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February 27, 2020

Commodity Conversations Weekly Press Summary

As the spread of the new coronavirus is expected to impact global trade flows, the US President said the government might offer farmers more trade aid in 2020 to compensate for the lack of purchases from China. The USDA said the news, announced on Twitter in all-caps, was a surprise. Meanwhile, lawmakers are looking at how the trade aid money – over USD 23 billion since 2018 – is being distributed. Critics point to the fact that foreign firms like Brazil’s JBS are receiving hundreds of millions of dollars in government funds.

The giant meat processor JBS received some more good news this week as the USDA ended a ban on raw beef imports from Brazil. The agency blocked Brazilian imports in 2017 on health and safety concerns. Otherwise, US efforts to isolate Iran have allowed it to take the position of biggest pistachio grower in the world. This deep-dive by Bloomberg looks at how geopolitics, climate change and resource mismanagement created challenges for Iranian producers, along with how investors are looking at new potential pistachio-growing countries, like Georgia, Uzbekistan, and Azerbaijan.

China’s virus outbreak is having indirect but impactful consequences for the food industry worldwide, such as the fall in Chinese fertiliser production. India usually imports 50% of its diammonium phosphate from China but the lockdown of Hubei province is forcing India to look for alternative suppliers. In North Korea, the price of many basic goods started to fall again after a spike caused by the closure of the border with China. Sources reported that the price of imported goods dropped as distributors were forced to release their stocks.

China is also one of the largest producers of alternative sweeteners and Coca-Cola warned that the ongoing virus will lead to a shortage. Although China is the group’s third-biggest market, it expects that the coronavirus will only affect revenues by 1-2% in the quarter. Likewise, Danone said sales will be down about USD 100 million in the first quarter because of the virus. Danone also pledged to spend USD 2.2 billion over the next three years in order to “build climate change resilience” into the business. The money will go to reduce plastic waste and to lower the carbon footprint of its supply chain.

The environment was also on the minds of British people as the UK is looking to launch post-Brexit trade talks. A YouGov poll showed that 57% of respondents thought the UK should enforce stricter environmental laws once it leaves the EU, while 37% said food safety standards should be strengthened, compared to 6% who thought they should be loosened. Moreover, farmers are worried as the environment secretary said he could not guarantee that food standards will not be lowered. British farmers are afraid they will be unable to compete amid cheap imports, funding cuts and a restriction on hiring immigrant workers.

The Netherlands only narrowly approved the free-trade agreement with Canada, in force since 2017, amid pressure from local farmers afraid of competition from imports. Farmers across the bloc have also opposed efforts to sign new deals with Mercosur, Australia and New Zealand. Otherwise, the EU’s efforts to punish Cambodia for human rights violations are being challenged as the Cambodian Prime Minister said the state will compensate for losses faced by local companies. The EU ended about 20% of the preferential duties under the Everything But Arms scheme but the PM said he will offer tax breaks to affected exporters.

Pakistan declared a state of emergency due to a locust outbreak that has destroyed crops, including wheat and cotton. The Prime Minister approved a plan which includes buying planes to spray pesticides. India’s agriculture ministry blamed the country for not reacting fast enough and letting the invasion spread, adding that some 400,000ha of crops in northern India had been affected. In response to a video of locusts in Xinjiang, China, the agriculture department said this was a desert variety which was unlikely to survive in China. Besides, the Himalaya provides an efficient wall against the migration of locusts, while the country has among the world’s best locust monitoring and extermination systems, it said.

The situation is more serious in Africa, however, as locusts are devastating crops in South Sudan, having crossed over from Uganda. Locusts have also been reported in Kenya, where farmers asked the government to intervene to avoid significant crop losses. The UN warned that the locust invasion could spread to more countries which could potentially create a food crisis. Somalia has declared a national emergency and the UN is appealing for funds to fight the locusts with aerial spraying. Climate change is likely behind the outbreak, which is the worst in 25 years, the UN said.

As farmers struggle with volatile weather patterns and unpredictable trade development, a new tool appeared to help them generate more income: YouTube. The website revealed that farming videos have seen their popularity grow twice as fast as cosmetic videos. While some channels focus on sustainable or organic practices, the most popular YouTubers are young, large-scale, conventional farmers. We particularly liked this video on how to farm Rice Krispies.

This summary was produced by ECRUU

February 24, 2020February 23, 2020

Are governments back at the table?

Bloomberg published an interesting opinion piece last week on the resurgence of government in our daily lives.

Since the Reagan / Thatcher era, government has been seen as `the problem not the solution`, particularly in terms of the economy. Over the past 40 years, privatisation and other market liberalising measures have reduced the role of government, leaving space for `market-based solutions`.

The international commodity trade benefited from this trend. When I started in the commodity business in the late 1970s, it was dominated by state agencies. Prodintorg was the monopoly importer in the USSR, as was COFCO in China and BULOG in Indonesia, along with a host of other government agencies in many other countries. If you wanted to buy sugar from Brazil you could only buy it from the IAA, a stage agency. And if you wanted to buy sugar from Australia you had to deal with QSC, a quasi-state agency.

Most of these agencies were dismantled during the 1980s and 1990s as governments withdrew from the international agricultural commodity trade; our business was effectively privatised.

If the Bloomberg opinion writer is correct, the pendulum is now swinging the other way. Governments now have the support of voters to be increasingly interventionist.

Once again, international agricultural commodity markets are not immune from this trend. The Chinese government, through COFCO, is an increasingly important player in managing China’s food imports. The Russian government, through VTB, is becoming an increasingly important player in Russian grain exports. Meanwhile, other countries are becoming more interventionist in imposing tariffs and other trade barriers.

What effect might this have on our business?

First, politics could become more important than price as a market driver. Although not perfect, markets do a reasonable job of sending the right signals to producers and consumers, importers and exporters. When governments interfere, these market signals become distorted: farmers end up growing the wrong crops while importers import the wrong quantities or the wrong commodities. Markets are better than government committees at balancing supply and demand all along the food supply chain.

Second, the trade in food could be weaponized. Less democratic governments have sometimes used food supplies as leverage to gain power over dissenting groups, using starvation and famine as a political weapon. More solid democracies happily no longer do that, but they do use food as a weapon in their international relations. Look at Russia’s ban on food imports from the EU, or China’s import tariffs on agricultural imports from the US. These types of intervention can distort markets and lead to an inefficient allocation of resources.

Third, we may see the return of corruption, both institutional and local. Putting a poorly-paid government bureaucrat in charge of a country’s food imports could lead him to favour one supplier over another – or to grant an import licence to a ‘friend or relation’.

Localised corruption is rare in advanced democracies, but institutionalised corruption is widespread. If governments become more involved in our business, the power of the lobbyists will grow. It will be increasingly worthwhile, and profitable, to lobby for or against a tariff, or for or against an import or export ban. Politicians need money to get elected even in the most transparent democracies.

If the Bloomberg article is right, it could become even harder for the world’s grain and agricultural commodity traders to make a living.

First, trading companies got out of the business of bribing government officials long ago, and for both ethical and good business reasons they won’t want to get back into it.

Second, western agricultural trade houses may be handicapped if government-owned competitors trade for political rather than price reasons.

Third, politics increases risk. Throughout 2019, for example, the price differential between Brazilian and US soybeans could – and did – change at the click of a tweet. Traders like volatility as long as it is not political.

If the world wants to feed the estimated almost 10 billion people that will be will living on this planet in 2050, then it will need international free trade in agriculture. Let’s hope that the pendulum doesn’t swing too far in the wrong direction.

February 20, 2020

Commodity Conversations Weekly Press Summary

The US is looking at resetting its tariff commitments under the WTO’s Government Procurement Agreement (GPA), or even exiting it altogether, according to sources who spoke with Bloomberg. The administration is reportedly blaming the WTO’s most-favored-nation (MFN) system for its trade deficit with areas like the EU and China but some analysts warn that US businesses could be hurt if they lost access to GPA tenders.

The USDA launched its “Science Blueprint” this month, a 5-year plan designed, among other things, to mitigate the effects of climate change on agriculture. Some advocacy groups welcomed the news, saying that the simple act of mentioning climate change was a step forward. However, critics have been quick to point out that it will not be easy to undo the efforts to undermine the USDA’s scientific research over the last few years which led to around two-thirds of agency researchers quitting.

The situation at the USDA seems to reflect what is going with the general public in the country. A survey by Yale University found that only 30% of Americans talked about the environmental impact of what they eat, while the rest said they didn’t know they should eat more plant-based food. Over half, however, said they would be willing to adjust their diets if they got more information on the topic.

An ongoing lawsuit in Texas might help with that. The National Press Photographers Association sued the Department of Public Safety over a ban on taking photographs of feedlots with drones. Separately, an investigation by the Food & Environment Reporting Network found that residents of Texas’ cattle feedlot belt say they are suffering from “fecal dust storms” when the wind blows on the millions of tons of manure produced by the cattle, sometimes thick enough to create smog-like conditions. The haze, as well as the amonia, could cause health problems such as asthma. However, Texas’ “right to farm” law, which was initially designed to protect farmers from growing cities, protects the feedlots from any legal action from local residents.

Nestle reported a net profit of CHF 12.6 billion (USD 12.89 billion) in 2019, up 24% on year and beating forecasts. The organic growth was up 3.5%, driven in part by strong demand for their Starbucks and Nescafe products. The group said it was working hard to guarantee a stable supply of food in China where most of its 30 factories have started operating again. It is still too early to assess the impact of the coronavirus, however, as China represents 8% of its global sales.
Looking forward, the CEO warned that organic growth would likely slow in 2020, adding that the group was planning more acquisitions in high-margin and “trendy” segments. The plant-based meat segment represents a “once in a generation opportunity,” he added, saying that plant-based tuna would be released later this year. On the other hand, Nestle may look to dispose of its US frozen food and water businesses which have not been doing well. In Nigeria, the company is due to start domestic production of milk following pressure from the government to reduce imports.

Unilever said it would stop advertising its food and beverage products to children below 12 years to help reduce child obesity. It will also launch a “Responsibly Made for Kids” logo for products with lower calories and sugar content. Similarly, the UN is calling on regulating ads to children, especially fast food ads on social media.

A report by the International Maritime Organization (IMO) analysed by The Guardian suggests that the cleaning systems (known as “scrubbers”) installed in ships to meet 2020 IMO pollution regulations, could result in more pollutants being released in the sea instead, contaminating seafood in the process. Some environmentalists have urged the IMO to ban the use of scrubbers until data, which the IMO says is currently insufficient to really assess risk, is clearer. The WWF, meanwhile, found that the Philippines, Thailand, Indonesia, Malaysia, China and Vietnam were responsible for 60% of the world’s annual ocean pollution, noting that Malaysia was the biggest consumer of single-use plastics.

In Ukraine, the government gave the green light to Bunge, ADM, Cargill, Louis Dreyfus and Glencore to get together and create TechCo, a company designed to digitise documents related to the sale of agricultural products. There are no concerns about competition as this will only affect post-sales, it said. Something similar is happening in the sugar industry where Dubai-based sugar refiner Al Khaleej Sugar, Universa Block Chain and DMCC Tradeflow signed an agreement to collaborate over the development of a platform designed to boost international sugar trade volumes in Dubai.

This summary was produced by ECRUU

February 19, 2020

AgriCensus Report

OPINION: Will China purchase more US ag goods?

14 Feb 2020 | Jonathan Kingsman

It is still too early to tell how badly – and for how long – the Coronavirus outbreak will affect the Chinese economy. But even before the virus hit, many grain traders were questioning whether China would, or could, honour the obligations made under the recently negotiated Phase One trade deal to increase purchases of American agricultural products.

The conventional wisdom is that the trade wars will have a lasting negative effect on the US agricultural sector. Observers compare the current situation to the two successive US grain export embargoes imposed by the Carter and Nixon administrations. As a result of those embargoes, the Japanese – at that time the biggest buyers of US soybeans – realised that they could not rely on the US and invested in South America to develop soybean production there.

There is a strong argument to be made that history will repeat itself, and that China will reduce, rather than increase, its agricultural purchases from the US as it seeks to diversify supply. However, there are two counter arguments.

The first is that China’s diversification options are limited, at least as far as soybeans are concerned. Although genetic modification has allowed soybeans to be grown in a wider geographical area, Brazil and the US still dominate global exports with 77 million and 49 million tonnes respectively in 2018/19. The remaining 25 million tonnes of global exports were divided among just five other countries.

It will be difficult in the short to medium term for China to diversify away from Brazil and the US. China could take a strategic decision to import an even greater percentage of their needs from Brazil, but this would further increase their dependence on Brazil.

The second argument is that it was the Chinese who imposed tariffs on US agricultural imports; the US did not embargo, or tax, exports. This is an important distinction. The Chinese government imposed tariffs as a bargaining tool in the trade negotiations—one of the few bargaining tools that they had.

If the Chinese were now to reduce US imports they would not only be seen as unreliable and untrustworthy, they would also reduce their bargaining power in future trade negotiations. There is a wider trade picture to consider outside of agriculture.

This is not to say that US farmers should necessarily expect a rapid increase in their exports to China. It may take a while before soybean exports get back to the record of nearly 59 million tonnes shipped in 2016/17.

Just five years ago traders were expecting that China would by now be importing 100 million tonnes of soybeans per year. African Swine Fever and the Coronavirus knocked the wind out of those demand growth estimates. It will take a while before demand recovers.

But recover it will. There has been some fear expressed that Chinese soybean imports have peaked. However, the Chinese middle class will continue to grow in both size and wealth. Their appetite for meat will grow with it, as too will soybean imports.

But what about other agricultural imports?

Alarm bells were rung recently when it emerged that China had bought about one million tonnes of wheat under their tariff rate quota from Australia, Canada and France, rather than from the US. However, this may actually be good news if it is a sign that China intends to follow a recent WTO ruling to reallocate unused import quota tonnages.

Corn and ethanol may be harder nuts to crack. Although China has signalled its intention to increase ethanol use, the country is unlikely to import significant quantities to achieve that end. As for corn the US, along with Argentina and Brazil, face growing competition from the Black Sea region. Ukraine has expanded production and has the potential to grow further. This should not be underestimated.

Ultimately it will come down to a question of price. The extent to which the US will participate in renewed Chinese import demand growth will depend on the competitiveness of US farmers. Politics are important in the grain trade, but price is even more so.

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February 17, 2020

Cheap food and politics

As I wrote in a recent post, Stalin believed that the political and economic future of the Soviet Union lay in industrialisation. He set high prices for industrially produced goods and low prices for agriculturally produced goods in order to encourage a shift from agriculture to industry. He reasoned that surplus workers in the countryside would be better employed in industry, and that a policy of cheap food would drive economic growth.

This view has not disappeared. Within the developed world, most governments keep food prices low (to placate urbanites) while quietly transferring money back to rural areas through tax-funded subsidies. And in the developing world, many classical economists still believe that industry, and not agriculture, drives economic growth.

The data, at first sight, appears to support that view. The chart below shows how workers moved from farms to factories as the industrial revolution gathered speed in 19^th century Europe.

While this chart, again from ourworldindata.org, shows that the richer the country becomes the smaller the percentage of the workforce employed in agriculture.

This third chart shows how agricultural productivity increases as countries get richer. This could be because a shortage of labour in rural areas leaves farmers no choice but to improve productivity. It could also be because farmers get better access to information, finance and technology as their country develops.

The conclusion is therefore clear. Stalin was right: a country develops when farmers migrate from field to factory. This migration leads not only to GDP growth in the cities but also to greater productivity on the farms. Everyone gains.

As a result, development economists and politicians give this process a nudge through low food prices, forcing productivity gains in the countryside while subsidising workers’ wages in the cities. (This is known as ‘urban bias’.)

However, there may be some confusion here between causation and correlation. Forcing displaced rural workers into the cities does not guarantee that industrial activity will pick up. The industrial revolution in the UK ‘pulled’ workers into the cities; displaced rural workers did not ‘push’ industrialisation. People are ‘pulled’ from farms to factories once factories offer them better wages and a better future for their families. Pushing workers from their fields may lead to an increase in poor urban dwellers – and hence a fall in urban wages – but it does not directly ensure economic growth.

In a closing address to last years FT Global Foods System Conference, Pavan Sukhdev, President of WWF International, argued that the number of people employed in agriculture in developing countries is simply too large to be absorbed by industrialisation within any reasonable timeframe. He argues for a different approach, one driven by economic growth in the countryside fuelled by sustainable agriculture. He cites the Indian state of Andhra Pradesh in India as an example, where six million farmers practise what is called ‘zero-budget’ farming.

So why then do governments continue a policy of keeping food prices low? It seems redundant in developed countries where the shift in population from farms to factories has already occurred. Meanwhile in developing countries it can drive people from their farms without helping the country’s economic growth.

The answer can possibly be found in the way that governments quietly transfer money back to farmers through subsidies. City dwellers pay partly for their food through taxes. Governments do this because urban voters are better organised than rural ones, and there are more of them. Cheap food buys votes in democracies.

Cheap food also helps keep leaders in power in less democratic countries. Consumers protest – and riot – when food prices are increased. The Arab Spring may have started in Tunisia, but it was food price protests in Algeria that gave it momentum.

So everyone wins with cheap food. The farmers are happy; they get paid partly through the sale of their produce and partly through tax transfers. Consumers are happy: they get cheap food in the shops, blissfully unaware that they are actually paying for it through their taxes. Governments are happy, because they stay in power.

The problem is that not everyone wins. But more on that in future posts.

February 13, 2020

Commodity Conversations Weekly Press Summary

Bunge reported a net loss of USD 51 million in the last quarter of 2019, an improvement from a loss of USD 65 million the previous year. This was in part thanks to higher sales and margins out of South America and farmers in Argentina selling their crops early in anticipation of the increase in export taxes. The CEO said the company was benefiting from becoming more “nimble” as well as implementing a “more rigorous approach to risk management.” Overall, however, the group reported total net losses for 2019 of USD 1.28 billion, from an income of USD 267 million in 2018. The CEO warned that there remained a lot of uncertainty for US origination in terms of the US-China trade deal in 2020, in addition to the African Swine Fever and Coronavirus.

Olam, on the other hand, said it should see a net one-time post-tax gain of USD 52 million for the last quarter of 2019 as a result of the company’s restructuring, which included the sale of a number of assets and shares.

Similarly, ADM was able to deliver a solid fourth quarter, with net earnings of USD 504 million, despite the challenging market environment. The company published its OutsideVoice Protein Perception & Awareness Study which suggested that plant-based food will continue to see impressive growth in 2020. The study found that 44% of US consumers now identified as flexitarian. In anticipation, ADM will expand its non-GMO soy protein factory in Europoort, Netherlands.

The decision might be particularly well-timed as members of the EU Parliament discussed a proposal to impose a tax on meat as part of the integrated food policy Farm to Fork (F2F) under the EU Green Deal. A recent report argued that a meat tax was essential to reach carbon neutrality and lower healthcare costs. Nonetheless, the farmer’s union Copa-Cogeca said the tax would impose a terrible burden on farmers, especially if it was only implemented in the EU.

Environmentalists added that the overall F2F effort would be jeopardised if the EU continued to negotiate new trade deals with countries like Brazil and the US. Some activists are concerned that the EU will not be able to stand up to pressure from the US, which recently threatened to target Germany’s auto industry with tariffs to push for concessions on agricultural trade.

Scientists continue to show evidence that eating red meat is linked to a small but increased risk of developing cardiovascular disease, such as this JAMA Internal Medicine paper which gathered data on 30,000 people over 30 years. Government guidelines against over-eating beef – which started as early as 1977 in the US – could have contributed to the growth of the chicken nugget, now infamous for being one of the most highly processed meat products. Right on cue, KFC and Beyond Meat launched Beyond Fried Chicken. Early reviewers say they are quite good, but food critics also note that “everything tastes like chicken”.

Besides, the Rothamsted Institute warned that tofu could actually have a bigger environmental impact than meat products in terms of protein content because it is highly processed and not as digestible. Danone is also reviewing how it is marketing its plant-based alternative to whippable cream after a Swedish group awarded the company the top prize for “food bluff of the year”. The product, called Alpro Cuisine Soya Whippable, only contains 2% soy but 25% palm oil. In response, Danone said it would change the packaging to highlight the palm oil content, pointing out that the palm oil was certified under the Roundtable on Sustainable Palm Oil and one of the most sustainable sources of oil.

California-based Farmers Business Network (FBN), a small start up hoping to disrupt the agricultural world, complained to Canadian authorities that big commodity groups were abusing their dominant position to block its growth. FBN launched an online marketplace for farmers to buy agricultural inputs, thus cutting out the traditional middleman. The Canadian Competition Bureau confirmed it was investigating the case and had extended the claim to include Cargill and Bayer. In the EU, meanwhile, the Commission said it was looking into whether Mondelez had abused its dominant position by restricting the cross border trade of certain products, in breach of the EU’s Single Market rules.

This summary was produced by ECRUU

February 12, 2020

AgriCensus Report

Chinese animal feed production returns amid coronavirus: govt

Feed production at factories across China restarted on Monday after a near two-week shutdown, with operations reaching 50% of capacity, the government said Monday.

Regional shortages in animal feed have become a concern for the government, with many factories shut for an extended period of time for Chinese New Year as the country suffers from an outbreak of the respiratory virus.

“According to a survey, the operating rate of feed companies nationwide has reached more than 50%, among which Guangdong, Shandong, Hunan and other big feed-producing provinces have achieved more than 70% of the operating rate,” an official from the Ministry of Agriculture said Monday.

“Some large-size companies have operating rates of over 90%,” said Kong Liang of the Joint Prevention and Control Mechanism of the State Council.

Getting animal feed to farmers in the world’s most populous nation has become a priority for the government, after transport restrictions meant to contain the coronavirus outbreak created regional shortages, leaving animals malnourished and culled.

Hubei province, home to the city of Wuhan, which was the epicentre of the disease, has seen the most disruption, although China’s government said it was now focussing on this area as a priority.

Market sources confirmed that many soybean crushers and animal feed producers had restarted operations this week, although it is hard to confirm an exact figure.

“We never stopped operating,” said one major crusher in northern China, adding that many soybean crushers nearby started restoring operations early last week.

“Most of our factories have started working,” said one soybean trader at a major international crusher.

The market expects the majority of output capacity for feed and soymeal will return by the end of this week.

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February 8, 2020

Silent Spring

“We stand now where two roads diverge… The road we have long been travelling is deceptively easy, a smooth super-highway on which we progress with great speed, but at its end lies disaster. The other fork of the road – the one ‘less travelled by’ – offers our last, our only chance to reach a destination that assures the preservation of our earth.”

Thus wrote Rachel Carson in her best selling book ‘Silent Spring’, published back in 1962. ‘Silent Spring’ is largely credited as the catalyst that began the environmental movement and (eventually) the formation of the US Environmental Protection Agency.

In the book, Ms Carson writes about the widespread use of chemical pesticides and the negative effects they can have on biodiversity. In particular she highlights how aerial spraying of DDT led to a collapse of local bird populations – hence the book title.

Although dated, the book has some useful lessons for us all. The first, and most obvious, is that if you are a hammer everything looks like a nail. Chemical pesticides largely came out of research during World War Two into chemical warfare. Once the war ended, scientists used the knowledge that they had acquired to use chemicals to kill insect pests rather than humans.

In this sense, chemical pesticides have a similar history to nitrogen fertilizers. As Michael Pollan writes in The Omnivore’s Dilemma, the US government found itself at the end of World War II with a surplus of ammonium nitrate, the principal ingredient in making explosives. Ammonium nitrate is an excellent source of nitrogen for plants, and the chemical fertilizer industry was the product of the government’s effort to convert its war machine to peacetime purposes.

In her book, Ms Carson writes of a USDA programme in 1958 to exterminate the fire ant, an insect that has a sting similar to that of a bee or a wasp. A million acres were sprayed in Florida and Louisiana with dieldrin and heptachlor, two relatively new chemicals many times more toxic than DDT. The results on wildlife, particularly birds, as well as on livestock, mainly pigs and chickens, were catastrophic. The poisons also accumulated in cow’s milk.

Spraying continued for the following two years but without any meaningful impact on the fire ant population. It appears that the pesticide only killed off the weaker fire ants but left the stronger ones alive to adapt and develop an immunity to the poisons. Ms Carlson likens it to human-induced Darwinism.

So that is the second lesson from the book: because nature constantly adapts, pesticides become increasingly ineffective. You either have to apply them in greater concentration or constantly develop new ones.

The third lesson is that everything in nature is related: try to solve one problem and you may create a worse one. As the author writes, ‘nothing in nature exists alone’. She gives the example of the US Forest Service’s use of DDT for combating the spruce budworm in 1956. The pesticide was successful in eliminating the spruce budworm but also killed off the natural predators of the spider mite, whose population then exploded to become an even worse problem.

Finally, Ms Carlson makes the point that, once they have been applied, these pesticides do not disappear, but build up in dangerous quantities in the soil, in earthworms, in the fish in the adjoining rivers and lakes, and in livestock. They then work their way along the food chain in surprising and dangerous concentrations. The spring was silent in 1962 because the birds had died after eating earthworms poisoned with DDT.

The world is a different place now than it was when Ms Carlson wrote her book 58 years ago. However, as the current ruckus surrounding glyphosate shows, the issues remain. The general public, including jurors, do not trust scientists. They believe that they are either in the pay of big chemical companies, or that they do not have sufficient data over a long enough period of time to evaluate a product’s safety. This distrust began with Silent Spring.

February 6, 2020

Commodity Conversations Weekly Press Summary

Two weeks after the signature of a phase one trade with China and one week after the approval of the USMCA, the price of US crops has been mostly down reflecting the impact of the coronavirus. China was not expected to meet the US import targets before the virus outbreak but, as a futures broker put it, now “they have a good excuse at least.” Instead, the country has been importing grains from Brazil, Australia, Canada and France where prices are lower. The CEO of ADM remained optimistic, however, expecting imports to pick up in the second half of the year when prices drop with the start of the US harvest.

In response to the virus outbreak, North Korea reportedly closed its borders and stopped almost all cross-border travel. While the country’s focus on self-reliance means it produces a lot of items like snacks or clothes, the raw materials mostly come from China and the border closure would have a significant impact on the economy if they have to remain closed for a while.

Pork producers around the world are still watching out for the African Swine Fever (ASF) and hoping they can protect their livestock from the disease. The Philippines reported the first case in the Mindanao province and the disease is now spreading through Eastern Europe. In Germany, the state of Brandenburg built a 12km electric fence on its border with Poland to stop wild boars from infecting the local livestock. Germany has been able to benefit from the uptick in demand so far as exports to China surged 43% in Jan-Jul 2019. However, a German producer warned that the spread was inevitable, which could push China to stop German imports.

The CEO of Cargill noted that consumers are increasingly focused on the need to change animal agriculture. Cargill recently purchased Delacon, a producer of animal feed additives, and Diamond V, who makes animal supplements from fermented ingredients. Diamond V also launched a human supplement brand that focuses on gut health. A Cargill scientist said “probiotics, prebiotics, postbiotics and phytogenics” could all play a role, while the CEO argued that the “the future is micro ingredients”.

For its part, Nestle announced that it will add USD 200 million to its investment in the pharmaceutical company Aimmune Therapeutics, bringing its total investment to USD 473 million. Aimmune Therapeutics recently received approval for a therapy to lower allergic reactions to peanuts in children. Nestle also announced a partnership with Burcon and Merit Functional Foods, two Canadian vegan protein manufacturers. The head of Burcon noted that the recent craze surrounding plant-based products “has been a wild ride.”

The response from some meat producers has been less enthusiastic, however. The Maryland Farm Bureau expressed its support for a proposal to ban the use of the word “meat” for plant-based or lab-grown products. Missouri passed a similar law in 2018. In Florida, Burger King argued that it never advertised the “Impossible Whoppers” as vegan. The comment was in response to a lawsuit complaining that the plant-based burgers were cooked on the same grills as other burgers.

Food manufacturers like Nestle, Mondelez and Danone, have made impressive strides in reducing the environmental impact of their own operations but are struggling to address the impact of their supply chain. S&P Global Market Intelligence suggested that the cost of environmental damage as a proportion of revenue of these three firms has been increasing since 2015, after six years of decline. In essence, major corporations have “outsourced their environmental impact to their supply chains”, an expert commented.

The idea of using agricultural crops to help lower the emissions of aviation and marine transport has been gaining ground as other alternatives like electricity remain a distant prospect. Sustainable Aviation, a group representing the UK’s aviation industry, has set a target to become carbon neutral by 2050, thanks to carbon offset programs, the use of bio-jet fuel, also called sustainable aviation fuel, and carbon pricing. The group hopes to achieve the goal despite a 70% expected growth in air passengers and the opening of a third runway in Heathrow.

Similarly, Maersk said it was hoping to move to phase two of its project to develop a new fuel to lower the emissions of its shipping fleet. Researchers at Copenhagen University are studying a drop-in heavy biofuel blend made from lignin and ethanol called LEO. And the Abu Dhabi National Oil Company said it was testing the use of biofuels to help meet new emissions standards set by the International Maritime Organization (IMO).

The most creative way to transform food this week comes from an international team of researchers who announced the discovery of a modified sugar molecule with broad-spectrum antiviral properties. An expert said the result could mark a new way to fight viruses without harming humans, with potential applications to combat the coronavirus, or other viruses such as the Zika or HIV viruses.

This summary was produced by ECRUU

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February 5, 2020

AgriCensus Report

Coronavirus to delay US-China trade deal ‘export boom’

The outbreak of the coronavirus in China will delay the “export boom” in Chinese imports of US goods and services, but the overall economic impact on the US economy will be “minimal,” White House economic adviser Larry Kudlow said Tuesday.

Kudlow said the outbreak of the coronavirus, which has now impacted over 20,700 people, with 427 confirmed deaths, is not “a catastrophe” nor “a disaster” for the US and the global economy.

Yet it will limit China’s ability to step up its purchases in the short term, meaning the anticipated export surge will take longer to be felt.

“It is true, the export boom from that [phase one] trade deal will take longer [to take effect] because of the virus,” Kudlow said on Fox Business news.

China has committed to buy an additional $76.7 billion worth of US goods and services in 2020, on top of the 2017 baseline figure, including $12.5 billion of agricultural goods such as soybeans, corn, ethanol, wheat and meat products.

“People should be very calm about this [the economic impact of the outbreak],” Kudlow said, adding that the impact on the US economy would be “minimal,” which he estimated at a 0.2% hit during the current quarter.

He added that the delay in Chinese purchases will be partially compensated by increased trade following the ratification of the USMCA trade agreement last month by the US Congress.

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