold to Glencore part of its shares in Renova, the joint venture they have together. However, with such high debt, it will be difficult to value the company which may have to be nationalised. The crisis in the country’s grain sector is growing with farmers threatening to withhold grains sales in protest against the increase in export taxes. 

Louis Dreyfus is tying up with China’s Donlink to build a USD 1 billion food industrial park near the Nansha port in China. The park will include plants that make aquaculture, bioenergy as well as grains trading, Louis Dreyfus said. The trading group also received a USD 100 million loan from the European Bank for Reconstruction and Development, part of which will be used to improve the integration of small cotton farmers in its supply chain. 

Nestle bought pancreatic enzyme companies Zenpep and Viokace this week. The CEO said the acquisitions were part of a plan to grow the group’s medical nutrition offerings, a segment that is growing faster than mainstream food. Analysts said this could be the sign of a return for Nestle into the business of prescription medicines, a market it exited in 2019. Otherwise, Nestle announced it was partnering with Burcon and Merit on developing plant-based alternatives to meat and dairy. This comes at the time when Tyson Foods, which also invested in Memphis Meat Inc, announced a new Coalition for Global Protein, a multi-stakeholder initiative for the sustainable production of protein. 

For those worried about food becoming too bland and healthy, a director at Diana Food argued that indulgence and taste will always remain the main criteria in the snacks industry and that bakery products will never be viewed as healthy. Nonetheless, she noted that some products could be seen as healthier than others.

This summary was produced by ECRUU

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Commodity Conversations Weekly Press Summary

Nestle will be investing CHF 2 billion (USD 2.1 billion) to find a solution to plastic waste, including using food-grade recycled plastics and reducing single-use plastics. However, the CEO said that the food industry would have to continue using plastic, and that recycling plastic in a way that was safe to use for food was a big challenge. As such, they will focus on finding ways to ensure that the plastic can be “infinitely recyclable” so it doesn’t end up as waste in landfills or nature. 

Similarly, Coca-Cola said it would not scrap single-use plastics for the time being as it would alienate consumers. The head of sustainability explained that plastic bottles were easy to carry and to close and that switching to cans or glass would actually push the group’s carbon footprint up. Similar to Nestle, the company is aiming for what it calls a “circular economy” and to have at least half of its packaging made from recycled waste by 2030. In France, half of a EUR 1 billion (USD 1.1 billion) investment will be used to increase the amount of recycling, as well as switch from using plastic in the secondary packing to using cardboard. Coca-Cola also said it would spend USD 11 million to clean up several rivers around the world, as well as educate locals about reducing waste. 

In the UK, ASDA is testing out the option of letting shoppers refill containers for things like pasta, cereals and coffee as well as setting up a machine where customers can drop cans and plastic bottles. It is working with Unilever and Kellogg on the project which, if successful, could be rolled out to more shops later in the year. 

Environmentalists had mixed reactions to the announcements by Nestle and Coca-Cola. Greenpeace, for one, said that recycling was not the ultimate solution. Food and drinks manufacturers must stop relying on plastic altogether, it said. They are also sceptical of clean up plans. In the same vein, China is banning the use of plastic bags this year in main cities and in the rest of the country by 2022, with the exception of fresh products which can still be sold in plastic bags up until 2025. 

BlackRock announced sustainability would officially be part of their investment strategy from now onwards. The CEO said that sustainability made business sense, with US investments into sustainable funds quadrupling in 2019. Analysts argue this is significant, as the fund, which manages some USD 7 trillion, has finally caved in after being ranked one of the companies with the worst voting records on climate issues.

Olam announced it is reorganising its business units into two separate groups – global agribusiness and food ingredients. Commodities such as cocoa, coffee, nuts and dairy will come under the latter, Olam Food Ingredients, while grains, oil and feed will be included in Olam Global Agri. Both groups, which could eventually go through an initial public offering, will be headed by Olam International. The CEO explained that the aim was to be able to capture growth in new, trending markets while leveraging on the existing capabilities of the Agri group. As part of the restructure, Olam sold its Californian onion and garlic facility to investment group Mesirow Financial in December 2019. It also sold part of its shares in Arise, a Special Economic Zone in Gabon. 

COFCO, which expects a record operating profit for 2019, is expanding operations in Russia and other countries under the Belt and Road project. The group has been restructuring its grain business, which included the departure of the head of grains, and strengthened its international presence in 2019. The chairman explained that the government’s directions have been to ‘go global,’ all the while ensuring food security and reducing poverty in China. As such, COFCO has been using e-commerce platforms and cooperative-type businesses to help farmers. Technology has been key to helping Chinese farmers make more money without having to move to the city. For instance, farmers are increasingly using video platform apps to create a direct link with buyers and show them where the product is from, with payments also being done through the apps. Alibaba-owned giant e-commerce app Taobao has even been training farmers on how to livestream. 

Plant-based meat company Quorn announced it would start disclosing the CO2 footprint on some of its products as well as include a comparative graph so that shoppers can understand the environmental implications of what they eat. The company also wants to come up with a “Recommended Daily Allowance” equivalent for CO2 consumption, instead of just for calories. 

Talking of calories, the US Department of Agriculture has some good news. It found that the method used to calculate calories – which is 200 years old – often leads to the actual calorie content being overestimated. Their study on whole nuts found that nuts are harder to digest than initially thought, which leads to less fat being absorbed and therefore fewer calories. 

This summary was produced by ECRUU

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Commodity Conversations Weekly Press Summary

The US and China signed a phase one trade deal on January 15 but Politico suggested that the full details might not be published until later. Experts say China does not want to expose itself by announcing to the market how much exactly it will buy, especially since the country is expected to base its purchases on prices. Overall, market participants are doubtful that China will meet its commitment to ramping up the purchase of US products to USD 80 billion over the next two years.

The USD 80 billion target seemed more unlikely as China reportedly decided to postpone its plan to mandate a 10% ethanol blend in the fuel supply in 2020. The country cited dwindling corn stocks and the limited domestic production capacity as the main reasons, while analysts said the move was to avoid depending on US imports

Trade relations between India and Malaysia remain strained since the Malaysian Prime Minister criticised India’s Kashmir policy back in October. Reuters reported that the government has unofficially instructed Indian importers to stop buying palm oil from Malaysia and that most traders now pay a premium to import from Indonesia instead. 

Malaysia faced more bad news as the Roundtable of Sustainable Palm Oil (RSPO) suspended the certification of plantations owned by FGV Holdings. A previous suspension was lifted in August but the RSPO said that concerns over forced labour had not been addressed after an inspection in October. 

The US Supreme Court is asking the White House whether it should hear an appeal by Nestle and Cargill over a 2005 case accusing them of complicity in child slavery on cocoa farms in the Ivory Coast. In the appeal, Cargill argues that the plaintiffs failed to show that decisions taken in the US could be linked to the injuries suffered. The Supreme Court decision would potentially give companies “a broader shield from lawsuits by victims of overseas atrocities”, according to Bloomberg. 

The Consumer Brands Association (CBA) officially launched in the US. A journalist said it was a sign of the diminishing relevance of the 100-year old Grocery Manufacturers Association (GMA) and the “symbolic end of the Big Food era”. The new lobbying group was born out of disagreements in the GMA and is designed to be consumer-focused.

Another pesticide produced by Bayer, called thiacloprid, was targeted by lawmakers in the EU who refused to extend its authorisation beyond April 30, 2020. The European Commission ruled that it was having a dangerous impact on groundwater quality, along with human and insect health. On the other hand, a spokesperson for Bayer insisted that the company, and many farmers, still believed in the future and safety of glyphosate. Nonetheless, she mentioned that the group would spend USD 6.7 billion over 10 years to find an alternative as a total of 42,000 people had sued the group as of October. 

In France, a plan to quickly phase out glyphosate and other phytosanitary products, called the Ecophyto plan, is being challenged by a strong demand from farmers, the lack of alternatives and a lack of alignment with neighbouring countries. The government revealed that glyphosate sales jumped 10% in 2018 and that it had delayed its Ecophyto plan several times since it was launched in 2008.

Still in France, the agricultural cooperative Limagrain announced plans to cultivate legumes such as peas, beans and chickpeas to cash in on the booming demand for plant-based products. However, Greenpeace USA highlighted that the growing effort to replace plastics with plant-based alternatives might just produce more single-use items and increase the demand for valuable environmental resources. A full life-cycle analysis noted that plant-based packaging alternatives actually have a 10-100 times larger impact on the environment than plastic, depending on the plant feedstock used. 

One of the best solutions to our climate crisis, according to a columnist at The Guardian, is to completely stop farming and to produce all of our food from unicellular life in laboratories. Switching to farmfree food, as he calls it, will address water concerns, the soil quality crisis, make food healthier and save both the planet and humans. A piece in Civil Eats, however, was quick to come to the defence of farming by making the point that farmers are actually some of the most important protectors of the planet as they help society understand how ecosystems work. He argues that for farmers – unlike for most people – a “pristine environment” is not an abstraction but something they actively endeavor to create. 

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Commodity Conversations Weekly Press Summary

Global chocolate makers have asked the European Union to make cocoa importers liable for environmental and human rights abuses in their supply chain. They say that the current voluntary measures aren’t working and that existing certification systems have failed as cocoa production, especially in West Africa, continues to cause deforestation and use child labour. Similarly, in the US, the Cocoa Merchants’ Association of America warned that customs had the right to stop cocoa imports if they suspected forced labour was involved. 

The big chocolate producers say they are in favour of the so-called ‘cocoa cartel’ whereby Ivory Coast and Ghana, which represent two-thirds of global supply, are making buyers pay a USD 400/mt premium, the equivalent of 16% of the current price. Both Hershey and Mars said it was important to help improve the livelihoods of the farmers, even though this will probably translate into higher prices

The world of coffee is also about to be shaken. The Vietnamese group Intimex, which exports a third of Vietnam’s robusta beans, announced a plan to use 30-40% of its green robusta beans to make instant coffee, from 10% currently. The aim is to cash in on fast-growing coffee consumption in Asia and is expected to affect the likes of Nestle and Olam who buy green beans for their domestic coffee plants. 

In the US, another milk giant has filed for bankruptcy. Texas-based Borden Dairy said the milk business was struggling in the face of higher costs and competition from plant-based alternatives. Changing eating habits, notably scrapping the breakfast cereal bowl, have led to US per capita milk consumption dropping by 40% between 1996 and 2018. The trade war with China has made matters worse by causing a 50% drop in US dairy exports to China in 2019. Borden pointed out that almost 2,800 dairy farms had closed in the last year and a half, while USDA data shows 20,000 licensed dairy farms went out of business in the last 10 years. 

Australia’s dairy and livestock industries are also set to go through a crisis with the fires raging through southern Australia, with current estimates suggesting that 12% of the sheep flock and 9% of the cattle herd would be affected. Farmers, who were already suffering from years of drought, are struggling to source feed which has become increasingly expensive. Dairy farmers are urging supermarkets to raise the milk price to help them cope, warning of a milk shortage ahead. Olam said its Australia operations had not been affected, however. 

Cargill saw profits grow 19% in its latest Q2 results, having successfully anticipated a rise in meat protein demand from China as a result of the African Swine Fever. The CEO said that the group’s strategy of divesting from non-core businesses was also paying off. Similarly, Bunge sold its Brazilian mayonnaise and margarine production assets to JBS for USD 155 million as it continues to focus on core businesses. In the US, Bunge sold its 25% stake in an Iowa-based ethanol producer.

ADM bought plant-based ingredients manufacturer Brazil’s Yerbalatina Phytoactives this week to cash in on the growing trends for plant-based and natural alternatives combined with a growing demand for health supplements. The group also opened an animal nutrition technology centre in the US state of Illinois with an aim to test ingredients in pet food and aquaculture and bring them to market as fast as possible. 

Meanwhile, corporate documents showed that Margarita Louis-Dreyfus pledged her stake in the company to get the loan she needed to buy the 16.6% stake from family members earlier last year. Commentators pointed out that this means Credit Suisse could gain ownership of the company should she fail to repay the loan. 

Nestle sold 60% of Herta to Casa Tarradellas as part of a Joint Venture which will see Nestle leaving the meat part to be managed by Casa Tarradellas while Nestle continues to handle the vegetarian side of the business. The company bought back some 225 million shares for USD 21 billion, with another USD 21 billion buyback planned by the end of 2022. 

The head of Dunkin Donut warned sceptics that the plant-based meat craze was here to stay. While Domino’s Pizza is testing the fake meat on its pizzas, Wells Fargo forecasts the market would triple over the next decade. So much so, in fact, that the shares of plant-based burger company Impossible Foods shot up after the group announced it had stopped chasing a deal to supply McDonald’s because of insufficient production capacity. 

Interestingly, however, data analysed by The Washington Post showed that if you calculate greenhouse gas (GHG) emissions by calorie instead of by weight broccoli actually emits more GHG than meat such as chicken or pork.

This summary was produced by ECRUU

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Commodity Conversations Weekly Press Summary

EU member states are unlikely to ratify the EU-Mercosur trade agreement following Brazil’s decision to open up sugarcane farming in the Amazon, according to an EU official talking to the Financial Times. Even cane industry sources complained that the policy would only benefit a fraction of growers and that the 44 million ha of degraded land was more than enough to expand planting. 

The Brazilian President may also be looking at scrapping the 2008 soy moratorium, an agreement under which traders committed not to buy soy from Amazon cleared land. The agriculture minister said that the moratorium was ‘absurd,’ echoing earlier comments by the President that existing laws were sufficient to protect the Amazon. The oilseed crushers’ organisation Abiove, on the other hand, said it would stick to the moratorium. 

There is a concern that the African Swine Fever and the ensuing surge in Chinese demand for Brazilian beef are also threatening the Amazon. Brazil’s meatpacking group JBS, for one, reported a 6% increase in its last quarterly profits thanks to the higher prices and stronger demand from Asia. And the meat trade between Brazil and China is expected to continue growing. Earlier this month, China approved 25 more meatpacking plants in Brazil for exports, bringing the total to 89. Some cities in the US, meanwhile, have suggested boycotting meat from companies linked to Amazon deforestation. 

This comes as data from Brazil’s space agency released this week showed that Amazon deforestation in the twelve months to July was up 30% on year and at a decade high. Brazil’s environment minister recognised that this was an issue and said they were using satellite data and the army to enforce existing rules. 

In northern India, the government has started fining farmers found burning crop residues, which is being blamed for the toxic air pollution. An estimated 23 million mt of crop residue from 80,000sq km of farmland is burnt in the north of the country every year. An analysis on the BBC explained that agricultural laws in the states of Punjab and Haryana force farmers to plant in June, instead of April, to take advantage of the monsoon rain and reduce the use of groundwater. The shorter window before the next crop, combined with the high costs of machines required to pick up the stubble, push farmers to burn their fields to prepare for the next crop. An analyst suggested that India will need to go through a second technological ‘green revolution’ involving machinery to fight the current pollution crisis. 

A month after the French constitutional court maintained legislation that would ban palm oil as a biofuel feedstock by January 2020, the National Assembly passed an amendment that delayed the end of tax incentives on palm oil biofuels to 2026 to give producers more time to adapt. In the meantime, major producers in Malaysia and Indonesia set up the Council of Palm Oil Producing Countries (CPOPC) to defend the image of palm oil. Malaysia also pledged to meet the new EU food standards for palm oil by 2021, as food consumption still accounts for 70% of global palm oil demand.  

China’s swine fever outbreak might be much worse than initially expected. The CFO of ADM said the group had seen some benefits on its crush margins but added that the full impact of the disease has not been felt yet. China might lose 20 million mt of pork to the outbreak, twice the initial estimate, which has led to a surge in exports of animal protein from countries around the world, such as Canada, the EU and Brazil. 

Louis Dreyfus (LDC) announced more changes in management this week, with the departure of the COO, a new head of risk and compliance and changes to the board of directors. The group reported a 45% drop in profit during the first half of the year and the CEO said things were unlikely to improve before 2020. 

The agriculture industry has not gone through a wave of consolidation and megamergers as some expected despite a thin-margin environment. A director at ADM said this was partly because consolidation can be a very complicated process while potential targets are limited. The trade war is also making it harder to make long-term plans and accurately assess the value of assets. Instead, the industry has been collaborating through joint ventures to minimise cost. For example, ADM, Cargill, Bunge, LDC, Glencore and Cofco are all working together to track shipping transactions using blockchain technology. 

In Turkey, finally, the Internet-famous chef Nusret Gokce, more widely known as Salt Bae for his extravagant (and salty) meat dishes, is reportedly looking to sell a stake in the Istanbul-based Nusret Gokce steakhouse. This could value the company at over USD 1 billion.

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Commodity Conversations Weekly Press Summary

Trade houses are getting increasingly involved – and competitive – in helping their clients use their ingredients for new products or to reformulate existing ones. Cargill, for instance, opened a new Culinary Experience Hub at its R&D center in Belgium. An official from ADM’s Wild Flavours branch said the group was also working on helping companies formulate products and bringing them to market fast enough to capitalise on new trends. The new products tend to have an increasingly short life span, he said. In Thailand, ADM’s Human Nutrition is launching a plant-based high protein drink as an alternative to dairy. 

Tate & Lyle, too, opened a new headquarters in Brazil’s Sao Paulo to help customers in South America with product formulations. The company wants to capitalise on upcoming legislation in Peru and Chile that will require clearer labels on packaging. The company reported adjusted operating profits of GBP 183 million (USD 234 million) for the Apr-Sep period, up 3% on year, thanks to a good performance from speciality ingredients and a 43% growth in natural sweetener sales

One ingredient that Nestle is trying to cash in on is microalgae – it is vegan, healthy and has a low carbon footprint. The company has partnered with the Dutch ingredients group Corbion to incorporate microalgae-based ingredients into plant-based products whilst maintaining a palatable taste. 

The craze for plant-based alternatives is far from over, with Burger King announcing the Rebel Whopper burger, its biggest product launch in Europe. The vegetarian burger will be the same price as its meat alternative, unlike in the US where it is usually more expensive. Its other plant-based burger, the Impossible Whopper, was one of the chain’s most successful launches. 

Food supplements were among the most popular products sold during Alibaba’s Singles’ Day this week, which saw a record CNY 268 billion (USD 38 billion) in sales, six times more than Black Friday sales in the US. Local analysts pointed out, however, that the sales growth dropped to a 5-year low of 26% as Chinese consumers are reducing their spending amid a slowing economy. 

Mondelez, meanwhile, is looking at capitalising on current health trends by increasing the share of so-called “portion-controlled packs” by 2025 to 20%, from 15% currently. These are packs with 200 calories or less. A survey it commissioned found that people, especially Millennials, were increasingly snacking throughout the day instead of eating bigger meals. At the same time, however, the company continues to see demand for more indulgent snacks.

The Business for Inclusive Growth (B4IG) had its first board meeting this week. The coalition includes giants such as Unilever and Mars and more recently Michelin. It has raised USD 1.4 billion for its initiatives that focus on fighting inequality, such as supporting small farmers to boost yields. The CEO of Danone, which is leading the initiative, said companies needed to change the way they do business. The head of Olam took it one step further and argued that businesses must stop blaming governments and the lack of regulation. He called on food companies to make their ecological footprint public as a starting point for real change to happen. 

One company walking the talk is McDonald’s, analysts said. The group will be buying enough renewable energy in Texas to power some 2,500 stores and reduce emissions by 700,000mt of greenhouse gas. This is part of their target to reduce emissions by 36% by 2030. In India, meanwhile, Nestle said it had collected and disposed of enough plastic to make its KitKat and Maggi brands plastic-neutral by the end of the year. 

Last but not least, Wilmar International saw a net profit of USD 447 million in the Jun-Sep quarter, up from USD 406 million last year and beating market expectations thanks to a 24% growth in its tropical oil business. It also benefited from discontinued operations in Brazil while the sugar division saw a pre-tax profit of USD 80 million, up 9% on year. Louis Dreyfus’ Brazilian sugarcane business Biosev didn’t do so well. The company reported a loss of BRL 304 million (USD 73 million) in the last quarter, nearly twice as high as in the same period last year, due in part to BRL 339 million (USD 81 million) spent on servicing its debt which was affected by the weaker Real.

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Commodity Conversations Weekly Press Summary

The Brazilian President repealed a decree which prevented sugarcane cultivation in sensitive areas such as the Amazon or Pantanal. Researchers warned that this could harm the chances of exporting cane products like ethanol to the EU or Japan where the environmental footprint is closely monitored. The sugar industry had previously lobbied against the move but recently suggested that deforestation concerns would be handled by new policies, such as the Forest Code and RenovaBio.

Experts estimate that 80% of the forest fires in Brazil are started to make space for cattle ranches, despite the fact that the three largest meatpackers pledged to only buy cattle from deforestation-free areas. As a result, journalists are now reporting cases of “cattle laundering”, where farmers move cows around to remove links to illegally deforested land.

Despite the strong rise in deforestation, Brazil emitted only 0.3% more greenhouse gases in 2018 when compared to 2017 thanks to the growth in clean energy sources such as ethanol and wind power. Nonetheless, some areas are witnessing dense smog and pollution because of the fire. In New Delhi, crop burning is one of the major reasons why the smog problem became so bad planes could not land and schools were closed. Ethanol, and other advanced biofuels produced from crop waste, could be a good solution to address the pollution, although the lack of funding is seen as a major obstacle. 

Conservation International said it would accelerate its program to plant cocoa plantations and other trees to restore some of the burnt Amazon areas. Commodity groups such as Olam and Mondelez pledged to pay a premium for the cocoa collected under the program. The cocoa grown in the Ivory Coast and Ghana, meanwhile, has recently become more expensive as the price for next season will include a Living Income Differential (LID) premium. Switzerland’s Barry Callebaut said it would pass on the premium to its customers, adding that most other players would probably do the same as the two countries account for 70% of the supply. 

Indonesia attempted to stop deforestation by banning new palm oil plantations for three years last September. However, the Roundtable on Sustainable Palm Oil (RSPO) said it was impossible to measure the success of the ban because of a lack of transparency. 

A study conducted by Maersk and Lloyds Register identified alcohols like ethanol and methanol as some of the most promising renewable fuels to help the maritime industry reduce their emissions, along with biomethane and ammonia. The COO of Maersk commented that most of the innovation will have to come from growing the production of these fuels to commercial scale. Maersk Tankers recently announced a partnership with Cargill and Mitsui to study ship decarbonisation. 

Nestle announced that 70% of its car fleet in Mexico used hybrid engines to reduce their carbon footprint, and that they were struggling to reach 100% only because of a lack of hybrid trucks and vans. Nestle, along with Pepsi and Coca-Cola, has been moving towards using aluminium cans to address concerns about the mounting plastic pollution. But the Coca-Cola CEO argued that the most environmentally-friendly solution in the long-run was actually to collect and recycle more plastic bottles. The group will not look to a strategic shift away from plastic, he added. 

Investors have been encouraging sustainable firms for years but a new breed of investors is now looking at going a step further by shorting companies with a lack of sustainable credentials, something Bloomberg dubbed “The Green Short”. Morphic Asset Management, for one, is short on Coca-Cola Amatil, an Australian bottler, because it is not doing enough for the environment and to tackle the obesity crisis. 

An in-depth analysis by Politico suggested a reason why the food industry is having a hard time dealing with a rise in obesity and diabetes: the US government has been shrinking the amount of money it invests in nutrition research. As a result, the science on what is healthy food is inconsistent and even contradictory at times. Experts are calling for the creation of a National Institute of Nutrition to help the sector focus on healthier foods. 

Finally this week, we recommend watching this montage of Australian farmers reacting to the recent heavy rain in New South Wales. While 100mm fell over the past weekend, some experts warn that more rain will be needed to fully recover from the drought.

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