Markets
Goldman Sachs commodities unit made more than $3 billion in 2022, up from closer to $2 billion in the previous two years.
McKinsey has published a report on the future of commodity trading. The consultancy predicts shipping times will increase eight per cent, energy prices threefold, and interest costs sevenfold between 2020 and 2024. It expects working capital requirements for commodity trading to rise to $500 billion.
The FAO Food Price Index fell 0.8 per cent in January, the tenth consecutive monthly decline. With this latest decline, the index has fallen 17.9 per cent from its peak in March 2022.
However, global food supplies are still at risk, and shoppers worldwide will pay even more for groceries this year than in 2022. Nestlé, the world’s biggest food company, has already warned it will increase prices this year to offset higher production costs that it has yet to pass on to consumers.
Traders have accused Russia of purposefully slowing the pace of Ukrainian grain exports after January ship departures fell to their lowest since August. The deal expires in March, but Turkey, at least, expects it to be extended “for a longer period.”
Farmers in the EU’s eastern member countries are unhappy about the increase in Ukrainian grain imports, and Hungary has imposed strict quality and safety inspections on them.
In India, a lower-than-expected planting area may cap a previously expected rise in wheat production. The government may extend the export ban as a result.
Chinese pork prices have fallen by almost per cent since Beijing began relaxing Covid restrictions, raising a question mark over China’s import demand for crop proteins.
Company News
Bunge reported an adjusted net income of $336 million for the fourth quarter, or $2.21 per share, up from $231 million or $1.52 per share in the previous year’s quarter. The fourth-quarter profits exceeded estimates as crush margins, and global crop demand bolstered its core agribusiness.
In an interview, Cargill’s new CEO warned against weaponising the global food chain. The company’s Brazilian unit announced a $240 million time deposit to fund ESG projects in the country. Meanwhile, the company closed its grain elevator in Portage, Indiana, but has completed its acquisition of Owensboro Grain Company, a soybean processing facility and refinery in Owensboro, Ky.
Mondelez has set aside 300 million euros to resolve an EU antitrust investigation into whether it blocked cross-border sales of its products in the EU in breach of competition rules.
Impossible Foods will cut about 20 per cent of its staff. The company currently employs about 700 workers.
Shipping
Maersk reported Q4 profits (EBITDA) at $6.5 billion, bringing full-year 2022 profits to $36.84 billion. The company expects profits to fall to (what Bloomberg considers) more normal levels of between $8 billion and $11 billion in 2023.
Even so, Maersk believes that shipping lines must undergo a radical restructuring to survive, arguing that “The way that supply chains have operated over the last number of decades is no longer fit for purpose.”
The company added that container shipping volumes could fall by as much as 2.5 per cent this year. The company’s Asia-Pacific president said, “It wasn’t hard over the last twelve months to make money. If you had something that could float and could carry your container, that was not hard. Now, skills matter.”
The FT has an article on the limits to sail power on cargo vessels with sails reducing fuel consumption by only 8 per cent – not enough to justify the investment.
Methanol may be a better bet. CMA CGM has ordered a dozen methanol-fuelled containerships, increasing the number of such vessels in the French carrier’s order book to eighteen.
The environment
The EU has launched Cleverfood, an initiative it hopes will transform the bloc’s food systems.
Europe’s highest court has ruled that EU laws restricting the use of GM crops do not cover gene editing techniques that are used conventionally and have a long safety record. MIT believes that CRISPR could save crops from devastation by pests.
Going somewhat against the trend, French sugarbeet farmers drove their tractors into Paris to protest an EU ban on the neonicotinoid pesticide.
McKinsey argues that, contrary to what most of us thought, consumers will pay more for sustainable products. The 2023 Ethical Food Global Market Report agrees. It argues that the global ethical food market is growing at 8.9 per cent per year.
India increased its bet on biofuels (as opposed to EVs), rolling out petrol blended with 20 per cent ethanol in eleven states and union territories.
Neither Indonesia nor Malaysia is happy with EU legislation limiting imports of goods linked to deforestation, arguing that the measures will mostly hit small farmers unable to meet the burdensome cost of compliance. Vox writes that palm oil is not that bad (anymore). A view that the FT echoes.
CNN questions whether Arizona has enough water to grow all the pistachio trees that farmers have recently planted.
The New York Times reports that the Chinese are taking factory farming to the next level, with two 26-story buildings under construction on the banks of the Yangtze River. Meanwhile, Spain has become Europe’s largest pork meat producer. The country’s farmers slaughtered 58 million pigs in 2021, up 40 per cent from a decade earlier.
The Guardian argues that we must embrace fake meat to save the planet, but Bloomberg is as negative on lab-grown meat as they are on plant-based meat. Others disagree, arguing that plant-based foods are a small but growing category. But if meat is not your thing, what about plant-based salmon?
The Guardian also has a piece on how California’s farmers are turning cow manure (but not cow burps) into biogas. At the same time, Time Magazine explains why agricultural methane emissions are a challenging area to tackle. The Washington Post has a long read on New Zealand’s methane-emission plans.
Salon lists the crops that climate change will ruin: coffee, corn, wheat, rice, almonds, and citrus. (We will be in trouble if they are right.)
Agriculture continues to attract venture capital inflows, with Responsibility announcing new sustainable food strategies in Asia and South America.
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