Agriculture and Chemicals: Part Two

Last week I wrote about three recent rulings that went “against” mainstream agribusiness. The first, by a Californian jury, found that glyphosate, a widely used herbicide, was carcinogenic and should be labeled as such. The second, by the EU Commission, was that partial bans on neonicotinoids, an important pesticide, should be extended and enlarged to prevent harm to bees. The third, by the EU Court of Justice, was that gene editing was a form of genetic modification and should come under existing GMO legislation.

The three rulings, coming as they did in close succession, made some wonder what the world has against agriculture in general and farmers in particular.

However, the rulings show the increasing disconnect between consumers and producers. The strong growth in demand for organic food highlights that consumers, particularly urban dwellers, increasingly want their food to be produced and delivered without herbicides or pesticides, and without its genes being modified or edited in any way. Farmers on the other hand want to produce as much food as they can from as little land as possible, and as cheaply as possible. Herbicides, pesticides and breeding techniques (whether genetic or “natural”) help farmers enormously in this task.

In a piece for Foreign Affairs Bill Gates put the case for research into gene editing, writing

This sort of research is vital, because a cow or a few chickens, goats, or sheep can make a big difference in the lives of the world’s poorest people, three-quarters of whom get their food and income by farming small plots of land…

Improving the productivity of crops is fundamental to ending extreme poverty. Sixty percent of people in sub-Saharan Africa earn their living by working the land. But given the region’s generally low agricultural productivity—yields of basic cereals are five times higher in North America—Africa remains a net importer of food. This gap between supply and demand will only grow as the number of mouths to feed increases. Africa’s population is expected to more than double by 2050, reaching 2.5 billion, and its food production will need to match that growth to feed everyone on the continent.

The challenge will become even more difficult as climate change threatens the livelihoods of smallholder farmers in Africa and South Asia. Improving the productivity of crops is fundamental to ending extreme poverty.

He continues,

Gene editing to make crops more abundant and resilient could be a lifesaver on a massive scale.

 In other words, we will have to improve agricultural yields if we want to feed the world and drag people out of poverty. Climate change will make food production even more difficult in the future, while at the same time we need to reduce agriculture’s carbon footprint, both in terms of its own emissions and in terms of forest erosion.

So we have a contradiction here: rich world consumers want their food produced organically, but at the same time they want farmers to use less land. This is a tough “ask” when the world’s population is increasing and when people are eating more meat. Adding a third objective of using agriculture to pull the world out of poverty makes the task even tougher.

However Bill Gates makes an important point when he mentions that cereal yields are five times higher in the US than they are in Africa. The EU beet producers were also right to point out that the extended ban on neonicotinoids would adversely affect beet yields. Against that, the recent increase in EU sugar production has helped to drive world sugar prices down to levels where many developing countries can no longer compete. (Huge production increases in India and Thailand were the main drivers, but the EU increase did contribute.)

You could therefore argue that advances in chemical and gene technology have already increased yields to such an extent that the world is producing too much food. You could add that the fact that these technological advances have largely benefited the developed world (and India and Thailand are part of the developed world), driving down production costs to a level at which under-developed countries, particularly in sub-Saharan Africa, cannot compete. This, as Bill Gates realizes, keeps them in poverty.

So maybe technology has got ahead of itself, (baring weather disasters) resulting in us producing too much food, too cheaply.

Some commentators have drawn parallels between the Californian ruling on glyphosate and the recent study that linked mobile phones and cancer. It is indeed curious that the press were quick to discount the mobile phone story on the basis that cancer rates haven’t increased with mobile phone use, but the media ignores the same logic when applied to glyphosate.

The media also ignore that logic when applied to sugar consumption and obesity. (Per capita sugar consumption has been falling for the past half century while obesity has been rising.)

Could it be that we apply different standards to products that we eat as opposed to products that we use? Could it be that we don’t care how the lithium is produced for our car batteries, but we do care how the wheat is produced for our bread?

Finally, there is the question as to whether the world is over-reacting in pushing back against farm chemicals. Some argue that every thing is to some degree carcinogenic (think sunshine and even toast), and that life is not risk-free.

However it may be appropriate to look back at the history of the insecticide Dichlorodiphenyltrichloroethane, commonly known as DDT. It was first synthesized in 1874 and was widely used in the second half of World War II to control malaria and typhus among civilians and troops.

DDT was made available for public sale in the United States in 1945 and was promoted by government and industry as an agricultural and household pesticide. Opposition to DDT was focused by the 1962 publication of Rachel Carson’s book Silent Spring, which claimed that DDT and other pesticides had been shown to cause cancer, and that their agricultural use was a threat to wildlife, particularly birds. The book’s publication resulted in a large public outcry that eventually led, in 1972, to a ban on DDT’s agricultural use in the United States.

Mosquitoes (not sharks or hippos) are the world’s most dangerous creatures. Over one million people die from malaria each year, mostly children under five years of age, with 90 per cent of malaria cases occurring in Sub-Saharan Africa. Some have argued that that fewer children would be dying if DDT hadn’t been banned.

However, DDT is still used in some parts of the world to combat malaria, and its use has been increasing since it was endorsed in 2006 by the World Health Organization. In many African countries, as well as India and North Korea, the pesticide is sprayed inside homes and buildings to kill mosquitoes. In 2007, at least 3,950 tons of DDT were sprayed for mosquito control in Africa and Asia, according to a report by the United Nations Environment Programme.

A panel of scientists from the United States and South Africa said DDT should only be used as a last resort in combating malaria. The 15 environmental health experts, who reviewed almost 500 health studies, concluded that DDT “should be used with caution, only when needed, and when no other effective, safe and affordable alternatives are locally available.”

The history of DDT may suggest that there is room for compromise on chemicals. Rather than outright bans, perhaps the solution would be to work where possible to reduce the use of chemicals in agriculture. But then compromises never make headlines or pay legal fees.

Images from Pixabay under Creative Commons

New award for Commodity Conversations

Commodity Conversations made it to the Best New Commodities eBooks

I’m happy to announce that my book, “Commodity Conversations: An Introduction to Trading in Agricultural Commodities”, made it to BookAuthority’s Best New Commodities eBooks:

BookAuthority collects and ranks the best books in the world, and it is a great honor to get this kind of recognition. Thank you for all your support!
The book is available for purchase on Amazon.

 

Agriculture and Chemicals: Part One

Last week, Monsanto—the agribusiness company that everyone loves to hate—was ordered to pay $US289 million to Mr. Dewayne Johnson, a former school groundskeeper, after a San Francisco jury ruled that the company’s popular Roundup weed killer contributed to the cancer that is killing him.

Glyphosate, the main ingredient in Roundup, was first approved for use in Monsanto’s weed killer in 1974, and has since been the subject of much emotive debate both in and out of the scientific community.

In September 2017, the  U.S. Environmental Protection Agency concluded a decades-long assessment of glyphosate risks and found that the chemical was not likely to be carcinogenic to humans. However, back in 2015, the International Agency for Research on Cancer, which is part of the World Health Organisation, classified it as a “probable human carcinogen”. Since then, California has added glyphosate to its list of chemicals known to cause cancer.

Mr Johnson’s lawsuit was the first to go to trial among hundreds filed in state and federal US courts that claim that Roundup causes non-Hodgkin’s lymphoma. Monsanto has said it will appeal the verdict.

However, the trial was an important test of the evidence against Monsanto, and will serve as a template for litigating thousands of other claims over the herbicide. Shares in Bayer AG (Monsanto’s parent company) fell sharply as investors weighed the potential costs of protracted legal battles. Bayer bought Monsanto for $66 billion in June this year.

Among the varied lawsuits against Monsanto is one from a bee keepers’ cooperative in France that claims that glyphosate is now widely found in honey. The US’s Food and Drug Administration also recently found traces of glyphosate in US honey, even apparently in “organic mountain honey”. The U.S. Organic Consumers Association and Beyond Pesticides filed a lawsuit against Sue Bee Honey of Sioux City, Iowa, because its honey tested positive for traces of glyphosate. The lawsuit said Sue Bee’s labelling, advertising its honey as “Pure” and “Natural,” is false and misleading. Another class action was started last year in Canada against a honey producer

Meanwhile, a federal judge in Brazil has ordered the suspension of products containing glyphosate until the government re-evaluates the chemical’s toxicology. France has already ruled that the herbicide will be phased out completely within five years.

Unsurprisingly, Monsanto has been accused of a corporate cover-up, with many on social media arguing that the company knew all along that their product causes cancer. Some scientists accused the company of “ghost writing” the scientific studies into the herbicide, and of trying “to destroy the United Nations’ cancer agency by any means possible” to save glyphosate.

Some on social media were quick to draw attention to an arguably similar ruling back in March where a Californian judge ruled that coffee companies will have to carry a cancer warning label because coffee contains acrylamide, a carcinogen. The acrylamide in coffee is formed early in the roasting process. All the foods we roast or fry also contain acrylamide, with 5 micrograms in a slice of toast or 7 micrograms in a bag of potato crisps, as examples. A cup of coffee has around 0.9 micrograms to 2.4 micrograms per 150 millilitre cup.

Others drew similarities between the Monsanto ruling and the recent EU’s almost complete ban on the use of neonicotinoid insecticides across the EU. Just as glyphosate is the world’s widest used herbicide, neonicotinoids are the most widely used insecticides. Back in 2013 the European Union opted for a partial ban on the use of the three chemicals in this class: Imidacloprid, clothianidin and thiamethoxam. The restrictions applied to crops including maize, wheat, barley, oats and oil seed rape. The newly agreed Commission regulation goes much further, meaning that almost all outdoor uses of the chemicals would be banned.

The action was driven by a recent report from the European Food Safety Authority (Efsa), which found that neonicotinoids posed a threat to many species of bees, no matter where or how they are used in the outdoor environment.

The decision is likely to particularly affect sugar beet production across the EU. The French sugar beet growers group CGB said, “This decision has a devastating impact on beet growing. With this ban, all French regions are likely to be affected by viral jaundice, with potential yield losses estimated at 12 pct at national level, and up to 50 pct in certain ocean climate zones.” Producers in the UK and Germany expressed similar opinions while others questioned whether neonicotinoids actually cause bee colony collapse disorder

These two latest rulings follow on from one by the European Court of Justice (on 25th July) that organisms obtained by mutagenesis plant breeding technique (gene-editing) are GMOs and should fall under the GMO Directive. The decision shocked the agriculture industry, which described it as a severe blow to innovation in EU agriculture and warned about economic and environmental consequences.

In a piece for Foreign Affairs published in April, Bill Gates outlined the case for using CRISPR and other gene-editing techniques on a global scale to meet growing demand for food and to improve disease prevention, particularly for malaria. “It would be a tragedy to pass up the opportunity,” he wrote.

In agriculture, Gates argues, gene-editing technologies could be used to make animals more productive while editing crops to withstand harsher growing conditions, or to include naturally occurring pesticides and herbicides, would improve crop yields.

These three rulings will make life more challenging for some farmers and may have major secondary implications. I will take up some of the issues in next week’s blog.

Images under Creative Commons from Pixabay

Fake news in the wheat market

Wheat prices spiked last week, reaching a three-year high, and then fell back down after Ukraine issued confusing statements on possible export limits. The trouble started when Ukraine said on Facebook that it planned to limit shipments of milling wheat. The ministry later tried to clarify things by saying that it was not discussing “strict limits” and would instead discuss projected shipment volumes with traders. The wheat price fell back pretty much to where it came from. The move can be seen on the following graph from Bloomberg.

The episode set off a social media storm. Some traders complained that journalists had acted irresponsibly by reporting on the original Facebook post without first checking on its accuracy. Others argued that the Facebook post was in itself a market-relevant event (even ignoring what it contained) and that needed to be circulated as quickly as possible. 

In an (excellent) article published after the event, Agricensus explained that,

The big two providers that control 56% of the market – Bloomberg and Reuters – have spent vast sums of money on improving latency by milliseconds – hoping that it gives their clients an edge in trading.

That puts pressure to print stories and market moving headlines, leaving reporters with little time to corroborate, double-check or even question the most ambiguous statements made by ministers and even world leaders.

Some commentators on social media complained that the episode was just another example of fake news. Others argued that you shouldn’t be trading on Facebook posts in the first place—and that if you want good information you should pay for it. However this ignores the fact that the original post was picked up by the big newswire services. And as Agricensus points out,

Global spending on financial market data analysis and news exceeded $28 billion in 2017, according to consultants Burton Taylor International – up 3.6% on the previous year and the highest growth rate since after the financial crisis.

 People are already paying huge sums for “real” news.

However, the idea that if you want real rather than fake news then you have to pay for it is one of the themes of Yuval Harari’s new book 21 Lessons for the 21st Century. The book will be released at the end of August, but in a prepublication interview Mr Harari tells The Guardian,

The idea of free information is extremely dangerous when it comes to the news industry. If there’s so much free information out there, how do you get people’s attention? This becomes the real commodity. At present there is an incentive in order to get your attention – and then sell it to advertisers and politicians and so forth – to create more and more sensational stories, irrespective of truth or relevance. Some of the fake news comes from manipulation by Russian hackers but much of it is simply because of the wrong incentive structure. There is no penalty for creating a sensational story that is not true. We’re willing to pay for high quality food and clothes and cars, so why not high quality information?

The Guardian has also published an extract from the book in which Mr Harari writes, 

In fact, humans have always lived in the age of post-truth. Homo sapiens is a post-truth species, whose power depends on creating and believing fictions. Ever since the stone age, self-reinforcing myths have served to unite human collectives. Indeed, Homo sapiens conquered this planet thanks above all to the unique human ability to create and spread fictions. We are the only mammals that can cooperate with numerous strangers because only we can invent fictional stories, spread them around, and convince millions of others to believe in them. As long as everybody believes in the same fictions, we all obey the same laws, and can thereby cooperate effectively.

He continues,

Joseph Goebbels, the Nazi propaganda maestro and perhaps the most accomplished media-wizard of the modern age, allegedly explained his method succinctly by stating that “A lie told once remains a lie, but a lie told a thousand times becomes the truth”. In Mein Kampf, Hitler wrote that “The most brilliant propagandist technique will yield no success unless one fundamental principle is borne in mind constantly – it must confine itself to a few points and repeat them over and over.” Can any present-day fake-news peddler improve on that?

Returning to the wheat market I understand that Ukraine always tracks and informally manages their wheat exports. Professional wheat traders were therefore surprised by the way that the market reacted to the Facebook post rather than by the Facebook post itself.

The post stampeded the herd—a herd that was already extremely nervous because of the extreme hot weather in many of the world’s wheat growing regions. Something else could have stampeded the herd: a rumour, say, or a big order hitting the screens—or even nothing at all. The herd was ready to stampede; it didn’t necessarily need an outside stimulus.

This type of situation is common in markets. Indeed, there was a lesser example just the week before when two famous wheat traders, Donald Trump and Jean-Claude Juncker announced that the EU would increase their purchases of US soybeans. The US soybean price rallied on the news and then fell again when the market realised that Trump and Juncker were not soybean traders after all.

There is an old commodity market saying that price will often go back to check out the extreme highs or lows made in a panic move, like the one in wheat last week. (This is not a prediction that the wheat price will return to last week’s highs, but I will be interested to see if it does.)

Finally, I had lunch with an old trader friend last week who reminded me that although traders love volatility, they don’t like political volatility; weather they can deal with, politics they can’t. Traders may or may not think that wheat prices will rise further on supply factors, but they have no way to foresee what the politicians will do in response.

As Bunge found out to their cost recently, it is dangerous to predict what politicians will do next, especially our present crop of politicians. As a result, traders normally increase the size of their bets in a fundamental market and reduce them in a political one.

Wheat has always been a “political” commodity; the current drought makes it even more so.

The Writing Was On The Wall

In his book Merchants of Grain (published in 1979), Dan Morgan describes the history of the grain trade and takes a look at what the future might hold for the five private companies—Cargill, Continental, Louis Dreyfus, Bunge and André—that at that time dominated the business.

The early 1970s had been exceptionally profitable for those five companies, and the seven families that controlled them. The Soviet Union was redirecting resources away from industrial production and towards consumers. Increasing meat supply was an integral part of that plan, but to do that the USSR had to import large amounts of protein and animal feed.

This coincided, in 1972, with the failure of the anchovy season off the west coast of South America (anchovies/fish meal was a significant source of animal feed at that time), as well as poor weather in the Black Earth region of the USSR.

The first wave of Soviet buying in 1972 came to be known as the “Great Grain Robbery”, and resulted in rising food prices and domestic inflation in the USA. It also began to focus political attention onto the grain trade, something that intensified when the Soviets came in for a second round of buying in 1975.

But that buying was a double-edged sword. As Dan Morgan writes, “Opportunities for big profits, which the companies had looked forward to in the doldrums of the 1950s and 1960s, certainly were present. But the enormous volumes and the volatility also created unprecedented risks.”

Continental Grain learnt this the hard way when they underestimated the depth of the second round of Soviet buying; the grain giant sold physical corn short, expecting to cover their sales when prices fell later in the year. But corn prices didn’t fall; they continued to climb and the company covered their shorts at the top of the market.

For Michel Fribourg, the owner of Continental Grain, this was a traumatic event, and he declined to offer any further tonnage when the Soviets came back for more in October 1975. A few months later he reorganized the company, firing traders and employing risk and business managers instead. As Dan Morgan writes, the risk in these big sales was just too big: “The glory days of the grand slams in the Russian trade were over.”

He continues,

“Continental was not the only company to experience trading troubles. Most of the companies now insisted that the Soviet Union share more of the risks. Louis Dreyfus, for its part, set up a system of compensating balance sheets with the Russians. In effect it worked for the Russians on a fixed commission; losses in any given transaction would have to be recovered in profits on subsequent transactions…”

At that time most commodity imports were handled by central government agencies within the importing country. Governments were generally assumed to be more reliable counter-parties than the private sector, but this belief was shaken when in early 1975 wheat prices fell and “Turkey’s wheat-importing agency cancelled the wheat import contracts it had concluded at higher prices with Continental, Bunge, and Cargill.”

At the same time, the state buying agencies in importing countries had begun to attract the US government’s attention in terms of the inducements and bribes that the grain companies paid to civil servants and politicians to get the business done. A new light was being shone on these practices. A new morality began to take hold within the US, leading to the Foreign Corrupt Practices Act that was passed in 1977.

A new light was also being shone on the shipping and transportation of the physical grain, leading to an FBI investigation in short-loading and falsified shipping documents at the Mississippi grain loading terminals. In 1975 a grand jury in New Orleans “issued a total of thirty-one indictments, covering 265 federal criminal violations against forty-eight individuals…All kinds of activities came to light that showed how company employees schemed to misgrade or diminish the quantities of grain destined for foreign countries.”

Meanwhile, anti-competitive practices were also being brought under the spotlight. “In December 1976, the Interstate Commerce Commission held hearings in Chicago to determine why some small grain elevators inland had been unable to obtain covered hopper cars and grain boxes to move their commodities…The hearings showed what a close relationship existed between certain railroad companies and the grain firms.”

Physical trading margins within the agricultural supply chain were almost as thin in the 1970s as they are now, and the big trading companies largely made their profits by speculating massively on the futures markets that they themselves dominated. But there again a new morality was beginning to take hold with the formation in April 1975 of the Commodities Futures Trading Commission, a new independent government agency to police the exchanges. It was formed “with fewer “policemen” than the Rockville, Maryland Police Department” and appeared to get off to a slow start, but it was a sign of things to come.

Perhaps more importantly, the big trading companies were already—in the 1970s—beginning to lose their domination of the agricultural futures markets.  Large well-financed speculators were moving in. The most famous were the Hunt brothers who had made a fortune early in the decade by squeezing the silver market. The brothers entered the soybean market in 1976, accumulating “approximately a third of the total beans that forecasters thought would be left over when the new soybeans from the 1977 crop became available. This was not a corner, but it was getting near to one”.

Their buying pushed prices higher and helped speed the demise of the publicly quoted Cook Industries, a former cotton trader that by the mid 1970s had begun to rival the traditional grain companies. “Within a year the company that Ned Cook had built into one of the highest-flying grain companies in the world had all but disappeared”. Cook was forced to sell its US grain elevators, allowing the Japanese trade houses Mitsui and Marubeni their long-awaited opportunity to get a foothold into the US grain business.

Taking all this together it is perhaps possible to pinpoint the start of the decline of the traditional grain business as a reaction to the massive price volatility and subsequent general inflation that followed the Russian purchases of US grain in the 1970s.

The grain companies had been hoping for such an event all through the doldrums of the 1950s and 1960s, but the consequences were greater government intervention and increased transparency, as well as the entry of well-financed speculators into markets that had previously been quietly local.

Bring those elements into a sector that was already struggling to cope with higher volumes and greater counter-party risks and you can begin to see that the writing was already on the wall. The era of seat-of-the pants buccaneering trading was on the way out; professional risk management, cost control and a new morality were on the way in.

Photos from Pixabay under Creative Commons

Bad journalism and poor science

The Guardian recently published two articles concerning the cancer risks of mobile phone use. The first was entitled, The inconvenient truth about cancer and mobile phones. The second, published one-week later, was headed, Mobile phones and cancer – the full picture.

In the first article the two journalists highlighted a recent study that found that mobile phones caused cancer in rats. They wrote,

The study concluded that there is “clear evidence” that radiation from mobile phones causes cancer, specifically, a heart tissue cancer in rats that is too rare to be explained as random occurrence.  

The journalists continued,

Not one major news organisation in the US or Europe reported this scientific news. But then, news coverage of mobile phone safety has long reflected the outlook of the wireless industry. For a quarter of a century now, the industry has been orchestrating a global PR campaign aimed at misleading not only journalists, but also consumers and policymakers about the actual science concerning mobile phone radiation. Indeed, big wireless has borrowed the very same strategy and tactics big tobacco and big oil pioneered to deceive the public about the risks of smoking and climate change, respectively. And like their tobacco and oil counterparts, wireless industry CEOs lied to the public even after their own scientists privately warned that their products could be dangerous, especially to children.

The story was picked up by other media, both in the UK and in the US, and spread rapidly across social media.

The second article in The Guardian, written by Dr David Robert Grimes, a physicist, cancer researcher, and science writer based at Queen’s University Belfast and the University of Oxford, completely refuted the first article.

He argues that the study cited in the first article is flawed, and accuses the journalists of cherry-picking and misrepresentation, saying they had ignored data that contradicts their hypothesis and retained only evidence that fitted the desired story. He writes that, this is antithetical to science, where the totality of evidence must be assessed in concert.

He continues,

Since the early 1990s, mobile phone usage worldwide has grown at an exponential rate. If phones are linked to cancer, we’d expect to see a marked uptick in cancer with uptake. Yet we do not. American mobile phone penetration increased from almost nothing in 1992 to practically 100% by 2008 and there is zero indication glioma (cancer) rates have increased, a finding replicated by numerous other studies.

And adds,

The scientific evidence points to a conclusion totally at odds with what the authors postulate. The analogy to industry bamboozling the public to ignore findings doesn’t hold if there is no strong scientific consensus from which to deflect, rendering it cynical or ignorant to equivocate the twain. This is not a case of an industry trying to distract from an inescapable scientific conclusion – the reality is there is nothing of substance from which to deflect.

All this might sound familiar to those of you who are in the business of producing and supplying sugar to an increasingly reticent public. In most people’s minds sugar has now been identified as “the cause” of obesity. This has become an almost irrefutable fact, despite there being little—or no—scientific evidence that a sugar calorie is more fattening than any other calorie. Meanwhile, the sugar industry has been accused of lying to the public and conspiring to conceal the harmful nature of their product.

In his article Dr Grimes argues that the fact that cancer rates have not increased in line with mobile phone use suggests that there is no link between the two. There is no correlation. As far as sugar is concerned, per capita sugar consumption has been falling while obesity has been increasing. This is an inverse correlation.

I will leave the final words to Dr Grimes whose strong criticism of the first article may strike a cord to those of you in the sugar industry.

As enthralling as (the) narrative might be, it is strewn with rudimentary errors and dubious inferences. As a physicist working in cancer research, I found the authors’ penchant for amplifying claims far beyond that which the evidence allows troubling. And as a scientist deeply invested in public understanding of science, I’ve seen first-hand the damage that scaremongering can do to societal health. While it is tempting to rage into the void, perhaps this episode can serve as a case study in how public understanding of science can be mangled, and what warning signs we might look out for.

Photos under creative commons from Pixabay

Food connects us to nature

In his 2006 book The Omnivore’s Dilemma, Michael Pollan asked the question, “Where does your food come from?” He wrote,

“Imagine if we had a food system that actually produced wholesome food. Imagine if it produced that food in a way that restored the land. Imagine if we could eat every meal knowing these few simple things: What it is we’re eating. Where it came from. How it found its way to our table. And what it really cost. If that was the reality, then every meal would have the potential to be a perfect meal.”

In 2016, when Penguin published a tenth anniversary edition of his book, New Food Economy interviewed the celebrated author, asking him whether he thought his book had had an effect on the way food is produced and marketed, and how much had changed in the previous decade. His answer to both questions was “not much”. He did however concede that the market (in the US at least) for organic and local product has been growing strongly, and that the alternative food economy (as he called it) is gradually being co-opted by the main food economy. He told New Food Economy,

“One of the good things about having a handful of large companies dominate the food landscape is that monopolies can sometimes move quickly to change the system. When you persuade McDonald’s or Walmart or KFC to change what they do, you can rapidly drive a lot of change throughout the food system. Ultimately, I think many of the values that seem alternative now—cage-free eggs, for example—will be mainstream very soon. I think you’ll have major fast food chains switching to organic at some point as a marketing matter—and it’ll work, and others will follow suit.”

He added, 

“This is how change comes to America, right? We tend to make progress by co-opting challenges, rather than by revolution and replacement. There is no question that you’ll see this alternative food economy gradually co-opted.”

This is certainly something that we have seen over the past few years: sustainability has gone mainstream in terms of both the environment and human and animal rights. However the biggest challenge is still to come: to get (wealthy) consumers to pay for it. As Michael Pollan told New Food Economy in 2016,

“Still, the alternatives we’re talking about will probably never be as cheap as conventional food, partly because those low prices didn’t reflect the true cost of product. We pay for conventional food in other ways: in public health, in damage to the environment, in taxpayer subsidies. As we reform the system, I think we’re going to see that the low cost was illusory. You can’t really produce food that cheaply, without charging the real cost to the environment or the public health.

That, I think, is the big challenge of the food movement: to democratize sustainably and ethically produced food.” 

Describing his relationship with nature, there is one thing that Michael Pollan wrote in The Omnivore’s Dilemma that I particularly liked,

“The single greatest lesson (my) garden teaches is that our relationship to the planet need not be zero-sum, and that as long as the sun still shines and people still can plan and plant, think and do, we can, if we bother to try, find ways to provide for ourselves without diminishing the world. ”

I was thinking of this when I picked up a copy of Mr Pollan’s recently published How to Change Your Mind: The New Science of Psychedelics. This surprising new book describes the history of psychedelic drugs, such as LSD and psilocybin (from magic mushrooms), and looks at the new research being done around the effects of these drugs. Mr Pollan uses himself as a guinea pig, starting with some dried up magic mushrooms. Under their influence he rediscovers a connectivity with nature that he lost as a child. He writes,

“I stepped outside, feeling unsteady on my feet, legs a little rubbery. The garden was thumming with activity, dragonflies tracing complicated patterns in the air, the seed heads of plume poppies rattling like snakes as I brushed by, the phlox perfuming the air with its sweet, heavy scent, and the air so palpably dense it had to be forded. The word and sense of “poignance” flooded over me during the walk through the garden.” 

For many city dwellers (and I count myself in that category), our main—and sometimes only—connection to nature is through the food that we eat. It is no surprise that we need to maintain that connection. But to do that we have to know where our food comes from, and that its production doesn’t inflict damage on the environment, or cruelty to animals or our fellow human beings. Food is not only our connection to our agricultural past, but also to our environmental future.

My favourite quote from How to Change Your Mind is from Huston Smith.  Michael Pollan writes,

“Huston Smith, the scholar of religion, once described a spiritually “realized being” as simply a person with “an acute sense of the astonishing mystery of everything.” 

The author argues that when we treat nature and the environment as an object to be studied—and mastered—we are losing sight of the fact that we are in, and connected to, nature. We have no choice in the matter: everything we do that alters nature alters us in turn.

In his book Michael Pollard interviews Paul Stamets, a world expert on mushrooms and advocate of medicinal fungi.

“Mushrooms have taught me the interconnectedness of all life-forms and the molecular matrix that we share…. I no longer feel that I am in this envelope of a human life called Paul Stamets. I am part of the stream of molecules that are flowing through nature. I am given a voice, given consciousness for a time, but I feel that I am part of this continuum of stardust into which I am born and to which I will return at the end of this life.”

 Whether or not you need psychedelic drugs to feel this connectivity is another matter—and perhaps the subject of another blog.

All images from Pixabay under creative commons

The last straw

Earlier today, when I went for my morning swim in the lake, I suddenly found myself caught up in a large semi-submerged plastic bag. My guess is that it  had once packaged a large-screen TV, possibly recently purchased for the World Cup. As to what it was doing in the lake, someone may have brought it down to one of the lakeside beaches to sit on during an evening barbecue. They had  inadvertently, probably after a few too many beers, left it there to wash out into the waves..

One moment I was swimming peacefully in crystal clear water; the next I was confused and panicked as I struggled to free myself from the plastic. At one stage my hands and arms were inside it and I had trouble staying afloat. My panic only lasted a few seconds, but as I brought the plastic bag back to the shore to dispose of in one of the rubbish bins on the beach, I thought of all the turtles and other marine life that get caught and perish in the plastic debris floating in our oceans. They too must suffer the same sense of panic and confusion that I had felt earlier today. One moment they are free; the next they are trapped in a thing of which they have no comprehension.

I had already been thinking about plastic last Saturday evening when my wife and I went out to dinner and we were served our cocktails with unnecessarily large—and unnecessarily plastic—straws. I thought about complaining to the waiter about them, but my habitual British fear of embarrassment stopped me. I didn’t want to spoil what was a lovely evening.

Starbucks announced this week that they would be completely eliminating plastic straws from their 28,000 stores around the world by 2020. And that is no small thing: the company currently uses more than one billion plastic straws per year.

McDonald’s also recently announced it will ban plastic straws at its U.K. and Ireland restaurants; other food outlets and airlines are following the trend. Cities are also joining in, with Seattle becoming the latest city in the US to do so. The UK environment minister has gone on record as saying he would like to ban plastic straws completely in the UK, while the EU has also proposed a ban on plastic straws and single use cutlery.

This week National Geographic published an excellent article on the history of plastic straws and how they took over the world. They write that in just the U.S. alone, one estimate suggests 500 million straws are used every single day. One study published earlier this year estimated as many as 8.3 billion plastic straws pollute the world’s beaches.

However, eight million tons of plastic flow into the ocean every year, and straws comprise just 0.025 percent of that.

Bloomberg argues that giving up plastic straws may make you feel better about yourself, but will have little effect on ocean plastic. The news agency cites a recent survey  that found that at least 46 percent of the plastic in the oceans by weight comes from a single product: fishing nets. Other fishing gear makes up a good chunk of the rest. (Bloomberg suggests that all fishing gear should be marked with the name of the ship that uses it: a complicated and difficult solution that will take time to implement.)

Banning plastic straws, like taxing calorific soft drinks, is a simple response to a complex problem. Doing so enables politicians to say that they are doing something to solve a problem, whether it is plastic waste or obesity, but in reality they must know that their actions will have little impact.

So what is the solution to plastic waste—and what can the food and agriculture industry do to help? The answer is, as usual, complicated.

The BBC published this week an excellent analysis of the issues involved with plastic packaging in the food industry. They argue that although plastic is viewed as bad, “the shrink wrap used on cucumbers for instance, can more than double the length of time the vegetable can last, allowing it to be kept for up to 15 days in the fridge and cutting food waste in half.

The BBC adds,

“Much of the food we now buy in supermarkets comes tightly wrapped in sealed plastic films and protective trays. This keeps fresh meat in an oxygen-free atmosphere, helping to prevent it from spoiling. Delicate fruit and vegetables are also kept safe from bumps that can degrade them, meaning they’re more likely to be sold. Putting grapes in their own individual plastic boxes has been found to cut food waste by 75%.”

The BBC also looks at the environmental cost of replacing plastic drink bottles with glass ones. They write that “it is generally not that much more expensive to produce a glass bottle versus one made from PET – about $0.01 more, according to some analysis. 

“However, when manufacturers start transporting produce in glass bottles, costs start to rise. A 330ml plastic soft drink bottle contains around 18 grams of material while a glass bottle can weigh between 190g and 250g. Transporting drinks in the heavier containers requires 40% more energy, producing more polluting carbon dioxide as they do and increasing transport costs by up to five times per bottle.

As a result, some, including those the packaging industry, argue that in many cases plastics are actually better for the environment than the alternatives.

But what about plastic made from renewable sources? There again the answer is not a simple one.

Coca-Cola became a leader in bioplastics when two years ago they launched the PlantBottle,  partially made with Brazilian sugarcane. However just because they are made from renewable green sugarcane doesn’t mean the bottles are biodegradable or compostable. They have to be recycled, but they also have to be separated from PET in the recycling process, driving up the costs.

France is a leader in the use of biodegradable and home-compostable plastic bags in supermarkets, and in 2017 took partial steps to ban single-use plastic bags. France’s Environment Ministry estimates that before the ban 17 billion plastic bags were used in France each year. Of those, some five billion were handed out at check-outs and 12 billion were for fruit and veg. An average plastic bag takes one second to make, is used for roughly 20 minutes and takes up to 400 years to degrade naturally.

The example of France shows that real progress can be made if the political will is there, even if only by one small step at a time. Further comfort can be taken from the fact that with petrol prices rising, recycled plastic is actually cheaper than fresh, virgin plastic made from oil. A tonne of virgin PET costs around £1,000 while clear recycled PET costs just £158 per tonne.

We can all be part of the solution by drinking from a reusable bottle whenever we can, and by conscientiously recycling the PET bottles whenever we can’t. As for plastic straws, they have become a totem for the anti-plastic movement; they help to focus our attention on the issue. So don’t wimp out like I did last Saturday evening: refuse a plastic straw whenever it is offered to you.

And one last thing: please don’t take any plastic with you when you go to the beach this summer. I had enough of a panic attack already!

All images from pixabay under Creative Commons

Palm oil – a complex problem

A report published last week by the International Union for the Conservation of Nature (IUCN) highlighted the way that the palm oil industry is encroaching on rainforest and endangering biodiversity.

However the IUCN also highlighted the little-reported point that alternative oil crops, such as soy, corn and rapeseed, require up to nine times as much land as palm. Palm oil provides a third of the world’s vegetable oil, from 10% of the land used for all oil crops. Switching to alternative crops could result in the destruction of wild habitat in other parts of the world, such as Brazil and Argentina.

The director general of the IUCN told The Guardian, “When you consider the disastrous impacts of palm oil on biodiversity from a global perspective, there are no simple solutions. If we ban or boycott it, other, more land-hungry oils will likely take its place.”

The IUCN report’s lead author added, “Palm oil is decimating south-east Asia’s rich diversity of species as it eats into swaths of tropical forest.” But, quoting US writer HL Mencken, he said, “For every complex problem there is an answer that is clear, simple, and wrong.”

The answer is to not to ban palm oil, but to make its production more sustainable. That is easy to say and difficult to do. Indeed, the IUCN report criticised current sustainability efforts, arguing that certified palm oil is little better than non-certified palm oil.

A spokeswoman for the Roundtable on Sustainable Palm Oil (RSPO), which certifies almost 20% of all palm oil, disagreed. She told The Guardian that, “While we acknowledge that the certification system is not perfect, it has made a real contribution against deforestation.” She added that the RSPO is currently strengthening its standards.

So here we have two of the ten factors that Hans Gosling highlighted in his recent book Factfulness: Ten reasons we’re wrong about the world—and why things are better than you think. First, things are more complicated than they seem. Second, they are not perfect, but they are getting better.

An example of that second point can be found in the slowdown of soybean expansion in the Amazon basin following a moratorium by trading and food companies  on purchases of soybeans from newly deforested land. The annual rate of deforestation for soybeans in monitored municipalities has fallen 85 percent since 2008 and has accounted for only 1.2 percent of total cutting in the Amazon region in the period.

According to Greenpeace, the moratorium shows that zero deforestation is a possible pledge, and that similar protection should be expanded to other areas facing destruction.

The problem, of course, is that we still have to feed the world’s growing population. Agricultural expansion is the single largest driver of biodiversity loss, and it makes sense on a global scale to increase yields from existing areas rather than expand into new areas. This can be done by improving seeds, breeds and processes, or by planting more efficient crops.

As the IUCN study admits, a hectare of palm oil trees produces roughly 4,000 kg of oil per year, while a hectare of soybeans produces only 475 kg. (Cynics might argue that it is this difference in yields, and hence costs, that is driving the western world’s anti-palm oil lobby, not concern over biodiversity loss.)

Looking at different crops in terms of calories, palm is one of the most efficient at 3,520 calories per square metre, just behind sugar beet at 3,652 calories per square metres, but ahead of sugarcane at 2,781 calories. So if you really needed to feed the world, you would cover the planet with those three crops.

Of course nothing is that simple. First, calories alone are not enough: the body also needs proteins, vitamins, fibre and micronutrients. (Although my kids might disagree, you cannot live on Nutella alone.) Second, those three crops aren’t suitable for all climates; they don’t grow everywhere. Third, as the Irish potato famine showed us, monoculture can be extremely risky.

However there is a fourth issue here: fairness. The IUCN estimates the total area of industrial scale palm oil plantations at 18.7m hectares, with smallholder plantations taking the total to 25m hectares. This means that smallholder farmers grow about one quarter of all palm oil. Those smallholder farmers are no different from any of us; they are simply looking to provide for their families and ensure a better future for their children. It is difficult to tell them that they can’t do that.

In his book, Hans Gosling warns against another human instinct: to always blame someone when something goes wrong. Just as polar bears have become the totem of global warming, orang utans have become the totem of all that is wrong with palm oil. But unlike polar bears, whose numbers are increasing, Borneo’s orang utan population has fallen by an estimated 150,000 in the past 16 years.

The IUCN estimates that most of that decline has been caused by hunting, rather than through habitat loss as a result of agricultural encroachment. (There is an argument that agricultural expansion is bringing humans into closer contact with wildlife, and and that it is this that has lead to an increase in hunting.)

All in all, if you were to ask your friends and neighbours why orang utans are dying out, they will blame palm oil. If the palm oil industry wants to win back the hearts and minds of the world’s consumers, they will need to work with the local population to reverse that decline in the orang utan population.

As one of the coauthors of the IUCN report said, “We need to work with people to help them understand that orang utans are not dangerous and that it’s illegal to kill them. We know this decline has been largely due to hunting, and if we can turn that around, these orang utans could, over a long period, bounce back. When you lost the habitat, it’s gone forever, but the forests are still there. If we can stop the hunting and killing, we can reverse the trend.”

The conclusion has to be that boycotting palm oil is not a solution to the problem of biodiversity loss; it may in fact displace and aggravate it. The only (horribly complex) solution is to work with bodies such as the RSPO to improve sustainability, to help smallholder families lead better lives without cutting down virgin forest, and to educate the local population not to kill protected wildlife. The solutions are as difficult as the problems are complex, but they are nonetheless urgent.

Images from Pixabay under creative commons

Are commodities a zero sum game?

A close friend (and ex-trader) recently contacted me to argue that unlike services or many manufacturing industries the supply chain for commodities is a zero-sum game. The market fixes the price of the end product, so if one participant in a supply chain makes more money, someone else in the supply chain has to make less. The same applies to market share. As demand is static, or at best growing very slowly, if one producer sells more, another must sell less.

It is an interesting point. Everyone in a commodity supply chain is a price taker—they have to take whatever margin the market allows them. They only way they can make a bigger margin would be to use their market power to squeeze other supply chain participants in order that they make less. And, argues my friend, widespread communication, instant information, and all the other things that I have written about in the past, have reduced the market power of the agricultural trade houses. As a result, they now capture a smaller share of the margins in the chain.

This would probably change if the supply chain was disrupted for external reasons, such as crop failure, natural disaster, or war (whether armed or trade), but as the CEO of Cargill said a couple of weeks back, it is no longer enough to “rely on the occasional crop failure, export ban, or supply shortage to save the day.”

If we accept that a commodity supply chain is a zero sum game, there is a way of increasing your margins without taking money from your suppliers and clients: you can do it by cutting your costs. This can be done in a number of ways.

Cutting labour costs is often (usually) a company’s first response to margin pressure. Reducing headcount can do this, making the remaining employees work harder or more efficiently. Reducing salaries or, in the case of traders, bonuses is another option.

Companies can reduce costs by outsourcing specific tasks in the hope that other companies will be able to perform a function more cheaply that they can. (We saw this recently with Bunge closing their sugar trading department and letting other trade houses merchandise their production.)

Innovation, either in processes or technology, can help companies reduce labour costs and gain efficiency. Obvious examples include better communication between offices, data handling in offices, and mechanization (including robots) in manufacturing and handling. There is no reason to think that innovation will suddenly end. Indeed there is reason to think that the trend will accelerate, (for example blockchain and AI), enabling further cost reduction along the supply chain.

Farming is the one part of the agricultural supply chain that has probably benefited the most from innovation and technology. Hybrid seeds, more efficient farm machinery, improved pesticides and insecticides, as well as drone and GPS technology have all helped to reduce costs.

Economies of scale are a common source of cost reduction; building a one million tonne commodity processing plant or port loading facility will not cost twice as much as building a 500,000 tonne one. However the best way to reduce unit costs is to increase throughput; make sure that the capacity you have built is being used to its maximum.

Lastly, and this in the interest of everyone, companies can cut cost by reducing waste. The UN estimates that food waste and crop losses amount to close to one trillion dollars each year. That is a huge cost not just to the environment but also to the agricultural supply chain. Even making small inroads into that waste could significantly benefit the profitability of supply chain actors.

In a zero sum supply chain, the only way to increase your profits without picking others’ pockets is by reducing your costs. Unfortunately, what may work for an individual company (or farmer) may not work collectively.

One farmer can take advantage of innovation and technology to grow the same size crop from a smaller area, but his instinct will be to plant all his available land and produce more. To capture economies of scale a processor will build a mega-plant, and to reduce his unit costs he will look to maximize throughput. And, obviously, any success in reducing wastage will also increase available food supply.

There is therefore a tendency for cost cutting in a commodity supply chain to lead to increased supply. And increased supply usually results in lower prices. Acting alone, an individual player in the supply chain may be able to increase his margins by cutting costs. However, if everyone does it, the resulting extra production could result in a fall in price that negates the costs saved.

Looking at this in another way, economic theory tells us that the price of any particular commodity is, in the long term, determined by the marginal cost of production of that commodity’s most efficient producer. The more efficient the producer, the lower the cost.

Or looking at it from yet another angle, you have to ask, “Who has the market power?” If you are talking about Apple, it is the producer. If you talk about apples, it is the consumer. Where there is no product differentiation—and there is none in commodities—the market power lies with the consumer and not the producer.

Transforming commodities into ingredients can shift market power from consumers to producers. Some commodities, such as coffee and cocoa, are already losing their commodity status and are differentiated by origin. End-consumers are already willing to pay more for gluten-free, or lactose-free, or organic, or non-genetically modified, or locally produced food. And the big brands are willing to pay more (hopefully) for specific food varieties that fit their particular recipes.

That takes us back nicely to the beginning of this blog. Cost cutting can help restore margins for individual participants in the food supply industry, but it is not a solution for the supply-chain as a whole. The only way for the food supply chain to restore margins is by recapturing the market power that they have lost over recent decades. Crop failures or other disruptions would do that in the short term, but product differentiation is the only solution in the long term.

Image courtesy of Pixabay under creative commons