Commodity Conversations News Monitor

Fertiliser has become political. The FT warns that governments are worried that rising fertiliser prices, because of the increase in the cost of natural gas, will boost food inflation, and food shortages may result in social unrest. As the newspaper argues, “freezing in the dark while hungry does not make happy voters.”  The BBC believes that poorer countries are most at risk.

A lack of trucks and railcars may lead to localised ethanol shortages in the US. Unlike crude oil and other refined products, which can be transported by pipeline, ethanol is shipped primarily by train. Ethanol prices are up more than 50 per cent in the year to date and are contributing to the rise in gasoline prices. The WSJ wonders whether this will reignite the food versus fuel debate.

The EU Parliament has approved the EU Commission’s proposed reform of the Common Agricultural Policy (CAP), which at 387 billion euros ($436 billion) accounts for around a third of the EU’s 2021-2027 budget. The reform will require that farmers spend 20 per cent of their subsidy payments on “eco-schemes” from 2023-2024, rising to 25 per cent in 2025-2027. In addition, at least 10 per cent of CAP funds will go to smaller farms, and all farmers’ payments would be tied to complying with environmental rules.

The FT reports that Brazil’s foreign minister has attacked the EU for “trade protectionism” over a proposed ban on agricultural imports from deforested areas. Bloomberg argues that the way the Brazilian government is rebooting the Bolsa Familia may weaken the country’s currency and further boost commodity exports.

The Indian government’s decision to abandon farm reform will have a broader negative effect on the country’s economy. Bloomberg argues that with 43 per cent of the workforce stuck in agriculture – and the average farmer earning 27 rupees ($0.36) a day – the country lacks the labour and capital to industrialise.

The UN FAO has published its report on the State of Food and Agriculture 2021, in which they ask whether our food supply is at risk.

NASA reports on how their research to growing food in space has led to vertical farming, a global market now worth $2.9 billion and predicted to reach $7.3 billion by 2025.

Wired writes on the future of food tech, arguing that it is better to phase out meat production than find technical solutions that reduce the sector’s greenhouse gas (GHG) emissions. However, the FT reports that US alt-meat sales are losing their sizzle, with sales down year on year. Alt-meat companies say it is because consumers are eating less at home than during the Covid lockdowns, but the bigger problem may be alt-meat’s 30-40 per cent price premium over meat.

Even so, Impossible Foods has raised nearly $500 million in a funding round, making it the most well-funded and richly valued plant-based meat startup in the United States, with more than $2 billion raised since its founding in 2011. Impossible Foods, valued at about $4 billion in its last fundraise in 2020, has said it hopes to eventually IPO at $10 billion.

In a fascinating video, Bloomberg takes us inside the world’s first vat-grown meat factory, belonging to Upside Foods—formerly Memphis Meats—backed by Bill Gates and Richard Branson. The company is betting that consumers will go for vat-grown meat and that factories such as theirs will eventually replace abattoirs.

Bloomberg also has an interesting piece on the Indonesian government’s attempts to persuade millenniums to take up farming and reverse the exodus from the countryside to towns. The project appears to be working. The news agency also looks at the way China’s agriculture ministry is laying the groundwork to allow the country’s farmers to grow genetically modified (GM) soybeans, rice, and corn for the first time.

In this piece, Bloomberg discusses the meaning of ‘regenerative’, the new buzzword in the sustainability space, and how people are now applying it to sectors other than agriculture. The term was first used in the 15th century to describe a spiritual rebirth.

Supply chain chaos has allowed shipping lines to charge their customers 20 times more per container than they did before the pandemic. But their underlying expenses haven’t changed much, allowing cargo carriers to keep almost all the price increase as profit. Quartz looks at how the shipping companies are spending those profits. Some invest in the supply chain while others expand their fleets, buy cruise ships, airlines, ports, or simply repurchase their shares.

Under recently introduced new data laws to enhance their national security, China’s shipowners are turning off their ships’ AIS tracking systems. The move is making it harder for analysts to monitor commodity trade flows and port congestion.

In company news, US antitrust officials have sued to block Louis Dreyfus Co.’s deal to sell its Imperial Sugar unit to US Sugar. They argue that it would leave just two producers supplying 75 per cent of refined sugar sales across the country’s southeast. The lawsuit is part of a push by the Biden administration to toughen antitrust enforcement.

The FT looks at two startups offering crop insurance to smallholder farmers. Pula bundles insurance into sales of other products such as seed, fertiliser, and loans to farmers in Africa. At the same time, Stable operates a platform that allows smallholders to insure their production.

After slipping to number two last year in the annual ranking by Forbes, Cargill is once again the largest private company in the US. The company’s revenue grew by 17 per cent through May to $134.4 billion. Koch Industries, which displaced Cargill last year, fell back to second with estimated revenue of $115 million.

Bunge is paying premium prices to growers who avoid deforestation even if they have a legal right to do so. Bunge aims to cut carbon emissions directly tied to its operations by 25 per cent by 2030 from 2020 levels.

Brazilian orange juice producer Cutrale has suspended exports of orange juice concentrate to the US, arguing that a new export tax has made them unprofitable. Cutrale will instead supply customers from Mexico.

Finally, there is some good news for us coffee addicts. A study of 200 Australians over one decade has found that drinking coffee may make you less likely to develop Alzheimer’s disease. “Flat white, anyone?”

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The Indian government has announced it will repeal three contentious farm laws that prompted a year of protests and unrest in India. The government passed the three farm laws in 2020 to overhaul India’s agriculture sector by rolling back farm subsidies and price regulations on crops. The country’s PM said he was adamant that the laws were necessary reforms but acknowledged that they were unfeasible given the fierce opposition from farmers.

Cargill’s CEO has warned that disruptions to the global supply chain may persist, keeping food prices high through 2022. He said, “I thought inflation in ags and food was transitory. I feel less so now because of continued shortages in labour markets.”

Bloomberg, however, argues that shipping costs are beginning to trend lower and wonders whether the worst supply chain problems may now be over.

Arabica coffee prices have hit ten-year highs and are nearly double a year ago. With a La Nina pattern forecast for early 2022, some analysts worry it could take years for the market to recover. Coffee connoisseurs are worried that roasters will downgrade quality by using more of the cheaper robusta beans.

Prices are also rising in Italy for food staples like tomatoes, pasta, and olive oil. The cost for tomatoes increased 12 per cent last month compared to a year ago, while pasta saw an almost 5 per cent rise.

The ports of Los Angeles and Long Beach delayed to 22nd November their plan to fine shipping companies that let cargo containers stack up at terminals. Both ports have seen a “significant improvement” in clearing the containers out of the shipping terminals since they announced the $100 per day fines for leftover cargo on 25th October. “Sweeper ships” have taken away many of the empty containers.

The ‘storm of the century’ in British Columbia has left the Port of Vancouver, Canada’s largest port, stranded without access to trucks and rail cars. Water and landslides have blocked the tracks of the nation’s two major railways and washed away parts of the main east-west road artery, the Trans-Canada Highway.

Satellite data from Brazil’s national space research agency INPE showed about 877 square kilometres of Amazon rainforest forest were cleared last month, up 5 per cent from October 2020 and the worst October deforestation since the current monitoring system began in 2015.

The EU has unveiled new regulations to curb deforestation that cover imports of soy, beef, palm oil, wood, cocoa, and coffee and some derived products such as chocolate, leather, and furniture. The plan will require backing from member states and the European Parliament to enter into force.

China bought at least 30 soybean cargoes from the US and Brazil last week, with more than half from Brazil. If Brazil continues to steal market share from the US, it could further weaken Chicago soybean futures prices. Soybean futures in Chicago are already down about 25 per cent from a high reached in May.

A US Senator has introduced legislation to halt the import of Brazilian beef into the US after media reports that Brazil delayed reporting two cases of mad cow disease. The US imported $62.3 million of beef and beef products from Brazil in the first nine months of this year, up 36 per cent over the same period a year earlier.

Dutch speciality chemicals company DSM may soon bring their cattle feed ingredient Bovaer to market following a positive assessment by the European Food Safety Authority (EFSA). DSM says the ingredient cuts cattle’s methane emissions by between 20 and 35 per cent without affecting production.

Bayer and Microsoft have announced plans to collaborate on developing digital tools and data science capabilities for agricultural businesses and associated industries. Plans include helping companies better process satellite imagery, tracking farm inputs and practices to follow environmental regulations.

ADM has invested in Farmers Business Network (FBN). FBN’s platform has been dubbed a “Google for farmers”, providing its 33,000 members new distribution outlets for their crops and alternative options to purchase seeds and chemicals. The investment comes five weeks after ADM and its rival Cargill sold their farmer facing digital joint venture GrainBridge to software company Bushel.

CME Group Inc.’s plan to move core trading systems to Google Cloud could impact high-frequency traders (HFTs) who have installed their computers as close as possible to the CME’s computers. HFCs may need to restructure and rethink their systems if CME moves their trading infrastructure to the cloud.

The US Environmental Protection Agency (EPA) has proposed giving oil refiners more time to prove compliance with the nation’s 2020 and 2021 biofuel blending mandates. Several oil refiners have slowed or stopped buying compliance credits in a bet the EPA would ease the requirements.

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A new week and a new record number: 111 container ships are currently waiting to offload at Long Beach and Los Angeles. Starting on 15th November, the two ports will begin fining shipping companies $100 a day for containers left on the docks, but the logistic companies say they have nowhere to move the containers and will pass on the fines to their customers.

The New York Times reports on a recent survey that found that 22 per cent of the US’s foreign agriculture sales are being lost because of transportation challenges. Port delays have particularly affected container shipments of cheese, butter, meat, walnuts, and cotton.

Germany’s Hapag-Lloyd, the world’s fifth-largest ocean shipping line, posted a record quarterly profit of $3.92 billion in Q3 2021, up from $756 million in Q3 2020. The company earned an average of $4,468 per forty-foot equivalent unit in the third quarter, up 106 per cent, year on year. Rates in the trans-Pacific averaged $6,244 per FEU, up 112 per cent year on year.

These record profits are leading to accusations of profiteering. British trade groups have called on the country’s Competition and Markets Authority to investigate “cartel-like” pricing in the shipping industry.

There is some relief for importers, with spot container rates falling nearly 5 per cent in the first week of November. Some analysts predict that average spot rates are past their peak. Dry bulk rates have also fallen sharply, but this analyst believes the fall to be temporary and expects rates to move higher again in 2022.

The Guardian reports that merchant ships account for around 3 per cent of man-made GHG emissions. The International Maritime Organization (IMO) predicts that, on current trends, the industry’s emissions could be 30 per cent higher in 2050 than in 2008.

But will current trends continue? Some argue that decarbonising the global economy will indirectly solve the issue for the shipping sector. They predict that a sharp reduction in the demand for coal, iron ore, bauxite, and other ingredients for heavy industry, along with reduced tanker demand, will result in a dramatic reduction in tanker and bulker fleets.

DTN reports that fertiliser prices continue to shatter records. The average US retail price of a ton of anhydrous fertiliser rose 38 per cent from the previous month to a record $1,113. The seven other fertilisers tracked by DTN saw increases ranging from 9 to 36 per cent.

This brief video looks at the impact of high fertiliser prices on US farmers and their planting decisions.  In Brazil, farmers are worried that the fertiliser they have bought may not be delivered, potentially reducing next year’s corn and soybean production. In India, a shortage of fertilisers is disrupting winter planting and fuelling civil unrest. Farmers have clashed with police, and, in some states, the police are distributing bags of fertilisers at police stations to keep law and order.

Sri Lanka faces a different problem.  The government imposed a ban last May on chemical fertiliser imports to promote organic agriculture. The government also banned chemical pesticides and herbicides. As a result, paddy rice production could fall by 40 per cent this year.

But it’s not just fertiliser prices that are rising; cotton prices have hit ten-year highs, up over 50 per cent since the start of the year.

The UN’s FAO reports that GHG emissions from agriculture and food production have risen by 17 per cent over the past 30 years, accounting for 31 per cent of greenhouse gas emissions in 2019. Deforestation accounted for about 6 per cent, while transport, storage, and food preparation accounted for more than 50 per cent.

Twenty-seven firms, including Sainsbury, Nestle and Danone – accounting for 60 per cent of the UK’s soy imports – have signed the UK Soy Manifesto. It ensures physical soy imports aren’t grown in areas where forests were cut down, or native vegetation was converted into farmland after January 2020.

While agriculture may be one of the drivers of climate change, it is also a victim. Bloomberg Green warns of an apocalyptic future where climate change could result in food shortages and push almost 2 billion more people into hunger.

Perhaps the future is already here. The UN’s FAO reports that weather disasters linked to climate change cost the farming sectors in developing countries over $108 billion between 2008 and 2018.

A study published in Nature asks whether Brazil is reaching a climatic limit to rainfed production of soybeans and corn. The study argues that regional warming and drying have pushed 28 per cent of current agricultural acreage out of their optimum climate space. It projects that 51 per cent of the region’s agriculture will move out of that climate space by 2030 and 74 per cent by 2060.

India has approved a proposal to achieve 20 per cent ethanol-blending with gasoline by 2025, five years ahead of its previous target. The government also hiked the price of sugarcane ethanol for blending in petrol.

However, in the EU, there are concerns that the bloc’s strict rules will cause a shortage of biofuels. Brussels has set a 7 per cent limit on the quantity of crop-based biofuels used in the transport sector while giving biofuels feedstocks a percentage score based on their contribution to indirect land-use change (ILUC). It effectively bans palm oil as a transport fuel in the EU.

Meanwhile, Indonesia’s palm oil industry is training farmers and teachers and running social media campaigns to highlight the positive aspects of the crop.

Several countries, including Japan, the UK, and the US, have written a joint letter to the Chinese Customs Minister asking him to delay the introduction of new regulations that require food importers to meet new registration, inspection, and labelling requirements by 1st January 2022.

Brazil has become the first country to allow imports of flour made with genetically modified wheat. However, shipments of the new variety developed in Argentina are unlikely anytime soon due to opposition from Brazilian millers and consumers.

A new study found that palmitic acid may encourage the spread of mouth and skin cancers in mice. Other fatty acids did not show the same effect. Neither of the fatty acids tested increased the risk of developing cancer in the first place. The study was widely reported in the popular press.

In company news, Reuters looks at Beyond Meat’s disappointing third-quarter results and the relatively slow rollout of the company’s products. Remaining on the subject of meat, Royal DSM has announced that it will build a £100 million factory in Scotland to manufacture its new feed additive Bovaer. The company says the additive can reduce methane emissions from livestock by approximately 30 per cent.

My recommended long read this week is from The New Yorker Magazine on the great organic food fraud. But, if podcasts are more your thing, try this one from Bloomberg on the vagaries of the lumber market.

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Global food prices continued to rise in October, hitting a new decade high. The FAO Food Price Index jumped 3 per cent in the month, with vegetable oil prices up 9.6 per cent and cereal prices up 3.2 per cent. Cereal prices are up 22.4 per cent from a year ago.

Last week, Chinese shoppers rushed to stock up on food staples after the commerce ministry warned of possible shortages. Agriculture officials later reassured consumers that there is no need to worry as the country is facing surpluses in grain and pork and has abundant state reserves. Chinese pork prices have fallen below the cost of production recently as the country recovers from African Swine Fever and more farmers take to pigs.

Elon Musk, the world’s richest man, has challenged a claim by an official from the UN World Food Programme (WFP) that $6 billion of Musk’s wealth of $311 billion could keep 42 million people from dying of hunger. Musk said that if the WFP could describe how the money would solve world hunger, he would “sell Tesla stock right now and do it.”

Commodities traders are pursuing legal action against Brazilian coffee farmers who are defaulting on sales after arabica coffee prices rallied some 60 per cent this year. Defaults have also spiked in other commodities like soybeans.

It’s not just food prices that are rising; the cost of the herbicide glyphosate has increased as much as 300 per cent in some regions of the US. Meanwhile, fertilizer prices continue to soar, suggesting that food prices will increase further.

From December, Russia will impose a six-month quota on some fertilizer exports, limiting nitrogen fertilizer exports to 5.9 million tonnes and complex fertilizers containing nitrogen to 5.35 million tonnes. An analyst said that the quotas would have little impact because they are in line with predicted exports.

Bloomberg takes an in-depth look at the effects that high fertilizer prices and shortages will have on crops around the globe, with a particular focus on coffee, corn, wheat, and rice. The impact could be particularly severe in the US, which imports 20 per cent of its urea and 40 per cent of ammonium nitrate from Russia alone.

High energy prices are not just impacting fertilizer costs. They are also propelling sugar prices higher on expectations that Brazilian mills will produce relatively more ethanol.

Adding to their woes, US farmers could also face a shortage of tractors and tractor parts as 10,000 workers continue their strike at John Deere’s plants.

Maersk has reported record third-quarter profits of $5.9 billion on sales of $16.6 billion. Profits were up nearly five times over the previous year. The company is spending more than $1 billion to expand its air freight operations, purchasing Senator International, a German freight forwarding company, and adding five new aircraft to the fifteen it already operates.

NASA has published a study that predicts corn yields will decline 24 per cent by 2030 because of climate change. Projected increases in temperature, shifts in rainfall patterns, and elevated surface carbon dioxide concentrations would make it more challenging to grow maize but could expand wheat’s growing range. Wheat yields could potentially increase by about 17 per cent by the same date.

US President Biden told COP26 that climate change is already fuelling crop failures in some world regions. At the same time, the US Agriculture Secretary warned that “the climate crisis threatens to disrupt food systems around the globe, exacerbate food insecurity and negatively impact farmers’ livelihoods.”

The Agriculture Secretary added that the time has come for American farmers to slash their GHG emissions by taking advantage of newly announced incentives, including loans and grants for building or improving manure digesters or transitioning to lower-emission manure management practices like composting.

In an interview, he said Americans could still eat meat while cutting global warming. “It’s not a question of eating more or less or producing more or less,” he said. “The question is making production more sustainable.”

The Belgian Prime Minister has said that third countries would need to meet the EU’s sustainable requirements to export their products to Europe. The EU is preparing a carbon border tax on goods from jurisdictions with lower environmental obligations.

Twelve of the world’s biggest global agricultural trading and processing companies have committed to improving their supply chains to be consistent with limiting the increase in global temperatures to 1.5°C.

The Guardian writes that cutting methane is the best opportunity to slow global warming between now and 2040. The newspaper adds that about a third of human-caused methane emissions come from livestock, mostly from beef and dairy cattle. Methane from their burps and manure is the most significant concern and the best opportunity to tackle global heating.

California-based Upside Foods has opened a facility to produce hundreds of thousands of pounds of cultured meat. The US government still hasn’t approved the sale of cultivated meat, but Upside Foods COO said, “It’s not a dream. It’s not science fiction. It’s a reality today.”

However, the debate continues whether lab-grown meat will ever become economically viable, whether the US government will approve it, and whether consumers will eat it. Despite the doubts, the sector has little difficulty in raising venture capital finance.

Belcampo, the northern Californian pasture-raised beef company, has closed its e-commerce site, restaurants, and retail shops, raising the question of whether pasture-raised premium beef is economically viable.

But it is not just cattle farmers who struggle to be sustainable; sustainable fish farming is also a challenge.

If you are a farmer interested in regenerative agriculture but don’t know where to start, Farmers Weekly will get you going and help you avoid some common mistakes. (Spoiler: soil health is the key.)

Bloomberg Green has a well-written feature on palm oil, arguing that the world is addicted to the stuff. However, the news agency admits that palm oil is up to ten times more productive than rapeseed, soybean, or sunflower oils and replacing palm oil with an alternative would require a lot more land.

Indonesia has pushed back against the UK’s statement that COP21 participants had pledged to “halt and reverse forest loss and land degradation by 2030.” Indonesia’s vice foreign minister said his country had only agreed to keep its forest cover steady over the period – meaning trees could still be cut down and replaced.

Indonesia will increase efforts to help smallholder farms — which cover 6.7 million hectares, or 75 per cent of total oil palm plantations in the country — to replace old trees with new, more productive ones. It could increase annual yields from smallholder plantations to 22 mt/ha from about 9.2 mt/ha.

A new web-based monitoring platform will help the palm oil industry trace its product back to its origin to ensure that it’s legally sourced and sustainably produced. The platform collects and analyses data on more than 2,000 palm mills, 480 refineries and crushers, and 400 high-risk plantations.

Google has invested $1 billion in CME Group and has struck a separate deal to move the futures exchange operator’s trading systems to the cloud. The deal gives Google a foothold in the financial services sector.

Lastly, Bloomberg interviews the author of “Seed Money: Monsanto’s Past and Our Food Future” and asks if cheap food is worth the risks.

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A tonne of fertilizer is now more expensive than a tonne of rice. With fertilizer accounting for as much as 70 per cent of rice’s production cost, there are concerns that rice prices will have to increase as a result.

However, India is currently harvesting a record summer-sown rice crop of 107 million tonnes, bringing combined summer and winter rice production to 125 million, or nearly 25 per cent of global rice output, its largest ever. It should allow India to repeat, or even surpass, last year’s record rice exports of 20 million tonnes.

Malaysia faces reduced palm oil production this year due to a shortage of workers. A lack of skilled harvesters has left fresh fruit bunches rotting on trees, preventing farmers from capitalizing on palm’s recent price rally. Palm oil, the world’s most consumed vegetable oil, has soared more than 30 per cent this year, while soybean oil is up almost 50 per cent.

However, soybean prices ended October with their sixth straight monthly loss, the worst run since May 1998 when, like this year, US farmers were heading into a record harvest. Demand for this year’s bumper crop is in question as the sales pace to China lags expectations.

Durum wheat prices in western Canada have risen more than 60 per cent since August and are currently trading near their highest level since at least 2015.  Drought has impacted North American production. Output in Canada, a top exporter, shrunk by nearly half this year and the US harvest is the smallest in 60 years.

Bloomberg warns that European energy prices may increase to a point where it becomes too expensive for farmers to dry their corn crops. Gas suppliers have told French farmers to prepare for shortages, use less fuel and postpone harvesting. The increase in gas prices is also contributing to a slower corn harvest than last year in Ukraine.

North Africa is feeling the impact of higher food costs. The price hikes also come at a time when many North African economies are struggling. In Morocco, the government has suspended an import tax on durum and soft wheat, while Egypt, the world’s top wheat importer, is paying the most in at least five years for wheat and is reportedly talking with international banks over a plan to hedge their wheat purchases. However, Algeria’s agriculture minister said supplies are plentiful and blamed speculators for a spike in foodstuff prices.

Robusta coffee prices are up 60 per cent in London this year. They are at their highest level in more than four years as adverse weather hurt crops and logistics headaches, including a shortage of shipping containers, curbed exports from Vietnam.

Meanwhile, lumber prices are once again moving higher.

Freightwaves warns that we should not expect any relief from costly container shipping rates. It argues that the recent levelling off in rates was temporary and that we will have to wait until the Chinese New Year for rates to start to trend lower. The FT worries that supply chain logjams could last into 2023.

The backlogs are playing havoc on liner schedules. Two out of every three vessels were behind schedule in September, with an average arrival delay of seven days.

Several ports in the US are overrun with containers and anchored containerships. There are more than 70 containerships anchored in California’s San Pedro Bay and another 28 vessels awaiting berths at Georgia’s Port of Savannah. Los Angeles and Long Beach ports announced they would levy a surcharge on containers that overstay their welcome. The tax will start at $100 per container and increase in $100 increments each day.

Maersk has warned clients of further supply chain disruptions from China’s ongoing power shortages. Currently, 20 out of 31 provinces in China are subject to electricity rationing and power prices could rise 20 per cent from current levels.

In company news, Bunge reported solid earnings and sales in their third quarter, posting income of $653 million, up nearly 150 per cent from $262 million from the third quarter a year ago. Sales were $14.12 billion, up 39 per cent from $10.16 billion a year ago. Bunge has raised its adjusted earnings-per-share outlook to at least $11.50 per share, up from $8.50 previously.

ADM plans to cut more than half of its capacity for corn ethanol for cars and transition it to clean jet fuel production, working with renewable fuel maker Gevo Inc. The move comes as the popularity of electric vehicles raises questions about the future growth of ethanol for cars. At the same time, demand for sustainable jet fuel is expected to boom as the aviation industry tries to reduce carbon emissions.

Plant-based meat producer Impossible Foods is looking to raise about $500 million, which would push the company’s valuation to $7 billion, higher than its chief rival, Beyond Meat, at roughly $6.2 billion.

In partnership with Yum China Holdings, Lavazza plans to have 1,000 coffee outlets in China by 2025. Yum owns 65 per cent of the joint venture, and Lavazza holds the rest. The partners are injecting $200 million into the company.

The Guardian argues the world’s meat and dairy companies are failing to act on methane emissions. The newspaper writes that livestock generates about 32 per cent of anthropogenic methane. Changing Markets has published a new report on the issue. The European Parliament has asked the EU to impose binding targets on countries to cut methane emissions, setting the scene for legislation Brussels will propose later this year.

The FT wonders (again) whether adding seaweed to animal feed will help reduce methane emissions. Bloomberg reports that the US dairy herd shrank by 85,000 cows between June and September, the most significant four-month drop since 2009 as the cost of feeding the cows has risen to uneconomic levels.

Brazil’s Vice President has announced plans to bring forward the country’s 2030 goal of ending illegal deforestation by two or three years. He also said forest fires in the Amazon region had dropped by about 40 per cent this year.

Reuters has an interesting article on the race to persuade the world’s farmers to sequester carbon.

Finally, China has called for the removal of farm subsidies in some developed countries as part of Beijing’s push for the World Trade Organization reform.

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Food inflation looks like it will be with us for some time, and food processors are passing on the higher prices to consumers. Unilever has increased prices by 4.1 per cent in the third quarter, the fastest rate since the start of 2012, passing on extra costs for commodities such as palm oil and soybean oil, as well as shipping costs.

Danone has forecast that inflation in milk, packaging and transport costs could worsen next year, leading the company to shift price increases to consumers and seek more cost savings. The company says its cost inflation will accelerate to 9 per cent in the second half of their financial from 7 per cent in the first part of the year.

Procter & Gamble has also warned that rising commodity and freight costs are eroding profitability with $2.3 billion in after-tax expenses this fiscal year versus a prior expectation of $1.9 billion.

Nestle has raised its full-year sales target by raising prices on its products ranging from pet food to bottled water. The company expects input prices in 2022 to increase even more than the 4 per cent rise seen in 2021.

There seems little sign that food prices will cool anytime soon. Fertilizer prices are surging as numerous nitrogen fertilizer plants in Europe have shut as gas prices soared. Some suggest that European farmers might reduce plantings as a result. There are concerns that some European fertilizer plants may shut permanently, relocating production to countries where energy costs are lower.

High fertilizer prices could affect Brazilian corn production. Brazil spot prices for phosphate fertilizer more than doubled during the past year, while potash and urea tripled in the same period. The Brazilian President had previously said that the country faces the risk of fertilizer shortfalls next year. In the US, high fertilizer prices could lead US corn profits to drop by about a quarter – from $500 an acre to $430 an acre – next year, potentially motivating farmers to shift to soybeans which could earn $500 an acre. Earlier this month, The Green Market Index of North American fertilizer prices soared past their 2008 peak to set the highest level since the index started in 2002.

Fertilizer supplies could tighten further with Chinese authorities imposing new hurdles for fertilizer exporters. Some Chinese fertilizer cargoes ready to be shipped are being delayed by local authorities for additional checks or obtaining new export certificates. China is a crucial supplier of urea, sulphate and phosphate, accounting for about 30 per cent of world exports.

Not all food prices are rising. Australian avocado prices have halved this year on a record crop and reduced demand due to the country’s Covid lockdowns.

While avocado prices may be falling, the head of Europe’s largest meat processing company has warned that climate concerns could mean beef becoming a luxury product like champagne and only consumed on special occasions. He is more optimistic about pork consumption. (Bacon and avocado toast, anyone?)

But you could face difficulties if you plan on drinking Colombian coffee with your brunch. Reuters reports that coffee traders and roasters face significant losses as Colombian coffee producers take advantage of higher prices and default on sales contracted at lower levels. One solution might be lab-grown coffee. Fortunately for the world’s coffee growers, it currently tastes more like tea than coffee and could take many years of development before it reaches your coffee machine.

Bloomberg Green calls out the US National Cattlemen’s Beef Association (NCBA) for arguing that American cattle ‘may not be contributing much at all to global warming.’ A research scientist at Texas A&M University – paid by the NCBA – says the US beef industry may have had zero impact on climate change since 1986. There’s even a chance, he says, that American beef may have reduced the planet’s warming.

The Guardian is similarly unconvinced and calls on public development banks to stop financing factory farms. At the same time, the BBC questions the UK government’s reluctance to nudge consumers into eating less meat.

California’s pay-to-pollute climate-change policies have resulted in cow manure now worth more than milk. Farmers find that selling cow methane to local energy companies is so profitable that they are increasing their herds. Milk has become the by-product of manure production.

Meanwhile, the Brazilian government is increasingly concerned over meat exports to China. The country voluntarily suspended shipments to China six weeks ago after confirming two cases of mad cow disease in separate meat plants. Still, there is little sign that China is in a hurry to resume imports.

In company news, Bunge has agreed to sell its seven Mexico wheat mills to Grupo Trimex for an undisclosed sum. ADM is selling its ethanol production complex in Peoria, Illinois, to BioUrja Group as part of its strategic review of its dry mill ethanol assets. The plant has an annual capacity of 135 million gallons. Cargill is expanding its partnership with BASF to develop enzymes for animal nutrition, adding research and development capabilities to the partners’ existing feed distribution agreements.

Bumper production and a record corn demand from China mean 2021 is a good year for US farmers. The USDA estimates that US farm income from crops will jump 20 per cent to $230.1 billion in 2021, the second-highest ever after the record set in 2012.

The Counter writes that farming is a profession and that the future of agriculture does not lie with smallholdings. It notes, ‘stop trying to build a more resilient and equitable food system on a foundation of an unproven (or disproven) small family farm ideal, especially when a very real set of alternatives is available.’ The USDA estimates that off-farm income contributed an average of 82 per cent of total revenue for family farms in 2019.  In contrast, large farms earned only 7 per cent of their total income from off-farm sources. The FT is concerned that we might be approaching the end of family farms in the UK. The number of farms in the country declined by 35 per cent between 2005 and 2016 to just over 185,000.

Britain’s Shockingly Fresh is set to begin its first harvest at its naturally lit vertical farm and plans to build 40 more units. Unlike most vertical farms, which use fully enclosed systems with heating and artificial LED light, Shockingly Fresh uses only natural light.

Wired looks at African Swine Fever and the effect that it could have on US pork production. The disease has already arrived in Haiti and the Dominican Republic. The Guardian has a longer article on the subject and explains why US pig farmers are panicking at the prospect.

Bloomberg’s Port Congestion Tracker shows that the world’s ports are becoming even more gridlocked after a typhoon in Asia resulted in at least 107 container ships waiting off Hong Kong and Shenzhen. RBC Capital Markets reckons 77 per cent of ports around the world are experiencing abnormally long turnaround times.

Globally, there are 584 container ships stuck outside ports, nearly double the number at the start of the year, with the backlog the worst in Southern China. The delays have pushed the average global price of shipping a 40-foot container to close to $10,000, three times higher than at the start of 2021 and almost ten times pre-pandemic levels.

Maersk is diverting some ships from Felixstowe, the UK’s largest container port, because of a shortage of truck drivers both in the harbour and outside.  The backlog is preventing new loads from being landed.

Finally, if you have time, I recommend this long read from the BBC on regenerative farming.

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The FAO Index of world food prices rose 1.2 per cent in September to hit a decade long high.

Grains rose 2 per cent, driven by wheat, while vegetable oils rose 1.7 per cent on strong demand for palm oil and concerns about worker shortages in Malaysia. An FAO economist told Bloomberg, “It’s this combination of things that’s beginning to get very worrying. It’s not just the isolated food-price numbers, but all of them together.”

Reuters writes that global food prices were 32.8 per cent higher in September than one year ago. CBS reports that US wholesale food prices jumped 8.3 per cent from August this year compared to August 2020 — the most significant gain for more than a decade. An industry analyst told CBS, “We haven’t seen anything yet. Prices are going to continue to go up for a good year and a half.”

Fertilizer prices hit record highs last week, suggesting further food price increases. The cost of natural gas, the primary feedstock for most nitrogen fertilizer, has soared in Europe and China, and some manufacturers have shut plants or reduced production, resulting in shortages.

Cotton hit the mainstream media last week when CNN reported that prices had hit a ten-year high after droughts and heat waves damaged US cotton crops. US clothing prices climbed 4.2 per cent last year, and there are concerns that they will rise even faster next year.

There is some good news on the freight front. AgWeb quotes data from Shifl that show China/U.S. spot container rates dropped by $9,000 – down 51 per cent between September and October. Demand could be down with China slowing production due to a power crisis, but AgWeb warns that issues remain due to a growing backlog of unfulfilled orders.

The FT believes that container rates could fall further despite continuing port congestion on the US West Coast. Business Insider feels that the world’s supply chain problems are easing, while FreightWaves believes we haven’t yet seen the worst.

Meanwhile, bulk rates are rising again, pulled up by increased demand for coal shipments. Spot rates for Capesize vessels have topped $80,000 per day for the first time since 2009, and Supramax rates have risen above $35,000 per day.

Maersk is working on improving the fuel efficiency of their ships and may introduce Silverstream’s Air Lubrication System, which creates a carpet of microbubbles that coat the entire flat bottom of the vessel, reducing friction and resistance between the hull and the water. Silverstream says it reduces fuel consumption by 5-10 per cent. Maersk may use the system on their recently ordered methane-powered vessels. (All we need now is to find a way to capture the methane from cows and use it as fuel!)

The FT explains why cows have risen to the forefront of the debate over global warming and what farmers do to alleviate the problem. The newspaper writes that the 1.5 billion cattle on the planet produce seven gigatonnes of GHG emissions per year, or 60 per cent of livestock emissions, with almost 40 per cent coming in the form of methane, which is about 28 times more potent than carbon dioxide in global warming.

In a separate article, the FT explains what Brazilian farmers are doing to improve their environmental footprint. It highlights the role of ag-tech start-ups in precision agriculture, biological replacements for pesticides and fertilizers, and methane reduction from cattle.

Democrats in the US Congress have introduced new legislation, the FOREST Act of 2021, to reduce illegal deforestation globally by restricting the trade of certain agricultural commodities, such as palm oil, cocoa, soy and cattle products, and rubber and wood. The legislation has attracted little Republican support and is unlikely to pass.

Nestlé is launching plant-based substitutes for eggs and shrimp to complement the company’s existing vegan product line that includes plant-based tuna, burgers, and sausages. The egg substitute contains soy protein and omega-3 fatty acids and can be scrambled or used as an ingredient in cakes and cookies. A Nestlé official told the BBC, “We think less meat and dairy is good for the planet, but it’s also good for diet and health, and it is also a big commercial opportunity.”

Bloomberg Green has a long read on the fuel versus food debate, focussing on India’s ethanol policy. The news agency argues that it’s a vital issue in a country where about 209 million Indians, or about 15 per cent of its population, were undernourished between 2018 and 2020.

Indonesia has conducted its first test flight using a jet fuel containing 2.4 per cent of palm, flying more than 100 km from Jakarta to Bandung. The country has the mandate to increase the palm oil content in aviation fuel to 5 per cent by 2025. Indonesia also has a mandatory biodiesel programme for road transport with 30 per cent palm oil content. The government is keen to expand the use of vegetable oil for energy and slash fuel imports.

And in Kenya, Reuters looks at the benefits of using locally produced sugarcane ethanol for cooking rather than the traditionally used charcoal, kerosene and liquefied petroleum gas.

Forbes interviews the founder of RePlant Capital about her fund for regenerative agriculture.

Last week we reported on the biggest greenhouse in Europe. This week, CNN reports on the biggest greenhouse in the US, situated in the foothills of the Appalachian Mountains. Built in 2020 and set across 60 acres, the greenhouse yields 30 times more per acre than open fields while using 90 per cent less water.

Finally, global warming might mean we can one day drink coffee from the world’s most northern coffee plantation in Sicily. Unfortunately, the project will take years before it can reach large-scale production. Farmers first tried to grow coffee on the island more than 100 years ago, but a cold winter in 1912 killed the trees.

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Environmentalists question whether the US and the EU’s Global Methane Pledge can achieve its objective of slashing methane emissions by 30 per cent by 2030 without more of a focus on agriculture. Food production is responsible for 25 per cent of global methane emissions every year. In the US, agriculture accounts for 36 per cent of the country’s methane, surpassing the coal and gas industry, which generates 30 per cent.

The Economist goes as far as asking whether we should treat beef in the same way as coal – presumably phasing it out. The Guardian takes a more optimistic stance and highlights farmers’ efforts to reduce their methane emissions.

However, the anti-meat lobby continues its media campaign in Time Magazine, writing:

‘Producing food through animals is inefficient, wasteful and dangerous. Today, animal agriculture, including many kinds of meat and dairy, as well as fish farming, uses roughly 80 per cent of all arable land and 41 per cent of all freshwater. It also produces nearly 60 per cent of agricultural emissions, and it is the leading cause of wildlife extinction, deforestation and loss of biodiversity, yet it produces less than 18 per cent of all calories consumed globally. It is also the cause of zoonotic diseases such as COVID and a root cause of antibiotic-resistant diseases.’

Sadly, farmers in the UK face the prospect of culling 120,000 pigs due to a shortage of abattoir workers. The FT writes that one solution may be to slaughter and cut each animal into six pieces for export to Asia, reducing the need for skilled workers. The newspaper also warns that a shortage of field workers may lead to a lack of pumpkins at Halloween. Meanwhile, due to high fertilizer prices, UK farmers may reduce field applications, possibly leading to a drop in yields next year.

Ironically, the UK’s inability to slaughter and process domestic animals, including Christmas turkeys, could lead to a surge in meat imports from the EU. Right on cue, the Guardian interviews the CEO of Higher Stakes, a company looking to produce lab-grown bacon. And in a video, the FT poses a similar question to the UK’s Good Food Institute. Not wanting to be left out of the debate, CNN asks whether there is a future for plant-based seafood. Their answer is a resounding yes.

France has accused the UK of breaking its Brexit commitments on fishing rights. Earlier this year, Britain and France deployed warships to the isle of Jersey amid protests about curtailing the ability of French boats to fish in British seas.

As well as possibly buying the UK produced six-cut pork, China is already buying increased quantities of US beef – up to $1 billion worth this year. China has cut back on Australian imports following a political tiff after Australia called for an independent investigation into the origins of the coronavirus.

The Jones Food Company (JFC), the owner of Europe’s largest vertical farm, has announced plans to build the world’s largest vertical farm. When completed in 2022, it will have 148,000 square feet of growing space and supply 1,000 tonnes of fresh produce to UK supermarkets per year. The Economist is in favour of vertical farming.

Because of Brexit, the UK may soon ease restrictions on gene editing in agricultural research. The EU will continue to apply the same rules on gene editing as on gene modification.

The Philippines has become the first country to approve the commercial production of nutrient-enriched Golden Rice. The International Rice Research Institute (IRRI) developed Golden Rice to help curb vitamin A deficiency in developing nations. Even so, some environmental NGOs continue to lobby actively against Golden Rice because it is genetically modified.

Food Navigator reports on how Unilever is addressing environmental and social sustainability issues through regenerative agriculture. Cargill is also promoting regenerative agriculture with RegenConnect. The company manages a pilot programme that in 2020 ran on nearly 10,000 acres and paid farmers $30-45 per acre to adopt regenerative agriculture practices. Cargill plans to advance regenerative agriculture practices to 10 million acres in North America by 2030.

An op-ed in Aljazeera calls for scientists to work together to end global hunger by 2030. The outlet writes, ‘With almost 768 million people facing hunger in 2020, up some 118 million from the previous year, the global food system is in trouble.’

Meanwhile, the Guardian warns that the recent spike in coffee prices is just a taste of what is to come with global warming affecting coffee growing areas. The Guardian also writes about the difficulty in certifying the smallholder palm oil farmers who account for 40 per cent of global palm oil production.

Port congestion is negatively affecting container shipment schedules while encouraging container ships to increase sailing speeds – and, as a result, emissions. Coca-Cola is working around container tightness by switching business to bulk carriers. Meanwhile, barge rates on the Mississippi River are soaring because of the damage caused by Hurricanes Ida and Nicholas.

Finally, Bloomberg has two reports on the problems farmers face in Brazil and China – and how food prices could soar as a result.

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The question is, ‘Why are supply chains so messed up?’

Last week we wrote that more than 60 container ships are stuck off Los Angeles and Long Beach, but there are more than double that number — 154 as of Friday — waiting to load export cargo off Shanghai and Ningbo in China. There are now 242 container ships waiting for berths countrywide.

There is disagreement as to the percentage increase in container traffic this year compared to last year. Clarksons projects global container trade will reach 206.8m teu in 2021, up 6.3 per cent year-on-year. Maersk estimates that global trade volumes will grow 7 to 8 per cent this year compared with 2020. The container advisory CTI Consultancy put the annual figure in the 8 to 9 per cent range while Alphaliner predicts 5.8 per cent year-on-year growth.

Overall, the top 20 container ports handled 13 per cent more twenty-foot boxes in the first six months of 2021 compared to the same period in 2020. Still, the most startling figures come from the US, where Los Angeles/Long Beach and New York/New Jersey recorded a year-on-year throughput growth of 41 and 31 per cent, respectively.

A crane has collapsed at an export facility in Aberdeen on the US West Coast that handles about 20 per cent of US soybean exports. The damage could take months to repair, further complicating shipping logistics.

In this video, Cargill’s CEO argues that current high food prices are transitory. Many of the world’s central bankers agree. However, LDC’s CEO has warned that commodity markets face a period of intense volatility due to COVID-19, shipping congestion, and question marks over when the US Federal Reserve will start tapering monetary support. Hedge funds are taking advantage of this volatility to make good profits, particularly in niche commodities. Unfortunately, as the WSJ points out, price volatility can make it difficult for smaller traders to finance their everyday business.

The UN held its long-anticipated Food Systems Summit last week to set the stage for a transformation in global food systems to achieve the UN’s Sustainable Development Goals by 2030. The world’s media seems largely to have ignored the meeting.

Some indigenous farmers’ organizations had previously criticized the event, claiming it had been hijacked by the agro-industrial sector. Some scientists, researchers, and academics boycotted the event, afraid that it would put profits before people by focusing too heavily on technology such as digitalization, gene editing and precision agriculture. This article (in French) explains the reasons behind the boycott.

The UN defended the summit in a press release, writing that almost 300 Indigenous Peoples organizations participated.

Bill Gates, who knows something about technology, has invested in Iron Ox. This Silicon Valley-based start-up believes robots powered by artificial intelligence could farm more sustainably than traditional agriculture. The company says its mission is to make the global agriculture sector carbon negative.

Technology doesn’t have to be complicated or expensive to have an impact. In this long read, Bloomberg describes how a tiny piece of plastic is revolutionizing drip irrigation. Meanwhile, the Swedish company Volta Seafeed wants to make a seaweed-based cattle feed supplement that will reduce cows’ methane emissions by up to 80 per cent.

And while we are talking about meat, the Counter doesn’t believe the hype around cultured meat, arguing that it isn’t scalable economically. Impossible Foods is rolling out its plant-based meatless pork in Hong Kong, Singapore, and the US, and McDonald’s is pushing ahead with their plant-based product, a vegetarian burger called the McPlant, launching it in the UK.

Brazil’s coffee farmers have harvested 30.7 million bags of arabica this year, compared to 48.8 million last year, down nearly 40 per cent and the smallest crop since 2009. Brazil’s robusta harvest is, however, at a record. But while Brazilian coffee farmers struggle with the weather, climate change means that US farmers can now grow the crop. I can’t wait to taste some!

In an FT opinion piece, SovEcon warns that Russian government intervention in the domestic wheat market will disincentivize growers and cost the country its leading position as an exporter.

Reuters reports that the US Environmental Protection Agency (EPA) is proposing cuts in the amount of biofuel that must be blended into fossil fuels. The news agency obtained a document that suggested that the EPA would reduce 2020 and 2021 requirements to about 17.1 billion gallons and 18.6 billion gallons, respectively, compared to 20.1 billion gallons in 2020. The level for 2022 would reportedly be at 20.8 billion gallons. The EPA sets the 2020 and 2021 mandates retroactively. Administration officials cautioned that the numbers are not final and still subject to revisions

Indonesia has said that it will use existing laws to deal with issues around sustainable palm oil production after a moratorium on new plantation permits ended on 19th September.

Finally, the Guardian’s long-read this week is about an ‘ecofeminist movement’ in Africa, Nous Sommes la Solution (NSS), that wants to revolutionize African agriculture by promoting ‘sustainable agroecology’.

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The UN FAO has published a new report urging reform of the world’s $540bn in farming subsidies.  The FAO estimates that subsidies account for 15 per cent of agriculture’s total production value globally, with the figure expected to more than triple to $1.8tn by 2030.

The report finds that converting land to agricultural use has led to a 70 per cent reduction in global biodiversity. Food production generates about a quarter of all greenhouse gases. The UN estimates that these hidden costs to public health and the environment total about $12tn a year: $6.6tn in health problems caused by obesity, undernutrition, and pollution; $3.3tn from agriculture’s effects on the climate and the environment; and $2.1tn due to wasted food and fertiliser leakage.

The Guardian adds that while $100bn is spent each year on climate change measures and $5bn for deforestation, governments annually provide $470bn in farm support that negatively impacts the world’s climate and biodiversity.

Bloomberg warns that climate change could negatively affect food supplies. It says that yields of staple crops could decline by almost a third by 2050 unless emissions are drastically reduced in the next decade.

The US and the EU have agreed to try and cut methane emissions by about one-third by the end of this decade. Their agreement targets the energy, agriculture and waste industries.

A report in Nature argues that agriculture is responsible for 35 per cent of global GHG emissions, with the meat industry accounting for 57 per cent of all food production emissions, with 29 per cent coming from the cultivation of plant-based foods. The rest comes from other crops like cotton or rubber. Beef alone accounts for a quarter of emissions produced by raising and growing food.

When asked about meat’s contribution to GHG emissions, most people will quote the FAO figure of 14.5 per cent. Another new report, however, claims that this figure is out of date and that the minimum estimate for animal agriculture’s emissions should be updated to 16.5 per cent.

The Guardian writes that one solution might be to potty-train livestock to poo and pee in designated areas where their waste can be better managed.

The FT writes that PR agencies working for the alt-meat sector may be behind some of the anti-meat articles in the media. The newspaper argues that lab-grown meat is not about sustainability. They write, “Ultimately, lab-grown meat is not about saving the planet, it’s not really even about food. It’s about IP.”

Meanwhile, ADM plans to launch its first US plant-based meat portfolio in a joint venture with Brazilian beef producer Marfrig Global Foods SA. According to ADM, more than half of conventional meat-eaters are diversifying to alternative proteins.

Nestlé SA has announced a three-pronged plan to invest approximately $1.3 billion over the next five years to help its farmers and suppliers transition to using regenerative agriculture practices. Agriculture accounts for nearly two-thirds of Nestle’s total greenhouse gas emissions, with dairy and livestock making up about half of that. The company hopes to halve its emissions by 2030 and achieve net-zero emissions by 2050.

With a certain irony, a shortage of CO2 used to stun pigs and chickens before slaughtering could impact UK meat supply chains. The CO2 used by the meat industry is a by-product of fertiliser production, but two large UK fertiliser factories have recently suspended operations due to soaring gas prices. The UK’s biggest poultry supplier has said the CO2 shortage could result in a lack of turkeys for traditional Christmas dinners.

Meanwhile, the UK retailer Marks & Spencer is closing eleven of its French stores because of problems supplying them with fresh and chilled foods since Brexit. The UK government has promised an investigation into how labour shortages, Brexit and surging commodity prices are hurting the country’s food industry.

Governments in other countries are also looking at their food supply chains as shortages bite, and prices rise. Global food prices were up 33 per cent in August from a year earlier. Bloomberg thinks that the situation is unlikely to improve as extreme weather, soaring freight and fertiliser costs, shipping bottlenecks, and labour shortages compound the problem.

In China, the government has said it will continue efforts to stabilise commodity prices using various measures, but with a particular emphasis on the use of market instruments (presumably the management of reserve stocks).

The Danish shipping giant Maersk has upgraded its profit expectations for a second time this year to between $22bn to $23bn. At the start of this year, they had forecast profits between $8.5bn and $10.5bn. Freight rates have jumped 26.6 per cent from a year earlier, the sharpest increase since February 2006, based on figures from Cass Information Systems. The gain followed a 23.8 per cent increase in July. A record 65 container ships are waiting to offload in the ports of Los Angeles and Long Beach. Of those, a record 23 are drifting because anchorages were full.

In long reads, the Guardian writes that new forensic testing techniques are helping to reduce food fraud, particularly in terms of origin. Bloomberg Green takes a long look at how even the best-intentioned agricultural companies can fail to live up to investor expectations regarding sustainability and human rights.

Lastly, the FT looks at how investors can use ETFs to profit from the commodity super-cycle, but, in this excellent podcast, a seasoned trader asks whether there is a super-cycle at all.

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