Commodity Conversations Weekly Press Summary

Acquisition talks between ADM and Bunge have ended after over a month of negotiations as both companies could not come to an agreement. Sources say the talks were slow as the two companies were concerned about potential regulatory issues . In addition, JP Morgan had previously warned that an ADM acquisition would not necessarily be economically rational, taking into account Bunge’s 2017 revenues, the challenges faced by the sector, and ADM’s debt.

The big four ABCD companies all reported significant growth in the amount of grain they exported from Brazil in 2017, generally thanks to a recovery from the 2016 drought and a bumper crop. COFCO, in particular, was able to boost its grain exports by 327% thanks to its acquisitions of Nidera NV and Noble Agri, along with its access to China’s soy market, while ADM was able to increase exports by 140% thanks to its upgraded port terminals. A corn farmer in Mato Grosso said that the competition among the four firms was good news for farmers as it pushed up prices.

COFCO is keen to tie up with competitors in its efforts to feed China. The group’s president said that while the company still hoped to become one of the ABCDs in the long term, it conceded that it still had a lot to learn about the world markets and that it would rather partner with than compete against the other big tradehouses.

The Louis Dreyfus family hedge fund Sierentz has launched a new agricultural commodities trading firm – Sierentz Global Merchants. The group, which just hired  a senior execution expert from LDC, will focus on grain exports from the Black Sea.

Bunge announced that it will offer US farmers a premium for their corn crop during the three year period that it takes for them to achieve official organic certification, in a move the company hopes will encourage and help more farmers make the transition.

Cargill launched a website,, to highlight the importance of maintaining good trade relations and urge the US to avoid imposing protectionist measures. The company said the US imposing steel and aluminium tariffs could antagonise China and other trade partners into retaliatory tariffs on agricultural products. In any case, economists say there is little historical data to prove that higher tariffs can decrease the trade deficit. They argue the US should focus instead on reducing its fiscal deficit.

Olam has invested USD 1 billion in Nigeria ever since it set up in the country 26 years ago. A company official said the goal was to turn Nigeria into Africa’s agricultural hub. Investments include a rice mill and plantation which is on its way to become the biggest rice farm on the continent, as well as investments in poultry and animal feed, among many others.

Wilmar is teaming up with the Malaysian Palm Oil Certification Council (MPOCC) to help all farmers achieve a sustainable certification by the end of 2019, which Wilmar says will help it meet consumer demand, while helping smallholders achieve higher yields and income. More than half of all mills in the country should benefit from the project. In India, meanwhile, the company increased its shareholding in Shree Renuka Sugars to a controlling 39% from 27% previously.

Cocoa exporters in the Ivory Coast, such as Ferrero, Cargill or Olam, could be affected by a government drive to lower the production of cocoa from about 2 million mt to 1.7-1.8 million mt, in an attempt to stop a supply glut from depressing prices. The government is uprooting cocoa plantations and blocking companies like Nestle and Mars from distributing hybrid seeds.

In the UK, the sugar levy on sweet beverages has already been hailed a success, even though it will only be implemented in April. Many beverage companies have anticipated the sugar levy and fewer drinks will be taxed than initially expected. The government expects now to only raise half the money it had initially forecast. AG Barr and Britvic estimate 99% and 94% of their respective products won’t be taxed. Coca-Cola, too, is catering to low-sugar beverages demand from consumers by reformulating Fanta and Sprite in the UK. The company’s sales volume in the low- or no-calories variants account for 35%. The original Coke, on the other hand, has not been reformulated which means it will become more expensive.

Nestlé said it was the industry’s responsibility to improve public health. The head of the UK & Ireland operations said it was working very hard to reformulate its products and make them healthier. The company has already reduced sugar by 10% in its confectionery brands, removing 2.6 billion teaspoons of sugar.

Similarly, General Mills and the Kellogg Co. is working to make its supply chain more transparent. The group’s head of sustainability explained this was key to building customer trust, especially when it comes to packaged food. Its strategy focuses on investing at origin as well as working closely with partners such as ADM and Cargill to improve sustainable sourcing. It hopes to source all its US wheat sustainably by 2020, from 36% in 2016.

The EU announced that it was investigating the VAT tax waiver the UK extended to commodity derivatives transactions in spot, futures and options contracts. The UK was granted the authorisation to extend a VAT waiver on some commodity deals in 1977, but the EU is alleging that the government extended the waiver beyond the intended limit and that this is creating unfair competition for other EU exchanges.

The EU is considering a new law which would force retailers to reveal their profits as a part of efforts to bring transparency in the food chain business and provide more profits to farmers. Lawmakers said they expected strong opposition from the food sector, but insisted they were committed to passing a proposition they hope to publish in May.

The winner of 2017 Africa Food prize highlighted that climate change is posing a threat to key staple crops and food security globally as increasing temperatures have lowered yields.  He highlighted the need to develop a new system to feed the growing demand without harming the environment.

In California, the new buzz word is “regenerative agriculture” – a type of farming designed to rebuild topsoil as well as to encourage biodiversity. The Regenerative Organic Alliance is working on putting together a certification system built on the USDA’s organic certification. And a campaign has been launched in the state to support a law that proposes to ban the sale of pork veal and egg produced from caged animals. The petition has collected 200,000 signatures so far and a campaigner said he was confident they could reach the required 365,000 signatures by the May 1 deadline.

Did you know that Britons throw away 25 million slices of bread every day? The organisation Love Food Hate Waste has started a campaign suggesting people freeze bread, and toast it when they want to eat it, to significantly reduce that waste.

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Commodity Conversations Weekly Press Summary

Sources say that ADM has approached an Asia-based company to create a consortium to buy Bunge in a attempt to bypass anti-trust regulation and to stand a bigger chance against potentially competing bidders. There seem to be further signs that Bunge is preparing for a takeover. First, SEC filings show that higher level executives at Bunge received USD 3.2 million in stocks last week. Second, investment group Continental Grain has reportedly increased its stake in Bunge to over 1% to push the company to sell itself. Meanwhile, Ontario Teachers Pension Plan Board, which manages over USD 7.5 billion, also increased its stake in Bunge.  

Bunge has completed its acquisition of 70% of premium quality oil producers IOI Loders Croklaan. Bunge’s CEO said that value-added food and ingredients segment make now to 35-40% of the group’s portfolio

ADM has acquired 50% of Russia’s largest food and beverage producer Aston’s starch and sweeteners business – including two wet corn mills. This is the most recent of a string of investments and acquisitions of corn plants in the rest of the world. ADM forecast high fructose corn syrup and glucose and dextrose consumption will rise by 6% and 9.1% respectively by 2020.

Cargill and MV Cargo’s grain terminal in Yuzhne, Ukraine, is nearing completion and should be finished by the middle of the year. With a 5 million mt capacity, it will handle 10% of the country’s grain exports.

COFCO has created a “global asset management organisation” which will manage operating assets. The group has also reorganised its top executives as it pursues a policy of global growth. A company representative said COFCO now had a “solid organisational structure” that will allow them to continue to grow.

The Chinese government announced it was stepping up efforts to fight soil pollution, caused in part by fertiliser and pesticide contamination, amid increasing worries that crops are being grown in contaminated fields. As part of the plan, 6.67 million ha of land will be converted into forests. By 2020, 90% of the contaminated farmland (estimated at 3.33 million ha in a 2013 survey) should be safe to grow food again.

Soil pollution is not China’s only problem. Experts say the government’s plan towards the Camel Economy – an economy with lower water consumption – are moving much too slow. With close to 80% of the country’s water reserves in the South, the 12 provinces in the North – home to 38% of agriculture and 41% of its population – suffer from water shortage. To significantly reduce water consumption the government might have to increase the price of water and give up on plans to become self-sufficient in food, given that 62% of the water resources go into agriculture.  

Local media reports that the first part of China’s South-to-North water diversion project – which consists of 1,432 km of mainly open water canals – has already helped millions of people since its inception in 2014. Some 13% of the diverted water can be used for agriculture.

Environmental and social groups have opposed the project, but the government has already moved on to the next phase. It continues to work on its ‘air corridor‘ which would divert water by evaporating it and then controlling its journey in the air through atmospheric interference. The Tianhe Project, which means “water in the sky”  will eventually transfer 5 billion cu m of water per year.

Water shortages might be closer to home that you suspect. A quarter of the world’s 500 biggest cities are already facing water supply issues, and the top 11 cities most likely to run out of water include Sao Paulo, London, Tokyo and Miami.

Still on the subject of water, several fact-checking websites have debunked a story, first published in a Brazilian blog, that Coca-Cola and Nestle were in talks with the Brazilian government to privatise the Guarani Aquifer. The news caused someone to start an online petition against it, which was eventually removed after it became clear this was fake news.   

What is real news, on the hand, is that Coca-Cola is launching an alcoholic drink, the first time in the history of the company. The alcopop will be launched in Japan, where the “Chu-Hi” (canned drinks with alcohol) market is thriving. The alcohol content is expected to be between 3-8%, which means it will compete with the beer segment. The company said this was an experiment which would probably only stay in Japan but was also a sign that the company is exploring new opportunities amid falling fizzy drink sales.

Following the UK Labour party’s proposal to ban selling drinks with a high sugar content to under 16s, Coca-Cola announced it was changing its existing kids education program and looking into new ways to contribute to the younger community. It will scrap its Real Business Challenge designed for children as well as Coca-Cola’s factories tours.

On the other hand, Nestle is investing CAD 51.5 million (USD 39.69 million) to expand its ice-cream plant to 60 million L in Canada. The plant is not able to keep up with demand, the company said.

Unilever has launched Growing Roots in the US. Every purchase will go towards funding and supporting urban farming throughout the country. Interestingly, the initiative was started by Unilever employees.

Lego announced that it has started using sugarcane-based polyethylene supplied by Brazil’s Braskem to make some of its elements at its Danish plant. In the UK, Deliveroo said it will now encourage manufacturers to switch to sustainable plastic packaging, such as sugarcane boxes.

The UK has only 63 small scale local abattoirs left, down from 96 a decade ago. A recent report by the Sustainable Food Trust found that the bigger abattoirs are squeezing the smaller ones out and making them unprofitable, in part because of the current ill-adapted legislation. The trust suggests setting up mobile abattoirs, something which is already working in Canada and New Zealand.

Big data is working to help eradicate malnutrition. A new map has been published showing child growth over the last 15 years in 5km by 5km scale maps of African countries. While the map shows improvement in some areas, it also shows that none of the African countries will meet the United Nations goal to end childhood malnutrition by 2030. The good news, however, is that the detailing of this map will help governments target the right areas.

Finally a Los Angeles fast food chain is experimenting replacing workers with robots. Click here to see a robot flipping burgers.

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Commodity Conversations -Weekly Press Summary

Market talk had suggested that by taking over Bunge ADM is looking to make  a come back in the sugarcane sector in Brazil, acquiring its 21 million mt of cane crushing capacity in the country. (ADM sold its lone mill in Brazil in 2016.) Several sources have now said, however, that ADM is instead focusing on Bunge’s soybean crushing operations in Argentina. Not only is ADM the only major trade house not to have such assets there, but the plants and elevators are ideally located next to the deep port of Parana, giving it easy access to the rest of the world.

Meanwhile, ADM and Cargill will team up to manage a soybean crushing plant in Egypt, supplying beans and commercialising soymeal and oil domestically. The plant, currently under expansion, should reduce the need for Egypt to import meal.

Separately, Cargill has been working with Precision BioSciences and succeeded in cutting down the saturated fat levels in canola oil by 35% to 4.5%.

Olam reported a 159.3% higher net profit of SGD 265.1 million (USD 201.16 million) during Oct-Dec 2017, thanks in part to the sale of its sugar refining business in Indonesia. Excluding “one-time factors,” the company reported a 7.2% increase in earnings, although that was capped by a disappointing coffee crop from South and Central America.

Danone France is planning to go completely organic by 2025. It will give financial support of EUR 5 million (USD 6.1 million) to 2,300 farmers this year to help them adopt organic farming. The group plans to do this through a crowdfunding platform that will allow the general public to lend money at a rate of 2-4%. The platform will also allow farmers to ask for donations, giving in exchange products such as honey.

An Abiove economist has said it will take over 20 years for Brazil to modernise its railway system, roads and waterways and that the country’s poor logistics, especially the bad roads, are slowing the growth of agriculture exports. This could be an issue as the country is expected to export as much corn as the US by 2040, from just 25% currently. In the short term, however, investments by China will help improve the infrastructure.

In the US, several leading food companies such as B&G Foods Inc, General Mills and Tyson Foods said they are considering a price hike to offset rising transportation expenses. A host of factors like rising global crude prices, rail and road companies not expanding capacity and a scarcity of drivers have driven up transportation costs.

Meanwhile, the USDA has asked the government to create a separate immigration route for farm workers to reduce problems linked to labour shortage.

However, the need for field labour could be significantly reduced in the medium term. UK-company Hands Free Hectare has successfully harvested two crops (wheat and barley) without anyone having to go into the field.

The world is expected to consume more and more dairy products rich in fat. A food industry advisor explained that the dairy industry, along with a flurry of studies published over the last few years, have successfully convinced consumers that dairy-fat is not, after all, bad for you. A USDA report forecast this shift will continue to boost demand for butter and cream, which should support prices for full fat dairy. The price of butter rallied to EUR 6,500/mt in September, from EUR 2,350/mt six months before.

However, this is coming at a high environmental cost. The WWF is calling on the Netherlands – the world’s fifth largest exporter of dairy products in the world – to reduce it’s cow population by 40% over the next 10 years. The 1.8 million cows produce so much dung that farmers are having to dump it illegally, contaminating groundwater and air.

While the USDA noted an oversupply of skim milk powder which is often used in infant formula, Danone announced it was doubling the capacity at its New Zealand infant formula plant. The company said its main export market continues to be Australia, but it wants to capture growing demand from China.

An investigation by The Guardian and Save the Children showed that formula milk companies have been using various methods to encourage women in the poorest strata of the Philippines to choose formula milk over breastfeeding. Four companies – including Nestle – were found to be deliberately misleading mothers in hospitals and other forums.

The UK is facing a meat safety crisis. An investigation conducted by the Guardian and Bureau of Investigative Journalism found that two-thirds of audited plants broke food safety rules. The Food Safety Authority has set up a national review of meat processing plants, but there is concern that part of the problem is within the existing monitoring system.

A similar investigation in the US found government records which showed that 47 plants had breached safety standards by, for example, using meat from sick and contaminated animals. Overall, Americans are 10 times more likely to fall sick from food poisoning that people in the UK, according to the organisation Sustain. Campaigners are worried that the situation could get worse if the government accepts a proposal – currently under consideration – to increase the speed at which pigs can be slaughtered.

NGOs are putting pressure on the EU to step up its efforts to eliminate deforestation from the agricultural supply chains. This follows a report published last week which showed that the world’s trading system continue to be major contributors to deforestation – something many stakeholders had committed to work against. The report suggests a focus on palm oil and cocoa. However, sources say the EU’s action plan on deforestation in agriculture, which was due this year, is likely to be delayed.

Using data from fishing cargoes, scientists have found that industrial fishing is being carried out in over half of our planet’s oceans. Put into perspective, fishing pollutes four times more than agriculture even though it represents only 1.2% of human’s global caloric production. Over 85% of the fishing in high seas is conducted by just five countries: China, Spain, Taiwan, Japan, and South Korea. You can check out the map here.

Millenials are the biggest contributors to Australia’s weekly AUD 76.4 million food waste. A recent report found that households with the most millenials tended to waste more, which could also be the result of buying fresher food and cooking more at home.  A similar study conducted last year by Sainsbury in the UK also found that the younger generator wasted more food. It argued that lack of planning and an attitude of “living to eat” rather than “eating to live” was to blame.

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Commodity Conversations Weekly Press Summary


Glencore Agri reported a 7% increase in earnings last year to USD 631 million (excluding the “depreciation charge”). Glencore’s CEO said this was pretty good given the market conditions and compared to struggling competitors. He added that the group continued to look for potential acquisitions – although nothing specific has been identified yet.  

The market is expecting ADM will have to issue equity if it wants to buy Bunge. Fitch Ratings argued that a debt-only deal would likely affect the company’s access to cheap credit. Moody’s on the other hand said that – at an estimated USD 16 billion – Bunge is too expensive.

Unilever announced it would make public its entire palm oil supply chain – which includes 1,400 mills and 300 direct suppliers. This is part of their effort to become more transparent, and to help the palm oil industry become more sustainable.

Palm oil producer Sime Darby said it had put its expansion plans in Liberia on hold as it waits to see whether the Roundtable on Sustainable Palm Oil (RSPO) adopts new rules on deforestation. A company official explained that greenfield expansion in Southeast Asia has become difficult as governments don’t want to be seen allowing deforestation. Producers have been looking to expand production in West Africa to feed fast growing global demand but an ambitious ruling by the RSPO could also make expansion in Africa difficult.

Olam, which received last month the Roundtable on Sustainable Palm Oil (RSPO) certification for its palm oil mill and concessions in Gabon, is planning to use 50,000ha to expand its palm oil plantations (as well as rubber). However, it is only developing on grasslands at the moment because of the uncertainty over the deforestation rules.

After reporting disappointing quarterly results last week, Kraft Heinz recognised that changing consumer tastes and a shift from processed food to more natural options are a challenge. A piece in the Wall Street Journal argues that the group’s strategy to drive profits through acquisitions and cost cutting may not be enough, and that the company needs to generate more sales. A branding expert explained that consumers seek out products that “look handmade.”

This could explain why Kraft Heinz’ meat business is losing market share, while sales of processed meats in the US dropped from USD 21.9 billion in 2015 to USD 21.3 billion last year.  In a bid to tackle the problem, one of the plants has started repackaging in a way that highlights the natural ingredients, and has launched an antibiotic-free meat. The CEO also said the group was open to acquisitions.

Kraft Heinz are not the only facing this issue. More and more investors are calling on to companies such as Amazon’s Whole Foods and Costco to respond to shifting consumer demand. A report supported by some 57 investors representing USD 2.4 trillion in investment forecast that the plant-based protein diet is expected to reach USD 5.2 billion within the next 2 years.  

Similarly, a survey conducted by Cargill in December showed that consumers want to eat meat that has been fed with natural additives and supplements, the same kind of supplements that they themselves consume. The head of the group’s premix and nutrition explained animal health, sustainability and well being were increasingly important for consumers.

As a result, meat producers want labels to become clearer. The US Cattlemen’s Association has written to the USDA to spell out the difference between cell-cultured meat, or clean meat, and traditional beef.

Nestle announced a USD 14 million investment at one of its factories in Thailand so that it can produce a higher quality coffee with less sugar. Nescafe Gold Crema, as it is called, was launched at the same time in Thailand and Western Europe. Although Thais tend to have a sweet tooth, health concerns are driving the shift to black coffee.

Rabobank expects the wine industry will see further consolidation, especially in light of the difficult year many producers are going through. Growing regions in California, France, Italy, Spain and Argentina have all seen bad weather which has, in some areas, badly affected the grapes. The price of bulk wine on the VinEx exchange is already up 17% from 6 months ago.

The wine market will also have to adjust to changing consumer concerns. A recent report forecast that the growth in wine consumption in the US is expected to slow, in part because millennials are more “frugal.”

Amazon’s Whole Foods business is helping premium food producers reach consumers. The head of natural organic food company Hain Celestial said its sales have increased significantly in the last quarter, while its costs have dropped, thanks to sales via Amazon. He explained that consumers are moving away from shops and sourcing most of their needs online. In a bid to compete, one of the US’ biggest grocery chains, Albertsons, is planning to buy Rite Aid which would widen its reach to 4,900 locations in the country.

On the other hand, Amazon was told it had to pay a penalty USD 1.2 million for  unlicensed imported pesticide in the US. Although the selling was done by third parties, the Environment Protection Agency argued the products were going through Amazon’s warehouses. The company committed to crackdown on illegal pesticides.  

Finally, NPR started a video series called “Planet Money Shorts” and the first episode tells the surprising tale of how Germany’s duty on frozen US chicken imports led to the boom of the US auto industry. Watch it here.

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Commodity Conversations Weekly Press Summary


Costa Rica announced last week that it will lift the ban on planting robusta coffee as climate change is making it harder to produce the more fragile arabica crop. This is a general trend in the region. Central American robusta will likely displace Brazilian and Vietnamese origins into the US. But even with this switch, Olam forecast the world will not produce enough robusta in 2017/18 – for the second year in a row.

In the longer term, a study published last year forecast that arabica area would drop by 50% globally by 2050 because of rising temperatures and a switch to the cheaper robusta alternative. For premium-brand companies like Whittard of Chelsea it is a problem as robusta does not provide the same taste experience. Some producers are working on crossbreeding arabica but any genetic modification is expected to face consumer backlash.

Following the recent volatility in equities, fund money could be moving out of equities into commodity markets. Several analysts argue that inflation and higher interest rates will push traders to look at commodities that tend to be perceived as “inflation-proof.” Others are quick to point out, however, that agriculture commodities are suffering from oversupply.

After revealing disappointing Q4 results and its worst annual profits since 2009, Bunge announced it was exiting sugar trading, adding that some parties had expressed interest in buying its sugar trading business. Bunge’s CEO explained the aim was to focus on the group’s “core”, namely agribusiness, grains and oilseeds. He added that sugar margins had been unable to cover costs for a few years. In addition to selling its sugar assets, the group is also looking at selling its share in their renewable oils joint venture. 

The fundamental fund CC+ – which focused on coffee and cocoa – closed at the end of last year, joining a number of other similar funds such as Jamison Capital Partners and Astenbeck Commodities Fund II which also closed in 2017. The head of CC+, known as “Chocfinger” for his knowledge of the cocoa market, said he could not compete with computer trading, which he accused of distorting prices. Commodities broker Marex Spectron argued that fundamental analysis was now a “waste of time.”

In the US, Republican senators from grain states are trying to remove the disadvantage to private grain traders following the 20% tax rebate mooted for farmers selling their crop to farmer cooperatives. Private grain operators are seeing fewer contracts as farmers wait to see what happens, and big grain trading companies are even looking at setting up cooperatives. Ethanol producer Green Plains has already incorporated a cooperative in Kansas, and ADM is looking for alternatives in case a solution cannot be found.

Nestle acquired a majority stake in superfood producer Terrafertil. The company, based in Ecuador, operates in seven countries and fits Nestle’s aim to diversify into plant-based and healthy foods. The group is facing some issues after a consumer filed a lawsuit in the US accusing the group of using cocoa from Ivory Coast which has been produced using child and slave labour. Nestle is also hitting back at accusations that it is using more water than allowed in California’s San Bernardino National Forest.

A debate in the Dutch poultry sector is highlighting two conflicting facets of sustainable food production: environmental impact and animal welfare. The industry has been moving towards larger living spaces for chicken, along with slower growing strains, which has in turn increased the environmental footprint. Making eggs from battery-caged chicken was banned in the EU in 2012, but commentators noted these eggs actually have the lowest carbon footprint.

And in an attempt to make fish farms more environmentally friendly, companies are looking at insects to replace the fish meal they usually feed salmon. Dutch-based Protix developed an insect-based feed made from the larvae of black soldier flies, which was approved by the EU in 2017. The firm tested the feed for four years and said the fish tasted exactly the same, while the salmon, who are famously picky eaters, reportedly enjoy the insect feed.

Consumers are apparently more worried about the impact of genetically-modified (GM) crops on the environment than on their health, according to a German survey, which was trying to assess where the resistance to GM came from.

Meanwhile, a trade spat between China and the US has grown to include agricultural products. Chinese importers are reportedly looking to lower their purchases from the US, as the Chinese government is expected to retaliate against the US decision to impose a tariff on solar panels and washing machines. Chinese traders are not taking delivery of US corn, and are looking at Australia and Brazil for sorghum and soybeans, respectively, instead of the US.

While some were celebrating the opportunity to expand their export markets, the UAE environment minister told a conference on farm innovation that the global supply chain has made every country susceptible to food insecurity and is also posing a challenge to the Middle East where the rising population is putting pressure on the ability of the countries to provide food to their people.

Penn State University is looking at a novel way to address the food insecurity issue: recycling human waste to make food. Through anaerobic digestion, scientist are growing a type of microbe from methane gas that consists of 52% protein and 36% fat. The end product, dubbed microbial goo, might need to be mixed with conventional food to make it taste better, and if that doesn’t sound appetising, don’t worry, it’s designed for astronauts who might spend months travelling to Mars.

Another, perhaps more popular, method of improving food security has also been making headlines: the effort to reduce food waste. The Italian Agriculture Minister said a 2016 law, which pushes firms to donate food instead of wasting it, has so far provided food for more than 1.5 million people. A Swedish University found that only seven products accounted for 50% of the food waste costs incurred by retailers, namely bananas, apples, tomatoes, salad, sweet peppers, pears and grapes. Aldi announced this week that it will join the Champions 12.3 coalition which aims to half the retail and consumer per capita food waste levels by 2030. Nonetheless, most of the food is wasted by households, not retailers, as highlighted by the Love Food Hate Waste campaign which has been going for more than 10 years.

And if you are still hungry for more agriculture related news, we recommend the Netflix “Rotten” documentary series. Instead of focusing on what it thinks you should not eat, like most food documentaries seem to do, it investigates allegations of crime in the food industry, such as the smuggling of adulterated honey, or the trade war between the biggest US and Chinese garlic producers.

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Commodity Conversations Weekly Press Summary

Sources say that ADM and Bunge could announce a merger by the end of this week. They warned, however, that the agreement could still be derailed – especially if other parties are interested in bidding for the group. Bloomberg writes the move could be the “biggest shake-up in a generation” and many analysts forecast this is likely to be only the beginning of a “reshuffling” of the ABCDs.

Fitch Ratings argues Cargill’s lower leverage and higher cash flow put it in a strong position compared to its competitors, especially in terms of M&A. It suggests that Cargill could pick up some of the more niche and higher margins assets that Bunge might have to sell in the case of a takeover by ADM.

COFCO is looking at buying logistic facilities – including warehouses – inside Brazil’s Mato Grosso. The head of the South American operations said they want to buy directly from the farmer instead of going through other groups. COFCO exported 7 million mt of soybean from Brazil in 2017, up from 2.4 million mt the previous year, making it the third biggest exporter behind Bunge and Marubeni. Over 50% of China’s soybean imports now come from Brazil, a demand which is expected to continue growing. In January alone, Brazil’s soybean exports jumped 70% on year.

After prolonged regulatory delays, the EU has approved imports of DuPont Pioneer’s Plenish soybeans. With Monsanto’s Vistive Gold soybeans also expected to be completely commercialised this year, farmers in the US are planning to scale up the planting of these GM varieties of high oleic soybeans. These beans produce oil with lower saturated fat and trans-fats and capture a premium of USD 40-50c/bushel. A market expert forecast that high oleic soybeans will become the fourth-largest grain and oilseed crop in the US within the next 10 years.

In other trade news, the Chinese commerce ministry announced last week that it will investigate US sorghum imports under its anti-subsidy rules. Sorghum is used as a feedstock for ethanol and animal feed, and sources mentioned that producers might switch to corn to limit the risk of an unstable sorghum supply. The US is expected to export about 260 million bushels of sorghum to China in 2017/18.

The UAE’s Al Khaleej Sugar Refinery has signed a deal with the Egyptian government to build a USD 1 billion beet factory which could be fully operational by February 2021. The 77,000ha complex will eventually have the capacity to produce up to 900,000mt of sugar from locally grown beet, as well as to grow wheat and corn and refine 900,000mt of raw sugar in the off-season. The aim is to supply the deficit domestic market and to export to other African countries.

Olam is building a cocoa powder manufacturing plant near Chicago which should be operational by the middle of the year. The cocoa for the plant will be sourced from Africa, Asia and South America, although Cargill pointed out West Africa is becoming  an increasingly big supplier to the cocoa world market, mainly because farmers elsewhere are switching to other crops.

However, a representative of the Ghana Cocoa Board complained that global cocoa prices had collapsed from USD 3,100/mt to USD 1,800/mt in less than a year, and that this was hurting producers. To try and boost the domestic industry, Ghana’s Cocoa Processing Company is looking at setting up a cocoa manufacturing group in the country so that it can process the local raw cocoa beans for the domestic market.

The pace at which cocoa plantations have spread in the region has attracted the attention of environmentalists, especially in Ivory Coast where plantations are causing deforestation. Cargill was one of the global buyers which, last November, committed to sourcing zero cocoa from newly deforested land by 2030.

Following the likes of Cargill and Wilmar, and amid a consumer backlash, Nestle has decided to stop sourcing palm oil from Guatemalan producer REPSA. Nestle said the producer has failed to implement its action plan to deal with allegations that it was violating workers’ rights and hurting the environment. Nestle has also stopped buying palm oil from the IOI Group following it’s suspension from the Roundtable on Sustainable Palm Oil (RSPO).

Meanwhile, Cargill is working on reducing maritime pollution. The company has tied up with four NGOs to help improve sustainability and accountability in the shipping industry.

Mars wants to increase its scientific transparency by publishing research standards and disclosing sponsorships. Its public affairs vice-president said the goal is to avoid linking research funds to defined outcomes, and to attempt to regain consumers’ trust.

New research found that 50% of the UK’s food consumption is now “ultra-processed,” making the country the biggest processed food consumer in Europe. Germany followed closely with over 46% while France has just 14% of processed food consumption.

Finally, shoppers in the UK spent GBP 8.6 billion (USD 12.1 billion) to buy their groceries online last year, up from GBP 8.1 billion (USD 11.4 billion) the previous year. They expect their food to be delivered faster and faster. An article written by the BBC argues that “Time wars really are the new price wars.” More outlets, including Amazon, offer to deliver groceries within the same day, and in some cases within an hour. However, this is coming at a high cost, both financial and environmental, due to the additional packaging required.

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Commodity Conversations Weekly Press Summary

Coffee company Keurig Green Mountain, owned by JAB Holding, has purchased soft drinks manufacturer Dr Pepper Snapple for USD 21 billion. Analysts said the move came as a surprise, given that consumers seem to be moving away from sugary drinks. The group has made USD 58 billion worth of acquisitions over the last six years.  Bloomberg suggested that one of the reasons the coffee company is so successful is because it pays its suppliers  almost one year after purchasing beans, a move that cuts out trade houses and improves cash flow.

Bunge has bought two US-based corn flour mills valued at USD 75 million from Mexican corn miller Grupo Minsa. An official said the move would boost its Food & Ingredients business and help grow the company in other regions. However, market commentators argued the strategy behind the acquisition could be linked to the recent ADM takeover bid.

In the  soybean market Brazil is taking an increasing share of the Chinese import market. Customs data showed that 57% of Chinese soybean imports came from Brazil last year, up from 35% 10 years ago while US origin dropped to 31% from 38% in the period. This is partly because US farmers prefer high-yielding varieties which have lower protein levels while Chinese buyers want protein to feed their livestock. US soybean exports to China are expected to struggle further after the Chinese government announced last week tougher sanctions for importers who don’t follow the rules on GMO crops.

Canada has been exporting more barley to China, taking market share from Australia. Australia’s barley harvest was affected by a drought this year, but more farmers could switch to growing the crop instead of wheat. While demand for Australian wheat has been affected by competition from the Black Sea, world barley prices are now on par with milling wheat prices, compared to a 10-12% discount just a year ago. China’s barley needs should continue growing fast to feed livestock, as the government is encouraging corn to be used for its ethanol.

To become more competitive on the world market, Canada is accelerating the building of a grain terminal at Port Metro Vancouver in the hope to have it opened in 2019. This is the port’s first new grain terminal in 50 years.

The Russian government, meanwhile, said it wants to develop flour production capacity to help absorb the bumper wheat crop and create value addition. The agriculture minister wants the country to continue being a significant wheat producer as well as to encourage a shift in domestic consumption towards higher quality wheat.

Cargill is looking to hire data scientists to build an artificial intelligence that can use the company’s data to boost profits. An official said they hoped machine learning would help reduce human error and make better decisions. Cargill’s decision to take a minority stake in Cainthus is another sign that advanced technology is at the centre’s of the group’s strategy. The Irish startup has developed a facial recognition technology for cows to improve farm efficiency and help the animal’s well being.

This week, apart from announcing a new potato starch production line in Denmark with its partner AKV Langholt, and unveiling its first fish feed plant in India, Cargill has also said it is investing USD 25 million in Puris Proteins, a plant-based food manufacturer and North America’s biggest producer of pea protein. Cargill said Puris will help them meet the world’s growing protein demand whilst keeping in mind shifting consumer concerns, or what it calls being ‘label-friendly’.

Separately, Cargill is also working on reducing waste. The company said it will be giving USD 1.5 million to Brazilian non-profit organisation Gastromotiva whose focus is to help the poor and marginalised while reducing food waste through things like vocational training. This is part of what has been called the Social Gastronomy Movement.  

ADM, meanwhile, opened a state-of-the-art centre in Singapore to develop new flavours and ingredients for the health-conscious Southeast Asian customers. Similarly, a bakery innovation centre was opened in Kentucky, USA, in a bid to meet growing demand for vegetable-based, non-GMO and organic options in the fats and oils arena.

With the aim of developing a more sustainable palm oil supply chain, Unilever has joined up with PT Perkebunan Nusantara (PTPN) to help Indonesian mills and farmers manufacture palm oil in line with zero deforestation norms. It will provide resources, funds, and technical assistance. Unilever also announced support for the Cerrado Manifesto which aims to stop deforestation of the Brazilian region. Efforts are paying off – a recent report by CDP and McKinsey found that Unilever was among the companies with the greenest supply chain.

In India, meanwhile, Unilever will invest USD 3 million in grocery delivery start-up Milkbasket.

It the UK, Nestle will launch a premium chocolate bar which is already present in other European countries, moving into the gourmet market and rivalling Lindt. “Premium chocolate is one of the fastest growing areas in confectionery,” the company said. Separately, Nestle Waters North America announced it was investing in its spring and sparkling water portfolio, adding ten new flavours, as well as new packaging designs.

Coca-Cola announced it would launch three new drink brands before the UK sugar tax is rolled out on April 1. The tax, combined with slow sales, have put pressure on the group which plans to close a UK factory and distribution centre to reduce costs and boost efficiency. Britvic is going through a similar process and will close its Norwich factory.

Another unintended repercussion of the war on sugar has been a tequila shortage. Demand for agave, which is also used as an alternative sweetener, has been growing. The price has skyrocketed as a result. This should boost planting, but Reuters reports it could take as long as 2020 for there to be sufficient supply.

Sugar is not the only one to be struggling with bad press. Coffee shops in California could be required by law to warn customers of the risks linking coffee and cancer. Some argue that exposure to acrylamide, which appears during the roasting process, could be a source of cancer.  

While more brands are voicing their commitment to becoming healthier and more sustainable, a report by Kin&Co warned that too many companies are  announcing intentions before implementation, hurting the brand image. An example could be the public outcry that followed when a customer complained that a UK Tesco store did not allow him to use his own container at the deli counter. In its defence, Tesco said it would work to reduce plastic packing, but not at the cost of hygiene.

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Commodity Conversations Weekly Press Summary


This week’s big news was ADM making a takeover bid for Bunge. Analysts argued that  not much is expected to happen in the near term as Bunge will want to keep its options open. In addition, a deal would likely face challenges in terms of regulatory approval. It does make people wonder, however, whether ADM has changed strategy since its announcement three months ago that it would reduce capital spending on oilseed crushing. (You can see Commodity Conversations’ take of the story here.)

Credit Suisse says Glencore could make a more formal offer for Bunge after the latter’s results on February 1. Bunge is expected to reach or even exceed the goal of saving USD 100 million in 2018 as part of its USD 250 million cost-cutting plan, although this will not be enough to offset the low margins and weak environment. The bank predicted below-normal margins for Bunge and ADM in 2018, partly because of competition from Argentine exports and delayed pricing by farmers.

Meanwhile, ADM announced this week a partnership with China-based Qingdao Vland Biotech to develop and commercialise feed enzymes for animals.

The world of GMO soybean is about to get crowded. BASF SE and DowDuPont are hoping to take advantage of Monsanto’s struggles with its Roundup Ready seeds where accusations related to drifting dicamba have lead to many lawsuits and restrictions in several US states. 

Monsanto is still trying to solve antitrust issues so that it can be bought by Bayer AG. It is also facing issues in Brazil where the Association of Soya and Maize Producers of the State of Mato Grosso (Aprosoja) asked the government back in November to void one of its soybean patents.

Louis Dreyfus concluded the first agricultural commodity trade using blockchain technology in December when it sold a US soybean shipment to China’s Shandong Bohi Industry. Dreyfus said the process involved digitised documents, which reduced processing time by a fifth while also reducing the risk of fraud and human errors. However, the group’s Global Head of Trade Operations said there was still a long way to go before the technology could be really scaled up. Until then, Dreyfus is likely to use a hybrid model.

Food industrials have been talking about their commitment to sustainability and the environment. Unilever has called on other stakeholders in the consumer goods industry to adopt 100% reusable plastic packing by 2025, in line with its own goals, to reduce plastic waste in the ocean. Similarly, Coca-Cola announced it is targeting 100% recyclable packaging by 2030 and will recycle one bottle for every one it sells. The group has already reached the milestone of replenishing 100% of the water it uses in final products, five years ahead of target. Both Coca-Cola and Unilever will be using more plant-based resins to replace plastic.

In the same vein, Budweiser beers in the US will soon unveil a new packaging to show consumers the beers are now being made using 100% renewable electricity.

Cargill has announced that its plant in Germany will shift from making corn-based starch and sweeteners to producing advanced biofuel and other food-based products from wheat, including starch that could be used for packaging. The transition, which is expected by 2020, comes at a time when the EU is targeting all plastic packaging to be recyclable by 2030. You can get more information on the EU’s Plastic Strategy here.

Cargill, along with Arabian Agricultural Services Company, unveiled a new corn mill in Saudi Arabia which will be run by their joint venture, the Middle East Food Solutions Company (MEFSCO). The new mill will increase MEFSCO’s glucose and starch production capacity by 100%, and total production volume by three times as well, as adding high-fructose corn syrup to its portfolio.

Cargill sees Asia playing an important role in its quest to feed the world in a safe and sustainable way. Its Asia Pacific CEO said the company is planning a totally transparent and sustainable supply chain for palm oil by 2020. As part of its transparency efforts, the group will not only make public its plans and progress reports but also acknowledge forest fires in Indonesia and put hotspots online.

Meanwhile, more and more people are putting butter in their coffee, a trend that seems to be particularly popular in the Silicon Valley. Nestle is jumping on the trend and will introduce ketogenic creamer brand Know Brainer as a part of an accelerator programme. The  company is using consumer and market research data to develop a brain-boosting butter coffee product which will be unveiled in March 2018.

Nestlé also announced it was moving its chocolate research centre from Switzerland to England. We may see more changes within Nestle given that hedge fund Third Point, which owns 1.25% stake in Nestle, has urged the company to divest underperforming businesses and evaluate its 23% holding in L’Oreal.

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Commodity Conversations Weekly Press Summary

COFCO is planning to move ahead to gain market share from rival trading firms, a source close to the company confirmed. This echoes an earlier statement saying the company was looking to partner with overseas players, and not limit itself to being a procurement platform for China. As part of the recent team changes, COFCO hired ADM’s ex-manager to head its APAC division. In Brazil, it is reportedly looking at taking Cargill’s shares in the Sao Paulo Cevasa sugar mill.

However, an American agricultural economist argued that COFCO would not manage to win much more market share unless it bought into one of the main agricultural trading houses. An ex-employee added that its government mindset would be a challenge, as well as the wide cultural differences within the group as a result of past acquisitions.

Regardless, China’s appetite for commodities is only expected to grow. In 2017 it became the world’s first oil importer, overtaking the US. Soybean imports, meanwhile, increased 14% on year to reach a new record, and should continue to grow in 2018.

The USDA has ask Congress to accelerate efforts to correct a provision in the Tax Cuts and Jobs Act which gives tax benefits to farmers selling crops to cooperatives instead of private traders. A USDA statement on January 12 stressed the tax benefits for farmers needs to be retained, but other industry participants must not be disadvantaged.

The US is increasingly seen as about to withdraw from NAFTA, according to two Canadian government sources. Similarly, BMI’s Fitch Group pegged the probability of a US withdrawal at 30%, mainly because the US president can take this decision unilaterally. However, the President recently said he might consider extending the deadline for negotiations.

The UN’s FAO index showed that food prices fell in December, thanks to high supplies of sugar, wheat and dairy products among others. Similarly, the Bloomberg agriculture sub-index of futures contracts hit its lowest ever level in December. Even so, the FAO index showed that food prices in 2017 were the highest since 2014, but still 24% cheaper than 2011.

In the US, corn growers who had hoped to increase their revenues by cultivating white corn, usually used for food products, are being forced to sell it at a loss to ethanol and animal feed producers because of a surplus and an eroding physical premium. The premium is expected to remain low in 2018, as South Africa recovers from drought and starts exporting white corn again.

Despite the country’s grain glut, Russia’s agriculture minister said this week the government will only buy grains through its State Intervention Fund as a last resort. He argued that state intervention at the moment would be ‘harmful.’ Last month, the government decided to give USD 34 million in cash subsidies to the railway network to move grains from isolated areas to ports in a bid to boost exports. However, a shortage of wagons is still a problem.

Hedge funds saw on average a return of 8.5% return in 2017, the highest since 2013. FIR figures show this was mainly thanks to good performance of investments in equities. Confidence in hedge funds seems to be returning slowly, with an estimated USD 2.9 billion fresh capital injected in Jan-Oct 2017, compared to an exodus of USD 70 billion the previous year. The other good news is that HSBC revealed three out of the five best performing hedge funds in 2017 were human – as opposed to computer – driven.

In a bid to reduce exposure to macro risks, more hedge funds are looking into investing in so-called ‘exotic’ segments such as ethanol, rough rice or even cheese. These assets are viewed as giving higher yields. For instance, the Florin Court Capital fund said it logged a 7.6% profit after deciding to switch its focus completely to such non-traditional assets.

In the UK, Britvic will be shedding 20 billion calories from its drinks after reducing added sugar significantly ahead of a sugar tax debut in April. The move comes under the group’s new health and sustainability programme which also includes reducing plastic waste in a bid to become waste-free by 2020. It is trying to make bottles from sustainable wood fibres, among other things.

In a similar vein, Cargill has started producing and selling food-grade potassium chloride, a salt-alternative, at a new production facility which is part of its existing New York salt plant. The move responds to the growing consumer concern about eating more healthily, and aims to strengthen the group’s higher margin ingredients portfolio.

After much speculation, Nestle is officially selling its US confectionary arm to Ferrero for USD 2.8 billion. Nestle also sold its Australian chocolate brand Violet Crumble last week to a local confectioner. While the company intends to keep its non-US confectionery business such as KitKat, the sale will allow investing in healthier segments. The CEO said they are looking at pet care, water and vitamins. It is hoping to buy German drugmaker Merck, having bought vitamin maker Atrium Innovations last month for USD 2.3 billion. However, analysts at Reuters pointed out that, at an estimated USD 5 billion, Merck would only give a 4% return on investment.

More companies dealing and promoting urban farming are popping up, at a time when an increasing number of people are living in so-called food deserts. Futurism reports that thanks to the high level of technology required, vertical farming and urban agriculture tend to waste much less than traditional farming. While this could be a solution to help feed the growing global population, experts argue that crops such as grains are unlikely to ever be grown indoors.

Maersk has partnered with IBM to manage its large shipping network using blockchain. They are building a platform that can be used by all those involved in shipping. The technology – known to be well adapted to wide networks with multiple participants – will improve transparency by creating records that can’t be altered.

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Commodity Conversations Weekly Press Summary

Some pension fund managers are disappointed with the returns from commodities, especially given the equities market are going through a bull run. For one, Fidelity Investments Commodity Strategy Fund has lost 38% or USD 3.26 billion since 2012 from its investments in futures contracts as energy, gold and silver prices dropped and sugar and coffee supplies increased. The fund, however, said it was sticking with the commodity strategy as its managers take a long-term view. It has already reduced the share of commodities in its Freedom Funds to from USD 12 billion to USD 4 billion, or about 2% of net assets.

The US grains market has been through a tough year. Ethanol manufacturers and private grain handlers are now worried that the new tax law giving farmers a 20% deduction on grains sold to cooperatives will drive them out of the market. While Cargill and ADM said they were still evaluating the provision, many farmers are already exploring ways to sell grains kept at private elevators to cooperatives.

Meanwhile, cocoa traders are concerned about an impending crisis in Ivory Coast, where the Coffee and Cocoa Council (CCC) has reportedly resold some 100,000mt of cocoa export contracts that were going to be defaulted on. Because of falling prices, exporters have been struggling to get the financing to buy the beans for their export commitments. Last year, already, the CCC lost some USD 355 million because it had to resell cocoa at a loss.

On the other hand, the NAFTA trade negotiations could get a big boost from recent figures which showed total trade between the US and Mexico in Jan-Nov 2017 gained 6.4% and reached USD 512.2 billion. Mexico reported a surplus of USD 65.68 billion, the highest since 2007. Analysts said this was a sign that the private sector of both nations would be able to convince the White House to continue the NAFTA program, although the growing surplus in favour of Mexico could add to tensions.

Talking of revisiting trade arrangements, the UK government is likely to pay EU-like farm subsidies for five years up to 2024 during the transition period when Britain exits the bloc in March 2019. British farmers get about USD 4.06 billion in subsidies as a part of EU’s Common Agricultural Policy, and the government aims to match this amount until it comes up with a new system.

Sources say Italy-based Ferrero could be buying Nestle’s US chocolate business as early as this week, paying as much as USD 2.8 billion and outbidding rival Hershey. This would follow another acquisition – that of Ferrara Candy back in December – as Ferrero tries to gain more US market share while Nestle focuses on healthier segments. Another European group to eye the US market is French dairy company Lactalis which will buy US-based Siggi’s. Siggi’s manufactures Icelandic style yogurts, reportedly based on a recipe prepared by the founder’s mother.

Still in the US, Hershey and Cargill have quit the Grocery Manufacturers Association, joining Campbell Soup, Dean Foods, Mars, Nestle, Tyson Foods and Unilever who previously left the association. While none of the companies gave a clear cause for leaving, many of them wanted the lobby group to change its stance on a host of issues including GMO labelling.

In an interesting twist, Japan’s government has designated Coca-Cola Plus as a “Foods for Specified Health Uses.” Also known as the forshu stamp, consumers widely view the endorsement as a sign the product is healthy. The drink, recognisable by its while label, contains indigestible dextrin which acts as a laxative. Two other sodas, Kirin Mets Cola and Pepsi Special, also received the government’s health seal of approval.

China seems to be tightening its grip on food safety. The government has removed from stores 1,400 baby formula products which were not registered with the Food and Drug Administration. The move will open up the country’s USD 20 billion baby formula market to other players, a market which is expected to grow 5% annually as a result of the easing of the one-child policy.

Scientists may have found a cause behind the declining honey bee population. A recent study showed that honey bees are attracted to some types of fungicides, such as the herbicide glyphosate. The University of Illinois explained that this was likely leading to increasing levels of fungicide contamination in hives.

The UK’s Prime Minister has committed to an end to plastic waste by 2025. The plan would extend the charge on plastic bags to more shops as well as tax things like takeaway wrappers. A latte levy on disposable coffee cups and a ban from 2023 if these cups are not recycled were also proposed to try to reduce the 2.5 billion disposable coffee cups used annually. However, several environmental groups said the plan would need to be legally enforceable to have any impact.  

Olam‘s CEO has taken charge as the chairman of the World Business Council for Sustainable Development. The co-founder of Olam International is the first person from the agri sector as well as the first Asia-based and Asian CEO to head the council.

Finally, the CME Group, which owns CBOT and Chicago Mercantile Exchange, has allowed block trading in all its agricultural markets as of January 8. These privately negotiated deals are permitted in its other markets such as Black Sea wheat and Eurodollars. Futures International explained the company was trying to create more liquidity in deferred futures spreads and create some transparency. However, the National Grain and Feed Association complained block trading will decrease transparency by taking business out of the public marketplace.

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