As the ongoing trade dispute between the US and China escalates, some major food merchants are taking advantage of the trade dislocations to boost their profit margins. After Cargill mentioned the change in dynamics in its latest earning, ADM reported a two-fold increase in its second quarter net profit and said it was benefiting from the trade disruptions. The tensions propelled China’s grain demand from South America, where supply is already low because of a drought, while forcing other buyers to source grains from the US.
Bunge was not so lucky. The group posted a USD 26 million loss in the quarter, including USD 24 million linked to hedges in the grains market. The CEO explained they had – wrongly it turns out – gone long on Chicago soybeans on the expectation that the trade war between China and the US would be of short duration. They are hoping to do better in the second half of the year, however, despite the uncertainty linked to the new Brazilian freight rates and lower exports from the US. Bunge’s sugar and bioenergy groups reported a USD 40 million loss in the quarter, and the group explained it was partly a result of preparations to exit that business. Bunge added that it decided to postpone a potential IPO.
In Russia, meanwhile, the KSK terminal at the Novorossiysk port, which is a joint venture between Cargill and Delo Ports, could export 6-7 million mt/year of grains by July 2019. The manager said that in the last five years, KSK has increased exports three-fold, from 1.5 million mt in 2015 to 4.9 million mt in 2017.
Coca-Cola has been trying to cash in on the fact that students tend to carry a bottle of water on campus by installing self-service water stations at US universities. The idea is that the water is free but you can get additional bubbles or flavours at a cost. A test trial showed that students opted for the add-ons 10-20% of the time. The company wants to install more machines across the country’s university campuses. The timing may be right, especially as Coca-Cola had to increase prices this year because of higher import duties.
Starbucks’ US sales increased by a mere 1% in the last quarter, which the company blamed on health-conscious customers. In China, the company has joined hands with Alibaba’s meal delivery unit Ele.me to start door deliveries as local rivals eat into its shares. The company registered a 2% drop in comparable store sales in Apr-Jun but still hopes to triple its revenue in China over the next five years.
In Europe, Nestle lost an 11-year long court battle after the EU’s highest court rejected its trademark claim on Kit Kat’s four-fingered shape. Nestle had obtained a European trademark in 2002, which was challenged by Cadbury five years later.
There was a lot of talk about genetically modified (GM) food last week after the European Court of Justice decided to categorise gene editing in the same bracket as GM. The announcement was criticised by the biotech and chemical industries. Some farmers also criticised the decision, saying it will deny consumers access to high-quality farm products which use fewer pesticides.
In India, a survey of packaged food, including imported products, found that 32% had GM ingredients but 65% of them did not disclose it on their labels. This is despite the fact that Indian laws ban importing of GM food without approval. In Brazil, on the other hand, sugar and ethanol producer Copersucar says cane productivity can rise to 21mt/ha in 2025, from 11mt/ha in 2015, by using GM cane and better seeds.
In the US, the USDA has received a slew of suggestions from industry representatives on the National Bioengineered Food Disclosure Standard which is likely to be implemented from January 1, 2020. The Grocery Manufacturers Association wants refined ingredients to be excluded from disclosure norms as 90% of corn, soybean and cane are genetically modified. This, it said, will prune the list of products by 78%.
Environmentalists are hoping that China will direct some of its focus on cutting emissions to its livestock sector and its growing meat consumption instead of only looking at the power and transport segments. Chinese demand for feed is being blamed, in part, for deforestation in South America while the meat industry is a significant contributor to pollution.
On the subject of climate change, Cuba is looking into whether it needs to change its sugar harvest and planting calendar. The government said climate change had affected the weather, seasons and that the harvest timings may need to be adjusted accordingly.
Finally, a survey found that people in the UK are increasingly concerned about wastage as well as sugar content in food, but less so about prices. Over half of those surveyed put food wastage as a top concern, compared to 42% three years ago.
This summary was prepared by ECRUU
