Viterra has announced it will acquire the Gavilon grains and ingredients (but not its fertiliser) business from Marubeni for $1.13 billion plus working capital. Marubeni bought Gavilon for $2.7 billion in 2013 expects to get as much as $3.51 billion from the sale. The FT wonders whether it will lead Viterra to IPO while Javier Blas gives his take on the acquisition here.
Agricultural commodity traders are worried about a Russian invasion of Ukraine. Agweb has a couple of articles on what conflict might mean for world markets. Bloomberg looks at how Russia’s past actions have impacted trade flows and how an invasion might restrict trade. It also looks at how India is diversifying sunflower oil imports away from Ukraine, their biggest supplier. Meanwhile, Ukrainian corn has been going as far afield as Indonesia.
Agricensus looks at what might happen to Russia’s grain exports if the world cuts the country off from the SWIFT payment system. Any disruptions to Russian exports could prove a boon for French wheat exporters who have been losing export share to Russia.
There are no signs that India’s vegoil appetite will fall anytime soon. Domestic consumption should climb by as much as 17 per cent over the next four years.
Conflict could lead to higher food prices. A researcher at Mintec tells Bloomberg she sees agricultural commodity prices beginning to peak and likely retreating into the second half of 2022. Still, it could take until at least 2023 before consumers feel the benefit. Reuters also thinks we may have to wait for 2023 for prices to ease.
Insurance payments to US farmers due to drought rose more than 400 per cent between 1995 and 2020 to $1.65 billion, while payments due to excess moisture rose nearly 300 per cent to $2.61 billion. The federal government pays about 60 per cent of the nation’s crop insurance premiums through taxpayer subsidies.
Brazil’s Parana State estimates its 2021/22 soybean crop at 12.83 million tonnes, down 35 per cent from 2020/21 and below a previous projection of 18.4 million tonnes, due to low rainfall and high temperatures provoked by La Nina. The weather phenomenon has also led South Africa’s farmers to plant less acreage after record rainfall curtailed sowings.
Farmers in Brazil, Argentina and the US are holding back crop sales in expectation of higher prices. The three countries account for more than three-quarters of global corn and soybean exports.
But it is not just food prices that are soaring. Cotton has hit new ten-year highs for the fourth time in five months.
CNN worries that rising food prices are hurting those that can least afford them and calls for the US Fed to raise interest rates to dampen inflation expectations.
Higher interest rates won’t solve the labour shortage in Malaysia’s palm oil sector, where output has fallen to a five-year low. Foreign workers make up around 85 per cent of the labour force on plantations.
Thailand’s government is concerned about the impact that higher palm oil prices will have on the country’s consumers while recognising the benefits accruing to farmers. Higher palm oil prices may spur the search for alternatives.
China Dialogue has a well-presented feature on palm oil sustainability, focusing on Wilmar and the RSPO. Reuters has a long-read on sustainable palm oil in Malaysia’s eastern state of Sabah. Swiss researchers have published the results of the OPAL Project, a six-year study into sustainable palm oil. The study focused on three oil palm growing countries: Cameroon, Colombia, and Indonesia.
Fox News worries that high US fertiliser prices will reduce production this season. They write that a fertiliser bag that cost $11 in 2021 now sells for about $20. However, US wholesale fertiliser prices have fallen to levels last seen last October. Things could change quickly if the world imposes sanctions on Russia, a significant nitrogen, phosphorus, and potash exporter.
India will allocate about 3 trillion rupees ($40 billion) on food and fertiliser subsidies in its budget for 2022/23, roughly the same amount as in the fiscal year 2021/22 ending March.
Kula Bio, a Boston-based start-up, has raised $50 million to accelerate production for their next-generation nitrogen fertiliser that uses bacteria to remove nitrogen from the air and deposit it in soil.
In little-reported news, Sri Lanka’s government will give about $200 million in compensation to the country’s rice farmers whose crops failed under a botched scheme to establish the world’s first 100-per cent organic farming nation. The government last year banned imports of agricultural chemicals leading to about a third of Sri Lanka’s agricultural land being left dormant. The government reversed the ban last October.
Canada’s cattle ranchers continue to struggle to feed their herds due to the country’s recent drought-reduced grain crop, Covid-related restrictions on US truck shipments and capacity restraints on rail movements.
There was another flurry of anti-meat articles last week, with this one summarising the environmental arguments for going vegan.
A new report in the Journal of Ecological Society argues that animal agriculture is responsible for at least 87 per cent of greenhouse gas emissions. It says that earlier studies have underestimated the environmental impact of livestock farming and have failed to include the negative impact of forests lost to animal agriculture.
Greenpeace Brazil reports that up to 80 per cent of deforestation in the Amazon rainforest is due to cattle ranching. Storebrand, a $120bn Nordic asset manager, has placed ADM and Bunge on its “observation list” for moving too slowly to eliminate deforestation risk from their supply chains.
Human Rights Watch has written an open letter asking the EU Commission to include land rights in their upcoming regulations restricting imports of any commodities that have contributed to deforestation.
The Economist posted a video on LinkedIn about alternative meat, but the FT wonders whether the demand for alt-meat has peaked. After a 46 per cent rise in 2020, US sales of plant-based meat fell 0.5 per cent in 2021.
The Chinese government has released its official Five-Year Agricultural Plan (in mandarin). It mentions cultivated meat for the first time and suggests that producing it is in the national interest.
The EU has implemented a ban on giving antibiotics to healthy animals. The Guardian is upset that the UK has not done the same.
A new study finds that climate change will make it harder for farmers to grow coffee, cashew, and avocado. CNN is particularly concerned about what that might mean for coffee lovers. You can find the BBC’s take on the report here.
China has published draft rules for gene-edited plants. It could now take only a year or two to get approval for a gene-edited plant compared with around six years for GM ones. Last November, Beijing passed new regulations for genetically modified (GM)crops.
Nestlé has announced a major – perhaps game-changing – initiative in cocoa sourcing. The company will triple its cocoa sustainability funding to $1.4 billion over eight years, including direct pay-outs to African cocoa farmers to remove child labour from its supply chain.
ADM reported a record fourth-quarter profit and said it would continue to benefit from solid demand for crops and biofuel in 2022. ADM’s net earnings rose to $782 million in the quarter ended Dec. 31, up from $687 million a year earlier. (You can access the earnings call deck here.)
Walmart is investing in the vertical farming start-up Plenty and will start carrying its leafy greens in all California stores this year. The investment is part of a $400 million funding round.
In shipping news, MSC, the world’s largest container-shipping company, is looking to buy ITA Airways, the successor to the defunct Alitalia. The transaction would have a value of between 1.2 and 1.5 billion euros. Lufthansa would act as an industrial partner.
Maersk has announced plans to launch an offshore vessel-charging company to support the maritime industry’s decarbonisation efforts by eliminating idle emissions. A project for decarbonised shipping is gearing up to introduce the world’s first ammonia-powered ship.
Lastly, if you are reading this before taking an afternoon nap, have a coffee first.
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