The impact of the bad weather across the US Midwest and Great Plains was worse than initially expected for ADM, who reported a 41% fall in net quarterly earnings. The sweeteners, starches, ethanol and bioproduct segments all reported lower results. The company is even looking at splitting off its ethanol business, including several of its dry mills, as a result. On the positive side, the firm said it expected to see a resolution in the US-China trade war soon, which would significantly boost demand.
ADM, along with other specialty ingredient firms like Ingredion, will be competing with Tate & Lyle for new acquisition targets, analysts noted. The head of Tate & Lyle said acquisitions in the sector will be their main priority over the next 18 months. Tate & Lyle’s specialty ingredients business, which makes sugar alternatives such as stevia and sucralose, has seen a very strong growth last year. For the moment, however, the primary product branch, which makes starch-based sweeteners in North America, remains the largest segment.
In a similar vein, Cargill inaugurated a new corn processing plant in Brazil. It is designed to produce up to 30 different starch products adapted to meet changing consumer demand. The plant will be able to make non-genetically modified corn starch, as well as variants that can change food texture. Cargill reported a 15% growth in its annual profit in Brazil last year and intends to invest USD 127 million in the country in 2019.
In Southeast Asia, Louis Dreyfus Company (LDC) announced that it bought a stake in one of the region’s largest poultry producers, Malaysia-based Leong Hup International, during a recent IPO. This marks LDC’s first investment in livestock and is part of an effort to “diversify further downstream”, the CEO explained. In addition, the group will also look to purchase a stake in China’s Luckin Coffee in an upcoming IPO.
Now that two US courts ruled against Bayer in glyphosate cases, analysts are saying the firm faces a potentially serious threat. Bayer reported that the number of cases related to the weedkiller had reached 13,400. The firm could absorb up to USD 5 billion in settlement costs but a settlement expense of USD 20 billion could severely impact its credit rating, experts warned. Fortunately for them, Monsanto’s purchase helped Bayer increase core earnings by 45% to USD 4.67 billion in the past quarter.
Another Monsanto project is facing legal headwinds, as activists published a paper arguing against the spread of genetically modified (GM) chestnut trees in North America. A fungal infection wiped out millions of trees in the 1900s and Monsanto helped develop a GM tree resistant to the disease which could be planted in the wild. But activists argue that the trees could spread into indigenous territory and violate tribal belief in nonintervention. Researchers, however, say the spread of the tree would be easy to keep under control.
Two major food producers, Hershey and Mondelez, said the strategy to increase prices has paid off in the first quarter. Hershey is increasing the price of 20% of its products by 2.5% this year, while Mondelez hiked the price of North American products by 2% last year, a strategy also followed by Kraft Heinz and General Mills. Hershey also benefited from a fall in cocoa costs which helped increase profit margins, while Mondelez said results were impacted by higher costs and currency fluctuations.
Mondelez International pledged this week to source 100% of its cocoa through its Cocoa Life program by 2025. About 43% of its cocoa is currently sourced through the program which offers farmers financial and educational support. However, the firm said it was already witnessing some cost inflation and crop variability due to climate change. Similarly, Nestle announced that 77% of its agricultural commodities were now deforestation-free, with the goal to reach 100% by 2020. Nestle is monitoring its entire palm oil supply chain using satellites and plans to extend the verification to pulp and soy.
Mars Inc released an unusual snack in India this week, called GoMo Dal Crunchies, which is a yellow square made from yellow peas. The launch is part of Eat Right India campaign and will be marketed with the help of Tata Trusts. While it does not sound as appetising as traditional Mars snacks, consumers are reportedly buying it for its rich iron, protein, vitamins and micro-nutrients content.
This summary was produced by ECRUU
