A Conversation with Simon Francis

Good morning, Simon, and welcome to Commodity Conversations. Could you tell me a little about your career journey so far?

I have spent all my career in dry cargo with intermittent ventures into the digital world. I set up my previous company, G-ports, in 2003 after working for Levelseas back in the Dotcom 1.0 days. G-ports was eventually acquired by Marcura in 2017.

I started with the UK’s oldest shipping company, Stephenson Clarke Shipping, founded in 1730. I spent three years with them as a trainee in operations and chartering before moving up to Panamax and Capesize vessels working for Mosvold.

During my career, I’ve worked with all ship sizes in the dry cargo sector, from coasters up to capes.   Within this sector, I’ve worked for owners and charterers in their operations and chartering departments, including six years at Peabody Coaltrade, where I helped set up the freight desk. Interspersed amongst those periods was my time spent setting up and growing G-ports.

You founded G-ports. Where did the idea come from?

A chartering person must constantly ring up port agents to determine port costs and port restrictions to enable accurate voyage calculations. It’s a cumbersome process. In 2003, I set up a database of over 1,000 ports containing proforma port costs and restrictions. Users could obtain the information they required at the touch of a button now.  G-ports then expanded into congestion indices and commodity flows.

Marcura acquired the company in 2017. I stayed with them for two years before moving to Swire Bulk, where I worked with their business innovation team, assisting them with digital transformation projects.

And what about SHINC?

The idea behind SHINC’s laytime management platform was borne from being both a frustrated user ‘on the ground’ and having sat in management positions where the visibility of our laytime and demurrage positions was hidden in emails, attachments, and Excel sheets. I launched it briefly in 2015 but then mothballed it as I didn’t think the sector was ready. I’ve since rejuvenated it as people now recognise the role digitalisation can play in their business.

We’ll return to SHINC shortly, but let’s stick to chartering and freight now. What’s the most significant change you’ve seen in freight in the 30 years you have been in the sector?

The way we do our work. Thirty years ago, we would handwrite a telex on a piece of paper, which we would pass to a secretary, who would type it up and send it via the only telex machine in the office.

The process moved to a mix of fax and email in the mid to late 90s, but a lot of it was still paper-based – printing off, giving copies to colleagues, filing, all that sort of thing.

Email helped because you could do it digitally, but you still had to go through a lot of emails. Now, you’re in a world where the email is read for you, automatically filed, and tagged.

There have been other changes. In my early days, we would do voyage calculations on the back of a cigarette packet and measure distances on the map with compass points. It is now all done electronically.

So, from a chartering point of view, the process of putting together a piece of business now can be done much quicker and more accurately than in the past.

Is the current trend to move from emails to platforms?

It is, but email is still the backbone of it all. Counterparties still communicate via email. A freight broker sends everything via email to his principals. Principals send everything to the ships via email, and so it goes on.

Platforms facilitate the information held within the organisation. The collaboration of the information after that is still a work in progress. Companies like Sedna exist because everyone is still using email.

At SHINC, we enable counterparts to collaborate digitally on the platform, but they still receive an email notification when a laytime claim is sent to them.

You mentioned that the emails are now read electronically. Does that use artificial intelligence? Can you see a prominent role of AI – Artificial Intelligence – within that email flow or platforms?

It’s a mixture of OCR – Optical Character Recognition – and AI.

Some services – AXS Marine, for instance – have been using OCR, the precursor to AI, to read emails for years. Sedna uses AI to read emails. It then extracts the relevant information and inserts it into the shipping companies’ platforms or accounting systems. It makes workflows more efficient.

In the case of SHINC, people spend a lot of time manually inputting information on the laytime and demurrage side, for example, extracting data from a statement of facts document into a laytime calculator. AI and machine learning will get us to the stage of automating much of this process. The user will then be the person who monitors the laytime process and makes decisions in a proactive rather than a reactive manner.

I like to compare it to an airline pilot. In the old days, pilots would fly a plane for 12 hours from London to Singapore. Nowadays, they pilot it for about 90 seconds. The rest is automated, but you still need the pilot to control, monitor and make proactive decisions when required.

Let’s move on to SHINC. What does SHINC stand for?

It’s an abbreviation that the shipping world uses in Charter Parties for laytime working days. It stands for Sundays and Holidays Included. I could have called it SHEX, which would have been Sundays and Holidays Excluded.

You’re at a shipping conference and in an elevator with a potential customer. You’ve got two minutes to pitch the company. What do you say?

I’m still practising this, so let’s see how it goes.

SHINC digitalises the laytime workflow vertical, making it a proactive rather than a reactive process, enabling commercial decisions to be made before events happen rather than after.

We digitalise the workflow, bring in as much automation as possible to reduce manual data entry, reduce the risk of mistakes and create a platform where users can create, collaborate, agree, and settle their laytime demurrage claims efficiently. All whilst providing users and their management complete visibility of all their laytime claims.

My follow-up question is, what problem is SHINC looking to solve?

The laytime process is still manual, from entering port events from the Statement of Facts into the laytime calculator to collaborating and agreeing demurrage claims via email with multiple PDF documents attached.

Users have long email chains of communications and spend time comparing one laytime calculation against another produced on different systems. They monitor and manage their laytime claims, often on an Excel sheet. It is still very much a manual process that is open to errors and sits at the bottom of the logistics chain. One error in calculating the laytime can cost users thousands of dollars. The data is so opaque that both users and management often never know the mistakes being made and the money they are risking!

The agreement of a demurrage claim can also be a cumbersome process as users often interpret the clauses in the contract differently, leading to protracted negotiations.

We hope to enable and encourage people to be more precise in their contract clauses, which will help to have fewer negotiations and quicker processing.

SHINC solves these inefficiencies by enabling information to flow live, both pre-arrival and whilst a ship is in port.  It will allow commercial decisions to be made proactively rather than reactively.

SHINC will then use a combination of AI and digitalisation to enable demurrage claims to be agreed upon and settled more as a process than a negotiation.

Finally, once the demurrage claim has been agreed, SHINC provides data insights to help chartering departments make better commercial decisions in the future.

When you say that it enables commercial decisions during the voyage and the port, what type of commercial decisions would those be?

A good example would be whether to work overtime or not in a port. Currently, one would probably have to sit down with a pen and paper to manually calculate how much lay time is left on the port call to ascertain if the shipowner should pay for overtime or the port. SHINC aims to enable users to track laytime remaining during a port call on a ‘live basis’. Thus allowing them to make more informed decisions about the likes of ‘Do we pay for overtime or not?’

Many of my readers are young people who are learning about the business. Demurrage, despatch, and laytime may be unfamiliar to them. Could you just briefly explain them?

When a charterer contracts a ship to carry cargo, they stipulate in the contract how long it will take to load or discharge the cargo.

It is known as ‘laytime allowed.’

If your cargo is 100,000 mt and you agree to load at 25,000 mt a day, that’s four days’ laytime allowed. It won’t take exactly four days to load in practice. Suppose the laytime used to load the cargo exceeds the laytime permitted. In that case, a penalty payment is payable to the ship owner by the charterer for keeping the vessel in port longer than the contracted period. That payment is called the demurrage payment.

If the vessel is loaded by the port quicker than the laytime allowed under the contract, the shipowner pays a payment called despatch to the port at (usually) half the demurrage rate. It is like a bonus to the port for loading the ship quicker than the contracted period.

So, laytime is the time the vessel spends in the port?

Correct. The time spent in port is subject to the contractual laytime clauses. So, you have laytime allowed, and then there will be events stipulated in the contract where the laytime clock stops.

What might those events be?

You can’t load sugar or grain cargo when it rains, so laytime will not count during rain periods. Laytime will not count when shifting from anchorage to berth. Laytime may not count if the vessel loader breaks down. Clauses like that stop the laytime clock as the port call continues. It is where the interpretation of the contractual clauses can cause disputes, negotiations and time wasted processing the demurrage claim.

In the contractual clauses, Sundays and holidays are sometimes included in the laytime and are sometimes excluded – which is why you’ve chosen that name.

Exactly. The standard terms are SHINC and SHEX, and then there are variations thereof.

What sorts of disputes occur over laytime?

The classic example is when the contract says that shifting from anchorage to berth does not count as laytime. We all agree, but the question then is which event counts as moving from anchorage to berth? Some say it is from ‘pilot is on board’ to ‘first line ashore’. Others say it is from ‘anchor up’ to ‘all fast’.

If the contract isn’t clear, you can waste time disputing that one point. Some more modern contracts explicitly say shifting from anchorage to berth means’ anchor up’ to ‘all fast’. It’s explicit and clear. But so many of the contracts are historical. They’ve been used year after year, and they’re not explicit in the terms. So, people then interpret it in different ways.

Are those clauses in the contract or the charter party?

They are in both the charter party and the commodity contract.

What happens if you have a chain of counterparties when the cargo has been sold on a multitude of times?

When you have a chain of counterparts, the ship owner makes the initial demurrage claim as they claim the demurrage compensation. This demurrage claim will pass along the chain of commodity buyers and sellers, eventually arriving at the port terminal operators. Each claim may differ slightly depending on the contractual laytime terms between the two counterparts in that part of the chain.  It means that for every one port call, there can be multiple demurrage claims flowing up and down the chain of counterparts.

I was interested to see that the different interpretations of the laytime clauses in the contract cause 30 per cent of disputes. So, how does SHINC help to resolve those disputes? You mentioned that you were trying to get people to be more precise in their contracts, but how will you do that?

It’s a long-term aim of ours – an education thing. We will look to advise our clients as we go along. It would be a case of saying, “You spent six weeks disputing the interpretation of a clause with your counterpart. Maybe you should reword the clause to avoid this confusion going forward and save you time and money.

It would be more of an advisory service we would offer as an add-on to our digital platform – a value-added service where SHINC is not just a platform but a company that helps parties improve their bottom line.

How much money are we talking about here regarding demurrage and despatch? Can they be significant amounts of money?

Absolutely. I don’t think anyone knows the total global annual demurrage bill for tankers, dry cargo, and barges. Educated estimates are several billion dollars a year.

How much might it be on an average grain cargo in Santos?

The most significant claims are at the beginning of the grain season when you have 60 vessels outside the port for 40-45 days. If it’s a $20,000 per day demurrage rate in the contract, you’re talking of a claim of $800,000 to $1,000,000.

Could your platform be incorporated into other platforms, such as Covantis?

Absolutely. We built our platform with an open API (Application Programming Interface) so we can integrate it with any other digital platform.

It’s part of how SHINC can help businesses facilitate efficient workflows. Integrating with other digital platforms saves businesses from manually entering data from one data silo into another.

When did you launch SHINC, and how’s it going so far?

We launched with our MVP (Minimum Viable Product) in March of this year. We’ve identified our ideal customer profile and are gaining traction within that sector. We are also building our brand so people know who we are, what we do and how we can help them improve their business.  We are a small, bootstrapped team, so things take longer than if one had more resources.

SHINC is working to become a B Corp. Why do you want to become a B Corp?

We’re here to generate a profit for SHINC, but we also want to look at the bigger sustainability picture. From helping ports reduce the time ships spend in port and thus reduce emissions to reducing the amount of paper used in the laytime process by going digital. Every little bit helps towards the greater goal.

And you’ve pledged to give one per cent of your revenue to Surfers Against Sewage. Are you a surfer?

I call myself an attempted surfer. I moved to Cornwall 21 years ago to surf, and I’m still learning how to do it properly.

Are you a serial entrepreneur?

Well, I’m on round two, having sold G-ports in 2017, so I guess so. I ran little businesses at school, but don’t know if they count.

What’s the most important thing about you that I don’t know?

The shipping motto is My Word is my Bond. I believe in it. It’s how I’ve been brought up in shipping and life. I’m a My Word, My Bond person. I’d like to think that I live my life like that.

What drives you?

I have learned, with age, that I should do things I enjoy. I enjoy the world of shipping. On a Sunday night, I don’t go to bed with a heavy heart when I think about going to work the next day. I do it because I’m interested in it and enjoy it.

I work on this project in my head 24 hours a day, SHINC! But there is flexibility in it. I was up at 4 a.m. this morning talking to the Far East, but then I did the school run. I can then do the afternoon school run or go to the gym and work later in the evening. It’s not nine to five. It’s not a market that opens from nine till five.

© Commodity Conversations ® 2023

Shipping – A conversation with Jan Dieleman

Good morning, Jan, and welcome to Commodity Conversations. Could you please tell me a little about yourself and your role within Cargill?

I joined Cargill in the Netherlands as a trainee.  After three years in grain, I worked in shipping for eight years and then went into the energy markets for six years. I returned to shipping about six years ago. I’ve spent most of my career on the non-agricultural side of Cargill, which is quite unusual.

I am currently the president of Cargill’s Ocean Transportation business. We charter around seven hundred ships: 25 per cent for Cargill and 75 per cent for external customers, operating mainly in dry bulk and, to a lesser extent, in wet bulk. We are one of the top charterers in the dry bulk sector.

Our business doesn’t handle container shipments – another department within Cargill handles them. The container business is relatively fragmented, but there is some overlap with dry bulk.

How many people work in Cargill’s Ocean Transportation Department?

We have around 300 people: 100 in Geneva, 100 in Varna, Bulgaria, where we do our operations, and about 50 in Singapore. We have smaller offices in the US and Asia, and Amsterdam.

It must be challenging to manage seven hundred ships. To what extent do you use Artificial Intelligence?

We have developed AI-assisted analysis to predict where ships will go once loaded.  And we have some systematic trading where our models look at the data to produce a trade recommendation.

We use these tools on the operational side. We can see each ship’s daily fuel consumption and advise the master of the best speed to sail. There’s a lot to be done around the optimisation of this. There are still instances where we speed up a ship only to find it stuck in a port line-up.

Connecting some of these data points from the whole supply chain, not just the shipping side, will be critical in the next step.

Do you integrate the various physical commodities – and their supply and demand (S&D) – into your shipping models?

In shipping, you touch on all the commodities and their S&Ds. To succeed in the sector, you need to understand the underlying commodity flows and have a broad view of what crops are doing. For example, a delayed harvest will have an impact on shipping.

There is a lot of noise, and you must distil it all down to find the essence of what is driving the market.

When I started in commodities, shipping was an old-fashioned male-dominated sector with alcohol-fuelled lunches. How has that changed?

When I started, the business was, to some extent, as you describe it. When you walked into the room, everybody looked similar. Things have changed for the better. If you step on our trading floor here, you’ll see we have a diverse group of people in terms of gender, nationality, and skillset. It’s much more a reflection of what society is today.

There are three reasons for this change.

First, shipping has become more dynamic. In the early 2000s, when Cargill began growing its freight presence, many commodity markets were being deregulated, notably coal and iron ore. Previously, those markets traded on ten-year contracts. Then, in 2008-9, we had a massive spike in freight rates, spotlighting shipping as a significant input cost. It has attracted a lot of new talent to the industry.

Second, there has been a drive for more sustainable shipping, an essential topic for the younger generation. It has helped us attract bright and diverse people into the industry.

Third, there has been greater use of digital tools. In the old days, you had to use a particular broker because he was the only one who knew where ships were. It meant you had to have a good relationship with the broker. Now, you look at a screen and count the vessels yourself. It has made the industry more professional.

You started in grain, moved to energy and are now in shipping. Which do you prefer?

I like shipping because it touches on the underlying commodities and the energy landscape. Energy accounts for around 40 per cent of the cost of moving goods from A to B. I like the challenge of decarbonisation. Transiting to new fuels will have a massive impact on the sector.

Combining all these inputs and how they will play out drives me.

The United Nations predicts that global maritime trade tonnage will double by 2050. If true, it will make decarbonisation even more challenging.

There’s some uncertainty around the doubling, but it’s fair to say that as the population grows, trade volumes will increase.

We’re not going to achieve our GHG goals by doing things more efficiently. To achieve our goals, we must shift to zero-carbon fuels. We’ll run into a wall if we only work on fuel efficiency.

Recently, we have ended the ‘chicken and egg’ debate by ordering two methanol dual-fuelled bulk carrier vessels in collaboration with Mitsui & Co., Ltd. and TSUNEISHI GROUP. I believe shipping will need to move to zero-carbon fuels to meet its decarbonisation goals. Methanol offers one such pathway. It is the most technologically ready of the zero-carbon options, and we wanted to do something now to move the industry forward.

What about wind – cargo carriers with sails?

Wind power will not get us to zero carbon, but it is a step towards zero. Sails could reduce emissions by up to 20 to 30 per cent. They could also reduce fuel consumption by 20 to 30 per cent, giving us an immediate return on investment. Wind will make the hydrogen, ammonia, or methanol problem 20 to 30 per cent smaller.

We have been on the wind journey for some time. More than ten years ago, we experimented with kites. We learned that they didn’t work. Culturally, it was difficult for us to admit they didn’t work, but that’s okay because we learned from it.

On the waters today, you see ships with wind rotors – pillars that help power the vessel. We are looking at fixed-wing sails, something entirely new for our segment. They are huge, 40 meters sails made of carbon. The concept comes from professional yacht racing.

Do any bulk carriers currently have these carbon sails?

No, but we are going through the process of introducing the technology. There are several hoops we must jump through to get approval. You can imagine that the sails have an impact on visibility. There are always questions about stability and seaworthiness.

Currently, we are fitting wind sails to the Pyxis Ocean and should be able to start testing soon. There will be cargo onboard, so it will not be a sea trial but actual commercial use. We have done a lot of modelling, but we will see how it works when you have something on the water. We plan to scale it quite rapidly if we get confirmation that it works.

Energy-saving devices, biofuels, and supply chain optimisation are solutions that can be used today. We, as Cargill, are doubling down on all three of those.

I recently read Bill Gates’ book How to Avoid a Climate Disaster. He argued that we should first concentrate on the low-hanging fruit, such as electric vehicles, rather than the challenging areas of maritime freight and aviation.

I read the book and handed it out to our team in ocean transportation, as the book paints the picture very nicely.

Aviation, shipping, and steel were not part of the original Paris agreement on carbon reduction. I can see the logic that you shouldn’t prioritise those sectors, but they still represent a large part of emissions.

There is also the problem that all industries and sectors are trying to do the same thing – they all have the same deadline. Everybody wants to be zero by 2050. There will have to be some prioritisation because we’re all competing for the same solutions. Hydrogen, for example, pops up in a lot of industries. Bill Gates is correct in calling that out.

The maritime sector needs to contribute. We have a responsibility as an industry to get going and can’t just sit around and say we will look at the issue in 10-15 years.

There are two points I would like to make on this. First, there is the issue of who will pay for it. In this sense, aviation is probably better placed to absorb the cost than shipping. The second is that there are many industries within the maritime space. Cruise shipping differs from container shipping, which is different from bulk shipping. Which sectors are the biggest emitters, and which are closest to the end-user? It will be easier to pass on decarbonisation premiums in some parts of the supply chain.

The cost of decarbonisation in shipping will be huge, but in the container sector, it might mean only an extra half dollar on a pair of shoes. If you can pass the costs down to the end user, you can start scaling this and lower the cost of these new technologies. You can then roll them out to the broader industry.

There’s more to do between sectors, but we lack the mechanism. We tried to get one global carbon market in Glasgow but didn’t manage it.

What about the industry’s shift to low sulphur fuels – did that have an impact?

There is no debate; the shift has been beneficial from an environmental point of view. The move to low-sulphur fuels was a lot easier than people expected. There had been fears that half the fleet would get stuck, but if you announce things early enough, the industry finds a way of working around it.

Some people in the industry argue we should have gone straight to zero carbon, but it wasn’t feasible when the legislation was drawn up in 2016-17.

What are the other sustainability issues in shipping?

When people talk about sustainability in shipping, they only speak about decarbonisation. Sustainability is a much broader issue. It’s about human rights and labour conditions at sea. It’s about the recycling of ships. Look at the SDGs. They are a lot broader than just GHG emissions.

When researching this interview, I read that you once walked out of a conference panel because it consisted entirely of men.

We had been toying with this for a while and had decided that – to make a statement – we should represent ourselves in a diverse environment. You can’t say diversity is essential and keep doing things as you’ve always been. We had decided to only go on panels and accept speaking arrangements when there was a diverse group of people represented.

The conference you mentioned was in Norway. The organisers changed a little bit what they had promised. I decided to say that that was not what we agreed, and I didn’t show up on the panel. It was a small thing, but it’s gone a long way, and we have gotten a lot of credit for it.

Many event organisers now put gender parity as a minimum requirement. It is becoming an industry practice. It is great to see.

Are you seeing any move to gender diversity among crews?

The latest number I’ve seen is that females make up only 2-3 per cent of the workforce on ships. That’s far from gender parity, but it’s a complex issue. Ships’ facilities can be basic, and crews can be away from home for extended periods, which makes things more challenging.

Do modern ships need smaller crews?

No, a bulker needs about 20-25 crew. As we get more digital tools, that will probably reduce over time, but the work will also change.

It is a simple activity today but becomes a very different ball game once you start moving into ammonia and hydrogen fuels. We will need additional and higher skill sets than we have today.

When people think about shipping, they think of flags of convenience, tax avoidance, pollution, safety, and poor crew treatment. To what extent is that bad image justified – that’s the first question. And second, what is the sector doing to improve things?

You’re right that the sector has a track record of not being the most transparent and maybe not being the most proactive.  You have good and bad spots in any industry, but we must be careful not to paint a whole industry with one brush.

Things are changing rapidly, especially in transparency. When you get transparency, you gain clarity as to what needs improvement. An excellent example is taxation and beneficial ownership – who owns the ships. From a compliance point of view, we are in a completely different world than fifteen years ago.

Initiatives like Rightship have created transparency around safety. More needs to be done. Working at sea is dangerous, and we must make it safer.

Other initiatives around the sector’s environmental footprint have helped. The drive to decarbonisation combined with digitalisation sets us up for further change.

Could you briefly expand on some of the recent industry initiatives? What role do the three organisations, Rightship, the Sea Cargo Charter and the Global Maritime Forum, play?

Cargill has had an investment in Rightship for over fifteen years. The organisation began as a vetting agency, going aboard ships to evaluate safety standards. It has played a considerable role in raising safety standards.

Rightship has since evolved into a tech and data-driven company in the ESG space. Safety is still an important pillar, but the environment and crew welfare are also there. Its mission is zero harm. It looks to achieve that by creating transparency and raising standards. We are still heavily involved. We believe the right thing to do is increase overall industry standards – not just ours.

Recently, I was elected chair of the Global Maritime Forum, where the more progressive companies across the maritime space work together on various issues. We collaborate and set industry standards. We have a project we call the Getting to Zero Coalition. We bring people together to look at technology and the investments we need to reach our emission objectives.

The Sea Cargo Charter is another programme under the environmental umbrella of the Global Maritime Forum. It is an end-user initiative to have a standard way of assessing shipping’s carbon emissions. Previously, there was no common standard; everybody did it independently, and there was no benchmarking. We are a group now of 32 companies that uniformly measure emissions and compare them to the scientific targets for emissions reduction. It’s a transparent and standard way to evaluate how companies and the industry are doing compared to where we should be. We actively participate in the programme.

There are other significant initiatives as well. The Neptune Declaration was created to organise the industry around crew changes during the covid period. It was challenging to get crew on and off ships – and then get them home because there were hardly any flights.

Another initiative is starting soon around diversity and inclusion to leverage best practices from the industry.

What is the role of the International Maritime Organisation?

The IMO is a UN body that looks to regulate what happens on the high seas. It sets minimum safety standards, along with a host of other things. In the old days, the minimum standard was the standard, but most owners and charterers now go beyond that standard regarding the environment and labour conditions.

The IMO sets the baseline for global shipping. It is important because shipping is a worldwide business. The IMO involves many stakeholders and countries, making it challenging to move at the speed with which the industry is changing.

Does that mean that the private sector is driving change within the industry?

Although it may not be valid across the entire industry, I agree that the private sector is taking the lead. For example, many countries and companies have declared 2050 net-zero carbon goals, way beyond the IMO goal of cutting carbon emissions by 50 per cent by 2050. A large part of the industry is willing to go faster than the IMO.

Finally, what advice would you give to somebody who’s starting in shipping or thinking about going into shipping?

Shipping is under-recognised and under-appreciated. People often think of shipping as a service or logistics operation, but it’s much more than that. It is a market – and a volatile one. The Capesize market is possibly the second most volatile market after Natgas. There is much more going on in freight than people realise.

If you’re interested in the decarbonisation drive, there’s a lot you can do in shipping, even though the sector is viewed as hard to change. There are a lot of opportunities. Our recent hires are excited about the green side of shipping and the contribution they can make.

For people already in freight or just starting, I would say, “Be curious. Don’t zoom in too quickly on one market or one commodity. Keep your eyes open, see how the interactions work and identify the risks and the opportunities.”

I would also say, “Don’t pursue a career where you don’t have a passion.  You can be okay, but you will never excel. Go where your passion is and be curious.”

Thank you, Jan, for your time and input.

© Commodity Conversations ® 2023

Commodity Conversations Weekly Press Summary

ECRUU is turning 5!

We’re making some (exciting!) changes and we’ve been debating whether to continue doing this weekly report. 

What do you think? Let us know in the comments if you want us to continue.

Brazil’s agribusiness logistical map is about to be turned “upside down”. Ports in the Amazon region, the so-called Arco Norte, are expected to handle over half of the country’s soy and corn exports, up from 23% in 2010 and overtaking for the first time ports in the Southeast and South. It costs USD 300/mt to transport grain from Mato Grosso to Santos Port, double what it costs to take the grain to Miritituba in Para where it is taken in barges to the Port of Vila do Conde. 

Export costs could fall further if the plan for Ferrograo, a railroad connecting Mato Grosso to Para, goes ahead. Another railway project, the Nova Ferroeste, would connect Maracaju to the Port of Paranagua and help reduce transport costs by a third. Both projects are opposed by environmentalists but an official argued that one 100-wagon train would replace 357 trucks. The government also invited the private sector to submit projects to create a new route from Sao Paulo to the Port of Santos. The project also attracted objections from environmentalists in the past but an official said the idea would be to create a zero carbon highway. Analysts said logistics bottlenecks were the biggest challenge for Brazilian agricultural exports but investments such as these will give the country a competitive edge. 

On the other hand, local media reported a shortage of grain storage space last week in Brazil’s Mato Grosso. Despite recent investments, the country’s total grain storage deficit increased from 12 million mt in 2010 to 94 million mt in 2019. Ongoing dry conditions combined with stronger domestic demand have pushed up the domestic price of corn. One corn ethanol producer warned that corn was so expensive it didn’t make sense to make ethanol from it at the moment. The situation is expected to get tighter with many analysts downgrading the corn harvest due to the drought. 

Chicago corn futures rallied to an 8-year high last week. The USDA downgraded the US’ end of year corn stocks to a 7-year low due to higher demand from the ethanol sector as well as strong export demand. It also reduced the forecast for planned corn planting next year. Analysts expect prices will continue going up – fertiliser prices have risen by close to 100% in the past year and there continues to be strong demand from the ethanol and export sides. However, they flagged that China bought a lot of corn which it hasn’t shipped yet. 

Nestle is the latest to join the Rimba Collective, a USD 1 billion project that aims to protect and even reforest some 500,000ha involved in the Southeast Asian palm oil supply chain. Launched by Lestari Capital, the project already involves the likes of Wilmar and PepsiCo. Nestle said “we are evolving from a no-deforestation strategy to a ‘forest-positive’ one.” 

Olam reported that 2020 was one of its best years ever. The tradehouse saw a 36% increase in operating earnings to USD 678 million despite the pandemic. On top of that, it announced it was now able to trace all of the cocoa it sources directly, which represents 12% of the world’s cocoa beans. 

ADM expects that its plant-based protein business will overtake its crop trading business in size by 2050. The company said it was already the world’s biggest plant-based protein provider. ADM is planning to invest more in plant-based protein in China where it is seeing an uptick in demand. China is looking to boost food safety and reduce carbon intensive farming, which will contribute to the country’s plant-based protein market growing from USD 10 billion in 2018 to USD 14.5 billion in 2025, ADM noted.

There is talk that Impossible Foods is planning an IPO which could fetch USD 10 billion. The group saw USD 7 billion in retail sales in 2020, up by a third when compared to the previous year. Prospects are good, Reuters noted, given that Beyond Meat’s share price increased fourfold since its IPO two years ago. 

The Good Food Institute estimated that a record USD 3.1 billion was invested in the alternative meat market in 2020. However, US sales of meat still increased by 19% in the past year. But this is not all bad. A new study found that the US beef industry reduced its carbon footprint by 40% between the 1960s and 2018 while making 66% more beef – making it the most sustainable beef production system in the world. 

Finally, not all vegan burgers were born equal. You can find out here which one is the best for the environment. 

This summary was produced by ECRUU

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Traders and merchants

Coffee traders and merchants move coffee from areas where it grows well (and cheaply) to places where it grows less well, or not at all. They transport coffee from surplus areas to deficit areas.  If coffee is worth more money in the US than in Brazil – and if that difference is more than the cost of shipping it (plus a little profit margin to make it worthwhile), then the trader or merchant will make it happen.

Coffee traders do not only move coffee from surplus to deficit areas. They also store and process it. They hold coffee at times when it is not needed (after the harvest) until a time it is needed (throughout the year). Coffee millers process coffee from a form in which it is not wanted into a condition in which it is wanted, transforming cherries into green beans. Roasters transform the green beans into roasted or soluble coffee.

Millers and roasters are, by definition, traders. A miller buys cherries and sells green beans, while a roaster buys green beans and sells roasted beans. Just as a trader may depend for his livelihood on his skill in buying coffee in one country and selling it in another, a roaster depends on his skill in buying coffee in one form and selling it in another. Millers and roasters are traders, and they need trading skills to perform their tasks correctly.

When you think about that a little, it becomes clear that what a trader is most interested in is not the outright price of coffee but the difference in the prices of that coffee in its different geographies, times and forms.  It is the price differential that matters, not the outright price. Traders like to limit their exposure to the outright, or flat price, of a commodity. They usually hedge their outright price risk, preferring to make their money on the differentials – the difference between the cost of the futures and the price of their particular coffee.

All traders – and that includes roasters – will try to reduce their risk of future price movements by hedging what they buy, taking an offsetting position for the same quantity in the futures market. Having purchased the physicals, a trader will sell futures as a hedge. When he sells the coffee, the trader will buy back their futures hedge; they no longer need to be protected against a move in the outright price of coffee because they don’t own it anymore.

Everyone involved in the coffee supply chain is taking and managing price risk. The farmer is perhaps taking the most significant risk by growing coffee in the first place. He may try to offset some of that risk by selling in advance – selling something that he doesn’t (yet) have.

The trader is taking a risk on the quantity that he buys but offsets that risk by hedging in the futures market. The roaster is also taking a risk; he has invested in his roasting machinery and has the risk that coffee prices will be too high to allow him to make a profit when he sells his roasted beans.

When I began my trading career with Cargill in the late 1970s, my first business card gave my title as ‘Commodity Merchandiser’.  But what is the difference between a trader and a merchandiser? Traders take positions on the markets, betting whether prices – or the differentials between prices – will rise or fall. Merchandisers move commodities along the supply chain, taking a tiny margin at each stage of its journey.

Traditional commodity merchandising has become more challenging and less profitable over time. It has become tough to make a margin just moving coffee along the supply chain.

One of the significant difficulties that merchandisers now face is that information is widely and freely available. It also travels incredibly fast. Technological change has reduced the potential for traders to arbitrage prices between geographical regions.

The other significant change is that governments and government agencies have pretty much left the coffee business. In the past, governments were often responsible for selling their country’s production, and this led to opportunities for corruption. Low-paid government officials were easy targets for unscrupulous traders; selling tenders were often rigged in favour of the traders that gave the biggest bribes. The markets have now been privatised, and this no longer happens.

In a world of instant information, it is no longer possible for merchants to take advantage of price differentials in various countries; instead, they now have to anticipate them. It is the point where a merchant becomes a trader. A trader predicts where shortages and surpluses will occur, and he takes a position in the market in anticipation of future price moves. As a result, analysis has become the lifeblood of trading.

It is not unusual for a trading company to employ more analysts than traders. Nor is it uncommon for traders to spend most of their time not on trading, but analysis. It is impossible to succeed in the commodity markets without an experienced group of traders and analysts to interpret and understand the mass of information that needs to be absorbed.

But analysis is not the only thing that you need to succeed in the physical commodity markets: you also need clients. Traders, therefore, have to keep in regular contact with their client networks, and they have to move physical coffee along the supply chain. There is now such an overlap between trading and merchandising that they are pretty much the same thing.

Merchandising coffee allows you to see the trade flows, helps with your analysis, and enables you to anticipate trading opportunities in the coffee market. But the margins on straight merchandising are now so thin – and sometimes even negative — that it is pretty much impossible for a pure coffee merchandiser to survive. The profits from trading subsidise the lack of profits, or the losses, on merchandising. In that sense, merchandising enables trading, and trading facilitates merchandising. They are mutually dependent.

© Commodity Conversations ®

This is an extract from my latest book ‘Crop to Cup – Conversations over Coffee’, available now on Amazon

A Conversation with Dave Hightower

Dave, thank you for taking the time to speak with me. You began the Hightower Report back in 1990. What are biggest changes that you have seen in the markets since then?

 When I started the company, China was relatively unimportant in the world grain markets. It is now the most important factor in terms of price and flows.

Back in 1990, the markets were still very US-focused, and still driven principally by the fundamentals of each particular commodity. Since then the markets have become global and have lost much of that focus on the US.

Globalization has also meant that markets now often move together, in unison. Ethanol has played a role in this: corn and beans are now energy commodities; there is a good correlation between the prices of crude oil, beans and corn.

Traders don’t always pay enough attention to outside markets. The price of oil is a major factor, but you also have to look at currencies and the stock market – are we, for example, going into deflation?

All this means that you can’t just look at the supply and demand of, say, beans, in isolation. You have to take into account a lot of other factors. So that has been the biggest change.

Are the fundamentals still important?

Very much so. The advent of the hedge funds has increased short-term volatility, but in the medium- to long-term, market price will always go to its fundamental value.

What are the main issues now in the grain markets?

We are coming out of a period of over-supply and going into a period of tighter supply. The trade had assumed that we would have multi-year surpluses, but we have slowly transitioned into lower stocks. In the corn market we have seen China liquidate huge strategic stocks – corn that was really old. They are now in a phase of rebuilding their stocks, and we are expecting them to hold bigger stocks than in the past, largely to protect themselves from future supply shocks, for example from a pandemic.

China has already purchased 71 percent of what they promised to buy under the first phase of their US trade deal. They will probably complete what they promised by the end of the year, but they may buy more depending on how much they want to rebuild their strategic stocks.

We are seeing China buying a lot of everything at the moment: crude; natural gas; copper; zinc etc. China’s GDP may grow 5.5 percent this year – that’s relatively slow compared to the past – but their economy is switching focus from exports to domestic consumption. That means that they will buy differently than in the past.

China is not going to buy agricultural commodities because of US pressure; China is going to buy or not buy either because they need it or because the price is attractive to them. In any case, it is not what China buys from the US that is important, it is what China buys globally.

US farmers have received record subsidies this year. Will that continue?

It will be a question of priorities. With the pandemic, there are now a lot of politically more important groups that are lobbying for financial help. The pandemic has increased the need for government spending and reprioritized where it is going. Unless crop prices fall so low that we start to see farm bankruptcies, I think that there will be less subsidies for farmers next year.

Remember that US farmers have had difficulty in promoting ethanol in the face of the oil lobby; the farmers have lost some of their political clout.

What will you be focusing on in your presentation at the Geneva Grain Conference?

I will be looking at the tail end of the Southern Hemisphere crops and then set the scene for the next cycle in the Northern Hemisphere. I will be concentrating on the fundamental S&D.

I will be very specific on the price outlook – where I believe prices will be going over the next six months to a year – and on the timing of future moves.

Thank you, Dave for your time and good luck with your presentation.

 © Commodity Conversations ®

My PC lunch

“It depends,” he said. “If they are free range then that’s OK, but if they are battery-raised then you should really not eat them.”

I was having lunch with an old friend and we were studying the menu, a three course set lunch. I had told him that I might have the quail eggs as a starter.

“You see,” he explained, “quail are wild birds that are easily startled. When they are in cages they try to fly away and can often break a wing. Chickens are different: they have been domesticated for thousands of years and are not so easily startled. We will have to ask if the quails are free range.”

“What about the octopus?” I asked.

“Can you believe that they are now starting to farm octopus?” he asked me. “It is incredibly cruel. Octopuses are intelligent creatures; they will suffer terribly in a confined pond. But they will probably learn to escape anyway.”

“I think I will have the winter salad,” I said, taking the third choice starter. But what are you having for your main course?” I asked. The choice was beef, lamb, cod or pasta.

“It’s a problem,” he replied. “I read recently that lamb can have a higher carbon footprint than beef because there is less meat on each animal, but it depends on whether the lamb is locally produced or imported from New Zealand. Do you know that imported lamb can sometimes have a lower carbon footprint that local lamb?”

“What about the beef?” I asked, ignoring his question.

It depends if it is grass-fed,” he replied.  “I am trying to cut down on meat generally. I saw that documentary the other evening, The Game Changers, about top athletes switching to vegan diets. It seems to work for them.”

“I think I will have the pasta.”

“You’re lucky,” he told me. “I am gluten intolerant—not coeliac—but if I eat wheat I blow up like a balloon. It’s most uncomfortable!”

The waitress came to take our order. She looked nervous and I guessed it might be her first day in the job.

“Do you know if the quail eggs are free-range?” my friend asked her.

“I am afraid I don’t,” she replied nervously. “But I could ask.”

“Yes please,” I replied. I didn’t much fancy the winter salad and would have preferred the eggs. The waitress disappeared for quite a while and then came back crestfallen.

“The chef doesn’t know about the eggs,” she told us sadly.

“What about the octopus?” I asked. “Is it farmed or wild?” A look of panic crossed her face. “Don’t worry,” I said, “I will have the winter salad.” She looked relieved and noted it down on her pad. My friend told her that he would have the same.

“What about the beef?” he asked her. “Where was it raised—what is its origin? You know, you really should mark on the menu where you source your meat.”

For a moment I thought she would burst into tears.

“I will ask the chef,” she told him.”

“And please ask him for the lamb as well please.”

“Yes sir,” she replied as she fled back to the kitchen.

“Are we allowed to eat cod at the moment?” I asked my friend. “I read somewhere that the cod stocks were being depleted again. It is difficult with fish—there is always a danger of overfishing.”

My friend was about to answer but we were distracted by the sound of shouting from the kitchen. Our waitress returned, looking rather flushed.

“The meat comes from the UK,” she told us rather cautiously. “The lamb is from Wales and the beef is from Scotland.” I guessed that she was making it up, or that the chef had told her to make it up.

“I will have the beef then please,” my friend told her.

“And I will have the pasta.”

“Could you please choose your deserts as well please?” our waitress asked us.

I looked at the menu and chose the cheesecake. My friend ordered the same.

“But only if it is made with Bonsucro certified sugar,” he added.

“You’re kidding me!” I exclaimed.

“Yes,” he replied with a laugh. “I am kidding you! But I am not sure about the cheese. Dairy has a high carbon footprint, you know.”

© Commodity Conversations ®


Grown commercially since 1997, GM (genetically modified) corn now accounts for about one third of the corn grown in the world, most of which has been genetically modified to tolerate glyphosate, sold as Roundup, a relatively inexpensive herbicide that kills all plants except those with genetic tolerance.

Monsanto released glyphosate resistant soybeans under the name Roundup Ready Soybeans in 1996 and within ten years 80 percent of all soybeans grown in the US were Roundup Ready. Roundup Ready corn received FDA approval in 1997 and it was commercially released in 1998. It used much the same technology as in soybeans, but also had built-in insect protection in the form of a Bt protein, a naturally occurring bacterium that lives in the soil and is toxic to insects.

Scientists also modified corn genes to make the crop more drought tolerance. Drought tolerant GM corn was approved by the USDA in 2011, and commercialized in 2013.

As Christine Du Bois writes in her book, “The Story of Soy,” some 80 percent of all soybeans in the world are genetically modified to be resistant to Roundup. In the Americas, that figure rises to 95-100 percent. In terms of acreage, GM soy accounts for around half of all GM crops in the world.

GM soy largely came about as a result of the introduction of Roundup in the 1970s, with Monsanto trying to find a gene that was resistant to the herbicide. They eventually one in bacteria in a Roundup factory’s waste pond, and engineered it into soy plants. The introduction of Roundup Ready soybeans allowed farmers to increase yields by planting rows closer together. Without it, farmers had to plant rows far enough apart to allow weed control by mechanical tillage.

The Monsanto Company was no stranger to controversy; it once manufactured the insecticide DDT, as well as the defoliant Agent Orange that was widely used in the Vietnam War. Bayer, a German multinational pharmaceutical and life sciences company bought Monsanto in 2018 for $66 billion. Since then Bayer has been entangled in litigation over claims that Roundup causes cancer, something that the company obviously denies.

Over the past twenty years, GM technology has revolutionised farming and transformed the seed and agricultural input business. Previously, much of a farm’s cost of production was in purchasing chemicals: fertilizers, herbicides and pesticides; chemical companies made their money selling these inputs. Now the cost is in seed development . The result has been a merging of the chemical and seed businesses: over recent years, the large chemical companies have bought up the seed companies.

Although GM technology has revolutionised the industry, its effect on yields is sometimes questioned. By one estimate, about 50 percent of yield increases since the 1920s have been the result of breeding, including genetic modification, while the other half have come from improved farming practices: better farming techniques have been just as important as genetics. However, that is hardly surprising when you consider that the primary objective of genetically modifying crops has not been to increase yield potential. The increases in yield that have come with genetically modified corn have come in the form of yield protection and stability, not actual increases in yield potential.

In Seeds of Science: Why We Got It So Wrong on GMOs, Mark Lynas, an early anti-GMO activist, admits that the scientific evidence for the safety of GMOs is robust. He writes, “I cannot deny the scientific consensus on GMOs while insisting on the strict adherence to the one on climate change, and still call myself a scientific writer.”

Meanwhile, Amanda Little, in her book “The Fate of Food: What We’ll Eat in a Bigger, Hotter, Smarter World, quotes Tamar Haspel, a journalist for the Washington Post, as saying, “The argument against GMOs has never really been about the GMOs themselves. It is about a corporate-dominated, industrialised food system for which GMOs serve as a kind of proxy.”

She argues that the public may be more accepting of the new gene editing technology, CRISPR (pronounced CRISPER). Gene editing involves the deletion, insertion, or modification of the genome at a specific site in a DNA sequence. She writes,

“CRISPR may not win minds and hearts overnight, and we still have much to study and learn about it. But here’s hoping that transparency, community involvement, and applications in the public interest will bring gene editing sceptics to the table — disbelief at least temporarily suspended — to give it a chance.”

However, as The New Food Economy argues, these new techniques are already creating a debate about what “genetic modification” really entails. Most people use the term to refer to inserting foreign DNA from one organism into another. This process, known as transgenic mutation, cannot happen on its own in nature.

CRISPR doesn’t require the insertion of foreign genetic material. The technology allows scientists to precisely edit in, or edit out, targeted traits. In this sense, CRISPR is an acceleration of traditional methods of plant and animal breeding, and not an unnatural mutation that could not occur outside of a laboratory. The United States Department of Agriculture (USDA) seems to agree, and has decided not to regulate gene-edited crops in the same way as GMOs.

Of all the new developments and new technologies in agriculture, CRISPR seems to be the one with the most potential to increase yields, something that is essential if we are to stop deforestation and biodiversity loss. But to do that, it will first have to be accepted by consumers. Fingers crossed that it is!

© Commodity Conversations ®

The History of Agriculture

My book on the grain merchants has reverted to the title I first thought of, “Alphabet Soup—The Seven Companies at the Centre of Your Food Supply.” I am still aiming for publication in early-November.

There is a saying in the book business that “the wastepaper basket is a writer’s best friend.” In putting together the first draft of my book, I deleted large chunks of what I had previously written. I have fished out some of the least bad bits, and I will share them with you over the coming weeks. This is the first:

As Richard Manning wrote in “Against the Grain: How Agriculture has Hijacked Humanity,” of the roughly 300,000 years that mankind has wandered this earth, we have spent 290,000 of those as hunter-gatherers. Agriculture is a relatively new game for us and, as you have realised when visiting your local supermarket, we still have hunter-gatherer genes.

And even during the last 10,000 years, farming has changed little. Fields were regularly left fallow, and animal manure was the sole fertiliser. It was only in the early 1800s that scientists began to understand that inorganic minerals such as nitrogen, potassium, lime, and phosphoric acid could replenish depleted soils, leading to the production of mineral fertilizers.

The search for fertiliser led merchants and scientists to the dry seabird islands off the South American and South African coasts, where immense deposits of bird droppings, rich in nitrogen and phosphorus, had accumulated over centuries. Guano mining became a profitable business. Between 1840 and 1880, guano nitrogen made a vast difference to European agriculture, but the best deposits were soon exhausted. Rich mineral nitrate deposits were found in Chile, and nitrate mines gradually took the place of guano in the late 19th century.

However, as Michael Pollen writes in The Omnivore’s Dilemma, the great turning point in the modern history of agriculture can be dated to the day in 1947 when a huge munitions plant at Muscle Shoals, Alabama, switched over from making explosives to making chemical fertilizer. He explains that at the end of World War II, the US government found itself with a surplus of ammonium nitrate, the principal ingredient in making explosives. Ammonium nitrate is an excellent source of nitrogen for plants, and the chemical fertilizer industry (along with that of pesticides, which are based on the poison gases which were also developed for war) was the product of the government’s effort to convert its war machine to peacetime purposes.

Even though the earth’s atmosphere is about 80 percent nitrogen, nitrogen atoms have to be split and joined to hydrogen atoms (“fixed”) before they can be used for fertilizer or bombs. A German Jewish chemist named Fritz Haber worked out how to do that in 1909. Before he made that discovery, all the usable nitrogen on earth had to be fixed by soil bacteria or by electrical lightning, which breaks down nitrogen bonds in the atmosphere.

In his book, Enriching the Earth: Fritz Haber, Carl Bosch and the Transformation of World Food Production, Vaclav Smil explains that “there is no way to grow crops and human bodies without nitrogen.” Without Haber’s invention, the amount of life on earth would have been limited by the small amount of nitrogen that bacteria and lightning alone could release. Mr Smil argues that as a result, the Haber-Bosch process for fixing nitrogen (Bosch commercialised Haber’s idea) was the most important invention of the 20th century. He estimates that 40 percent of the people on the earth today would not be alive if not for the invention. Without synthetic fertilizer, billions of people would never have been born.

Although Fritz Haber won the Nobel Prize in 1918 for “improving the standards of agriculture and the well-being of mankind,” he has since largely been airbrushed out of history. During World War I he helped the German war effort by making bombs from synthetic nitrate. Worse, he also developed poison gases including Zyklon B, the gas used in the Nazi concentration camps.

Michael Pollen argues that once mankind had acquired the power to fix nitrogen, the basis of soil fertility shifted from a total reliance on the energy of the sun to a new reliance on fossil fuel. The Haber-Bosch process works by combining nitrogen and hydrogen gases under immense heat and pressure, the energy supplied by electricity. The hydrogen is supplied by oil, coal or, most commonly today, natural gas.

Growing crops, which from a biological perspective had always been a process of converting sunlight into food, has become a process of converting fossil fuels into food. More than half of the world’s supply of usable nitrogen is now man-made—and more than half of all the synthetic nitrogen made today is applied to corn alone.

© Commodity Conversations ®

Commodity Conversations Weekly Press Summary

Wilmar International and Associated British Foods (ABF) announced the creation of a joint-venture in China that will produce yeast and other bakery ingredients. The partnership will build a new unit attached to a Wilmar food processing factory and take over operations from AB Mauri, an ABF subsidiary.

In order to reduce costs after a disappointing first quarter, ADM has merged two of its five businesses – the grain trading and oilseeds segments – into one operation. The group is struggling amid the bad weather in the US Midwest and trade tensions with China. This marks the second restructuring in 14 months and analysts noted that it would help streamline operations.

ADM was reportedly one of the trading groups who sold Brazilian corn to the US in recent weeks, as sources said that between 5 and 10 Brazilian corn vessels were purchased by Smithfield Food in the US, a subsidiary of China’s WH Group. Importing can save on the cost of transportation from the Corn Belt, where the bad weather is expected to delay planting and lower total corn output this year. Overall, traders estimate that the US could be due to receive 1 million mt of corn from South America. This would help Brazilian farmers, who expect to harvest a record 100 million mt of corn. Global corn supplies are also being threatened by the fall armyworm in China, usually the world’s second largest corn producer, as the pest has now affected 15 regions and should keep spreading, according to the USDA.

In Switzerland, the NGO Public Eye is asking the government to implement stricter rules on human rights violations for agricultural trading companies that operate out of the country. It estimates that 50% of global grain, 40% of global sugar and 30% of global coffee and cocoa are traded from Switzerland.

In a major but little-noticed move, the USDA officially authorised the transport of hemp and THC across US states last week. The agency said that “Congress has removed hemp from schedule I and removed it entirely from the CSA (Controlled Substances Act)”. Analysts noted that Unilever was in a good position to trial the sale of cannabidiol (CBD) products, which was legalised with hemp in the 2018 Farm Bill, thanks to its large number of brands. The group has already announced possible CBD variants for two brands: Schmidt’s Naturals, which makes natural deodorants, and Ben & Jerry’s.

The competition is increasing in the plant-based meat sector as Nestle is due to launch its Sweet Earth Awesome Burger in the US before the end of the year. While other brands like Beyond Meat and Impossible Foods are already available in many outlets, Nestle highlighted that its vegan burger is actually healthier, with more fibre and protein than its competitors. This marks the third plant-based burger offered by Nestle, along with the Garden Gourmet brand in the EU and the Incredible Burger it sells through McDonald’s in Germany.

The traditional meat market could also see some major changes, as Brazil’s chicken producer BRF SA is looking to acquire Marfrig Global Foods SA, which would create the world’s fourth-largest meat company. Protein export demand is expected to surge this year as China is due to lose 10% of its pig population to the African Swine Fever, although experts cautioned that the two groups might struggle to combine and streamline operations.

The Ecological Transition ministry in France instructed 15 fast-food chains, including McDonald’s, KFC, Burger King and Starbucks, to sort the waste at 70% of their restaurants before the end of 2019, in order to comply with a 2016 law. France is also planning to expand the ban on the destruction of food items to non-food items, like clothes sold by luxury stores or online retailers. The measures are seen as a consequence of the success of the green party during the European elections.

Lastly this week, a Californian judge agreed to overrule the decision that would have forced coffee makers to include a cancer warning label. The drawn-out legal case revolved around the trace amounts of acrylamide, a carcinogenic, found in coffee.

This summary was produced by ECRUU

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AgriCensus Report

Grain market shorts brace themselves for “history-making event”

Corn and soybean futures moved sharply higher during early trade on Tuesday as analysts warned that up to 13 million acres of area could be lost due to persistent rains across key planting areas.

By time of press the July front-month contracts on the Chicago Board of Trade were up 2.5% for corn and 1.5% for soybeans as traders rushed to buy back short positions.

“We have a true problem here, and the most aggressive price moves always occur when funds flip from net short to net long, that’s what’s happening,” said Charlie Sernatinger, a broker with ED&F Man.

Data recorded last week showed the net short position in corn has collapsed to 116,000 lots from 283,000 lots the week before, with soybeans falling to 153,000 lots from 169,000 lots over the same period.

Rain will continue to batter the Midwest this week, according to weather forecasts, although precipitation will be less intense than recent weeks.

Analysts expect some fieldwork to have been done despite the rains, although the estimates for Tuesday’s crop report vary wildly with corn plantings expected to be between 59-65% complete versus 49% a week ago and 90% by this time last year.

Soybeans are expected to be 25-36% complete versus 19% last week and 74% a year ago.

And now some analysts are saying the current crop could be the worst in more than 100 years, with more than 10% of the acreage lost due to sodden ground.

“Going forward there will be 10 million prevent plant corn acres and 3 million prevent plant soybeans. The yield is going down also. This a history making event in US crop production. Few understand the serious situation,” said Chuck Shelby, president of Risk Management Commodities.

Corn futures have rallied more than 18% in the past three weeks while soybeans have rallied just 5% over the same period.

However, with continued rain forecast, there is some concern that the corn rally could spill into soybean futures as delayed plantings expected to switch from corn to soybeans may not occur.

“The trade is focused on short covering in corn, which is lifting nearby contracts higher. Say the same planting problems arise for soybeans later this planting season, the same thing could happen to CBOT soybeans,” said Terry Reilly, an analyst at Futures International.

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