Author: jonkingsman

The lobby group Action on Sugar has been promoting Sugar Awareness Week on their @actiononsugar Twitter feed. One post, below, caught my attention.

It is difficult to know how much sugar billions of people across the globe are really consuming. On a country basis you can take production plus imports minus exports, but you don’t know how much sugar has been wasted, or added to or subtracted from stocks. It is even harder on a global basis where cross-border sugar trade flows can be difficult to track.

Having said that, the UN’s FAO estimates world sugar consumption in 1987 at 102 million tonnes. That year  world population reached 5 billion people, which equates to a per capita sugar consumption of 20.4 kilos . Thirty years later, the world’s population has reached 7.6 billion people and world sugar consumption has topped 180 million tonnes. So using the FAO’s figures that equates to a per capita sugar consumption of 24 kilos per person, an increase of 18 percent over thirty years.

Possably as a result of the group’s lobbying efforts, two of Europe’s leading magazines featured sugar on their covers this week. France’s Le Point promised to tell readers “The Truth About Sugar” while Germany’s Focus wanted to inform their readers of the difference between “good” sugars that come in the form of natural products, and “evil” sugars that the food industry adds to their processed products.

As part of Le Point’s crusade for the truth the magazine included a graphic that showed that per capita sugar consumption had risen from 16 kilos per person in 1960 to 25.5 kilos in 2016. Unlike the statistics on Action for Sugar’s Twitter feed, these figures are more or less correct. World sugar production in 1960 stood at 55 million tons while world population stood at 3 billion people, which gives a per capita consumption of 18 kilos. As for 2016, the FAO’s figures suggest a  per capita number of 24 kilos, but that is close enough.

What Le Point fails to point out is that if you exclude the low-income countries of China, India and Pakistan the average global per capita sugar consumption hasn’t changed from what it was in 1960 – 25 kilos per head. Per capita sugar consumption in the USA in 1960 was around 55 kilos per head.

At the recent Platts-Kingsman Conference (no longer anything to do with me) in Miami, the American Sugar Alliance, a pro-sugar lobby group, presented the following graph showing US sugar consumption correlated against US obesity rates.  As you can see, obesity rates have been rising while sugar consumption has fallen.

If you add in high fructose corn sweeteners, the picture changes somewhat, but not dramatically.

In their presentation the ASA highlighted the fact that Americans are consuming 374 more calories per day now than they were 34 years ago. The following graph breaks down where those extra calories are coming from.

Going back to Le Point, the magazine published the following graphic in their anti-sugar piece. It purports to show a correlation between world sugar production and obesity. The correlations look impressive, but they would have looked less impressive if they had taken the increase in population into account.

All this prompted me to revisit one of my favourite websites where I managed to produce the following graphic. It clearly shows how the decline in per capita consumption of corn sweeteners in the US has resulted in a reduction in the number of pedestrians killed by motor vehicles. So that at least is good news.

It is not clear who first coined the phrase, “There are three kinds of lies: lies, damned lies, and statistics.” In his book “The Persuaders – The Hidden Industry that wants to change your mind“, the author James Garvey explains that the practice of public relations is “rarely intended to inform the population about the intricacies of an issue and is more often calculated to circumvent critical thinking.”

Well said!

After years of building up herds that produce low-fat milk, the world’s dairy industry is now struggling to meet a surge in demand for cream and butter. Butter prices have more than doubled over the past year, but heavy stocks of (low-fat) milk powder are pressuring milk prices. It could take years for the sector to adjust.

http://www.globaldairytrade.info

There is a saying in the commodity markets that demand is the backdrop against which changes in supply play out. Demand for most food products tends to increase by a small, but predictable, percentage each year, roughly in line with increases in population and income.

The supply of agricultural products, on the other hand, can vary significantly from one year to another. Weather is nearly always the most important factor driving supply. Price comes a close second—both the price of the commodity itself (with a time lag), and the price of alternative, competing crops. Crop diseases and pest infections can from time to time also be important drivers.

However, as I wrote last week, the demand for a particular foodstuff can sometimes change dramatically in response to the publication of new scientific—or pseudo-scientific—research. When that happens, the demand shift is almost certainly amplified through both traditional and social media. The traditional media in particular like new scientific studies that go against conventional wisdom. The most recent—and most dramatic—example is the way consumers no longer believe that both animal and vegetable fat makes you fat. Conventional wisdom now blames fructose, whether in sugar or in fruit juices, for the obesity epidemic.

Nutritional scientists—and lobbyists—will doubtless argue until the cows come home whether it is fat or fructose that is making people fat. While they argue, dairy farmers struggle to sell their stocks of low-fat milk but are unable to meet the increased demand for the high-fat milk that is needed for butter and cream. Meanwhile, Florida’s orange growers struggle with a collapse in US demand for orange juice. Butter consumption in the United States is up 7-8 percent this year; orange juice consumption is down 5-7 percent over the same period—and down nearly 45 percent over the past twelve years.

Dairy farmers and orange growers have not only had to deal with dramatic shifts in demand; they have also had to cope with bad weather. It has reportedly been too wet in New Zealand and too dry in Europe to produce quality feed for dairy cows. (Both phenomena have been blamed on climate change.)

Meanwhile Hurricane Irma hit Florida’s orange groves hard this year, further lowering production that had already been decimated by greening disease. A solution has now been found for greening disease (by inserting a spinach gene into the tree), but it will take years for the new orange trees to mature. Growers are rightly worried that on current trends there won’t be enough demand to absorb supply once they do.

It will also take years for the dairy sector to beef up supply to meet the demand for high-fat milk. Most herds now consist of Holstein cows, a breed that produces large quantities of low-fat milk, perfect to meet the global growth in demand for milk powder for products such as infant formula in developing countries, particularly China. Farmers are now replacing those Holstein cows with Jersey cows that produce higher-fat milk, but it is a slow process. In the meantime, butter prices continue to rise.

But why are there actual shortages of butter in some areas of Europe—even ironically in Normandy, the heart of France’s dairy industry? Why isn’t price rationing demand? The answer is that supermarkets have been reluctant to pass on to their consumers the increase in butter prices. As a result they have refused to pay current prices, and European producers have found better buyers in export markets in China and, strangely enough, in New Zealand.

Consumer trends can have a real impact on demand for different commodities. It takes time for supply to adjust and by the time it does, there is always a danger that the science will have moved on.

It has been Olympic Week here in Lausanne where all the local sports clubs set up stands in and around the Olympic Museum to introduce new sports to young people. The event has been going on, I think, for nearly thirty years now and coincides each year with the school’s half-term holidays. Nearly forty clubs/sports are represented, and nearly seven thousand children took part, in the week.

I took Monday and Thursday off from whatever else I had to do, and helped man the rowing club’s stand. We had borrowed six rowing machines from the club and set up a system where we first showed the kids to use the machines correctly—or at least without hurting themselves, and  then let them “race” themselves or their friends over five hundred metres.

On each of the two days, we introduced nearly three hundred kids, aged between eight and fourteen, to the sport. They had a great time, as indeed did I. It was wonderful to see them all so enthusiastic—and competitive.

Out of the three hundred or so kids that passed through the stand each day, there were perhaps three, or maybe four, who were over-weight. Certainly none were obese. I say that because this week the world “celebrated” World Obesity Day.

The day coincided with a report issued by Imperial College London and the World Health Organisation which showed that childhood obesity rates in the world’s children and adolescents increased from less than 1 percent (equivalent to five million girls and six million boys) in 1975 to nearly 6 percent in girls (50 million) and nearly 8 percent in boys (74 million) in 2016. Combined, the number of obese five to nineteen year olds rose more than tenfold globally, from 11 million in 1975 to 124 million in 2016.

The lead author of the report, Professor Majid Ezzati, of Imperial’s School of Public Health, said, “These worrying trends reflect the impact of food marketing and policies across the globe, with healthy nutritious foods too expensive for poor families and communities. The trend predicts a generation of children and adolescents growing up obese and at greater risk of diseases, like diabetes. We need ways to make healthy, nutritious food more available at home and school, especially in poor families and communities, and regulations and taxes to protect children from unhealthy foods.”

Dr Fiona Bull, from the WHO, took a more nuanced stance, saying, “countries should aim particularly to reduce consumption of cheap, ultra-processed, calorie dense, nutrient poor foods.” However, she added, “they should also reduce the time children spend on screen-based and sedentary leisure activities by promoting greater participation in physical activity through active recreation and sports.”

This is not the first time that the WHO has called for measures to promote active lifestyles. They write on their website, “the fundamental cause of childhood overweight and obesity is an energy imbalance between calories consumed and calories expended. Global increases in childhood overweight and obesity are attributable to a number of factors including:

• A global shift in diet towards increased intake of energy-dense foods that are high in fat and sugars but low in vitamins, minerals and other healthy micronutrients;
• A trend towards decreased physical activity levels due to the increasingly sedentary nature of many forms of recreation time, changing modes of transportation, and increasing urbanization.

Back in 2014, the Institute of Economic Affairs drew attention to the energy expenditure side of the equation, writing that, ‘Only 18 per cent of adults report doing any moderate or vigorous physical activity at work while 63 per cent never climb stairs at work and 40 per cent spend no time walking at work. Outside of work, 63 per cent report spending less than ten minutes a day walking and 53 per cent do no sports or exercise whatsoever.’

Last week also saw the controversy continue over sugar taxes, with Chicago abandoning theirs, and arguments in the press both for and against. It is an emotive issue but while everyone argues about the food intake side, let’s not forget the energy expenditure side of the equation.

So this weekend, turn off your screens, go outside, and take your kids with you.

The Guardian newspaper voted the Sixth Extinction: An Unnatural History, by the award winning journalist Elizabeth Kolbert, the best non-fiction book of all time. It isn’t, but it is still worth reading.

Life has existed on our planet for around four billion years but mass extinctions seem to have taken place on our earth every twenty-six million years or so. Although everyone (more or less) agrees that a meteor strike caused the fifth mass extinction (of the dinosaurs, amongst others), geologists disagree as to what caused the others. Perhaps other meteor strikes; perhaps natural climate change.

Pretty much everyone, however, agrees that mankind is the cause of the sixth mass extinction that we are currently living in a geological era that geologists call the “Anthropocene”. Ms Kolbert writes,

The Anthropocene is usually said to have begun with the industrial revolution, or perhaps even later, with the explosive growth in population that followed World War II. … But the megafauna extinction suggests otherwise. Before humans emerged on the scene, being large and slow to reproduce was a highly successful strategy, and outsized creatures dominated the planet. Then in what amounts to a geologic instant, this strategy became a loser’s game. And so it remains today, which is why elephants and bears and big cats are in so much trouble…Though it might be nice to imagine there once was a time when man lived in harmony with nature, it’s not clear that he ever really did.

Man destroys biodiversity in three ways: first by eating it; second, by encroaching on—and stealing—its territory; and third by accident–spreading alien species or bacteria. Ms Kolbert writes,

“During any given twenty-four hour period, it is estimated that ten thousand different species are being moved around the world in ballast water. Thus a single supertanker (or for that matter a jet passenger) can undo millions of years of geographic separation.”

Meanwhile, the tsunami that struck Japan in 2011 has carried almost 300 species of sea life  across the Pacific Ocean to the west coast of the United States. In what could be the longest maritime migration ever recorded, an estimated one million creatures – including crustaceans, sea slugs and sea worms – made the 7,725km journey on a flotilla of tsunami debris.

Introducing alien species (including bacteria) into new areas can quickly wipe out native fauna that have no historical resistance. Ms Kolbert gives two examples -frogs in Central America and bats in North America – but there are millions of others. This process began one hundred and twenty thousand years ago when Homo Sapiens began its migration out of Africa, (arguably) wiping out the Neanderthals on the way (after mating with them first).

The process of extinction has been going on for so long now it seems all but inevitable that it will continue until the only animals that will be left on the planet will be the ones that we eat—or the ones that we can marvel or laugh at in zoos, or on YouTube. Looked at in this way, you might be tempted to think that the forces behind this are so powerful that we are powerless to stop it.

And if you think this mass extinction is not your fault, Ms Kolbert has this to say,

If you want to think about why humans are so dangerous to other species, you can picture a poacher in Africa carrying an AK-47 or a logger in the Amazon gripping an axe, or better still, you can picture yourself, holding a book on your lap.

And in case you think that it doesn’t matter if the world loses a few species of fogs or bats, Ms Kolbert adds,

The anthropologist Richard leaky has warned that Homo Sapiens might not only be the agent of the sixth extinction, but also risks being one of its victims.

So we are all doomed; we will take the world’s biodiversity with us. And there is nothing we can do about it.

But wait a minute; aren’t we already doing something about it?

Just this month, a convention came into force to prevent the transfer of potentially invasive species in ballast water, one of the many problems that Ms Kolbert wrote about in her book. Ballast water must now be treated before it is unloaded into a new location, so that any micro-organisms or other small marine species are destroyed.

Last month, the International Union for Conservation of Nature (IUCN) – the global standard for assessing extinction risk – announced that the conservation status of the snow leopard  has been improved from “endangered” to “vulnerable”. The species still faces serious threats from poaching and habitat destruction, but at least it is a step in the right direction.

Perhaps even more optimistically, last month saw the 30th anniversary of the signing of the Montreal Protocol for the preservation of the earth’s ozone layer. Thanks to the treaty, over 98% of ozone-depleting substances have been phased out globally to date. Without the treaty, the hole in the Antarctic ozone would have been 40% larger in 2013. And what’s more, the global health and economic benefits of the treaty are expected to amount to US$2.2 trillion, as a result of averted damages to agriculture, fisheries and materials.

Charles Darwin once wrote, In the long history of humankind, those who learned to collaborate and improvise most effectively have prevailed.

The Montreal Treaty is an example of what mankind can do when we work together. The Paris Agreement is another. We can fix this!

Image courtesy of Pixabay

Bunge hit the news this week when the company announced that it was buying 70 per cent of IOI Loders Croklaan BV from IOI Corp for close to one billion dollars. Loders Croklaan BV is one of the leading global suppliers of specialty oils and fats to the processed food industry. It has manufacturing operations in the Netherlands, the US, Malaysia and Canada.

Malaysia’s IOI Group bought Loders from Unilever in November 2002. Since then, the unit has grown from three to seven processing plants and earnings have quadrupled. According to a filing with the Malaysian Stock Exchange, IOI Group will record a gain of about 2.5 billion ringgit ($595 million) from the sale.

Bunge Ltd said that it was buying the stake as part of a strategy to invest in higher-margin businesses such as food ingredients and natural flavourings. The company denied that the purchase was a defensive move against being taken over themselves.

A couple of weeks back I wrote about the various strategies that different trade houses are following in an attempt to improve margins: Glencore is concentrating on logistics, Cargill on processing, and ADM on ingredients. I added, rather cheekily, that Dreyfus is trying a little bit of everything while Bunge was wondering whether they might be worth more as part of a bigger organisation.

The fact that Bunge’ share price fell on the Loders announcement seemingly confirmed that the stock market had been wondering the same thing. However, there was also a suggestion that the fall in the share price might have at least been partly related to the fact that Bunge was increasing their exposure to palm oil.

Some investors may be worried about the worsening economics of the industry. Palm oil stocks are soon forecast to top two million tonnes, and crude palm oil prices are down twelve per cent so far this year. Perhaps more importantly, palm oil is the one commodity that everyone loves to hate.

In 2016 the Round Table for Sustainable Palm Oil (RSPO) temporarily excluded IOI Group from membership over concerns regarding its palm oil purchases from third party suppliers. The issue attracted a lot of media attention at the time and all the major food companies cancelled their purchase contracts with the group. (Cargill held out for a while, arguing that they could make more of an impact by continuing to work with the supplier, but in the end they also caved in under media pressure.)

The RSPO reinstated IOI Group in August 2016 and the food companies slowly and reluctantly resumed sourcing their palm oil from them. In a statement at the time Unilever said, “We are pleased to see the progress IOI has made so far, in particular, on third party suppliers, independent verifications, and increased transparency.”

Greenpeace, one of the more aggressive civil society operators, said that over the years IOI has produced “a string of commitments about ending the destruction (of forests), but none of them were properly implemented and failed to make a difference on the ground.” However, they added that losing big customers “put IOI under enormous pressure and was instrumental in bringing about (a) change in direction”.

As you might expect there was considerably more media coverage when the RSPO excluded IOI Group from membership than when they let them back in. This is partly standard media bias: bad news sells more advertising than good news. But it also standard civil society bias: bad news (about evil companies destroying rain forests) encourages more donations than good news (about companies working to protect them).

Bunge’s purchase of Loders reduces the chances that they will be taken over themselves, and it is understandable that the stock market was disappointed by the news. However, it is not certain that a bidder would have in any case placed a high value on the company given its exposure to the Brazilian sugarcane sector at a time of low prices for both sugar and energy.

By making this move Bunge has done two things. First, they have increased their exposure to the world’s lowest cost—but most controversial—vegetable oil. Second, they have taken a strategic step along the path from trading to processing, and from commodities to ingredients. These moves are risky, but so often in business the biggest risk is not to move at all.