Commodity Conversations Weekly Press Summary

Soybean and corn farmers in the US could be looking at a difficult year ahead. A recent study showed that average 2018 returns should turn out higher than the previous year, as excellent yields and early hedging mitigated the effects of the escalating trade war with China. However, farmers will likely bear the brunt of the trade war in 2019 with a forecast for negative margins if prices stay where they are. Brazil has benefitted, on the other hand, with soybean exports surging 23% in 2018, mainly due to demand from China. But corn exports dropped 18% because of the higher logistics costs as a result of the minimum truck rates implemented last year.

These high trucking rates are pushing Cargill, Bunge and ADM to look into buying their own trucks although they said they will wait until a decision from the Supreme Court in the hope the minimum rates are overturned. If the decision takes too long, Cargill said it would go ahead and get its own fleet, while other Brazilian giants, such as Amaggi, Coamo and meat producer JBS have already bought trucks. However, there could be a limit in terms of the production of trucks, and logistics experts pointed out that these fleets were mainly intended for emergencies and not to replace outsourcing. Truck logistics is a completely different business with significant operational and labour costs, an expert warned.

Another conflict taking a toll is that with Iran. Even though the sanctions don’t apply to food, Cargill, as well as Bunge, are among the trade houses that have halted exports to Iran amid payment difficulties. The trading groups used to be able to avoid US sanctions by using smaller banks – mostly based in the EU – but an Iranian official explained that these banks have closed down or have stopped dealing with the country under pressure from the US. Some 16 vessels are reportedly stuck at port unable to offload because of payment issues.

Separately, Cargill announced it would sell its global malt business to the French cooperative Axereal. The unit is composed of 15 factories in four continents. And COFCO has joined a venture announced in October by ADM, Bunge, Cargill and Louis Dreyfus which aims to boost transparency and efficiency through the digitisation of agricultural transactions. The head of COFCO said that one of the goals was to automate execution to reduce costs.

Plant-based meat continues to attract the interest of the world’s largest food makers and distributors as it addresses two key consumer demands: the focus on health and lowering carbon emissions. A senior MacDonald’s executive recognised the value of meat alternatives and revealed that the food-chain – the world’s biggest beef consumer – might look into opportunities in the sector.

Cargill, Tyson Foods and Unilever all recently purchased firms involved in producing plant-based meat. Nestle joined the club this week and announced that it will launch of the Incredible Burger next spring, which is made from soy and wheat protein. The firm hopes to grow its vegan business to USD 1 billion within 10 years.

Meanwhile, the Impossible Burger, made by Impossible Foods, is already sold at 5,000 restaurants in the US. But the firm now faces another hurdle: the FDA said that in its uncooked state, the soy leghemoglobin used to give the burger a meat-like colour and texture would count as a food colouring. Under US law,  additives used for colour fall under much stricter norms, mostly because food makers have previously been found to use unsafe products to change colours. Nonetheless, Impossible Foods is still optimistic it will start selling the burger in stores in 2019.

Dairy products represent the next opportunity to switch to plant-based ingredients, and Nestle also announced plans to release a spirulina algae latte and a drink made from walnuts and blueberries. Nonetheless, recent studies reveal that not all plants are equal in the consumer’s eye, as sales of soy-based drinks have been dropping, while oat-based drinks have seen significant increases. Firms are also responding to this change, with Pepsi announcing the release of a Quaker Oat Beverage and Danone announcing three Oat Yeah drinks.

Producers are also responding to another growing consumer demand: cruelty-free products.  No-kill eggs, for instance, were recently introduced in Germany. Under a newly developed process, eggs are scanned just a few days after being fertilised to determine the chick’s sex so that males can be discarded before they hatch. And the team behind the eggs seem to enjoy a good pun – they called the scanning method “Seleggt” and labeled the no-kill eggs “Respeggt”.

This summary was produced by ECRUU

 

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Commodity Conversations Weekly Press Summary

A former executive from Blackstone has joined Louis Dreyfus as the head of food innovation and downstream strategy, a new role that was created as part of the group’s strategy to reduce its dependence on sourcing and logistics and expand towards food processing and ingredients. The CEO said that Louis Dreyfus will be focusing on the fast-growing region of Asia, especially when it comes to investing into processing, and that they would also be investing in startups to find the next generation of protein. In a rare interview, the group’s chairperson said the plan was for the company to become a diversified food and nutrition company, in addition to trading, and that she would consider taking on partners or even doing an IPO if it made sense.

A Bermuda Court last week approved Noble’s restructuring through a local insolvency process which will allow the group to avoid liquidation. During the hearing, company officials said there were no plans to list the new company on an exchange.

Cargill announced the launch of “Protect our Planet”, a new sustainability program which aims to rid all of its cocoa supply chain of deforestation by 2030. The sustainability project will include Brazil, Indonesia, Cameroon, Ivory Coast and Ghana, Cargill said, adding that its indirect supply chain would also come under the scope of its Cocoa Promise programme. In Ghana, where the company works closely with the government to improve sustainability in the cocoa sector, Cargill achieved 100% traceability. And in the Ivory Coast, Cargill has managed to map 80,000 of the 120,000 farms involved in its direct supply chain. Similarly, the Swiss chocolate producer Barry Callebaut this year bought 44% of its cocoa beans and 44% of its non-cocoa agricultural raw materials through sustainability programmes, an increase from 36% last year and close to its 50% target for next year. In addition, 12% of its direct suppliers have a system to monitor child labour.

Nestle Waters North America is planning to use at least 50% recycled plastic in its US water bottles by 2025. The company invested USD 6 million in the Closed Loop Fund to improve recycling programs, including a USD 1.5 million investment in an integrated manufacturer of post-consumer recycled PET. Similarly, Coca-Cola announced it would be financing Dutch recycling company Ioniqa Technologies to help recycle PET plastics. Coca-Cola is hoping that this will help achieve its goal of recycling half of its packaging materials by 2030. Coca-Cola is the world’s worst plastic polluter, according to research by the “Break Free From Plastic” movement which looked at almost 190,000 pieces of plastics trash collected in 42 countries between August and September.

Several EU countries have been issuing waivers to the cover ban on the use of neonicotinoids (a class of insecticide) following pressure from farmers, especially sugar beet farmers, who are saying there is currently no alternative. The ban was passed in April this year in a bid to protect wild and domestic bees. A new study in the US, however, suggests that research and policy are too focused on protecting the honey bee at the detriment of other local wild bees. The paper argued that scientists know very little about wild bees in the US – of which there are an estimated 4,000 species – and therefore do not know how to protect them. The study points out the inherent risks of relying on a single type of bee.

Another study, meanwhile, argued that the negative image around GMO technology is slowing down efforts to improve food security in Africa. The study looked at one type of GM corn and found that it could help farmers in African countries which face pests, especially the fall armyworm that is devastating crops across the continent. Similarly, a scientist in Europe who is trying to edit the genes of wheat so that it doesn’t produce carcinogenic chemicals when it is cooked said that policy in the European Union is holding back his progress. He explained that gene editing was subject to the same rules as gene modification which made it almost impossible to commercialise.

After years of trial and error, the company JUST has launched Just Egg, an egg substitute made from mung beans that is said to taste exactly like eggs, along with all the properties – such as foaming, gelation etc – of its animal counterpart. According to an analysis by the New Food Economy, this revolutionary substitute, combined with California’s recently introduced ‘Proposition 12’ which bans the sale of eggs from chicken in cages from 2021, could mark the beginning of the end of the industrial egg market in the US. Just Egg is also expected to disrupt the 430 billion egg per year market in China, where it will launch in early 2019. And to take the technology one step further, JUST announced it will be making cell-based Wagyu beef. Bon appetit!

Commodity Conversations would like to wish our readers a very Merry Christmas and Happy New Year. Our weekly press summary will resume on January 3.

This summary was produced by ECRUU

Commodity Conversations Weekly Press Summary

Bunge announced that the CEO will step down and that the board will start the process of finding a new one. The news comes a few weeks after two shareholders, Continental Grain and DE Shaw & Co, successfully lobbied to add four new members to the board, while another shareholder, Capital Innovations, said that the CEO had been “too comfortable” with the current situation at Bunge. A source also told Bloomberg that Bunge would now be open to revisiting takeover bids by Glencore and ADM.

Authorities in Singapore have blocked Noble’s restructuring attempt by not allowing it to relist as New Noble amid an ongoing probe. In response, the group decided to restructure through a Bermudan court and has applied for a hearing on December 14. Noble said that the only other option would be to file for insolvency. Singapore granted the group a second deadline extension and it will now have until December 31 to complete the process.

Norway’s government approved a new comprehensive policy to exclude feedstocks with a high deforestation risk from its biofuel supply by 2020. The country’s palm oil consumption reached a record level last year, while a Norwegian report estimated that current biofuels policies would increase the world palm oil demand six-fold over the next ten years.

A few days after the news, Wilmar published a joint-statement outlining a new effort to completely remove deforestation from its supply chain by monitoring suppliers with satellites and immediately excluding any source found to be causing deforestation. In response, Greenpeace said it would suspend its campaign against the firm, adding that satellite imaging could prove a breakthrough in solving the problem.

The head of the WTO said that world trade was going through its worst crisis since 1947 mainly as a result of the US-China trade war. The impact of the crisis is being felt very differently across the supply chain, with Brazilian soybean producers reaping significant benefits, with exports to China up 137% in the year up to November, while Brazilian meat producers have had to pay more for feed. But now, South American grain producers are concerned that they might lose their new markets amid talks of a truce between the US and China. Although flows won’t immediately change as contracts have been signed for the next few months, experts say that the region will have to implement long-term reforms to make its agriculture industry more efficient and diversified. In Brazil, for example, addressing tensions with truckers will be one of the first challenges faced by the new government.

While this is going on, China is trialling new insurance policies to help shield farmers from fluctuating crop prices. The Dalian and Zhengzhou exchanges are piloting an insurance-plus-future insurance program for corn, soybeans, cotton and white sugar contracts. Insurance companies guarantee farmers an income if prices fall below a certain threshold by reinsuring the crop through over-the-counter options.

Talking of grains, in the US a judge this week approved a USD 1.5 billion settlement plan proposed by Syngenta to compensate US growers and ethanol plants for the losses incurred when their corn was rejected by Chinese customs. This puts an end to a long-standing dispute in which Syngenta was accused of distributing a corn variety, Agrisure Viptera, before the Chinese government had approved it.

A new report by World Resources Institute said that the food industry’s ultimate challenge in the coming decades will be to produce the additional crops needed to feed a growing population while limiting the amount of land cleared to a minimum in order to not jeopardise the goal of keeping global warming below 2 degrees. Increasing productivity through a significant boost in research funding is the most pressing goal, the report suggests, while also highlighting the need for strong environmental policies and changing consumer habits, such as switching from eating beef to chicken.

Have you ever heard that carrots improve your vision? Or that you should wait a few hours if you want to swim after a meal? Or that chewing-gum will stay in your stomach for seven years if you swallow it? Some curious food myths seem to have spread throughout the world, as this list of common or weird food legends compiled by Atlas Obscura revealed.

This summary was produced by ECRUU

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Commodity Conversations Weekly Press Summary

Cargill is consolidating its position in the Colombian protein business by taking over Campollo, one of the largest producers of chicken and protein products in the country. This should help Cargill expand in Latin America. The company is investing an additional USD 4.44 million in the Philippines to increase its sales of chicken and pork, among other segments. The money will also be used to strengthen Cargill Joy Poultry Meats Production, a joint venture with Jollibee Foods. In India, Cargill is testing a digital data collection programme that calculates livestock as well as agricultural input to analyse performance.

ADM is preparing for the launch of its processing pea plant in North Dakota, US, due to start operating in the first quarter of 2019. In a recent interview, a company official explained they hoped to attract people who are opting out of consuming soy. ADM’s chief brand officer added that sales of soymilk have declined while demand for other plant-based dairy products is picking up.

Danone is struggling to find buyers for its Earthbound Farm, an organic salads company which it bought in 2016 when it acquired WhiteWave. There are also reports that Campbell is struggling to sell its smoothie company Bolthouse Farms. Both segments are reporting losses and analysts argue that managing fresh food businesses might not make sense for big publicly listed companies. The profitability of fresh food is closely linked to agriculture, something which these groups are less equipped to handle and lack the predictability which investors like.

The Organic Trade Association estimates that the sale of organic foods in the US has doubled in the last 10 years. However, US organic land has only increased by 20% since 2011, representing less than 1% of the country’s farms. As a result, a huge chunk of organic food is imported, especially organic corn for organic meat and dairy. Part of the reason that US farmers are slow to shift is the cost – farms have to go through a 3-year period without chemicals before they can be certified organic. However, companies that sell organic products are stepping in to help farmers during this transitional period. Initiatives include the “certified transitional” label by General Mills for which farmers can get a small premium.

The world’s agriculture system is “broken” and our “food systems are failing us,” according to a study carried out by 130 institutions around the world. The report argues that while agriculture is the world’s biggest source of greenhouse gases, it is also its greatest victim. They forecast that food shortages will become increasingly common as a result of weather disruptions from climate change. Not only that, but our agriculture, while resulting in 1 billion mt of food wasted every year, leaves 820 million people hungry and 2 billion people overweight, according to recent FAO data.

Scientists have noted that food allergies, especially among children, have increased considerably in the last few decades, with an estimated 9% of Australian and 7% of English children affected. While researchers aren’t sure what causes the allergies, these seemed to be linked to the environment as they tend to be more prevalent in cities and in rich countries. They also think that improved hygiene, which results in reduced infections, as well as the lack of vitamin D from insufficient sun exposure, are to blame.

The good news this week came from bee research, as the food industry and scientists join hands to protect our pollinator friends, who are directly responsible for 30% of our food supply. An important breakthrough was reported this week as researchers in Finland developed the first bee vaccine against microbial infections which can be consumed by the queen and passed on to her offsprings. Nonetheless, the most important challenge remains to identify the root cause of the mysterious but prevalent collapse of bee hives, through the development of new laboratory techniques or through the clever use of high tech solutions. Our favourite proposal comes from an entomologist in Tasmania who is equipping bees with tiny RFID backpacks.

RFID backpacks
Image Credit: CSIRO, Dr. Souza: RFID backpacks for bees

This summary was produced by ECRUU

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Commodity Conversations Weekly Press Summary

Civil society’s attacks on agriculture have increased significantly in the last few years, something which has come to be known as “agribashing,” according to a report published on the topic by a French institute. Researchers point out that, in the past, those who attacked the agriculture sector used to be a minority, focused on fighting GMOs. However, the focus has moved from agriculture’s negative impact on the environment to its effect on health – something which seems to stir people much more. The problem has been exacerbated by the fact that the agriculture sector, including farmers as well as the trade, has not been very good at talking with consumers whereas NGOs have. “[Consumers] have a false image of a nourishing and ideal nature that works alone, without human intervention,” one analyst said.

Farmers in France have been particularly vocal in their complaints against attacks on the agriculture sector. This is all the more ironic given that the country is considered to be the most sustainable food-wise in the world. This the second year in a row that France tops the index put together by the Economist Intelligence Unit.

Cargill has gone some way into addressing the issue with its US-based blockchain turkeys project which was successful enough for the company to more than double it in just a year. However, an article in New Food Economy argued that it had limitations in terms of providing consumers with a transparent access to supply chain information. It argued that the company could decide which information to show and not to show, adding that its role in getting the turkey from the farmer to the consumer was not clear. Similarly, the Animal Welfare Institute is suing the USDA on the basis that its “humane” and “sustainable” food label claims should require third-party audits – which is currently not the case. It wants the agency to strengthen the label approval process.

ADM could be on the verge of revolutionising the dairy industry. The group tied up with San Francisco-based startup Perfect Day to commercially sell milk which is not produced from cows but fermented from microorganisms like yeast. It is then manufactured, using a 3D printer, to create proteins. The product is looking to attract consumers of dairy-free products. A study by Mintel shows that that market has increased by 61% since 2013.

In Canada, Cargill sold its grain and crop input assets in Ontario – including the 50% of shares it owned in South West Ag Partners – to the agri-food cooperative La Coop fédérée. Cargill, which still owns an export terminal in Sarnia among other grain assets in the country, will now act as the marketing entity of La Coop fédérée. In Thailand, meanwhile, Cargill invested USD 70 million to upgrade one of its poultry supply chains as well as its aqua feed production plant in the Phetchaburi province.

In the UK, Tesco and the WWF have joined hands for a four-year project in which they aim to cut by half the effect of food items on the environment while ensuring that prices stay affordable. The WWF will help Tesco get rid of products that cause deforestation and help it sell 100% certified responsible seafood. Also in the UK, a number of businesses including Coca-Cola European Partners, Unilever and Danone, have committed to have “net zero emissions” by 2050. This comes at a time when a report by the World Meteorological Organisation showed that the global emission of the three main greenhouse gases, carbon dioxide, methane and nitrous oxide, have all hit a historic high in 2017 and that they show no signs of decreasing.

The UN Food and Agriculture Organization (FAO) renewed its call for governments to work on ending world hunger. Data suggests that in 2017, an estimated 821 million people went hungry, a regression to levels last seen a decade ago. The organisation pointed out that countries with high levels of hunger were also struggling with rising obesity rates. An estimated 2.1 billion people are considered overweight globally.

On a more positive note, a new study found that people have a healthier diet when they eat with their families. This is a good reason to take the time to sit down at dinner, even with a moody teenager!

This summary was produced by ECRUU

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Commodity Conversations Weekly Press Summary

Authorities in Singapore announced that they are launching an investigation into statements by the Noble Group that are suspected to be false and non-compliant between 2012 and 2016. The scale of the investigation is unprecedented which is why the government took so long to respond to claims made by a former employee almost four years ago, although experts note that the investigation could proceed very quickly. The group was reportedly surprised by the timing of the investigation as it was rushing to finalise a USD 3.5 billion debt restructuring deal before a November 27 deadline. Investigators conceded that the probe could delay the plan, which would put the whole proposal at stake and potentially threaten the survival of the group who noted that the only alternative would be to file for insolvency.

The world’s major food companies have been involved in acquisitions worth USD 128.7 billion this year so far and show no signs of slowing down. Sources reported that Mondelez was looking to purchase Australia’s Arnott’s Biscuits and Denmark’s Kelsen Group, both biscuit makers. And four months after announcing that it was planning to sell its international and fresh food segments, Campbell Soup has drawn interest from Pacific Equity Partners and Kraft Heinz in bids that could reach USD 3 billion. Meanwhile, Kraft Heinz said it would sell its malted milk drink segment in India as demand is slowing shifting away from the high-sugar content drink that was originally marketed as a health drink. GlaxoSmithKline (GSK) also said it was selling its malt-drink business in the country, with both Unilever and Nestle reportedly interested in a takeover with bids estimated at USD 3.1-3.5 billion.

India is a key market for Nestle, its CEO told reporters during a roundtable organised this week. He also highlighted that the firm learnt the importance of reacting quickly in the age of social media when the Indian government decided to ban the sales of Maggi Noodles because of concerns that they contained too much lead. The firm was eventually cleared, he noted, although it had to destroyed 30,000mt of noodles and never recovered its market share. Public concern is currently working against Nestle in Michigan, as campaigners criticised a new ad campaign which focuses on the free bottles delivered by Nestle to local residents. Activist highlight that Nestle only pays USD 200/year per plant to extract water in the state, while it was recently allowed to increase its extraction rate from 250gal/min to 400gal/min.

In California, voters overwhelmingly voted in favour of a new law that increases the minimum size of cages used for breeding pigs and calves, ignoring the comments by food producers who warned that prices will increase as a result. California will also ban the sale of products within the state if they do not meet the new standards, which is concerning producers around the country – and around the world – who now face higher costs if they want to compete. To complicate matters further, a study by the USDA, Michigan State and Iowa State showed that larger cages do not necessarily mean healthier animals, as hens were found to be twice as likely to die when given more space than the current convention.

White House policies are also grabbing the attention of major food producers, as Danone, Mars, Nestle and Unilever – all members of the Sustainable Food Policy Alliance (SFPA) – urged the government not to replace the Clean Power Plan with weaker regulation. In their public comments, they argued that, on top of threatening the world’s food supply, climate change was bad for business. Sustainability is one of the three main criteria that is expected to trend in the food industry next year, according to Mintel research. Mintel also noted that consumers are now looking at the entire product lifecycle when assessing sustainability. The other two criteria were health and convenience.

In Europe, a petition with close to 100,000 signatures is urging the European Commission to vote in favour of phasing out biodiesel from palm oil in February 2019. Palm oil could also end up at the center of a battle between two Italian giant competing for chocolate spread supremacy. Barilla is reportedly planning to launch a new spread in January to compete with Ferrero’s Nutella, which currently controls 54% of the global market. Barilla will target Nutella’s use of palm oil and use only sunflower oil, on top of having 10% less sugar and hazelnuts made in Italy.

This summary was produced by ECRUU

Commodity Conversations Weekly Press Summary

Louis Dreyfus announced that their group chairperson, along with her family trust Akira, had secured the USD 900 million needed to buy out the shares of other family members thanks to a loan – the terms were not made public. The plan is for her to take ownership of most of the company to grow it further. She said she was also opened to “strategic partnerships,” which was taken to mean that outside investors would be welcome. In Brazil, Louis Dreyfus’ Biosev sugarcane milling group is looking to sell more mills. Biosev posted a net loss of BRL 156 million (USD 41.53 million) in the quarter ending September, although the CEO is hopeful that sugar and ethanol prices will recover next year.

Bunge and Atvos (previously known as Odebrecht Agroindustrial) are two of the groups investing in boosting sugarcane output in Brazil. Bunge built a seedlings centre at its Sao Paulo sugar mill which will double production by 2020 and serve its eight plants. Similarly, Atvos said it was prioritising investment in cane fields and spending at least BRL 600-700 million (USD 171 million) annually in a bid to increase capacity utilisation. The group continues to look for an outside investor and could consider an IPO, the CEO said.

Separately, the Brazilian president-elect clarified that, unlike what had been reported earlier, the agriculture ministry and the environment ministry will not be merged. This came to the relief of environmentalists who had opposed the move. The Brazilian farm sector is also set to benefit from deals signed this week between Cargill, Bunge and ADM and China’s government to export soybean sourced from South America, a sign that China is willing to go pretty far to avoid US origin amid the escalating trade war.

In the US, Cargill is scaling up its blockchain turkey traceability program to cover 200,000 turkeys in 30 states this Thanksgiving, up from 60,000 last year. Interestingly, and unlike many such moves that tend to be consumer-driven, the company said the push came from farmers. Cargill has also tied up with TGI Fridays for its new retail frozen beef patties. It explained that while other groups were trying to create a space for themselves in the retail market, consumers tend to prefer brands they already recognise.

Wilmar International said its net profit rose by 11% on year to USD 407 million in the third quarter (Jul-Sep) on the back of a better performance in the sugar, grains and oilseeds segments. Analysts pointed out that palm oil was a key contributor to the better performance as the segment registered a 93% increase in pre-tax earnings.

In a new campaign against deforestation rolled out this week, Greenpeace put pressure on Mondelez to stop procuring palm oil from suppliers linked to deforestation. The organisation said that, as of 2017, 22 out of the 25 palm oil producers identified as the least sustainable were still supplying the company despite its commitment to eliminate deforestation by 2020. Mondelez reacted to the campaign by saying it had dropped 12 suppliers. It also called on producers to accelerate efforts to improve traceability and transparency in the supply chain.

Greenpeace was also involved in an ad by UK’s Iceland Foods which has gone viral after it was banned from airing on television. The Christmas ad was found to breach political advertising rules because it is about the environment and was originally made by the NGO but it has already been viewed 13 million times on Youtube. Also, close to 700,000 people have signed a petition asking for the ban to be lifted. You can watch it here.

Nestle, which aims to source all of its palm oil sustainably by 2020, teamed up with palm oil producer Sime Darby Plantation to launch a helpline for workers to report issues around labour rights. This was on the recommendation of a report by the Fair Labor Association.

Chocolate producer Lindt & Sprungli also found itself on the receiving end of complaints by environmental and consumer groups – as well as a petition with 70,000 signatures – accusing it of being insufficiently committed to ending deforestation in its cocoa supply chain. As a result, the company published a statement this week saying it was working on implementing an action plan to make sure its supply chain will be free from deforestation by 2025.

The CEO of Danone North America said that consumers’ lack of trust in food companies, especially the major ones, was only growing. He complained that “Big Food” was seen at “Big Pharma” due in big part to scandals around pesticides and GMOs. He hoped that the company’s motto, “One Planet, One Health,” and the recent acquisitions of organic products companies will help people view the group as a “good food company.”

This summary was produced by ECRUU

Commodity Conversations Weekly Press Summary

Last week saw the resurgence of an old but familiar player in commodity trading as the chairman of Continental Grain Co and the descendant of Simon Fribourg, who funded the agricultural giant in 1813, was given a position on Bunge’s board. Continental Grain Co revealed in March that it held less than a 1% stake in Bunge but it has successfully lobbied for the change along with another stakeholder, the hedge fund DE Shaw & Co, who will also be added to the board.
Furthermore, the head of Continental Grain Co will chair a new strategic review that will seek to turn around Bunge’s declining returns, as the firm lowered its projected operating profit for the year to USD 1.2 billion. Commentators noted that this could signal a potential takeover, although others noted that the Fribourgs operate on a longer investment schedule and might seek to sell some assets while strengthening other operations.

Nonetheless, Bunge surprised analysts when it reported strong quarterly results, at USD 365 million, compared to USD 92 million last year. ADM, who was reportedly interested in purchasing Bunge, also reported better than expected quarterly results of USD 536 million, compared to USD 192 million last year. The firm said it had been able to find new markets to compensate for the Chinese tariffs, in part because the demand for US crops was bolstered by droughts in Brazil and Argentina.

While some were hopeful that the US midterm elections could lead to constructive changes, the former White House economic advisor said the success of the Democratic party was unlikely to change the administration’s efforts to curtail China’s trade policies through protectionist measures. Farmers are now bracing for a drawn-out trade dispute, while a recent study estimated that they could potentially lose USD 8 billion in exports because of tariffs, dwarfing the USD 450 million benefit expected from the new trade deal with Canada and Mexico.

The tariffs are also having an unexpected impact on the Canadian lobster industry. American lobster producers lost their access to China when it imposed a 25% duty, but some have been able to export their lobsters to Canada and then to China and Europe in order to avoid paying the tariffs. Unsurprisingly, the Lobster Council of Canada condemned the move, called transshipping, as it is displacing the demand for Canadian lobsters.

The New Food Economy also published this interesting piece which looks into the oversupply of cranberries. The USDA has agreed to destroy 108,800mt of cranberries this year to correct the surplus and avoid a collapse in prices, just as it did with dairy and blueberries.

Meanwhile, the debate surrounding the safety of glyphosate has moved from Californian courts to Germany, where the environment minister said the country hopes to end the use of the pesticide completely at some point in the future. Glyphosate has received EU approval until 2023 and Germany won’t be able to limit its use before then, however. In response, the head of Bayer CropScience said the firm would keep defending the science which suggests that glyphosate is safe. Back in the US, the Bayer AG CEO said the firm will consider settling some of its cases in the country. The number of lawsuits against glyphosate  jumped to 8,700 after a San Francisco court ruled in favour of a plaintiff, but the CEO explained that the firm was well equipped to defend the cases thanks to its experience with lawsuits against some of its pharmaceutical products.

Nearly 200 lawmakers from 80 countries debated on how to control rising healthcare costs caused by unhealthy diets at the first global summit against hunger and malnutrition. The lawmakers were divided over whether taxes on sugary products and banning their advertisement were more effective than education campaigns. Regardless, food and beverage companies are going ahead and doing their thing. For one, Coca-Cola Australia is offering a new zero-sugar product called Coca-Cola Batch Blends containing artificial sweeteners. Through this, the company is committed to cutting sugar across its portfolio by 20% by 2025 in Australia.

While the science and technology behind agriculture keeps evolving, another potentially significant change is happening: women who work in agriculture are no longer considered a “farmer’s wife” but often run entire successful operations. In fact, women farmers, ranchers and agricultural managers were on average paid more than men in 2017, according to the USDA, making it one of the ten disciplines were females outearn males.

Finally this week, the debate around whether non-dairy products, such as almond or soya drinks, should be called milk has gained humourous contribution in this funny video showing a farmer explaining how to “milk” an almond, starting with how to find its tiny udders.

This summary was produced by ECRUU

Commodity Conversations Weekly Press Summary

Louis Dreyfus, Cargill, Bunge and Archer Daniels Midland (ADM) announced they will be working together as part of an industry-wide collaboration to make agricultural shipping transactions completely standardised and digital. The companies explained that using blockchain technology and artificial intelligence (AI) would significantly reduce costs as well as improve transparency. The process, which has already started in grain and oilseed operations, should gradually be deployed for other commodities.

With this in mind, ADM and Cargill announced a joint venture called Grainbridge, a digital grains marketing platform to help farmers in North America market their grains. Cargill said the platform will be free and will let farmers use technology, such as data analytics, to improve their profitability. The platform is open to other grain companies too which will encourage farmers to use the ADM and Cargill transactions and contracts.

In the US, Cargill announced it developed robots to herd animals at its plants, including cattle and eventually turkeys, in a bid to improve animal welfare as well as to protect workers. The robot was approved by a famous animal behaviourist who said it was “a major innovation in the handling and welfare of farm animals.” The robot doesn’t look much like a human cowboy (you can check it out here) but it will be saying ‘Hey! Hey! Hey!’ to move the cows along. In Europe, Cargill announced it launched its Waxy Corn Promise program, an initiative to help it sustainably source all of its waxy corn – a type of corn used to produce starches.

Separately, Cargill Aqua Nutrition said it would not tolerate soy suppliers who violate its code of conduct, including deforestation. The announcement was made after a WWF report said that soybean demand had turned Brazil’s Cerrado area, one of the world’s most biodiverse places, into the planet’s most endangered region. Environmentalists are concerned the situation is about to get worse if Brazil’s newly elected president goes ahead with his plan to merge the ministries of agriculture and the environment. Similarly, the head of Greenpeace in Argentina said that “Argentina is in a forest emergency.” Nearly 25% of the country’s native forest has been cleared, with a big part going to grow soybean. An EU-based NGO said there was pretty much no traceability of soybean in the country.

Mondelez announced it would extend its Cocoa Life program to Brazil, a cocoa-sourcing sustainability program it already operates in Ghana, Ivory Coast, Indonesia, India and the Dominican Republic. The program will aim to reduce deforestation in the Amazon as well as improve the welfare of farmers through yield improvements, among other things. This comes at a time when IRAdvocates, the human rights advocacy group which is suing Nestle and Cargill for aiding and abetting child slavery in West Africa, said it is planning to attack other chocolate makers, including Mars. IRAdvocates argued that any company sourcing cocoa from the Ivory Coast was complicit in using child labour. Nestle said that the companies that were working the hardest to end child labour were being targeted.

Going back to the WWF report, it also found that the world had lost over half of its invertebrate species between 1970 and 2014 as a result of increasing demand for food, water and energy. The report argued that the risk of water species disappearing was particularly high because of plastic pollution.

Tesco and Nestle announced they joined the Global Ghost Gear Initiative (GGGI), a 91-member initiative which works to eradicate the number of nets and other fishing gear debris in the oceans, estimated to account for 10% of marine debris. Similarly, Danone said that by 2025  100% of its packaging should be ‘circular,’ by which it means recyclable, reusable or compostable, compared to 86% currently.

The concept of ‘circularity’ is also taking hold among those trying to combat food wastage. Researchers from a university in the UK have been looking at ‘circular economic thinking’ from the second world war as an inspiration, such as how to efficiently redistribute unsold food. Further up the supply chain, Maersk announced the second edition of its Food Track program which funds startups that look for technological solutions to the 1.3 billion mt of annual global food wastage.

This summary was produced by ECRUU

Commodity Conversations Weekly Press Summary

Nestle and Unilever both reported strong third-quarter sales this week, helped by a strategy to increase prices, or “premiumisation”, as Nestle calls it. The firms pointed to higher oil prices and a stronger dollar as part of the motivations to increase prices, although Unilever said the move could eventually lead to a slight drop in sales volumes. They both expect overall sales to gain around 3% for the full year. Separately, Unilever dropped a plan to relocate its London HQ to the Netherland after investors opposed the move, although it did not comment on how it now plans to restructure after Brexit.

Nestle was also in the news this week because a federal appeals panel in San Francisco overturned the dismissal of a case brought forward by former child slaves who accused Nestle and Cargill of being complicit in forced labour in cocoa fields in the Ivory Coast. The appeals court said the firms took actions to make sure they would receive cocoa “at a price that would not be obtainable without child slave labour”.

Talking of price, the competitivity of US farmers is being put to the test as the trade war is pushing countries to impose duties on US agricultural products. China, for example, imposed a 70% duty on US pork which is a worrying development as the US National Pork Board says the country is “critical” for the industry to survive. Producers in Spain, Chile and Argentina are all reporting a surge in demand, but some still believe that the US will be able to compete by lowering prices thanks to their high efficiency, large-scale and low feedstock prices.

The situation does not look so promising for dairy producers in New York state who have been dealing with an oversupplied market for years, as demand for milk and Greek yoghurt is seeing a steady decline. Farmers are unlikely to lower production and are pushing to find new markets instead, resulting in a lot of waste. The Dairy Farmers of America cooperative reported that some 65,000mt of milk was dumped on farms in the Northeast as of July this year.

In a hope to remedy the situation, the US Trade Representative office said it will begin new rounds of trade talks with Japan, the EU and the UK, a move an analysis argued was vital for some industries. The US is also eyeing Japan, while the US Grain Council reiterated the importance of new pacts for the agricultural sector.

In Brazil, meanwhile, the head of Cargill said that the country’s biggest agribusiness challenge was the poor logistics infrastructure, adding that the situation was getting worse in part because of the high government-fixed truck rates. However, the National Land Transport Agency conceded that transport fees could be below the official freight table rates if all parties agreed and if it was clearly stated in the contract. The statement was made after they found that a large number of trucks were flouting the rules.

An analysis suggested that ABCD companies would have to spend at least BRL 700 million (USD 190 million) each if they wanted to run their own truck fleets in Brazil, which would end up costing them more than paying the 30% increase in freight rate. Regardless, a big part of the USD 1.4 billion Cargill has invested in Brazil over the last 6 years has been in logistics. On a separate note, the Cargill official said that the company is working on having 50% of its global workforce female by 2030.

Two worrying reports on climate change were published recently, as the International Energy Agency (IEA) said data for the first nine months of the year suggest that global carbon emissions will reach a new record in 2018, while the UN published a report saying that energy consumption needs to change drastically to avoid irreversible damage.

On a brighter note, food firms continue their push to develop cleaner and less polluting food. Applegate Farms, owned by the meat giant Hormel Foods, announced that it was investing in plant-based meat alternatives, while a report estimates that the plant-based market is now worth USD 3.7 billion. Food could also help the environment in another more unusual way: by making cement stronger. The IEA estimates that cement causes 7% of total CO2 emissions, but Britain’s Lancaster University found a way to use carrots to strengthen concrete by 80%, thus reducing the amount of concrete needed. Scottish-based CelluComp mixes in cellulose extracted from carrots, which it could also get from trees or most agricultural waste.

This summary was produced by ECRUU