Media Monitor

The FAO World Food Price Index fell 1.1 per cent in September but remains 5.5 per cent higher than a year ago. Vegetable oil prices led the decline, falling by 6.6 per cent over the month to reach their lowest level since February 2021. Malaysia’s rising palm oil inventories helped drive the fall in veg-oil prices.

However, the US consumer food price index rose 0.8 per cent in September, bringing the 12-month increase to 11.2 per cent. The wider CPI rose 0.4 per cent in September, bringing the 12-month inflation rate to 8.2 per cent.

The number of vessels waiting to sail to or from Ukrainian ports under the UN-backed grain deal reached a record high of 120 at the end of last week due to a shortage of inspectors. Ukraine has shipped more than 6.9 mln mt of grain and oilseeds since the deal came into force on 1st August.

Russia’s renewed bombing campaign drove wheat prices higher early in the week on fears Russia may not continue the deal when it expires in November. Russia’s Geneva UN ambassador added fuel to the fire when he told Reuters on Thursday that Moscow may not renew the agreement unless it addresses its demands on food and fertiliser exports.

Russia is considering abolishing its grain export quota due to a bumper crop. The county’s farmers have already harvested 103 million mt of wheat, up 36 per cent yearly.

China has set its 2023 grain import quota at the same level as last year, with wheat at 9.636 mln mt, corn at 7.2 mln and rice at 5.32 mln. China may import corn from Brazil as early as December to reduce its dependence on the US and replace supplies from Ukraine.

Argentina may tighten restrictions on wheat exports after drought reduced crop estimates from 19 mln mt to 16 mln.

US farmers are planting winter wheat through a third straight year of drought. Weather forecasts suggest dry conditions could stay. A lack of rain and snow has withered summer crops like tomatoes and onions and threatened leafy greens grown in the winter.

Heavy rainfall in India has damaged crops just before harvesting, raising fears that the government may impose additional restrictions on food exports.

A strong US dollar, high commodity prices and rising interest rates are destroying demand for grains and oilseeds in developing countries. Cargill’s head of trading told Bloomberg that, as a result, global trade flows might fall by 5-6 per cent for wheat and 2-3 per cent for corn and soybean meal.

Higher world wheat prices and a weak yen are already encouraging Japan’s food producers to promote domestic consumption of rice flour-based products. Domestic rice consumption has been falling over the years as more Japanese turn to bread and noodles.

Foreign Policy Magazine dedicates its autumn issue to food supply chains, arguing that “the solution to the global food crisis isn’t more food.” The FT also has a long read on the future of farming and regenerative agriculture.

In company news, Bloomberg questions why Cargill is so successful. (Spoiler: it’s private ownership.)

Brokers expect dry bulk freight rates to strengthen slightly into year-end and to weaken in 2023. However, 2023 could see net zero growth in the world’s dry-bulk fleet, while 2024 could see more tonnage exit the fleet than enter. Meanwhile, container rates have fallen to pre-pandemic levels despite operators removing tonnage.

Brazil’s so-called “Ethanol King” is hedging his ethanol investments and has bought a minority share in Vale, the Brazilian mining company. Vale is a major supplier of nickel, a key ingredient in electric-vehicle batteries.

Honeywell International will commercialise technology using ethanol to produce sustainable aviation fuel (SAF). The company says its technology can cut GHG emissions by 80 per cent compared with petroleum-based jet fuel.

In environmental news, US food producers are removing “best before” labels that account for seven per cent of US food waste — or four mln mt annually.

The UK government could lose farm votes if it abandons plans to replace EU land-based subsidies with environment-based ones.

Environmentalists have criticised the UK government over a plan to ban solar panels on farmland. The ban could threaten planned investments of £20 billion.

Even so, pilot projects in Spain show that solar panels can help farmers by creating shade and reducing water loss.

There was good news from India where farmers in Punjab are moving away from burning paddy rice stubble and ploughing it back into the land, where it breaks down and acts as a natural fertiliser.

There was bad news this week for alt-meat producers. A survey of Generation Z – people born after 1996 – found that just 14 per cent said they consume plant-based meat, and 23 per cent of those who do, say they plan to eat less plant-based meat in the future.

The plant-based Beyond Meat company may further reduce staff levels as rising inflation drives consumers toward less-expensive animal proteins.

National Geographic does a deep-dive into the future of alt-meat, asking if it will ever satisfy the US hunger for the real deal.

New Zealand plans to tax agricultural emissions from livestock and introduce an “agricultural emissions-pricing system” in 2025.  The country’s farming federation is “deeply unimpressed

Finally, a Turkish livestock farmer has fitted virtual reality (VR) headsets to his cows, transporting them to virtual pastures. It boosted milk yields.

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16th September 2022

Hurricane Ian has forced Florida fertiliser maker Mosaic Co. to halt operations and raised fears about supplies. The storm could also severely impact Florida’s citrus farmers, and orange juice futures traded higher.

Russia’s farmers have harvested a record 100 mln mt of wheat even as export taxes and logistical issues have slowed export flows. Farm associations warn that Russia’s partial mobilisation of reservists could disrupt the final stages of the harvest and the planting stages of the next crop.

Afghanistan’s ruling Taliban has signed an agreement with Russia to import two mln mt of wheat a year (until an unspecified date) at a ‘special discount’, payable in roubles.

The CEO of Russia’s VTB Bank, which owns stakes in major Russian grain export hubs, has asked President Putin to prohibit companies belonging to “persons related to unfriendly states” from buying grain and oilseeds from Russian farmers.

Ukraine has expressed doubts as to whether the Black Sea export corridor will be extended. Russia’s mobilisation and war escalation could increase risks to world food supplies.

Ukraine’s wheat harvest finished at 19 mln mt, leaving it with at least 11 million mt for export. Next year, the country expects to produce 50-52 million mt of grains and 15-17 million mt of oilseeds. Ukraine’s winter wheat sowing campaign is 15 per cent complete.

The US administration held a one-day conference on hunger, nutrition, and health – the first since 1969 – to make America a stronger, healthier nation. Corporations and non-profit groups have pledged more than $8 bn to help achieve that goal.  (Click here for a summary of the event.)

France held a meeting on the margins of the UN General Assembly in New York to discuss the global food crisis. The head of the World Food Programme has urged donors to help tackle the fertiliser supply crisis.

EU vegetable farmers, particularly in northern Europe, are considering halting production due to rising energy costs. Supermarkets may have to source more supplies from North Africa.

Drought-affected harvests may lead to EU politicians loosening rules on gene-editing techniques like CRISPR.

Drought is not limited to Europe. The San Francisco Chronicle looks at what some describe as the ‘desertification’ of the state’s rice farming areas.

The Dutch government continues to struggle with their plans to reduce farm GHG emissions.

A study published in Nature argues that changes in global food production systems have enabled affordable diets but have had less favourable outcomes for nutrition, environmental health, inclusion, and equity. A separate study in Nature argues that declining crop yields will limit the potential of biofuels.

US farmers are urging the US government to challenge a looming Mexican ban on GM corn and glyphosate.

The UK government is rethinking plans for England’s post-Brexit farm subsidies. Environmentalists say the revised plans are an attack on nature.

Food inflation and tight budgets may encourage consumers to eat less meat, which some argue could end world hunger.  Even so, McDonald’s has pulled their McPlant burger in the US after disappointing sales, and retail US plant-based meat sales are also falling. Shares in Beyond Meat are down more than 75 per cent this year, and CNN asks whether the company is worth saving. Some question whether plant-based meat is better for the environment than real meat. One recent study claims it is, but the debate continues.

The cost of moving container freight has halved in the past three months and is the lowest in two years. Analysts expect further contractions in the coming weeks before a bounce-back later in the year.

Malaysian palm oil futures have fallen to a near 20-month low as recession fears hurt demand. Indonesia says it will maintain the Domestic Market Obligation (DMO) policy that requires producers to supply the domestic market before they export.

Confectionary News reports on the recent European Cocoa Forum amid fears that EU plans to make companies responsible for human rights abuses and environmental harm in their supply chain will put EU processors at a disadvantage to competitors in Asia and the US. Olam Food Ingredients has called for a level playing field.

In company news, Louis Dreyfus Company has bought Australian grain trader and bulk handler Emerald Grain. Cargill has opened a new corn wet milling plant in Indonesia. ADM has inaugurated a Science and Technology Centre at the University of Illinois. Nestlé and Samsung have joined forces to launch a digital health platform. Unilever’s CEO has said he will retire at the end of 2023. And in Switzerland, Lindt has won the ‘chocolate bunny battle’ after a court ordered Lidl to stop selling imitation bunnies.

ETC Group – an NGO – reports that ten companies dominate agricultural commodity trading. COFCO is the world’s second-biggest, behind Cargill, with ADM the third. The NGO says that the commercial seed market is even more concentrated, with two companies controlling 40 per cent of the market, compared with ten companies 25 years ago.

Finally, good news for all coffee lovers: a new study has found that coffee lowers the risk of heart problems and early death. (I think we already knew that!)

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Ukraine’s grain harvest could fall by 50 per cent next year, with the pace of winter-crop sowing three times slower than last year. As of 3rd October, farms had sown 1.1 mln ha of winter wheat compared with 3.1 mln planted on the same date in 2021.

Russia’s farmers have accelerated winter wheat sowing after recent rain, planting grains on 9.4 mln ha compared with 10.7 mln ha a year ago. Winter wheat typically accounts for 70 per cent of Russia’s crop. The country’s Agriculture Ministry expects Russia’s grain harvest will grow by about five mln mt next year following the annexation of four (predominantly agricultural) Ukrainian territories.

France’s drought-hit farmers predict their corn harvest will produce about ten mln mt, the lowest in 30 years.

Due to low water levels, the cost of transporting grains and oilseeds down the Mississippi river has soared nearly 80 per cent since the beginning of September and over 150 per cent since August.

Last week, the largest Mississippi barge operator declared force majeure, warning customers it won’t be able to make good on deliveries because of low water levels. A logjam of vessels threatens to bring river traffic to a halt.

Canada is also facing problems transporting its wheat because of a shortage of railcars.

A shortage of US dollars has resulted in up to 900,000 mt of wheat building up in Egyptian ports. Egypt has been increasing import spending, leaving the central bank short of foreign currency.

Kenya has lifted its ban on importing and producing GM crops following the country’s worst drought in 40 years. The authorities hope the move will improve crop yields and food security.

Some analysts expect the EU soon to lift its ban on genetically modified and gene-edited crops. The EU official handling the issue said, “we must ensure the technology is safe. Somehow, we must get the balance right.”

Others would prefer that we plant ancient grains like amaranth, quinoa, chia, bulgar, millet, sorghum, and Kamut, a grain found in King Tutankhamen’s tomb.

Brazil should produce a record ten mln mt of wheat this season, up from a previous estimate of 9.67 mln. Brazil is currently a net wheat importer, but the government hopes to be a net exporter in ten years.

Brazil imported a record quantity of fertilisers this year. Their silos are full, and prices are sliding as farmers reduce applications. European farmers are looking at reducing fertiliser use, planting less acreage or switching crops. Even livestock farmers could be negatively affected.

The EU Commission has reduced the residue limits for two neonicotinoid pesticides, clothianidin and thiamethoxam, a move which may limit EU food and animal feed imports. The new rules come into force early in 2023, but third countries will have up to three years to adapt to the new regulations.

JBS, the world’s biggest meat producer, has pulled the plug on its US plant-based meat division Planterra Foods, maker of the OZO brand, closing a factory it opened in Denver in 2021. The company will keep its plant-based operations in Brazil and Europe. Is it a bad sign for plant-based meat? Do consumers consider fake meat too woke?

Beyond Meat doesn’t think so. It is sticking to its mission of making animal-based meat obsolete with innovations, such as its forthcoming vegan steak. Meanwhile, US firms eagerly await US government permission to start marketing lab-grown meat. They expect an announcement soon.

Plant-based milk may also be coming off the boil.

Tesco, the UK supermarket chain, has accelerated its plans to halve food waste in its operations, bringing the deadline forward from 2030 to 2025. The company has linked directors’ bonuses to achieving the goal.

Rising food prices could encourage consumers to waste less but ditching “best before” labels could also help. Wired Magazine believes the solution lies in eating your garbage – making enticing dishes out of the food you would otherwise jettison.

In shipping, Cargill plans to boost its use of biofuels in its fleet and to order methanol-fuelled ships as part of its plans to cut emissions.  Maersk has ordered a further six ocean-going container vessels with dual-fuel engines able to operate on green methanol, bringing their total order to 19 ships.

Maersk recently raised its full-year profit forecast from $24 to about $31 billion. The consultancy Drewry estimates that the entire container-shipping industry will make an operating profit of $270 billion this year, more than ten times the profit of $26 billion in 2020.

Nestlé was in the environmental news last week. The company pledged to spend more than CHF 1 billion by 2030 to source coffee sustainably, more than double the previous pledge. In a revolution for UK chocolate lovers, Nestlé will ditch the foil wrappers it has used for Quality Street for the past 86 years in favour of more environmentally-friendly paper.

The company has also scrapped the gold foil on its KitKat bars, replacing them with wrappers made with 80 per cent recycled plastic. It has also said it will stop sourcing from an Indonesian palm oil producer accused by environmental groups of land and human rights abuses.

On the financial side, Nestlé’s CEO said in an interview that the company is ready to make acquisitions in any of its business lines.

John Deere plans to build a world of fully autonomous farming by 2030, while Huawei believes smart farming is the start of sustainable food. Some argue that the future lies in vertical farming, where yields are higher than in traditional farms.

A coalition of farming and environmental groups have asked the UK government for a level playing field for food and animal welfare standards in future post-Brexit trade deals. The call follows a bitter row over the Australian deal, which the National Farmers Union (NFU) called a “betrayal” of British farmers.

As if the UK is not going through enough (many self-inflicted) difficulties, the country is suffering its worst avian flu outbreak in history. There are fears of a Christmas turkey shortage.

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India has banned broken rice exports and imposed a 20 per cent duty on exports of various grades of rice, excluding parboiled and basmati rice. India accounts for over 40 per cent of global rice shipments, exporting a record 21.5 mln mt in 2021, more than the combined shipments of the world’s next four biggest exporters: Thailand, Vietnam, Pakistan, and the US. Rice loading has stopped, and nearly one mln mt of rice is trapped in the ports as buyers refuse to pay the export levy.

The move caught markets by surprise as monsoon rains, delayed in parts of India’s northern and eastern rice-producing regions, have improved over the last couple of weeks, boosting crop prospects.

Russian President Vladimir Putin wants to revisit the UN-brokered Ukrainian grain export deal, saying it has “cheated” developing countries.  He claimed that only two out of 87 ships, carrying 60,000 mt, have gone to developing countries. He added that he wants to limit grain and other food export destinations.

However, the data shows that a significant percentage of the more than two mln mt of grains shipped under the agreement has gone to developing countries, with 400,000 mt shipped to Africa and more than 600,000 mt going to Asia and the Middle East.

Even so, Turkish President Tayyip Erdogan said Putin was right to complain that grain from Ukraine was going to wealthy rather than emerging countries.

Rather than being worried that Ukrainian shipments aren’t going to developing countries, Russia’s gripe is that Western sanctions restrict Russia’s ability to export grain and fertilizers. UN and Russian officials discussed the issue at a meeting last week in Geneva.

Russia’s foreign minister called for the removal of “logistic sanctions that prevent the free access of Russian grain and fertilizers to world markets.” He said, “Our Western colleagues are not doing what the UN Secretary-General promised us.” President Erdogan will meet President Putin next week to discuss the issue.

Ukraine says Russia has no grounds to review the Black Sea grain deal.

Last Sunday, Ukraine dispatched its biggest convoy of grain vessels under the deal after 13 ships carrying 282,500 mt of agricultural products left the Black Sea ports of Odesa, Chornomorsk and Pivdennyi.

However, at the current rate of exports, it will take around six months to ship the rest of the grain from Ukraine’s last harvest. The dangers of sending ships into the heavily mined Black Sea, along with a lack of large vessels, means volumes transported are well below Ukraine’s goal of doubling farm exports to at least 6 million tonnes by October. Ukraine’s farmers have already begun to sow their winter crops.

The Washington Post (via yahoo) has a good round-up of the toll that hot weather and drought have inflicted on US farmers.  CNN looks at how Europe’s drought could mean a one-third drop in Spain’s olive oil production. (Spain is the world’s biggest producer of olive oil.)

Some European farmers are shutting down operations and reducing production because of the energy crunch. There are worries that high energy prices will lead to food shortages this winter, mainly fruit and vegetables.

The FT has a long read on Japanese agriculture that argues the case for reform. But reform is not easy. Holland’s Agriculture Minister resigned this week, indicating that the government is losing its battle to reform agriculture and reduce emissions. (The Netherlands is the world’s second-largest exporter of agricultural goods.)

Could meat go the same way as tobacco and sugar? The Dutch city of Haarlem certainly hopes so. It will become the first city in the world to ban meat adverts from public spaces.

Plant-based meat might not be the climate saviour that some predicted. Food Navigator writes that it is becoming the biggest category failure in food history. Plant-based meat does not live up to its hype, and manufacturers aren’t delivering the taste and texture consumers need to repeat purchases.

Will bean-free coffee and chocolate have more success?

Yara, the Norwegian fertilizer giant, is close to acquiring Petrobras’ fertilizer unit, known as UFN-III, based in Mato Grosso do Sul state. It could cost less than $100 million as the unit is not yet operational. Yara already owns five plants and 24 mixing facilities in Brazil.

Reuters reports that US ethanol plants produce more than double the GHG emissions per gallon of fuel production capacity than oil refineries. Meanwhile, carbon capture could give a new lease of life to algae biofuel.

The current downturn in the Capsize freight index is the sharpest since 2008. Average cape rates are under $6,000 daily, less than half of operating expenses.

Meanwhile, the container shipping industry may be heading for a hard landing after making more money in the last three years than in the previous six decades.

Finally, there has been some talk of imposing windfall taxes on food traders, but no one has mentioned the big investment banks. The big banks made record profits trading agricultural commodities in January-June this year – an estimated $600 million, twice the $300 million they made in 2021. However, this compares with the estimated $6.6 billion they made in oil and gas markets and the $3.1 billion they made in metals.

Click here for Bloomberg’s take on the past week’s food and agriculture stories.

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The UN FAO world food price index fell for the fifth month in a row in August, averaging 138.0 points versus a revised 140.7 in July. The index has fallen from 159.7 points in March but is still 7.9 per cent higher than a year earlier.

As a hopeful sign, fertilizer prices are easing (a little). Even so, Forbes argues that farmers still need to up their N-game and use fertilizers more efficiently.

Freight rates are also falling. Container rates have fallen 40-46 per cent from last year, while Capesize time charter rates have dropped below $1000/day on the transatlantic route,  beating a March 2016 record low of $1,015 per day.

By the end of August, 62 ships had left Ukrainian ports, transporting about 1.5 mln mt of grains and oilseeds. However, the UN warns that Ukraine must ship millions of tonnes of grain from its previous harvest to make room in their silos for the new crop.

To facilitate shipments, Ukraine will allow merchant sailors to leave Ukraine if they receive approval from their local military administrative body. The government bans men aged 18-60 from leaving the country.

A new 320-nautical-mile route for shipments from Ukraine’s ports of Odesa, Chornomorsk and Pivdennyi/Yuzhny may also facilitate shipments.

The UN has scaled down its talk of a food crisis and says the problem is affordability, not availability. Business Insider disagrees. It predicts that next year’s food crisis will be worse than this year’s due to a drop in production, particularly in Ukraine. It quotes a McKinsey report that estimates Ukraine’s grain production will drop by 35-45 per cent next harvest.

As of 25th August, Ukrainian farmers had harvested 25.3 mln mt of new crop grain, including 18.8 mln mt of wheat. The Food Ministry expects grain and oilseed production to reach 65-67 mln mt this year.

The FAO has lowered its forecast for global cereal production in 2022/23 to 2.774 billion mt, down 1.4 per cent from last season. The agency pegs world cereal use at 2.792 billion mt, leading to a projected 2.1 per cent fall in global stocks.

The USDA estimates US agricultural exports for the fiscal year 2023 at $193.5 billion, down from a record $196 billion in 2022. The USDA sees lower exports of cotton, beef, and sorghum partially offset by higher exports of soybeans and horticultural products.

For the past 30 years, the average return on US farmland, adjusted for inflation, has been around 5 per cent, making it an attractive investment. The USDA estimates that non-farming landlords own 30 per cent of the country’s farmland.

Canada’s wheat production will increase 55 per cent this year to 34.6 mln mt as yields improve amid better moisture and more moderate temperatures, making 2022 the third best harvest since records began in 1908. Last year’s drought-stricken crop was the worst since 2007. Canadian farmers will harvest more canola, barley, oats, soybeans, and corn in 2022 compared to last year.

Malaysia’s palm oil industry fears a significant drop in production this year due to a shortage of around 120,000 workers. Producers expect to leave six mln mt of fresh fruit bunches unharvested, equal to one mln mt of vegetable oil.

This year, drought and extreme heat have decimated Texan cotton production, costing farmers at least $2 billion.

Politico argues that the 350 companies that account for more than half of the world’s food and agriculture revenue are not doing enough to adapt to climate change.  It writes that many companies are continuing to operate as if it’s business as usual.

In an exception that proves the rule, wine producers may benefit from hotter and drier climates.

China is investing heavily in overseas agriculture.  Goldman Sachs reports that Chinese grain yields are 40 per cent lower than in the US, putting production costs about twice as high as America’s. It takes Chinese farmers between 6 and 26 per cent more grain to produce a kilo of pork or chicken than it does their American counterparts.

The UK’s Agriculture Minister has told the FT that British farmers have nothing to fear from newly signed trade agreements with Australia and New Zealand.

The container-shipping line AP Møller-Maersk has completed its $3.6bn acquisition of LF Logistics, announced in December. Maersk and other container shipping lines are reinvesting record profits to build integrated supply chains.

Synthetic milk, produced using fermentation, may threaten the dairy industry.  Unlike artificial meat – which can struggle to match the complexity and texture of animal meat – synthetic milk is touted as having the same taste, look, and feel as regular dairy milk.

Brazilian Presidential candidate Lula has pledged to step up the conservation of the Amazon rainforest by bolstering the environmental protection agency Ibama and increasing enforcement.

A new report finds that the US government drastically underestimates the social cost of carbon dioxide emissions. The US currently puts that cost at around $51/mt, but new research puts the figure at $185/mt.

Scientists are studying the effect of ozone pollution on crop yields and are working on new crop varieties.

Finally, Sifted questions whether vertical farming will survive a recession. Will people buy vertically grown basil in a cost-of-living crisis?

You can find Bloomberg’s weekly food supply summary here.

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Hot and dry weather in much of Europe will substantially reduce crop production, particularly corn, soybeans, and sunflowers.

The European Drought Observatory reports drought is affecting a staggering portion of Europe, with 47 per cent of EU land under the level of “warning” and 17 per cent at the more severe “alert” status.

French farmers are asking their government for billions of euros in compensation for crop and livestock losses.

Politico believes that European farmers have little choice but to adapt to climate change. On the same theme, the Guardian suggests five crops that could feed a climate-changed world: amaranth, fonio, cowpeas, taro, and kernza. (No, I hadn’t heard of them either.)

The world’s cotton crops are suffering from hot, dry weather, with yields falling in India, Brazil, and China. Drought has killed the cotton crop in Texas, but higher cotton prices could spark a revival of cotton in wetter Louisiana.

With almost all of Texas in drought, ranchers are sending more cattle off to slaughter.

Corn prices moved higher this week on evidence that the drought across the US Midwest would reduce yields.

The drought in China is threatening food production, prompting the government to order local authorities to take all available measures to ensure crops survive the hottest summer on record.

China is particularly concerned about its rice crop. The six worst-affected regions, Sichuan, Chongqing, Hubei, Henan, Jiangxi, and Anhui, account for almost half of China’s rice output.

More than 70 days of extreme temperatures and low rainfall have wreaked havoc along the basin of the Yangtze, which supports a third of the country’s crops. The government is using drones and chemicals to seed rainclouds.

The government warns that the country’s temperatures are rising faster than the global average and says it is a sensitive region in global climate change.

India announced restrictions on wheat flour exports. Wheat flour exports jumped 200 per cent after India banned wheat exports last May. There is talk that the country may import wheat and abolish its 40 per cent import tax.

Ukraine has exported almost ten mln mt of agricultural products since Russia invaded, including nearly two mln mt since the beginning of August.

Citing fake shipping documents, Turkey said it will re-impose phytosanitary certification requirements for imports from Ukraine.

Ukraine has restored a rail link to Moldova after a 23-year hiatus. The connection could carry ten mln mt of freight a year.

The UN is working with the EU and the US to overcome obstacles to Russian food and fertiliser exports.

Yara, one of the world’s largest fertilizer makers, is slashing ammonia production due to soaring gas prices. The company announced a 50 per cent cut to its ammonia-based urea and nitrogen fertilizer production in Europe, citing record high gas prices. There are worries that soaring fertiliser prices will deepen Africa’s food crisis

The closure of the UK’s biggest ammonia fertilizer plant could lead to a shortage of CO2, a by-product used in the beer and soft drinks industry and by abattoirs to stun animals before slaughtering them. The plant closure could result in beer shortages and pig pileups, causing alarm among the bacon and beer-loving British.

It is ironic that the world should suffer a shortage of CO2 when there is too much in the atmosphere. At the same time, global methane emissions are rising. The FT warns, “If you think of fossil fuel emissions as putting the world on a slow boil, methane is a blow torch that is cooking us today.”

On a more optimistic note, Brazil’s presidential frontrunner Luiz Inacio Lula da Silva said his country does not need to cut a single tree to plant more soybeans and sugarcane or raise cattle. He promised to restore law enforcement in the Amazon rainforest to curb deforestation.

The Boston Consulting Group has published a report on alternative proteins, writing that investing in the sector is the most efficient way to reduce global GHG emissions.

The Guardian has called for a windfall tax on food companies. The newspaper erroneously reports that the four ABCD companies – ADM, Bunge, Cargill and LDC– control 70-90 per cent of the global grain trade. (Seven companies – ABCD+ Wilmar, Viterra, and Olam – account for an estimated 45 per cent of the seaborne trade in grains and oilseeds.)

Earlier this year, the UK charity Oxfam also called for a windfall tax on food companies. They made a similar call in 2011 during the last food crisis. (I had forgotten that we had a food crisis in 2011.)

In 2015, the USDA, EPA and FDA set a goal to reduce food loss and waste by 50 per cent by 2030. They still have a long way to go, but new technology, such as an artificial ice cube, could help.

Finally, Bloomberg asks if sail is the future of commercial shipping. The news agency reports that adding a sail to an existing cargo ship can reduce GHG emissions by 20-30 per cent. You can find Bloomberg’s weekly food and agriculture summary here.

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Comment

The UN estimates that retail establishments and the food service industry waste around 931 mln mt of food each year worldwide. If food waste were a country, it would be the third biggest source of greenhouse gas emissions, accounting for nearly 10 per cent of global GHG emissions.

Media Monitor

Deforestation in the Amazon reached a new record high in the first seven months of this year, up 7.3 per cent from last year. Environmentalists blame President Jair Bolsonaro for rolling back environmental protections. Luiz Inacio Lula da Silva believes he has a solution in subsidized “green” farm loans to spur planting in the Cerrado. However, the FT argues that Cerrado agriculture has reached critical levels.

Wheat prices fell this week to the lowest levels since Russia’s invasion of Ukraine on bearish news ranging from rising Ukrainian shipments to falling US export sales.

Ukrainian grain exports are moving more quickly and fluidly than I had expected. Five more ships have left Ukrainian ports carrying corn and wheat, three from Chornomorsk and two from Pivdennyi.

Although one of the ships was carrying humanitarian food aid for Africa, some people are disappointed that the first cargos have not all gone to the world’s neediest people. Corn has gone to the UK and Ireland, while Italy has received sunflower seeds and soybeans shipments.

The first vessel to leave Ukraine under the deal, the much-followed Razoni, was initially destined for Lebanon but arrived in Syria with its cargo of corn.

Ukrainian officials are working on releasing a detained vessel carrying wheat for Egypt following investigations over its alleged Russian owner.

Ukraine’s grain exports so far in this season are down 46 per cent last year at 2.65 million tonnes. Ukraine exported 948,000 tonnes in the first half of August, down from 1.88 million tonnes in the first 15 days of August 2021.

Russia is exporting wheat at a “painfully slow” rate and lags 28 per cent behind last year, despite a bigger crop. Analysts blame logistical and financial constraints, with some banks and shipping companies opting to shun the region.

With Ukrainian grain exports now flowing, the media is turning its attention to the weather as a factor driving the world food crisis. Politico reports that the drought in the Horn of Africa is worsening, while, in the US, 60 per cent of West, South and Central Plains are experiencing severe drought or higher this year. Plunging water levels on the Rhine River make transporting cargo harder in Europe. France’s drought threatens local biodiversity in the River Loire, and rocky beaches have emerged in Italy’s Lake Garda.

Some of the tributaries running into the Yangtze River are dry in China. The river winds through some of China’s most productive agricultural regions, and the lack of rain threatens crop development during harvest. Drought is also negatively affecting Syria’s pistachio crop.

Some French farmers are adjusting to climate change by experimenting with sorghum rather than wheat. Meanwhile, regulators worldwide are becoming more comfortable with GM drought-resistant crops. Brazil and the US are expected to approve GM drought-resistant wheat soon.

Even the Guardian is on board, with a report that soybeans genetically modified to absorb light more efficiently produced a 25 per cent greater yield. The newspaper called it “an advance that could significantly boost global food supplies when nearly 10 per cent of the world population was hungry last year.” (It fails to mention that 99 per cent of soybeans are fed to animals, not humans.)

The energy crunch has curtailed a quarter of Europe’s nitrogen fertilizer capacity, and there are fears that the situation will worsen. Faced with higher prices and tighter supplies, farmers may cut global fertilizer usage by as much as 7 per cent next season.

Economic mismanagement has led to a food crisis in Sri Lanka. The ousted government sought to improve its balance of payments crisis by banning the import of fertilizer, which led to the destruction of half the country’s rice crop. Fuel shortages are slowing a recovery.

Political mismanagement in the UK has led farmers to throw away up to £60 million of fruit and vegetables due to a shortage of workers. The UK’s post-Brexit visa scheme allows only three-fifths of the needed workers to enter the country.

The UK’s government-appointed food tsar said it must reduce meat and dairy intake to meet its climate goals. Surprisingly, organic pasture-grown beef and lamb are some of the worst foods for GHG emissions.

The UK has more than 1,000 CAFOs (Concentrated Animal Feeding Operations), some holding as many as a million animals, according to a new book called Sixty Harvests Left – How to Reach a Nature Friendly Future.

Marketwatch has an excellent round-up of the current state of the alt-meat market, writing that the “crusade to replace meat” has slowed. Meanwhile, Uruguay’s cattle industry is booming.

The BBC asks whether eating fish can be a sustainable option. The answer is that it can be, but you must choose the right fish.

The Guardian asks whether vertical farms could be a solution. Some believe so, while others argue that their future will be limited to growing “lettuce for rich people.”

If your local supermarket has run out of lettuce, here’s what to buy instead. Finally, here is why you can no longer find Dijon mustard.

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Comment

In a two-week experiment (reported in May), the BBC tracked the carbon emissions of vegetarian, vegan, and omnivore diets. The results were in line with expectations. Vegan CO2e emissions were 9.9kg per week, vegetarian 16.9kg per week and omnivore 48.9kg per week. Some takeaways:

  • Waste less. Emissions stop if you eat food but continue until the food has decomposed if you throw it away.
  • Focus on what you eat rather than its geographical origin. Transport makes up a small percentage of GHG emissions in the food chain
  • The GHG emissions vary depending on how you cook the food. Batch cook and only use your oven on special occasions.

ComCon News Monitor

The Food and Agriculture Organization’s (FAO) index of world food prices declined again in July, averaging 140.9 points versus 154.3 for June. Wheat prices fell 14.5 per cent, while corn fell 10.7 per cent. Even so, the July index is still 13.1 per cent higher than a year ago.

The FT warns that the world’s food crisis* is not over just because prices are falling. The newspaper is cautiously optimistic about Ukrainian supplies but worries that drought and climate change will keep costs high.

The first grain cargo to depart Ukraine since Russia’s invasion, carrying 26,000 mt of corn, has found a new buyer after the original Lebanese buyer refused to take the shipment due to quality concerns. The ship will unload 1,500 tonnes in Turkey and sail to Egypt with the rest.

Two more ships left Ukraine’s Black Sea ports on Friday, including one laden with wheat. Over the past two weeks, fourteen ships have left Ukraine, mainly carrying corn.

The Joint Coordination Centre (JCC), which oversees Ukraine’s export programme, agreed that grain vessels moving through the maritime corridor would be protected by a ten nautical mile circular buffer zone.

In July, Ukraine exported 412,000 mt of wheat, 183,000 mt of barley, 1.1 mln mt of corn, and 362,100 mt of sunflower seed. The country has an estimated three mln mt of grain in its ports, which could take until around mid-September to clear.

Russia has banned imports of agriculture products from 31 of 34 regions of Moldova following a dispute over payments for natural gas.

India’s government has warned it could scrap a 40 per cent duty on wheat imports – and cap the quantity of stocks traders can hold – to dampen prices. Some suggest that India could import wheat later this year, but domestic prices are currently a third lower than world prices.

Global wheat demand may be falling faster than expected as consumers switch to alternative crops, especially for animal feed.

Drought is ravaging crops across large parts of Europe, including Spain, southern France, central and northern Italy, central Germany, northern Romania and eastern Hungary. Corn, sunflower and soya bean yields are forecast to drop by about 8-9 per cent, with cereal yields expected to fall 2 per cent overall, compared with the five-year average. Water levels on the Rhine are at critical lows because of the drought.

Europe’s farmers may face difficulties sourcing fertiliser for their new crop. The cost to produce ammonia and urea is up about 60 per cent from a year ago due to high gas prices. ICIS estimate that as much as 40 per cent of European urea production may have been cut this year. Farmers may increasingly turn to manure instead.

Analysts are concerned about inclement weather’s effect on global rice production.

Seaweed is one crop that should never (never say never) be affected by drought. The BBC has an explainer on the state of the farmed seaweed sector.

Meanwhile, Dutch farmers are in an uproar over plans to curb animal numbers and cut nitrogen emissions. The government wants to reduce livestock numbers by a third in its goal to halve emissions by 2030. Farmers have blockaded roads, airports, and train stations and dumped slurry at the home of the minister in charge of the programme.

Ireland’s government is planning similar measures, committed to a 25 per cent cut in greenhouse gas emissions from agriculture by 2030. The agriculture sector is responsible for about 37 per cent of Ireland’s emissions.

Something similar is brewing in Canada, where the government proposes cutting fertiliser emissions by 30 per cent by 2030. Farmers say they may have to reduce grain output significantly if the measures are passed.

In company news, Cargill reported that its fiscal year 2022 revenue jumped 23 per cent from a year earlier to a record $165 billion.

UAE state investor Mubadala Investment Co and energy company Raizen are in the final round to acquire Brazilian ethanol joint venture BP Bunge Bioenergia. The company owns 11 producing units with 33 mln mt of sugar cane crushing capacity and could be worth $1.8 billion.

Plant-based meat company Beyond Meat posted a second-quarter net loss of $97.1 million and lowered its revenue outlook for the year. The CEO said consumers are reluctant to pay a premium for environmentally friendly products.

*  I am not sure there is a global food crisis – at least not yet. The supply chain has multiple buffers if crops fail due to climate change or government GHG caps. Today only 55 per cent of the world’s crop calories feed people directly; the rest are fed to livestock (about 36 per cent) or turned into biofuels and industrial products (roughly 9 per cent).

Governments are beginning to try and reduce livestock production (see above), but the world is moving in the other direction on biofuels. The USA is looking to increase government support for the biofuels sector, while  Indonesia is considering expanding the biofuel mix in domestic diesel from 30 to 40 per cent.

The other buffer is food waste: a third of the world’s food is wasted. Spain is trying to do something about it.

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Media Monitor

Russia, Ukraine, Turkey, and the United Nations may sign a deal next week to resume Ukraine’s grain exports. (It is not a done deal.) As part of a deal, the US will reassure banks, shipping and insurance companies that Russian exports of food and fertiliser will not breach Washington’s sanctions.

Ukrainian grain shipments have started to pick up through the Danube to Romania. Sixteen vessels are waiting to load, while more than 130 are awaiting their turn in Romania’s Sulina canal.

Russia looks set to bring in a big harvest with yields 0.1-0.2 mt/ha higher than last year, but Ukraine’s farmers are facing their most challenging harvest since independence. With the Russian incendiary bombing of Ukraine’s wheat fields, the country’s harvest has become a battlefield.

If there is one good thing to come out of Russia’s invasion of Ukraine, it is that consumers in the western world no longer take food for granted. Russia’s blockade of Ukrainian ports has launched a global awareness of where food comes from and how it ends up on your plate.

Much press coverage is critical of the systems that keep (most of) the planet fed. For example, an opinion writer on CNN writes, “The war in Ukraine is showing us how badly the food system provides for people and the planet.”

In an interesting report, the environmental NGO Replanet argues that governments should lift bans on GM crops, ditch biofuels and persuade their citizens to eat less meat. More interestingly, it wants governments to stop promoting organic farming. The NGO argues that the EU mandate to triple the area under organic production will reduce the bloc’s grain harvests by 20 mln mt.

I find the suggestion on organic farming particularly interesting. Time writes that the Sri Lankan government’s ill-thought-through move to organic agriculture precipitated the country’s economic collapse after a more than 30 per cent drop in rice yields. (Other newspapers are finally beginning to mention it.)

The ‘food versus fuel’ issue is an emotional one. This blogger may have a point when he questions the rationality of using biofuels to fuel planes once you calculate the additional cropland required. But could farmers survive without biofuels?

They can’t in Indonesia. The government is increasing the palm oil content in its domestic diesel from 30 to 35 per cent and testing a 40 per cent mix. It is another example of government intervention going wrong: the country is struggling with excess palm oil supplies following an earlier export ban.

And on GM crops, China could soon finally allow GM corn imports, allowing Brazil to export to China before the year-end.

So, what is the future of agriculture? Carbon credits may provide farmers with an alternative income to biofuels, but there is still the issue of fertiliser use and its contribution to GHG emissions. Vertical farming plays a role in growing some crops (let them eat lettuce).

Until then, the weather will continue to be the second most significant price driver for commodity crops (after price, in a feedback loop. Government intervention comes third.)  To emphasise the point, the worst drought in 70 years has put a third of Italy’s agricultural output at risk. (You can read the FT’s take on the issue here.) Drought has also led to a global shortage of mustard and hummus.

However, favourable weather conditions and high-quality seeds have led to a one per cent increase in China’s wheat output this year. (The BBC has a piece on the role of satellites in predicting future harvests.)

Finally, Bloomberg argues, “Commodities can make for great trades, but they are often lousy investments.” (Excellent advice!) The agency has again published a summary of its leading food and agriculture stories.

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Commodity News Monitor

The prices of palm oil, wheat and corn have fallen back to levels seen before Russia invaded Ukraine, easing fears of a global food crisis and proving, once again, that high prices are the best cure for high prices.

But how much damage has already been done? In a recent report, the UN says the number of people going hungry worldwide rose to 828 million last year, an increase of about 46 million from the previous year. The Guardian quotes the director of the UN World Food Programme as warning that the food crisis will result in “global destabilisation, starvation, and mass migration on an unprecedented scale.” He adds that 50 million people in 45 countries are just one step from famine.

Africa’s indigenous crops could be a long-term solution, but in the short term, Yemen is running low on wheat and is pinning its hopes on imports from India.

Brazilian fertilizer imports jumped 18.6 per cent in June to reach 4.15 mln mt, suggesting that the country’s farmers will have adequate supplies for summer crops.

Turkey’s president is close to brokering a deal between Russia and Ukraine to reopen Black Sea shipping lanes to grain exports from Ukraine (as opposed to Ukrainian grain exports from Russia).

Ukraine is trying to convince Turkey to arrest vessels that it believes carry stolen grain. There were reports early in the week that Turkish authorities had detained one ship, but they have since allowed it to leave port. Ukraine summoned the Turkish ambassador to complain.

The FT writes that annual food inflation in Turkey is 80 per cent. The newspaper warns, “There is no government that an empty cooking pot cannot bring down.”

Ukraine’s government has unveiled a $5 billion plan to improve road, rail and border checkpoints for the country’s agricultural exports. The country has appealed for private financing for the scheme. Meanwhile, Romania has reopened a Soviet-era rail line, and the Polish port of Gdansk is upping its throughput of Ukrainian grain.

Japan has donated $17 million to the UN FAO to help Ukraine store crops in plastic sleeves and modular storage containers. Ukraine still has 18 mln mt of last year’s harvest in storage, and the country is expecting to harvest another 60 mln mt in the current season. Around 30 per cent of its granaries are full as the harvest picks up pace.

Meanwhile, Russia is trying to convince Africa that the war is not responsible for the continent’s food shortages.

UK farmers may have no choice but to leave crops unpicked this harvest due to a shortage of foreign workers. The situation could lead to ‘catastrophic food waste’. UK food exports to the EU have fallen significantly since Brexit.

The WWF has called for a transformation of the UK’s food system, arguing that farmers use 40 per cent of the country’s arable land to grow wheat and barley to feed farm animals instead of people.

Barry Callebaut has suspended production at its manufacturing site at Wieze in Belgium after detecting salmonella. Ferrero recently faced a similar problem at Arlon in Belgium.

On the environmental front, Dutch police have fired on farmers protesting nitrogen emission cuts that could require farmers to use less fertilizer and reduce their livestock numbers.

Cargill is equipping some of their vessels with sails to see if they can cut GHG emissions. Researchers have found that feeding cows asparagopsis, a seaweed native to Australia, cuts cows’ methane emissions by 90-95 per cent. The FT asks what carbon labelling on food packaging might mean for the sector.

Finally, wheat lovers may be interested in the recent book “Oceans of Grain”, which examines the role of wheat in the rise and fall of empires.

Click here for Bloomberg’s excellent weekly roundup of their food and agriculture stories.

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