This past week has been a volatile one for the markets – a rollercoaster ride for commodity traders. First, Business Insider published an overview of the factors driving food price inflation, but it was quickly followed by a collapse in the corn and soybean markets. Bloomberg attributed the selloff to the prospects for better weather and fed tightening and wondered whether it marked the end of inflation worries.
Spring rains may have improved prospects for the approaching winter-wheat harvest in the Northern Hemisphere. However, Brazil is still struggling with their worst drought in a century, affecting crops and hydroelectricity generation. Brazil has announced that it will allow GMO corn imports from the US following the failure of the country’s second safrinha corn crop, responsible for over 70 per cent of the country’s corn output.
In an attempt to dampen prices, China ordered state-owned enterprises to limit their exposure to overseas commodities markets and, in a clear case of ‘shoot the messenger’, arrested key grain analysts. However, Bloomberg argues that it will be tougher than China thinks to dampen prices. Still, markets may do the job without government intervention: wholesale domestic pork prices have fallen by 50 per cent since their highs in January.
Top ag traders who attended last week’s FT Commodities Global Summit are still (moderately) bullish on grains and oilseeds. However, others who attended the event were less convinced, warning that a slowdown in Chinese growth rates will reduce their imports.
High commodity prices have increased food fraud: adulterating food, replacing it with an inferior product, or faking its origin. Traders not only have to watch out for fraud, but they also have to watch out for wild boars. Last week, Algeria rejected 27,000 tonnes of French milling wheat after two dead boars were found in the cargo. No one is quite sure how they got there.
Talking of meat, Reuters has published an interesting explainer on the US meat industry where four companies – Cargill, Tyson Foods, JBS and National Beef Packing – slaughter and process about 70 per cent of total US beef production.
Still on meat, yellow pea is the fastest-growing source of protein for plant-based meat alternatives. The yellow-pea market is expected to be worth $140 billion globally by 2029, up from $14 billion in 2019. Insect-based pet food continued to make the headlines with start-ups and pet food manufacturers trying to formulate meat alternatives from sources such as fly and mealworm larvae.
On the ethanol front, rumours circulated that the White House is looking to keep RFS biofuel blending targets unchanged from last year – or even lower them. There were suggestions that the government would provide oil refiners with more RIN waivers. Some small refineries are reportedly not purchasing credits, waiting instead for a Supreme Court ruling. Reuters estimates that US oil refiners have amassed up to a $1.6 billion shortfall in RIN credits.
And a warning to Brazil’s ethanol producers as the country’s motorists slowly switch to EVs. A recent study found that ethanol demand could start declining as early as 2025, falling about 40 per cent through to 2035 – and a further 20 per cent to 2040. This would leave demand at 40 per cent of current levels.
The famous Ever Green container ship that blocked the Suez Canal for six days in March is still stuck in a legal battle regarding compensation claims by the Suez authorities.
The EU is expected to propose the widening of its emissions trading system next month to include maritime transport. The International Maritime Organization, the UN agency that regulates shipping, concluded six days of meetings last week but failed to make much progress on the (admittedly difficult) issue of how to cut emissions.
ADM, Dreyfus, Cargill and Amaggi have joined forces with the payments company TIP Bank to create a joint logistics platform to handle road freight in Brazil. Bunge launched a similar initiative last year.
Brands are fragile and increasingly so in the era of social media. For example, Coca Cola suffered a $4bn fall in its share price when Cristiano Ronaldo removed two Coca-Cola bottles from his desk during a press conference, replacing the soft drink with water.
British food and drink exports to the EU fell by £2bn in the first three months of 2021, with sales of dairy products plummeting by 90 per cent. Brexit checks, stockpiling, and Covid have been blamed. Meanwhile, the UK meat industry is cutting production due to Brexit-induced labour shortages.
The U.S. Supreme Court threw out a lawsuit that accused Cargill and Nestle of helping to perpetuate slavery at Ivory Coast cocoa farms. The court sidestepped a broader ruling on the permissibility of lawsuits accusing American companies of human rights violations abroad. Unfortunately, child and slave labour continues in the cocoa supply chain, raising a dilemma for both chocolate companies and investors: disengage or engage?
From next month, you will be allowed to buy and sell farmland in Ukraine for the first time since it was banned in 2001. Transactions will be limited to 100 hectares.
Finally, in an opinion piece for the FT, a senior policy advisor for the UK government makes a case for genetically edited crops and livestock. CRISPR fried chicken, anyone?
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