Commodity Conversations Weekly Press Summary

The global demand for livestock and feed is expected to recover in 2020 when China will have gone through 5-months production worth of meat in cold storage – a direct result of the African Swine Fever (AFS) culling. The analysis by S&P Global Ratings argued that this will help the bottom line of trade houses which have been hurt by the AFS as well as the US-China trade war, especially companies with strong exposure to US origination. In the absence of any major consolidation, agricultural trading groups are expected to continue to look at divesting unprofitable assets, as is already the case for Bunge and ADM for their sugar and ethanol business units. 

BP and Bunge are still waiting for antitrust approvals from three countries, including China, for their joint venture which they hope to finalise this year. Bunge reported a loss of USD 1.5 billion for the third quarter, compared to a profit of USD 365 million the previous year. This includes a USD 1.7 billion charge following the merger of its Brazilian sugarcane business with BP. Good results in South America and in its edible oil segment were insufficient to offset the damages caused by the ongoing US-China trade conflict. In the hope of a resolution in the conflict and higher prices, US farmers have been withholding crops, especially soybeans. The CEO forecast that annual earnings would drop as much as 20% compared to last year. 

Another country where farmers are holding on to their crop is Argentina where producers are eagerly waiting for the newly elected President to explain his policies on agriculture, especially exports. There is a concern that he will increase taxes on grain exports and even bring back export quota limits. Farmers told Reuters that a return to these populist measures would hurt revenues, adding that the last time quotas were implemented wheat and corn planting collapsed. Some say the country could implement a dual exchange rate to help agriculture exports compete thanks to a weaker currency. 

In neighbouring Brazil, Cargill is pushing for the soybean industry to capture more of the value chain and focus on exporting processed products such as meal and soy oil. The call was echoed by the country’s vegetable oil association which pointed out that, ironically, the share of soybean exports stood at 81% of soybean products exported in 2017, compared to 13% back in 1981, when 87% of exports was in the form of meal. In Europe, meanwhile, Cargill announced it was putting USD 35 million in a product line to produce soluble fibres which can reduce sugar content in confectionery products by 30% without affecting the taste or texture. 

Olam Cocoa launched its Cocoa Compass initiative this week which sets targets aligned with UN Sustainable Development Goals. Among the commitments, Olam is aiming to eradicate child labour and deforestation by 2030. It will also work towards improving farmers’ incomes and has agreed to pay the Living Income Differential (LID) premium of USD 400/mt on 100,000mt of cocoa it bought from Ghana and the Ivory Coast. In the US, meanwhile, several industry groups, including Coca-Cola, are warning that the Ninth Circuit Court’s decision to hold Nestle liable for slavery in cocoa plantations in Ivory Coast could actually discourage companies from trying to tackle the issue.

A Greenpeace plastic waste collecting initiative in two areas in Thailand found that most of the waste came from single-use plastic from food packaging and that close to 20% of it was produced by five multinationals: Coca-Cola, Nestle, Ajinomoto, Mondelez, and Unilever. Italy is trying to deal with the issue by proposing to tax plastic in its 2020 budget at a rate of around USD 1/kg. A source told Reuters that the tax, if approved, would bring in over USD 1 billion and would help offset a cut in income tax. Unsurprisingly, beverage companies are opposing the proposal saying it would hurt their bottling operations, especially considering that the budget also includes a sugar tax. 

On the subject of bottling, The Guardian reported this week that conservation groups continue their fight to stop Nestle from accessing water in California’s Strawberry Creek. They accuse the group of depleting water levels and hardly paying for it while selling the bottled water at a profit. At the heart of the fight is a debate about who should control freshwater supply on public land, with Nestle’s former CEO arguing that it needs to be privatised. 

An analyst at Forrester Research forecast that the global food delivery market will likely go through major consolidation in 2020. Although the largest firms managed to raise significant funds in 2019, none reported a profit. Uber, DoorDash and Amazon are seen as the most likely to make acquisitions in the market. 

As China is busy eating through its stocks of meat, Russia quietly became Europe’s biggest importer of cows. This is the direct result of Russia’s policy to modernise its dairy sector, incentivised by the ban on imports of foreign dairy products. As of 2018, the country was 20% shy of being self-sufficient, mainly because a third of milk consumption is still supplied by low-yielding household cows. By 2027, however, Russia hopes to export to China and other Asian countries.

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Commodity Conversations Weekly Press Summary

Nestle reported a 3.7% growth in organic sales over the first three quarters of the financial year.  Strong global Purina PetCare sales and demand for Starbucks products in North America helped offset disappointing sales for beverages, especially in the water segment. As a result, the CEO said Nestle Waters was being restructured so that it could be managed locally, instead of globally as is currently the case. The restructure should help identify consumer trends and higher-margin products amid an increasingly competitive market. 

The focus on increasing the group’s “local responsiveness” will take place across all segments thanks to a new strategy and business unit, the CEO said, adding that “In a period of rapid change in our industry, it will be more important than ever to recognize key trends early and to act on them fast.” Nestle will be looking actively to acquire more businesses aligned with this new strategy, the group said. It may also spend USD 20 billion in 2020-22 in share buybacks, thanks in part to the USD 10 billion generated from the sale of its skincare business earlier this month. Looking forward, a company official forecast that the world population will have to reduce its consumption of sugar, salt and meat to switch to vegetables and cereals as a result of the limited resources combined with the obesity epidemic. 

Danone lowered its 2019 growth forecast slightly after disappointing quarterly results in part due to cool summer temperatures in Europe which led to lower sales in its Waters Europe segment. Overall, however, sales grew 3.7% in the quarter, up from 3% last year, thanks to a strong growth in the specialised and early-life nutrition units which grew by 10%, mostly driven by the demand from China. 

The group’s investment arm, Danone Manifesto Ventures, bought a minority shareholding in organic plant-based food company Forager Project. This is part of its goal to increase revenue from plant-based products to USD 5.7 billion by 2025, from USD 1.9 billion currently. In Asia, meanwhile, the company launched a ‘One Person, One Voice, One Share’ initiative which aims to get employees involved in the Danone 2030 roadmap – designed to be in line with the UN’s Sustainable Development Goals.

Cargill launched a new platform, Feeding Intelligence, to help keep ranchers on top of the information, news and technology that impact their business. The group is streamlining its animal feed business in the US, resulting in the closure of two plants in New York in North Carolina. On the other hand, it will invest USD 225 million to expand and upgrade its soybean crushing assets in Ohio. 

In India, Cargill successfully removed 225mt of annual plastic packaging by replacing paper labels with mould-labeling on its edible oil bottles and reformulating the plastic it uses so that 90% of it is recyclable. On the sweetener side, Cargill announced that it was able to make the first liquid ingredient stevia. Stevia previously could not be used to make a concentrate, which limited its ability to function in beverages and energy drinks. 

Olam is in the process of acquiring the California-based almond company Hughson Nut Inc (HNI) as part of its aim to have a vertically integrated almond supply chain and add to its existing businesses in Australia and Vietnam. In Nigeria, meanwhile, shareholders gave the green light to Olam’s offer to buy the remaining shares in Dangote Flour Mills for USD 331 million. Olam also announced it has been granted a USD 1.5 billion revolving credit facility in addition to the USD 525 million sustainability loan it secured earlier this month. 

In Brazil, the agriculture minister said that COFCO was planning on investing in four sugar mills in the country. She urged the group to also invest in railway and ports to ease export logistics. 

In an unusual twist, Cote d’Ivoire and Ghana are threatening to scrap existing sustainability certification programs for cocoa if buyers don’t contract next year’s crop at a premium of USD 400/mt over October 2020 futures. Sources quoted by Bloomberg say that while most buyers have, in theory, accepted the premium many have yet to contract the crop as they don’t know how to hedge that premium. The West African countries call the premium a “living income differential” (LID) to offset the collapse in world prices and argue that it is more effective in helping farmers than sustainability certification premiums. However, some have pointed out that the LID, too, has failed to be passed on to farmers. Regardless, Nigeria and Cameroon are looking to follow suit while Peru could impose a minimum price. 

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Commodity Conversations Weekly Press Summary

Commodity prices initially bounced when the US announced that it had reached a partial trade deal with China, although they eventually dropped back down once it emerged that it might take five-weeks for an agreement to be drafted. China reportedly agreed to double its import of US agricultural products and review some of its currency and intellectual property laws. However, an analyst called the trade targets “meaningless” until a proper breakthrough is announced, while a Chinese trader mentioned that trade negotiations were always one Tweet away from breaking down. 

China has already started to increase the amount of US goods it imports, according to trade officials. Nevertheless, the country might be looking to buy more US products simply because the supply in other countries such as Brazil is starting to tighten, making US origins cheaper. Moreover, China has been very active in investing to improve Brazil’s export infrastructure so it is unlikely to completely switch to other import origins. 

In the EU, the trade chief announced that the bloc will subsidise olive growers to help them deal with US tariffs. Under the plan, companies will receive money to buy and store excess olive oil. EU officials mentioned that the focus remained on finding a solution with the US to remove duties and address concerns around Airbus. 

Indonesia and Malaysia plan to challenge the EU’s decision to phase out the use of palm oil as a renewable fuel at the WTO, while they warn that they will also limit European imports in retaliation. In response, a member of the EU Parliament said he was confident the WTO would agree with the EU’s environmental concerns. He also clarified that palm oil will still be allowed as a fuel feedstock although it will not be recognised in the Renewable Energy Directive II (RED II).

A French court announced a similar ruling as it maintained a law that would exclude palm oil from tax advantages in 2020 despite an appeal by Total. The group recently spent EUR 300 million to convert its La Mede refinery to process palm oil and warned that it will not be competitive if it has to use local rapeseed instead. 

Palm oil producers who are certified as sustainable complain that large food companies refuse to pay a premium and that they mostly buy certified palm oil for European markets. Nestle revealed that 56% of the palm oil in EU goods was sustainable, compared to just 4% in India and 0% in China. In response, the Roundtable on Sustainable Palm Oil (RSPO) announced that members, including Nestle and Unilever, will now face fines unless they increase the proportion of sustainable purchases by 15% every year. 

Meanwhile, India reportedly threatened to tax Malaysian palm oil in response to a comment by the Malaysian Prime Minister who criticised India’s Kashmir policies. A Malaysian minister said the country might import more raw sugar from India in order to ease trade relations.

The Mercosur bloc is planning to hold trade talks with Vietnam, Indonesia, South Korea and Singapore, according to Brazil’s trade minister. Mercosur also includes Uruguay, Paraguay and Argentina. Separately, Brazil’s space agency revealed that deforestation rates slowed in September but were still 96% above the same month last year. In the first nine months of the year, forest destruction was 93% higher, although the start of the rainy season should slow down burn rates. 

Environmentalists criticised large food companies in the UK for still using soya beans sourced from deforested regions in Brazil. Although 23 brands, including many fast-food chains, signed the Cerrado Manifesto in 2017, the pledge was not signed by Cargill who is responsible for a large portion of the UK’s soya imports. The firm argued that boycotting an area simply moved the problem somewhere else or left more room for other buyers. And a Brazilian official noted that boycotts could prevent sustainable economic development and make the problem worse. 

The CEO of Mondelez commented that food makers need to distinguish between consumer trends and actual purchasing behaviours. He argued that taste and not health will continue to be the main driver of purchases because of the “difference between what people say and what they do”. McDonald’s and Campbell Soup made similar remarks as their attempts to sell healthier products failed. KFC is another example and reportedly spent USD 8 million to make oven-grilled products, although consumers kept buying deep-fried food. 

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Commodity Conversations Weekly Press Summary

Another major commodity group, this time Louis Dreyfus, reported lower results because of global trade tensions and the African Swine Fever in China, along with the bad spring weather in the US Midwest. The CEO said the situation will remain difficult for the second half of the year and will only improve in 2020. Nonetheless, the firm paid USD 428 million in dividends for the first half of the year, the highest since 2014, as the chairwoman is reportedly looking to repay loans she took to buyout minority shareholders. 

China could have lost up to half of its pig herd to swine fever and the Vice Premier has set a target to return to a normal herd size as early as next year. In the meantime, the country is facing a shortage of 10 million mt of pork, more than the global trade supply. To deal with the shortage, a local pig farmer imported 906 breeding pigs from Denmark, the first pig imports this year. And a breeder in Nanning is looking to raise pigs that weigh up to 500kg, compared to the usual weight of around 125kg. 

US producers are also looking to take advantage of the surge in Chinese pork demand. To that end, JBS USA announced that it will remove ractopamine from its pig supply. Ractopamine is a growth drug banned in China and the EU. A US competitor, Smithfield Foods, has already dropped the additive to export to China while Tyson Foods said it was considering a similar move. 

Global trade is due to see another wave of protectionism as the WTO ruled that the US could impose duties worth USD 7.5 billion on EU products in response to the EU support of Airbus. The US will levy a 25% duty on EU food goods starting on October 18, but an EU official said the US seemed uninterested in finding a way to avoid the tariffs. Food firms in the US warned that this could have significant repercussions on their businesses. A cheese importer said he was stocking up with USD 15 million worth of Italians cheeses ahead of the duties. 

A Dutch-based company, DSM, published some potentially good news for both the environment and meat lovers. It developed a new feed that can reduce the amount of methane emitted by cows by up to 30%. The feed, called Bovaer, could be available in late 2020. Cows are responsible for a third of the methane emitted in the US but experts highlight two common misconceptions: the methane comes from burps, not farts, and the natural gas infrastructure still emits more methane. 

A new evaluation of published research also tried to correct a misconception by arguing that there was not enough evidence to support the claim that eating red meat can have a negative health impact. Researchers analysed past observational studies and concluded that the impact of eating red meat was very small and not supported by strong evidence. Health experts were quick to criticise the paper and some argued that nutritional research can not be held to the same standards as medical research. A professor highlighted that years of studies consistently found a negative health impact. And the press revealed that the lead researcher had failed to properly disclose his past ties to an industry group

Ireland revealed that the average sugar content in drinks dropped to 23g in 2019, compared to 31g before a sugar tax was introduced in 2015. Nonetheless, the government noted that some of the decrease was offset by larger container size and the growth in energy drink sales. Similarly, the UK said the sugar content in soft drinks dropped 28.8% since the introduction of a sugar tax in 2017, although the total consumption of sugar gained 2.6% between 2015 and 2018. Public Health England explained that the overall increase in sales of sweet products was enough to offset the drop in sugar content. 

Nonetheless, PepsiCo’s said a good performance from its low-sugar and bubbly sparkling water brands will help with revenue growth in 2019. And Coca-Cola announced that it will launch its energy drink in the US, as it noted that sales in the sector have been increasing while regular soft drink consumption has been steadily declining. Separately, Coca-Cola unveiled a new bottle that uses recycled marine plastics. The plastic was collected in the Mediterranean sea and is used for 25% of the bottle packaging. 

Two very unusual products were unveiled this week. Glenlivet launched whisky cocktails contained in a seaweed-based skin that dissolves in the mouth. And Aleph Farms announced that it has successfully grown lab-meat using cow sells, on the International Space Station

The Glenlivet

Commodity Conversations Weekly Press Summary

Cargill saw its net earnings drop 10% on year to USD 915 million for the quarter ending in August as good protein demand was not enough to offset the disruptions caused by the trade war and the African Swine Flu. Cargill said it was re-organising its animal nutrition business to focus on animal health and wellness. The company is also working on its ecommerce platform to better liaise with its customers and to simplify transactions. For instance, the platform should help Cargill communicate more effectively on issues including new tariffs due to the trade war. The company has also set up a new Land Use and Forest Protection Advisory Panel to scale up efforts against deforestation. In Brazil, it wants to set up a start-up accelerator to finance ideas to solve the deforestation challenge. 

Nestle said it wouldn’t meet its 2020 deforestation goals. It now targets 90% of its commodities to be “deforestation-free,” up from 77% in 2019. On the other hand, it denied claims by the  Rainforest Action Network that it had sourced palm oil from illegal suppliers in Indonesia. Nestle pointed out that 100% of its palm oil supply chain was closely checked using satellites. The group’s senior vice president said he would welcome increasing government regulation to create more of a level playing field among stakeholders. For example, Nestle just inaugurated a 28,000 photovoltaic solar plant at its Al Maha site in Dubai as part of its target of zero net emissions by 2050. Separately, Nestle has bought a minority stake in Before Brands, a company that makes products with allergens designed to prevent allergies from developing in young children. 

Louis Dreyfus and China’s Luckin Coffee announced a plan to jointly produce and distribute juices in China, on top of their plan to set up a coffee roasting plant. Commentators pointed out that the venture helped Luckin compete with Starbucks in the Chinese market on the one hand, and was part of LDC’s strategy to do more food processing, on the other. 

ADM is going to make yet another by-product from corn. It has tied up with Korean group LG Chem to make a sustainable corn-based acrylic acid used in polymers which can then be used in products such as diapers. A company official said the group was already making some 30 products from corn kernel. At the same time, ADM reportedly set up a company called Vantage Corn Processors under which it will incorporate its ethanol plants by the end of the year. 

Olam has echoed a proposal by a famous economist that industry stakeholders in the coffee market get together to create a global fund to subsidise farmers in times of low coffee prices, as is currently the case. Olam’s head of coffee argued that, because coffee is mostly grown in poor countries, farmers usually don’t benefit from subsidies when prices fall below the cost of production. He suggested the fund could also help growers develop more sustainable practices. Nestle pointed out that, at the current pace of global warming, it might be impossible to grow coffee by 2050. In the US, retailers The Kroger and Albertsons announced they were joining the Sustainable Coffee Challenge to do their bit in helping what Fair Trade USA called a “pricing crisis” in the coffee market. 

There’s been progress in the cocoa sector, meanwhile. For one, Cargill’s cocoa and chocolate business announced it was extending its partnership with the International Finance Corporation for a sustainable supply chain in West Africa, Indonesia and Brazil. Barry Callebaut said it would soon launch its WholeFruit Chocolate, a product that is made entirely from the cacao fruit, including parts that are usually thrown away. This is part of a plan to use only sustainable ingredients by 2025. Similarly, Nestle said it had started using the usually discarded cocoa plant fruit as a sweetener. Interestingly, Nestle also launched KitKat bars that will cost USD 17/bar as part of its premium range of chocolate products. 

Plant-based meat continued to gain traction last week as Impossible Foods received a United Nations Global Climate Action Award in recognition of its contribution to the fight against climate change. The Spoon noted that in September alone, at least six new plant-based burgers had been launched in the US. Similarly, IKEA is trying to make a vegan version of its signature meatballs.

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Commodity Conversations Weekly Press Summary

The drop in soy demand caused by the African Swine Fever outbreak in China will mean that COFCO will source less soy from Brazil this year, although the director said he hoped the group will be able to compensate by boosting corn exports. He noted that Brazil holds great potential for agricultural expansion that will be key to expand future food production. The state-controlled company said it will continue to invest in the country, although very cautiously. COFCO has already spent USD 4 billion in acquisitions recently, which enabled it to quickly grow in Brazil’s grains, oilseeds, sugar, coffee and cotton sectors. 

Argentina overtook Brazil as the largest beef exporter to China as beef sales more than doubled in the first seven months of the year. The overall protein demand has surged following the sharp drop in the local pig population. The swine fever has also impacted the supply of edible oils in China, which are produced during the processing of soybeans used to feed pigs. The country doubled its import of palm oil in August compared to last year in order to compensate. Palm oil is also replacing the beans that would have been imported from the US. 

In Indonesia, the state-owned PTPN III  – one of the largest land-owners in SouthEast Asia – said it raised USD 640 million to finance its capital and expand activities in palm oil, rubber, tea and sugarcane. The group manages 1.18 million ha of palm oil plantations. Meanwhile, the Center for International Forestry Research revealed that the deforestation rate related to palm oil on the island of Borneo has steadily been declining since 2012, mainly because of low palm oil prices and government moratorium on new plantations. The center unveiled a new tool, called Borneo Atlas, which lets anyone track deforestation on the island and the companies responsible.

Some 87 companies around the world have now agreed to join the UN’s Global Compact and align their operations to limit global temperature rise to 1.5°C. Unilever was one of the first groups to follow the pledge announced back in June, which now also includes Danone, Nestle, Novozymes, Royal DSM and Natura. Many of these companies also launched the One Planet Business for Biodiversity ahead of the UN Climate Action Summit in NY, highlighting the risks attached to the loss of biodiversity. Two-thirds of the world’s crop production is based on only nine plants: sugarcane, corn, rice, wheat, potatoes, soybeans, palm oil fruit, sugar beet and cassava. 

Similarly, Harvard joined the Cool Food Pledge and will work to reduce its greenhouse gas emissions related to food by 25% by 2030. Nonetheless, students note that the University still refuses to divest from fossil fuel investments, as the University President argues that the USD 39 billion endowment was not a tool for social change. The endowment has also tried to diversify from the risks of conventional stocks by investing in direct agriculture holdings across the world. The process was seen by many as a failure and the total value of the investments was written down from USD 4 billion to USD 2.9 billion. 

Some experts speaking at the UN summit attempted to defend the role global food trade can play in fighting climate change by disputing the idea that importing food always leads to more carbon emissions. Buying locally produced food only makes sense when the produce is in season, and driving a long distance to buy goods could emit more carbon than air freighting fresh produce from across the world, according to the Hoffmann Centre for Sustainable Resource Economy. A recent survey showed that people were also confused about how and why almost a third of all food produced is wasted. Food waste was not as much of a factor for a majority of people when dining out, while people said their biggest reason to limit waste was to save money. 

Farmers in the US highlighted that barley is particularly vulnerable to sudden weather changes, such as drought, heat or floods, which means climate change could potentially threaten our beer supply. To anticipate the issue, beer makers created the Brewery Climate Declaration and are testing other small grains such as winter barley, wheat rye or rice to ensure that future generations can also drink good beer. 

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Commodity Conversations Weekly Press Summary

Unilever and Nestle have been talking this week about their commitment to being carbon neutral by 2030 for the former and 2050 for the latter. Nestle is giving itself two years to plan how to do it and figure out how much it will cost. An energy expert warned that the task would be difficult – and costly – in part because there was no standardised way of measuring emissions. However, Unilever said it had managed to switch to only using renewable electricity across all its operations in North America, Africa, Asia, Europe and Latin America at a net-zero cost.

As part of its strategy, Nestle said it would sign the “Business Ambition for 1.5°C” which is a global initiative focusing on fighting climate change. The CEO explained that they were working on reducing the group’s environmental footprint by using environmentally friendly ingredients, working with farmers to reduce carbon emissions as well as developing reusable or recycled packaging. It has already set up an Institute of Packaging Sciences to find sustainable packaging options. “Our vision is a world in which none of our packaging ends up in landfill or as litter,” he said. In the US, meanwhile, the group is downsizing its workforce as it transitions away from direct store delivery to using warehouses. 

McDonald’s is approaching the packaging challenge differently. It decided to test out different packaging options and get feedback from consumers via its plastic-free restaurants in Germany and Canada. The idea is to see what works before it can be implemented globally. 

Going back to Unilever, the group has been accused by a Mexican organisation of falling short of its commitment to fortify its corn flour products with vitamins and minerals as is required by law. The group registered USD 190 million in sales in fortified food last year, ranking second in the global Access to Nutrition Index. Analysts say that this specific food and beverage sector is expected to grow 24% within 5 years. In Greece, Unilever is working with the WWF on a pilot project to reduce food waste at three hotels. Customers are given notes urging them to carefully consider how much food they put on their plates during buffet meals. The hotels have also tried to reduce the availability of buffets in favour or meals that need to be ordered. 

Meanwhile, a blockchain-enabled sustainability and traceability project started by WWF Australia and BCG Digital Ventures’ managed to raise USD 5.8 million in funding. The idea behind OpenSC is to use technology to identify and earmark sustainable supply chains and then help customers learn about them. An official involved explained that this would not replace certifications but aims to help bridge the gap between customers and producers. 

Cargill announced it was exiting asset management and selling its share in CarVal Investors, explaining that it wanted to focus on businesses where it was more actively involved. Cargill and Maersk Tankers are pooling together some of their Medium Range (MR) fleet, combining the former’s trading expertise with the latter’s digital capabilities to become more flexible and efficient. In India, Cargill opened a USD 10 million 60,000mt corn silo in Karnataka, its first foray into bulk storage in the country. 

In the US, Cargill is upping its marketing efforts on beef packaging to highlight the meat’s protein level after the group identified that other meat products advertised their protein content better, leading consumers to believe that beef had less protein than it did. In New York, meanwhile, local residents are protesting Cargill’s use of seismic testing ahead of an expansion of a salt mine near Cayuga Lake. The residents are concerned about the effects on local wildlife as well as possible contamination of the lake water but Cargill argued that the seismic testing was used specifically to identify and prevent environmental damage. 

Bunge is acquiring 30% of Brazil’s agricultural group Agrofel as part of its plan to increase origination from farmers, especially soybeans. The group, which has 450,000mt in storage capacity, originates about 1 million mt of grains annually. In Asia, meanwhile, Olam was granted a USD 525 million loan linked to sustainability Key Performance Indicators. The funds will be used to finance their current loans. 

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Commodity Conversations Weekly Press Summary

Following in Austria’s footsteps, Germany’s cabinet agreed to progressively phase out the use of glyphosate and implement a total ban by the end of 2023. In France, some 20 mayors banned the weedkiller last month. This could be a game-changer for agriculture, as a farmer in Nebraska pointed out that glyphosate and Monsanto’s Roundup Ready seeds were probably the biggest labour-saver since the invention of the tractor. That same farmer, however, was one of the first farmers in Nebraska to file a lawsuit against Monsanto after being diagnosed with non-Hodgkin lymphoma.

Some of the major scientific institutions disagree on whether glyphosate is safe but three juries in California have already ruled against Bayer – the new owner of Monsanto. Experts note that the outcome of the legal challenges might not come down to science, but rather Monsanto’s efforts to manipulate the regulatory process. In France, the government is investigating a list of potentially influential individuals Monsanto compiled in order to control public opinion. Bayer conceded that the list was created but argued that it was not illegal. 

The Environmental Protection Agency in the US explained that relying on industry studies when assessing pesticides was a common practice because companies must cover the costs of approval. It highlighted, however, that the data is shared and often collected by outside labs. The comment was in response to a second lawsuit filed against the agency which claimed that the recently approved sulfoxaflor pesticide would threaten bees, beekeepers and the whole food supply. 

In France, a public consultation was opened on the proposal to ban the use of pesticides within 5-10 metres of houses, due to come into force in January 2020. Associations argue that the distance is too small, while some mayors have already implemented a ban than can be as wide as 150 metres. The agriculture ministry warned that enforcing a 150-metre pesticide free-zone would reduce the total crop area by 20-30%. 

Meanwhile, Malaysian palm oil exporters are expected to lose market share in India following the recent 5% hike in import duty. India said the higher levy would apply to refined palm oil to protect domestic refiners. In response to hostility towards palm oil and low prices, the Malaysian government announced a plan to promote the cultivation of food crops. Palm oil is currently grown on 5 million ha, out of the 7 million ha of total agricultural area, but crude palm oil prices more than halved in the last eight years. 

The Indonesian government, on the other hand, hopes it can address mounting palm oil inventories by promoting the use of biodiesel. It recently reported that a fleet of cars travelled 42,000km on biodiesel and reported no engine issues. The plan is to increase the current 20% blending mandate to 30% next year and possibly 100% in 2021. 

China approved 25 Brazilian meatpacking plants for exports this week at a time when European countries are increasingly worried about buying meat from Brazil amid the spike in deforestation rate. Brazil already exports most of its meat to China, where the African Swine Fever (ASF) has decimated the local pig herd. The trade war with the US is also impacting the supply of soybeans and China announced that it will allow the import of soybean meal from Argentina

China is stepping up efforts to deal with the ASF by boosting subsidies and has even started enforcing pork rations in some cities. Last week, the government said it would release emergency stocks of frozen meat if necessary. Some estimates say China lost 100 million hogs to the disease while Vietnam said it culled 4.7 million pigs to contain the outbreak. The disease has also made its first appearance in the Philippines, despite a ban on pork imports and reinforced quarantine procedures. 

ADM was the target of two separate antitrust lawsuits last week which accused the group of manipulating prices. The first one concerns its Golden Peanut subsidiary, along with another peanut sheller Birdsong Corp, which are accused by farmers of conspiring to fix unprocessed peanut prices. The two firms control 90% of the shelling industry. The second lawsuit accused ADM of manipulating the Argo ethanol market to benefit from its short position. Some traders had already complained to S&P Global Platts that ADM was selling large amounts of ethanol on the cash market just before the market closed.

Bunge revealed that it owned a 1.6% stake in Beyond Meat. The maker of plant-based meat alternatives recently reached a market capitalisation of USD 9.9 billion, more than Bunge. Kellog and Danone joined the long list of firms planning to launch meat alternatives, while the University of Cambridge said it has removed beef and lamb from its menu to reduce its carbon footprint. A less impressive announcement came from Unilver’s Country Crock with the launch of “Plant Butter”. People quickly realised it was pretty much margarine, but with a higher concentration of saturated fat.  

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Commodity Conversations Weekly Press Summary

Just when there seemed to be no limits to the possibilities of plant-based meat alternatives, the CEO of Whole Foods‘ warned that these alternatives were highly processed, rich in salt and fat and therefore not very good for you. Whereas he did concede that it was better than eating meat in terms of the environmental impact, a researcher at Oxford argued that it would be better still to consume unprocessed plants. He explained that “while [plant-based meat] products have about half the carbon footprint than chicken does, they also have 5 times more of a footprint than a bean patty.” And if this was making you think of waiting for lab-grown meat to be financially viable, a food anthropologist warned that it was not yet clear that this option would be much better for the environment either. 

Eating fruits and vegetables might not be as healthy as we think, according to a recent study published in the British Medical Journal. Researchers noted that, as expected, people who consume meat have a higher chance of reporting a coronary heart disease when compared to vegans and vegetarians, although it also found that vegans and vegetarians have a 20% higher stroke risk. The reasons are unclear, although experts said it could be linked to the lack of B12 vitamins in a vegetarian diet. Overall, dieticians argue that the healthiest diets involve eating a  wide range of foods.

We might also have to rethink whether buying unpackaged fresh food is better for the environment. A new study argues that the carbon footprint of food that wastes faster because it is not packaged is bigger than the environmental impact of the actual packaging. The solution, then, seems to be better packaging. 

The media backlash against Brazilian agriculture policy – which is being blamed for the fires in the Amazon – continues. ADM, Bunge and Nestle are some of the groups that have officially committed not to source from the newly deforested areas. They are using satellite data as well as ground teams to identify the affected areas. Some have blamed the Amazon fires on the US-China trade war which has led to a boost in exports from Brazil. However, Brazil’s soybean exports dropped to 5.3 million mt in August, a fall from over 8 million mt in the same month last year at the start of the trade war. On the other hand, Brazil exported a record high 7.65 million mt of corn in August, double what was exported in the same month last year.

In the US, Cargill tied up with White Dog Labs to work on a sustainable alternative to fishmeal in aquafeed using corn feedstock. It is also investing USD 75 million in Puris, which supplies plant-based meat companies such as Beyond Burger, to set up a new pea protein plant in Minnesota. 

In Ghana, the 20,000 certified cocoa farmers who supplied Cargill in 2018/19 benefitted from a combined USD 2 million in sustainability premium, an increase of 33% on year. The group buys directly from farmers who bring the cocoa to local warehouses where they are registered, allowing full traceability. Cargill also announced a USD 121 million investment in expanding its cocoa grinding plant in the Ivory Coast

As it continues to look for innovative solutions for the food and agriculture industry, Cargill announced the official opening of a research lab at the University of Illinois. Similarly, ADM said it would donate USD 2.5 million to the University of Illinois’ Feed Technology Center.

Bunge continues on its cost-cutting tracks and announced it was reducing headcount at its New York headquarters, which will be moving to St Louis as part of the company’s strategy to become more globally integrated. Analysts forecast that the group will probably look at selling its fertilizer business and could split the commodity trading side from food ingredients ahead of a possible sale. Glencore is seen as a potential acquirer, on the assumption that antitrust regulators would not approve a takeover or merger with ADM. 

Launched at the last G7, Danone is chairing a new initiative, Business for Inclusive Growth (B4IG), which aims to help all member companies encourage diversity and fairness throughout their supply chain. The program, which will be managed by the OECD, has already identified some 50 projects worth USD 1 billion in funding. The head of Mars, which also signed up, said, “It isn’t about philanthropy, but rather an understanding that a business can only be successful if it also enables all of its partners, community and the environment to thrive.” 

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Commodity Conversations Weekly Press Summary

The concerns over the Amazon fires continued to grow this week as some fear the environmental reputation of Brazilian food producers will be jeopardised for years to come. Norway’s Mowi, the largest salmon producer in the world, said it would source soy outside of Brazil unless the government addressed the fires, and the biggest meatpacker in the world, JBS, said it was closely monitoring its suppliers in the area using satellites. Although it admitted that monitoring indirect suppliers was challenging. Many other Brazilian agribusinesses, including from the paper and pulp sectors, argued that the President’s environmental stance has been ‘disastrous’ in terms of what was being communicated to the outside world. 

In contrast, the sugar union, UNICA, said the current government could not be blamed for the fires, adding that the environment minister was committed to protecting the forest. The CEO of Summit Agricultural Group, which owns a corn ethanol plant in Brazil’s Mato Grosso, argued that the media was not covering the Brazilian President’s response fairly and that sending in the army had been the right thing to do. 

The US President is also potentially facing a growing backlash from farmers for undermining the ethanol standard, a key political topic in Iowa where it involves at least 40,000 jobs. Most Democratic Presidential candidates for 2020 have come out in strong support of the ethanol industry, but environmental activists note that their stances often contradict earlier pledges. They also argue that supporting ethanol goes against the goal of completely phasing out fuel-based engines, as proposed in the Green New Deal.

The wavering support for the ethanol mandate, along with the damage caused by the trade war, pushed some to believe the President is losing farmer support. But this poll conducted at the end of July suggests the opposite, as 66.6% of farmers said they would vote to reelect the President, up from 59.6% at the same stage last year. Analysts suggested this could be thanks to the generous cash payouts he offered farmers. 

In Indonesia, the government is taking action to protect its palm oil industry by banning the use of  “palm oil-free” or “no palm oil” messages on food products. The government highlighted that the messages pushed consumers to think the product is not healthy, a claim that has not been proven. A similar move was implemented in Malaysia, the home of FGV Holding, the world’s largest producer of crude palm oil. FGV reported poor results for its second quarter, which it mostly attributed to the sharp drop in palm oil prices. The group is also looking to restructure its struggling sugar business, with Wilmar reportedly one of the investors interested in buying a stake. 

Still in Malaysia, Nestle reported a good growth momentum in the second quarter, as product innovations and portfolio enhancements sustained strong consumer demand. The same cannot be said about its tinned milk product in Australia – Nestle announced plans to close its tinned milk factory in northern Victoria. Consumers are less interested in the products and it cannot compete with cheap imports, the group said. In Europe, Nestle expanded its plant-based meat offer by launching Incredible Mince and renewing the recipe of its Incredible Burger.

Meanwhile, a recent survey in the US found that the proportion of people who identify as vegetarian or vegan has remained steady over the past 20 years and only represent a small portion of the population, at 5% and 3% respectively. But experts note that this hides the growing popularity of semi-vegetarian diets. Regardless, in Argentina, beef consumption is not dropping even after a 15-20% hike in prices. The depreciating currency has led to a recent surge in prices but consumers are reportedly willing to lower their budget elsewhere before cutting down on beef purchases. 

Japan’s second-largest beer company, Kirin, announced a plan to spend USD 1 billion to buy a 30% stake in Fancl, a maker of health foods and cosmetics, in order to deal with a shrinking local beer demand. In contrast, Coca-Cola will launch its first alcoholic drink ever in the country, a lemon-flavoured fizzy drink mixed with a grain-based alcohol called shochu. In India, Coca-Cola will launch a non-alcoholic malt-drink through its Barbican brand. Both products are seen as new alternatives amid a global shift away from soft drinks. 

The most exciting Coca-Cola innovation, however, comes from the UK, where the group will be testing the use of robots to deliver drinks in Alton Towers, a theme park resort. The self-driving robots will use AI technology to manoeuvre and deliver drinks to outlets across the park. 

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