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Russia, Ukraine, Turkey, and the United Nations may sign a deal next week to resume Ukraine’s grain exports. (It is not a done deal.) As part of a deal, the US will reassure banks, shipping and insurance companies that Russian exports of food and fertiliser will not breach Washington’s sanctions.

Ukrainian grain shipments have started to pick up through the Danube to Romania. Sixteen vessels are waiting to load, while more than 130 are awaiting their turn in Romania’s Sulina canal.

Russia looks set to bring in a big harvest with yields 0.1-0.2 mt/ha higher than last year, but Ukraine’s farmers are facing their most challenging harvest since independence. With the Russian incendiary bombing of Ukraine’s wheat fields, the country’s harvest has become a battlefield.

If there is one good thing to come out of Russia’s invasion of Ukraine, it is that consumers in the western world no longer take food for granted. Russia’s blockade of Ukrainian ports has launched a global awareness of where food comes from and how it ends up on your plate.

Much press coverage is critical of the systems that keep (most of) the planet fed. For example, an opinion writer on CNN writes, “The war in Ukraine is showing us how badly the food system provides for people and the planet.”

In an interesting report, the environmental NGO Replanet argues that governments should lift bans on GM crops, ditch biofuels and persuade their citizens to eat less meat. More interestingly, it wants governments to stop promoting organic farming. The NGO argues that the EU mandate to triple the area under organic production will reduce the bloc’s grain harvests by 20 mln mt.

I find the suggestion on organic farming particularly interesting. Time writes that the Sri Lankan government’s ill-thought-through move to organic agriculture precipitated the country’s economic collapse after a more than 30 per cent drop in rice yields. (Other newspapers are finally beginning to mention it.)

The ‘food versus fuel’ issue is an emotional one. This blogger may have a point when he questions the rationality of using biofuels to fuel planes once you calculate the additional cropland required. But could farmers survive without biofuels?

They can’t in Indonesia. The government is increasing the palm oil content in its domestic diesel from 30 to 35 per cent and testing a 40 per cent mix. It is another example of government intervention going wrong: the country is struggling with excess palm oil supplies following an earlier export ban.

And on GM crops, China could soon finally allow GM corn imports, allowing Brazil to export to China before the year-end.

So, what is the future of agriculture? Carbon credits may provide farmers with an alternative income to biofuels, but there is still the issue of fertiliser use and its contribution to GHG emissions. Vertical farming plays a role in growing some crops (let them eat lettuce).

Until then, the weather will continue to be the second most significant price driver for commodity crops (after price, in a feedback loop. Government intervention comes third.)  To emphasise the point, the worst drought in 70 years has put a third of Italy’s agricultural output at risk. (You can read the FT’s take on the issue here.) Drought has also led to a global shortage of mustard and hummus.

However, favourable weather conditions and high-quality seeds have led to a one per cent increase in China’s wheat output this year. (The BBC has a piece on the role of satellites in predicting future harvests.)

Finally, Bloomberg argues, “Commodities can make for great trades, but they are often lousy investments.” (Excellent advice!) The agency has again published a summary of its leading food and agriculture stories.

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The prices of palm oil, wheat and corn have fallen back to levels seen before Russia invaded Ukraine, easing fears of a global food crisis and proving, once again, that high prices are the best cure for high prices.

But how much damage has already been done? In a recent report, the UN says the number of people going hungry worldwide rose to 828 million last year, an increase of about 46 million from the previous year. The Guardian quotes the director of the UN World Food Programme as warning that the food crisis will result in “global destabilisation, starvation, and mass migration on an unprecedented scale.” He adds that 50 million people in 45 countries are just one step from famine.

Africa’s indigenous crops could be a long-term solution, but in the short term, Yemen is running low on wheat and is pinning its hopes on imports from India.

Brazilian fertilizer imports jumped 18.6 per cent in June to reach 4.15 mln mt, suggesting that the country’s farmers will have adequate supplies for summer crops.

Turkey’s president is close to brokering a deal between Russia and Ukraine to reopen Black Sea shipping lanes to grain exports from Ukraine (as opposed to Ukrainian grain exports from Russia).

Ukraine is trying to convince Turkey to arrest vessels that it believes carry stolen grain. There were reports early in the week that Turkish authorities had detained one ship, but they have since allowed it to leave port. Ukraine summoned the Turkish ambassador to complain.

The FT writes that annual food inflation in Turkey is 80 per cent. The newspaper warns, “There is no government that an empty cooking pot cannot bring down.”

Ukraine’s government has unveiled a $5 billion plan to improve road, rail and border checkpoints for the country’s agricultural exports. The country has appealed for private financing for the scheme. Meanwhile, Romania has reopened a Soviet-era rail line, and the Polish port of Gdansk is upping its throughput of Ukrainian grain.

Japan has donated $17 million to the UN FAO to help Ukraine store crops in plastic sleeves and modular storage containers. Ukraine still has 18 mln mt of last year’s harvest in storage, and the country is expecting to harvest another 60 mln mt in the current season. Around 30 per cent of its granaries are full as the harvest picks up pace.

Meanwhile, Russia is trying to convince Africa that the war is not responsible for the continent’s food shortages.

UK farmers may have no choice but to leave crops unpicked this harvest due to a shortage of foreign workers. The situation could lead to ‘catastrophic food waste’. UK food exports to the EU have fallen significantly since Brexit.

The WWF has called for a transformation of the UK’s food system, arguing that farmers use 40 per cent of the country’s arable land to grow wheat and barley to feed farm animals instead of people.

Barry Callebaut has suspended production at its manufacturing site at Wieze in Belgium after detecting salmonella. Ferrero recently faced a similar problem at Arlon in Belgium.

On the environmental front, Dutch police have fired on farmers protesting nitrogen emission cuts that could require farmers to use less fertilizer and reduce their livestock numbers.

Cargill is equipping some of their vessels with sails to see if they can cut GHG emissions. Researchers have found that feeding cows asparagopsis, a seaweed native to Australia, cuts cows’ methane emissions by 90-95 per cent. The FT asks what carbon labelling on food packaging might mean for the sector.

Finally, wheat lovers may be interested in the recent book “Oceans of Grain”, which examines the role of wheat in the rise and fall of empires.

Click here for Bloomberg’s excellent weekly roundup of their food and agriculture stories.

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At this week’s G7 meeting, the world’s wealthiest nations committed $5 billion to fight global hunger. Activists said that the sum falls short of what is needed, with millions of people on the brink of starvation.

Germany and the UK pushed the G7 meeting for a temporary waiver on biofuel mandates, but the proposal didn’t make it to the final communique.

The UN warns that the world faces an unprecedented hunger crisis, with a risk of multiple famines this year. There are worries that global crop problems could result in years of high food prices.

Talks continued this week to allow Ukraine to restart grain exports, but no one is optimistic about their outcome. Russia has accused the West of lying about the reasons for food shortages but at the same time bombed grain terminals in the Ukrainian port of Mykolaiv.

Egypt has bought 180,000 mt of wheat from India and is looking to add potato flour to subsidised bread. India is turning to rice bran for vegetable oil and animal feed.

Parts of Italy are suffering their worst drought for 70 years, with saltwater incursion adding to farmers’ problems. Heatwaves and fires threaten Tunisia’s grain harvest. Dry weather is impacting crops in Argentina.

The BBC reports that UK farmers are cutting production due to high fuel and fertiliser input costs.  High fertiliser prices are an acute problem in Africa, where up to 20 million people in the Horn of Africa could go hungry. Farm input shortages are also negatively impacting production in the US.

Malaysian authorities are encouraging palm oil producers to keep supplying factories despite a 22 per cent drop in palm prices over the past month. Times are also challenging for Indonesian palm oil farmers.

The US FDA has approved Argentine biotechnology firm Bioceres’ GM wheat. The USDA still needs to approve the drought-resistant HB4 wheat before it can be sold in the US.

The Guardian writes that farmers “are beholden to a handful of big corporations who set commodity prices” and “have little leverage to implement more sustainable practices.”

In a separate article, the newspaper asks why we feed crops to our cars when people are starving. It cites a report from the NGO Green Alliance.

The newspaper also worries that climate change is responsible for a shortage of (randomly) mustard, chilli peppers, coffee, and wine.

On the good news front, the Guardian cites a recent study that shows farmers can achieve high yields with less fertiliser. The newspaper wonders whether ‘peecycling’ could be a solution to the world fertiliser shortage. (Each of us produces enough pee a year to fertilise 145kg of wheat.)

Research by the University of Cambridge finds that intensive farming may reduce the risks of pandemics.

Nestlé and Unilever have promised to remove deforestation from their supply chains.

Finally, the FT has an excellent review of recent books looking to reinvent agriculture. They are all written by non-farmers (except for one writer who took up farming four years ago). Perhaps farmers don’t have time to write books.

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The UN FAO food price index fell in May for a second consecutive month after hitting a record high in March, although the cost of cereals and meat rose. The index averaged 157.4 points last month versus 158.3 in April. In their biannual Food Outlook, the FAO warns that the global food import bill will reach $1.81 trillion this year, up $51 billion from last year’s all-time high.

After jumping nearly two per cent last week, the Bloomberg Commodity Spot Index, which tracks prices for 23 raw materials, is up 36 per cent this year. The latest move was primarily driven by a jump in natural gas and wheat.

The FT has an excellent article on the developing food versus fuel debate (battle). The farming lobby is struggling to counter renewed attacks from the carbon fuel lobby.

With Ukrainian grain silos about half full in the run-up to this year’s harvest, the Kremlin reiterated its stance that it will only allow the resumption of Ukrainian grain exports once the West lifts all sanctions. (Turkey has backed Russia’s call for ending sanctions.)

The Kremlin that Ukraine must de-mine waters off the Black Sea coast, a task that could take six months.

Traders have little confidence that Russia is sincere in its efforts to allow Ukrainian exports after the Russians bombed two warehouses containing sunflower meal at the Nikatera export terminal in Mykolaiv.

Even so, Russian authorities say they are ready to export grains from Ukrainian ports currently occupied by Russian forces – including Mariupol and Berdyansk.

Ukrainian officials accuse Russia of stealing about 600,000 tonnes of its grain. A US official says there is evidence that Russia is exporting Ukrainian grain. A journalist confronted Russia’s Foreign Minister on the issue.

The Russian ambassador stormed out of a meeting of the UN Security Council after an EU official accused Moscow of deliberately creating a global food crisis by blocking exports from Ukraine.

The Guardian asks how Ukraine can export 20 mln mt of grain if sea routes remain blocked. The newspaper fails to offer an effective solution. Bloomberg wonders whether the rusty rail tracks along the Danube might provide a solution.

India has exported 469,202 mt of wheat since banning most exports last month. At least 1.7 mln mt of wheat is lying at ports and could be damaged by monsoon rains. Half a dozen countries, primarily Bangladesh and Egypt, have asked India to supply them with more than 1.5 mln mt of wheat.

The first Indian wheat cargo sold to Egypt in late April has reached Alexandria and passed inspection. The Egyptian government says it has enough wheat in state reserves to last until the end of this year but is looking to increase domestic wheat production.

US crop production may disappoint after a dry winter and wet spring in some key areas. (There are fears that this year’s Atlantic hurricane season could complicate grain exports.) France’s wheat crop still faces a moisture deficit, while the prospect of a normal monsoon in India may encourage farmers to increase acreage. China, meanwhile, is working flat out to bring in their harvest.

The FAO warns that spiralling input costs could deter farmers from expanding production. Farm input prices have increased more than food prices in the past year, suggesting lower actual returns.

Russian restrictions on fertiliser exports could significantly reduce new crop production. Farmers are looking for alternatives. Extracting phosphorous from human sewage could become economic if fertiliser prices stay high.

Undeterred, Nutrien Ltd, the world’s largest fertilizer producer, said it will increase its Canadian potash production by 20 per cent by 2025 to an annual 18 mln mt. (However, a glut of fertilizers at Brazilian ports may signal fertiliser prices are peaking.)

There are warnings of famine in Sudan and throughout the Horn of Africa, following the area’s worst dry spell in forty years. The EU is worried that food shortages could provoke a surge in immigration and is considering donating about 500 million euros to Africa for food.

Food will be on the agenda at the WTO meeting in Geneva this week (12^th – 15^th June), although India is expected to block a deal to help the World Food Program buy food for humanitarian aid.

An opinion piece in Aljazeera calls for the WTO to exclude agriculture from free trade agreements to allow countries to become self-sufficient.

Indonesia will reduce its maximum crude palm oil export and levy rate from $575 to $488 per mt to encourage shipments. Since restarting exports, the country has issued around 302,000 mt of export permits. India’s palm oil imports in May were their highest in seven months despite the Indonesian export ban.

Palm producers in Malaysia are dealing with a shortage of about 120,000 workers following Covid-related immigration restrictions.

Avian flu has affected nearly 38 million birds in the US, hurting egg-laying hens and turkeys the most.

A class-action lawsuit has been filed against Beyond Meat, alleging that the company makes false ingredient claims over the amount of protein in their products.

Investors managing $14 trillion in assets have written to the UN asking for a global plan to reduce agriculture’s GHG emissions. They note that food production accounts for a third of global GHG emissions and is the main threat to 86 per cent of the world’s species at risk of extinction.

New Zealand has published plans to have farmers pay for emissions from livestock. The country has 5 million people, 10 million cattle and 26 million sheep.

In Australia, the prices for lettuces have spiked after heavy rains along the west coast wiped out much of the crop. KFC said it would put cabbage in its burgers instead.

Finally, it was only a matter of time before people started blaming traders and hoarders for the rise in food prices.

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The food crisis was a major topic of discussion in Davos last week. Some participants argued that food supply chains have collapsed, with around 30 countries currently restricting food exports. (Thailand is one country that will benefit from other countries’ export restrictions.)

Malaysia this week joined the list with a ban on chicken exports, and India announced that it would limit sugar exports in the current 2021/22 marketing year to 10 mln mt. (Indian mills have signed contracts to export 9.1 mln mt of sugar and already exported 8.2 mln mt.) Bloomberg called the ban “an extreme case of precaution.”

India’s food and trade minister said India might relax its export curbs on wheat. He explained the ban ensured a fair distribution of grains to countries in need rather than allowing speculators to manipulate the market.  There have been fears that India might limit rice exports, but domestic supplies are adequate, and the government has decided that export restrictions are unnecessary for the time being. In the meantime, however, India could face a chapati crisis.

There have many media articles about Russia weaponising food.  European politicians have condemned Russia for blocking Ukraine’s access to the sea and accused the country of blackmail.

The EU and Ukraine want to impose a safe sea corridor for food exports. The Russian president said that he would comply if the West removed its sanctions. The UN suggested that the West could lift sanctions on fertilisers if Russia allowed Ukraine to export grain, but Russia wants all sanctions lifted.

The Kremlin argues that Ukraine caused the food crisis by placing mines in coastal areas. Ukraine is worried that removing the mines would allow Russia to launch a sea invasion. The EU called for talks with Moscow on the issue.

Speeding up rail shipments may be a solution in the short term. Lithuania has received its first rail delivery of grain from Ukraine for shipment from Klaipeda port and expects to receive up to one train per day, each with 1,500 tonnes of grain. The trains reach Lithuania via Poland. Ukraine also hopes to move 700/750,000 mt a month from two small ports on the Danube to Romania for onward shipment to North Africa and Asia.

The country is running out of time before the new harvest. The country’s spring crop sowing campaign is 89 per cent complete at 12.64 million hectares. The war makes further sowing progress unlikely.

China may have bought up to 400,000 mt of corn from Brazil for September/October shipment, replacing some of their lost Ukrainian corn imports.

US corn planting is running at the second-slowest pace in more than a quarter-century, and spring wheat planting is the slowest on record as wet and cool weather has plagued the northern plains. Some farmers may soon find it more profitable to file insurance claims and keep their land idle.

The BBC has a long read on palm oil in which they accuse plantation owners of depriving Indonesian tribes of millions of dollars. Aljazeera has a background article on the challenges facing the Malaysian palm oil sector, suffering from a shortage of foreign workers.

India’s palm oil imports could fall to an eleven-year low as the country imports more of the cheaper soy oil.

Indonesia will remove its subsidy on bulk cooking oil and replace it with a domestic price limit on the raw materials used to produce it. (Reuters explains Indonesia’s stop-start export policy here.) However, the country has no plans to reduce palm oil in its biodiesel mix.

The FT calls for a rethinking of global biofuels policies and argues that a 50 per cent reduction in grain used for biofuels in Europe and the US would compensate for all the lost Ukrainian grain exports. The US and many other countries face a dilemma over their biofuel policies as the prices of food, fuel, and feedstocks climb simultaneously.

Spot prices for the nitrogen fertilizer ammonia fell to $1,000 per mt last week, down 30 per cent in the past month. They are still 87 per cent higher than a year ago. Analysts attributed the price fall to demand destruction.

The CEO of Yara, the fertiliser producer, has said that sanctions have removed at least 15 per cent of the global fertiliser supply. Even so, Brazil is importing record quantities for its soybean crop. A Rabobank analyst said that even with higher fertiliser prices, Brazilian margins from soybean sales are at 56 per cent over operational costs for the next season.

Bloomberg offers this engaging investor guide to food protectionism but at the same time warns that the commodity price boom may be topping.

The New Scientist examines the ecological impact of farming in the Ishikari Lowland in northwest Japan, an area inhabited by hunter-gatherer communities until the 19^th century. The journal also reviews the book Regenesis: Feeding the world without devouring the planet, in which the author writes, “Farming is the most destructive human activity ever to have blighted the Earth.”

Finally, rising prices could end a great British tradition: fish and chips. Over the past year, the prices for cod and haddock are up 75 per cent, sunflower oil is up 60 per cent, and flour is up 40 per cent. What will we eat instead?  False bananas and fake meat, anyone?

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The Economist has an alarming cover this week (zoom-in), but the UN secretary-general is on the same wavelength, warning that the Ukraine war, warming temperatures, and pandemic-driven supply problems threaten to “tip tens of millions of people over the edge into food insecurity.” The FT agrees, arguing that food insecurity is a bigger problem than energy, and the Governor of the Bank of England says a surge in food costs could have “apocalyptic” consequences for the poorest people in society and the global economy.

The US Treasury Secretary agrees Russia’s invasion of Ukraine has created a global food crisis,  and the US Secretary of State has accused Russia of using food as a weapon. He demanded that Russia lift its blockade of Ukraine’s Black Sea ports to enable the flow of food and fertiliser around the world.

The deputy chairman of Russia’s security council, a former president of Russia, replied that Russia would not lift the blockade unless the west eased its sanctions on the Kremlin. “Countries importing our wheat and other food products will have a very difficult time without supplies from Russia. And on European and other fields, only juicy weeds will grow without our fertilisers,” he said.

Germany’s Foreign Minister countered, “We must not be naive. Russia has now expanded the war against Ukraine to many states as a war of grain. It is not collateral damage; it is an instrument in a hybrid war intended to weaken cohesion against Russia’s war.”

Ukraine is trying to find ways around Russia’s naval blockade, and the US is looking to end it by supplying Ukraine with advanced anti-ship missiles.

About 300,000 tonnes of Ukrainian wheat that Egypt’s General Authority for Supply Commodities (GASC) bought for delivery in February and March is yet to be shipped, with one cargo stuck in port and four others still to be loaded. Ukraine’s farmers are struggling to find storage for the summer crops and will use more silo bags.

Wet weather is delaying planting in the US Midwest. Farmers in North Dakota have planted 8 per cent of their wheat, while farmers in South Dakota have planted 60 per cent. Last year by this week, South Dakota had 90 per cent of its crop in the ground.

French farmers are becoming increasingly pessimistic over the prospects for their wheat harvest, and their crop is deteriorating fast. India’s Agriculture Ministry has reduced its 2022 wheat production estimate from 111.32 mln mt to 106.41 mln mt.

The President of AgResource told a conference in Geneva that global milling wheat supply in the 2022-23 marketing year (July-June) could fall short of demand by ten mln mt. He suggests that large milling wheat-consuming countries could use feed wheat for milling.

Although India has banned commercial wheat exports, the country has reportedly sold 500,000 mt of wheat to Egypt. The Egyptian government says the Indian ban does not apply to them. Turkey’s Agriculture Ministry reassured citizens that India’s ban would not affect them because the country imports wheat only to produce flour and pasta for export. The Sultanate of Oman has said it will replace Indian purchases with wheat from Australia and Argentina.

India’s government considers allowing traders to ship an estimated 1.8 million tonnes of the grain trapped at the ports by the ban. The government has already permitted grain awaiting customs clearance to be shipped out, but traders are pressuring the government to relax its ban further.

CNN looks at the background to the export ban and the rising risk of food protectionism, while the Guardian looks at how it affects the country’s wheat farmers.

Indonesia has ended its ban on palm oil exports but will reimpose a policy that requires producers to sell a portion of their output to the local market. Reuters has a good explainer on why Indonesia’s export ban has failed to dampen domestic vegoil prices, while Bloomberg looks at what the end of the ban might mean for world prices.

Higher vegetable oil prices threaten to drive one-third of the UK’s fish and chip shops out of business.

Malaysia’s Finance Ministry is still thinking about temporarily cutting the country’s tax on crude palm oil export to 4-6 per cent from the current 8 per cent.

Iraq is buying Thai rice again after halting its imports for many years, increasing Thailand’s domestic rice prices and raising questions over export availability later in the year. And the recent drought has led to a shortage of mustard in France.

South Brazil’s sugar millers have bought back an estimated 200-400,000 mt of sugar to produce ethanol instead.

The US is trying to decide whether it should adjust domestic biofuel policies in the face of the crisis. In Europe, the German government is considering reducing the production of biofuels made from grain or oilseeds.

The USDA released plans to distribute an estimated $6 billion to US farmers in crop disaster payments under the new Emergency Relief Program to offset crop yield and value losses in 2020 and 2021.

The global fertiliser shortage may prove the catalyst that finally allows Brazil to mine for potassium in the Amazon basin. Mexico is also looking to boost their domestic fertiliser production.

Sri Lanka faces a food shortage following the government’s decision in April last year to ban the imports of chemical fertilisers. Although the government has reversed the ban, no substantial imports have yet taken place.

In company news, Cargill announced plans for a new soybean crushing plant in Missouri, and ADM has announced it is partnering with California-based Eat Just, a lab-grown meat start-up.

US consumer food prices rose 9.4 per cent in April compared with a year earlier. Still, wholesale food prices increased 18 per cent from a year earlier, suggesting further consumer price increases are in the pipeline. Egg prices surged 220 per cent, butter jumped 51 per cent, and flour 40 per cent.

A famous hedge fund manager recommends investing in commodities as a hedge against inflation, but this study disagrees. If finds that commodities and inflation are not always the perfect fit.

The Guardian argues that one solution to rising food prices would be for all of us to grow more of our food. Bloomberg takes a more realistic approach to the problem, but the Guardian doubles down, arguing that the world food system is on the verge of collapse, just as the world financial system collapsed in 2008. The writer cites a 2012 Oxfam report that “just four corporations control 90 per cent of the global grain trade.”

Rising food prices add to poverty, hunger, and political instability concerns. They’re also shining a light on the role of agriculture in the climate crisis.  But if you want to reduce your carbon footprint, why not try sailboat coffee?

Finally, if you wonder which foods (and drinks) to buy or grow for your health, this article will give you the lowdown.

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In a shock move that may lead to panic in the markets, India, the world’s second-biggest wheat producer,  has banned wheat exports with immediate effect. The ban excludes exports which already have a letter of credit opened against them but includes forward sales, leaving exporters no choice but to declare force majeure on later shipments. The directive gives the government some wiggle room by hinting government-to-government sales may still be allowed. Meanwhile, the early arrival of monsoon rains could provide farmers with some relief.

India exported a record seven mln mt in fiscal 2021-22 and a record 1.4 mln mt in April, the first month of the 2022-23 fiscal year. Traders have already contracted to export 4.5 mln in 2022-23, and the country had earlier targeted to export a record ten mln mt in 2022-23.

In their latest WASDE report, the USDA had pencilled in India to export 8.5 mln mt. The agency forecasts 2022-23 global wheat production at 774.8 mln mt, the first decline since the 2018-19 season, and stocks at 267 mln mt, the lowest level in six years. It expects the US winter wheat shortfall could be more severe than previously believed and that the country’s wheat exports could be the lowest since 1971/72

The USDA puts Russian production at 80 mln mt, up from 75 mln mt last year, with exports at 39 mln mt, up from 33 million mt. It predicts (guesses) Ukrainian production at 20.5 million mt, 11.5 million lower than in 2021/22 and puts exports at 10 million mt, down from 19 million. Many traders believe that even ten mln mt of exports would prove too high.

The Chinese government is cracking down on the illegal destruction of wheat crops for construction sites and silage for animal feed.  An analyst told Bloomberg that given the poor conditions of the crop, it isn’t surprising that farmers are cutting the wheat for hay as it may offer a better return than grain.

A drought threatens the wheat harvest in France, where the first quarter of this year was among the ten driest winter periods on record for some regions. The one bright spot for wheat is in the Canadian Prairies, where wet conditions are delaying crop planting of corn and soybean and may increase wheat acreage.

The European Investment Bank (EIB) has said that Ukraine has €8bn worth of wheat from last year’s harvest that they can’t export. An EIB spokesman said, “They are sowing like crazy right now, and they will expect probably a good harvest, maybe 70 per cent of last year’s harvest, in a couple of months – and then what to do with it?”

The European Bank for Reconstruction and Development (EBRD) is considering financial support for Ukraine’s transport and logistics companies to help them maintain their exports. Ukraine last week formally closed its four Black Sea and Azov Sea ports, which Russian forces have captured, leaving land routes through neighbouring countries as its only export option.

Ukraine’s president has called for the end of the naval blockade of the country’s ports to allow wheat shipments.

The EU is exploring ways of getting around Russia’s Black Sea blockade by taking the overland route via EU roads and railways. Canada has also offered to help, but transporting Ukrainian grain by land into Europe can be difficult. The port of Constanta in Rumania is doing its bit, but in the meantime, the Russians are stealing Ukrainian grain and exporting it as their own.

Malaysian palm oil exports surged 40 per cent in the first ten days of May compared with the same period during the previous month after Indonesia imposed an export ban. The ban gives Malaysian palm oil an edge, and the government is considering cutting its export tax on palm oil. It also plans to slow the implementation of its biodiesel mandate.

Despite the export ban, Indonesian consumers complain that their domestic vegoil prices haven’t fallen. Indonesian customs officials have impounded eight shipping containers of cooking oil at Tanjung Perak port bound for East Timor. Those found guilty of breaching the cooking oil export ban could face five years of prison and a fine of up to 5 billion rupiahs ($341,997).

The FT writes that food nationalism is fuelling global inflation and hunger amid warnings of social unrest in Africa, where processed food manufacturers are substituting wheat with manioc flour and sorghum. The Guardian suggests cassava could be the best alternative.

The Ivory Coast is asking for $1.5 billion in private investment to restore degraded forests and increase food production. Meanwhile, the price of chilli sauce is rising steeply in Ghana.

Cotton prices also headed higher on world markets on fears of an Indian export ban and dry weather in the US.

US egg prices rocketed by 23 per cent between March and April as the country’s worst-ever outbreak of bird flu killed more than 37 million chickens and turkeys.

UK poultry producers warn that chicken could soon cost as much as beef due to the rising price of feed, and UK consumers are suffering. The Food Foundation reports almost 10 million Britons cut back on food or missed meals last month. (Ecowatch has published a timely guide on foraging food from the wild rather than buying it in a supermarket.)

There is some optimistic news from Australia, where researchers have identified a genetic driver in wheat that could increase protein content by up to 25 per cent.

Finally, the World Bank has published a book entitled Commodity Markets – Evolutions, Challenges & Policies. I haven’t read it yet, but you can download it here.

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After increasing 13 per cent in March, the UN FAO food price index fell about one per cent in April. Vegetable oil and grain prices dropped, while meat and dairy prices increased.

Up to 20 million people could go hungry this year In the Horn of Africa as delayed rains exacerbate the worst drought in four decades.

Some people are asking if the world is running out of grain.  Although that is unlikely, Arab countries are building stocks and have increased food shipments from Brazil. The US administration is taking the issue seriously enough to organise a conference in September on food security – the first in 50 years.

All eyes are on the weather in India, where a record heatwave could decimate the country’s wheat harvest. There is market talk that India could limit wheat exports, hurting neighbouring countries the most.

India exported a record 7.85 million tonnes in the fiscal year to March – up 275 per cent from the previous year, the government faces a dilemma this year as to whether to export any surplus or keep it at home to dampen inflation.

The French wheat harvest could also face challenges., although the EU’s Agriculture Commissioner says that “the EU itself does not face a food security risk”. The FT disagrees, arguing that shortages of diesel and fertiliser put production at risk. The FT also writes that Turkey’s farmers face hard times following the collapse of the Turkish lira and a surge in input costs.

As of 5^th May, Ukrainian farmers had sown 7.1 million hectares, about half of their forecast acreage. Spring wheat planting is now 97 per cent complete, compared to 89 per cent on the same date last year. Even so, satellite images suggest that the country’s wheat crop could fall by 35 per cent compared to the previous year.

Ukraine has accused Russian forces of stealing “several hundred thousand tonnes” of grain in the areas of Ukraine they occupy. There have been unconfirmed reports that stolen grain is being exported from Russian ports.

Ukraine could have a significant shortage of storage facilities due to a sharp fall in exports. At the end of the current season, oilseeds stocks might reach an all-time high of 21.3 mln mt.

Ukraine hopes to grow export capacity by 50 per cent in the next few months by expanding facilities on its western border, but it will still be far short of pre-war levels. The country exported 3.5 mln mt of cargo by rail last month. The UN FAO says that 25 mln mt of grain are stuck in Ukraine it doesn’t know when it can be accessed. A spokesman called the situation “grotesque”.

The cost of insuring merchant ships sailing to ports in the Black Sea has spiralled out of control, with underwriters charging as much as 10 per cent of the value of the vessel’s worth as an additional war-risk premium.

India plans to cut taxes on some edible oils to lower domestic prices. The BBC believes that the war in Ukraine and the Indonesian export ban are “a wake-up call” for India. However, India’s government says they are not worried about the export ban as the country has adequate stocks, and Indonesia has “no option other than export.” (The EU also says it has enough supplies to ride out the ban.)

Malaysian palm oil production should pick up with workers returning to plantations as the Ramadan season winds down. Malaysia’s domestic palm oil stocks are rising.

The Indonesian government’s vegoil policy measures are testing the country’s patience. Indonesia earned US$35.5 billion from 26.9 million tonnes in total palm oil exports last year, the most important markets being China (4.7 mln mt), the European Union (4.0 mln mt), India (3.03 mln mt), and Pakistan (1.6 mln mt).

Analysts expect fertiliser makers to post their biggest quarterly profits in years. They warn that supply disruptions could extend beyond 2022 and could even worsen.

Vietnam’s coffee production may fall ten per cent this year as farmers plant more profitable crops like avocados, black pepper and durians, helping them cope with the high fertiliser and fuel costs.

Australia’s biggest investment bank Macquarie Group saw full-year net profit up 56 per cent from the previous year to a record A$4.7bn ($3.3bn). Commodity earnings were up 50 per cent to A$3.9bn.

Maersk reported its best earnings quarter ever in Q1 2022 with a 55 per cent increase in revenue to $19.3 billion. EBITDA more than doubled to a record $9.1 billion. The company’s CEO told Bloomberg that it wrote down more than $700 million as the transport giant counts the cost of exiting Russia. Cargill and General Mills, however, continue to do business in Russia.

Drewry estimates the world’s container-line industry may make $300 billion in profits this year, up from $214 billion in 2021, before the windfall settles back to around $100 billion next year.

But even as container shipping companies report record profits, the cost of new containers is falling. Some suggest that this indicates a tipping point (Container ship charter rates are also cooling.) Meanwhile, thousands of containers are piling up in Rotterdam Port because of the sanctions on Russia.

Half a tonne of cocaine has been found in a container of coffee bean bags at a Nespresso factory in Switzerland. Europe is increasingly becoming a hub for the production and transhipment of cocaine. (Drugs have been turning up in commodity shipments for some time now.)

Louis Dreyfus has used a B30 biofuel-blended marine fuel for the first time to sail from LDC’s orange juice terminal in Ghent, Belgium, to LDC’s terminal in Santos, Brazil, and back again.

The World Health Organization has declared an “obesity epidemic” in Europe after finding that 59 per cent of the continent’s adults are overweight. Turkey and the UK are among Europe’s fattest countries. Meanwhile, a UK study has discovered that (as every parent already knew) adolescents don’t eat a healthy diet.

A NASA climate research scientist who has spent much of her career explaining how global food production must adapt to a changing climate won the World Food Prize.

Reuters has a long read on the start-ups looking to use Artificial Intelligence to improve supply chains.

And lastly, Bloomberg subscribers can listen to this podcast by Javier Blas explaining how commodity trading companies “really work.”

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Food and agriculture have been making the headlines, with Indonesia’s ban on palm exports adding fuel to the food price fire caused by Russia’s invasion of Ukraine.

Bloomberg and the FT explain the gravity of the situation, and Reuters explains the build-up to Indonesia’s export ban while warning that there is no plan B.

BloombergQuint has a long read on the fertiliser shortage, writing, “For the first time ever, farmers the world over — all at the same time — are testing the limits of how little chemical fertiliser they can apply without devastating their yields come harvest time. Early predictions are bleak.”

Other articles were less well-informed. The NY Times writes, “Prior to the war, Russia and Ukraine together exported over one-fourth of the world’s wheat.” (The world’s farmers produced 776 mln mt of wheat in 2020/21 and exported 202 mln mt, of which Ukraine and Russia exported 55 mln mt.)

Ukraine exported 567,991 mt of grain via rail through 27^th April and has shipped its first Panamax-sized bulk carrier of Ukrainian corn since the Russian invasion from Constanta in Romania. At the same time, Ukraine’s spring sowing campaign continues to progress, advancing by another 570,000 hectares, or four percentage points, between 21^st-25^th April.

Indonesia widened its vegoil export ban to crude palm oil, raising concerns over food protectionism. There is some discussion about how long the ban will last as the country may run out of storage capacity and restart exports as early as May. In the meantime, Indonesia’s navy has already seized two palm oil shipments. The ban has raised awareness of palm oil’s role in our diets.

The UK Food Standards Agency has ruled that, due to exceptional circumstances, products labelled as containing sunflower oil may now also include fully refined palm, coconut, or soybean oils without changes to the labels.

It’s an ill wind that blows nobody any good. Indonesian palm oil growers will suffer because of the ban, but Malaysian palm growers benefit from higher palm prices. Counter-intuitively, Malaysia has urged countries to reconsider their biofuel programmes despite recently committing to continue their own biofuel programme.

India’s wheat farmers and exporters benefit from higher wheat prices, and exports are already flowing. However, an unusually early record-shattering heatwave has reduced Indian wheat yields, raising questions about how much wheat the country can export. Meanwhile, the US President has asked Congress for $500 million to encourage US farmers to double-crop their fields and grow more wheat.

Bunge and ADM published better than expected results, and Bloomberg drew attention to the impact of higher volatility on traders’ profits. The news agency issued an opinion entitled “Commodity Traders Can’t Go ‘Unregulated’ anymore.” Cargill, however, worries about increased transport costs and argues that it is getting too expensive to export soybeans from Brazil.

Scientists are using satellites to monitor methane gas emissions from livestock farms. Meanwhile, cow masks that capture methane gas have won an award as part of the UK’s Prince of Wales’s Sustainable Markets Initiative. The devices could reduce methane emissions from cow burps by more than 50 per cent.

Finally, there are signs that port congestion is easing, with less than 40 ships waiting outside of the ports in Los Angeles and Long Beach, down from more than 100 earlier this year

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In a shock move, Indonesia, the world’s biggest palm oil producer, will ban all palm oil exports from 28^th April following a rise in the domestic price of cooking oil. The country’s finance minister admitted that the ban would hurt other countries but was necessary to prevent social unrest. Between them, Indonesia and Ukraine account for around 40 per cent of global vegoil exports. UK supermarkets have begun to limit vegoil purchases to a few bottles per customer.

Ukraine’s agriculture minister said 1.25 mln mt of grain and oilseeds were on commercial vessels blocked in Ukrainian seaports and may soon deteriorate. Ukraine’s state-owned railway halted the transport of some agricultural goods into Poland and Romania between the 16^th and 18^th of April, including grain and oilseeds. They gave no reason for the suspension.

Russia, meanwhile, continues to export grain, with almost 900,000 mt of wheat loaded in Russian ports so far this month, in line with the pace in March. Those shipments have spurred analysts to downgrade their outlook for EU wheat exports. The USDA has raised its estimate for Russian wheat exports to 33 million mt this season.

Ukraine’s agriculture ministry has said that as of 21^st April, farmers had planted crops on more than 3 million hectares, around 21 per cent of the ministry’s forecast for spring crops.

Egypt’s Supply Ministry is considering adding India to sixteen other wheat import origins. It said that Indian wheat purchases would depend on suppliers “offering competitive bids.”

There is some debate about the quantity and quality of Indian wheat exports this season, and the BBC wonders whether India can feed the world. India’s government expects a record 111 mln mt of wheat, but others worry that poor weather and a shortage of fertilisers will result in a disappointing result.

Heavy snow could delay spring wheat and canola planting in Canada. South America’s farmers could plant more spring wheat in September, but the area is coming out of severe drought (particularly in Argentina), and farmers worry about fertiliser availability.

For the moment, at least, Russian fertiliser is still finding its way to Brazil, with at least 24 vessels carrying almost 678,000 mt of Russian fertilisers expected to reach Brazil in the next few weeks. Fertiliser prices, meanwhile, have made record highs.

The International Rice Research Institute has predicted that reduced fertiliser use could lead to a 10 per cent drop in rice yields next season. A shortage of fertilisers may create a hunger crisis in Peru. The country’s rice, potato and corn production could fall as much as 40 per cent. The Rockefeller Foundation has called for debt relief and emergency aid to poorer nations to avert a “massive, immediate food crisis” in poorer countries.

Bloomberg looks for a silver lining to the cloud and wonders whether the rising price of fertilisers will lead to farmers using them more efficiently. (That may happen, but the Guardian warns that the Sri Lankan government ban (now reversed) on imports of fertiliser and other chemical farm inputs led to a collapse in food production. Some poorer sectors of the population face starvation.)

Bloomberg also argues that the world is too dependent on wheat, rice and corn. The news agency cites a recent study that governments should repurpose agriculture subsidies to support the growing of foods that benefit human health and the environment.

The war in Ukraine is pushing up freight rates, with about 80 to 100 ships, mostly bulk carriers, stuck in Ukrainian waters. More than 450 ships are waiting to dock to load or unload goods in Chinese ports because of the Covid lockdown in Shanghai. Container freight is also tight, with a fifth of the world fleet tied up in port congestion.

In the first quarter of 2022, China imported 30 per cent fewer soybeans from the US than last year.

Indonesia’s government has opened a corruption case linked to the issuance of palm oil export permits, naming four suspects, including a trade ministry official and palm oil company executives.

Cargill has stopped buying palm oil from Sime Darby after the US government said it had found indicators of forced labour in the Malaysian grower. Ferrero has told its suppliers not to purchase palm oil from Sime Darby. (The company says Ferrero is not one of their customers.)

Nestlé increased product prices by an average of 5.2 per cent in the first quarter of this year. Procter & Gamble increased prices by 5 per cent in the same period, while Heineken, the world’s second-largest brewer, increased prices by 5.2 per cent.

Dan Saladino, a BBC food journalist, has written a book called “Eating to Extinction: The World’s Rarest Foods and Why We Need to Save Them.” (The title says it all.)

The Guardian argues that our farmers and food systems are not ready for climate change and believes that seed banks are the last line of defence against a threatening global food crisis. However, help may also be at hand from rubisco, an ancient protein that could help crops cope with higher temperatures.

The FT reports on a new study that argues that asking people to become vegetarian will not be sufficient to curb GHG emissions. It suggests that a better solution lies in reducing methane emissions from livestock.

The Dallas Fed believes that commodity margin calls pose a macroeconomic risk. The FT published an opinion piece arguing the same thing. The newspaper says that the margin squeeze and higher commodity prices will favour the more prominent trading companies.

Wall Street banks’ commodities trading exposures are rising because of higher prices. Both Goldman Sachs and JPMorgan Chase reported an increase in their daily VAR.

The US president has said that the EPA (Environmental Protection Agency) will issue an emergency waiver permitting year-round sales of E15 gasoline, which contains 15 per cent ethanol.

Has the Covid pandemic and the war in Ukraine killed global supply chains?  Newsweek believes so.

Finally, if you want to know how an exiled Mexican president (who returned to office eleven times) invented chewing gum, this podcast is for you!

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