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The global demand for livestock and feed is expected to recover in 2020 when China will have gone through 5-months production worth of meat in cold storage – a direct result of the African Swine Fever (AFS) culling. The analysis by S&P Global Ratings argued that this will help the bottom line of trade houses which have been hurt by the AFS as well as the US-China trade war, especially companies with strong exposure to US origination. In the absence of any major consolidation, agricultural trading groups are expected to continue to look at divesting unprofitable assets, as is already the case for Bunge and ADM for their sugar and ethanol business units. 

BP and Bunge are still waiting for antitrust approvals from three countries, including China, for their joint venture which they hope to finalise this year. Bunge reported a loss of USD 1.5 billion for the third quarter, compared to a profit of USD 365 million the previous year. This includes a USD 1.7 billion charge following the merger of its Brazilian sugarcane business with BP. Good results in South America and in its edible oil segment were insufficient to offset the damages caused by the ongoing US-China trade conflict. In the hope of a resolution in the conflict and higher prices, US farmers have been withholding crops, especially soybeans. The CEO forecast that annual earnings would drop as much as 20% compared to last year. 

Another country where farmers are holding on to their crop is Argentina where producers are eagerly waiting for the newly elected President to explain his policies on agriculture, especially exports. There is a concern that he will increase taxes on grain exports and even bring back export quota limits. Farmers told Reuters that a return to these populist measures would hurt revenues, adding that the last time quotas were implemented wheat and corn planting collapsed. Some say the country could implement a dual exchange rate to help agriculture exports compete thanks to a weaker currency. 

In neighbouring Brazil, Cargill is pushing for the soybean industry to capture more of the value chain and focus on exporting processed products such as meal and soy oil. The call was echoed by the country’s vegetable oil association which pointed out that, ironically, the share of soybean exports stood at 81% of soybean products exported in 2017, compared to 13% back in 1981, when 87% of exports was in the form of meal. In Europe, meanwhile, Cargill announced it was putting USD 35 million in a product line to produce soluble fibres which can reduce sugar content in confectionery products by 30% without affecting the taste or texture. 

Olam Cocoa launched its Cocoa Compass initiative this week which sets targets aligned with UN Sustainable Development Goals. Among the commitments, Olam is aiming to eradicate child labour and deforestation by 2030. It will also work towards improving farmers’ incomes and has agreed to pay the Living Income Differential (LID) premium of USD 400/mt on 100,000mt of cocoa it bought from Ghana and the Ivory Coast. In the US, meanwhile, several industry groups, including Coca-Cola, are warning that the Ninth Circuit Court’s decision to hold Nestle liable for slavery in cocoa plantations in Ivory Coast could actually discourage companies from trying to tackle the issue.

A Greenpeace plastic waste collecting initiative in two areas in Thailand found that most of the waste came from single-use plastic from food packaging and that close to 20% of it was produced by five multinationals: Coca-Cola, Nestle, Ajinomoto, Mondelez, and Unilever. Italy is trying to deal with the issue by proposing to tax plastic in its 2020 budget at a rate of around USD 1/kg. A source told Reuters that the tax, if approved, would bring in over USD 1 billion and would help offset a cut in income tax. Unsurprisingly, beverage companies are opposing the proposal saying it would hurt their bottling operations, especially considering that the budget also includes a sugar tax. 

On the subject of bottling, The Guardian reported this week that conservation groups continue their fight to stop Nestle from accessing water in California’s Strawberry Creek. They accuse the group of depleting water levels and hardly paying for it while selling the bottled water at a profit. At the heart of the fight is a debate about who should control freshwater supply on public land, with Nestle’s former CEO arguing that it needs to be privatised. 

An analyst at Forrester Research forecast that the global food delivery market will likely go through major consolidation in 2020. Although the largest firms managed to raise significant funds in 2019, none reported a profit. Uber, DoorDash and Amazon are seen as the most likely to make acquisitions in the market. 

As China is busy eating through its stocks of meat, Russia quietly became Europe’s biggest importer of cows. This is the direct result of Russia’s policy to modernise its dairy sector, incentivised by the ban on imports of foreign dairy products. As of 2018, the country was 20% shy of being self-sufficient, mainly because a third of milk consumption is still supplied by low-yielding household cows. By 2027, however, Russia hopes to export to China and other Asian countries.

Nestle reported a 3.7% growth in organic sales over the first three quarters of the financial year.  Strong global Purina PetCare sales and demand for Starbucks products in North America helped offset disappointing sales for beverages, especially in the water segment. As a result, the CEO said Nestle Waters was being restructured so that it could be managed locally, instead of globally as is currently the case. The restructure should help identify consumer trends and higher-margin products amid an increasingly competitive market. 

The focus on increasing the group’s “local responsiveness” will take place across all segments thanks to a new strategy and business unit, the CEO said, adding that “In a period of rapid change in our industry, it will be more important than ever to recognize key trends early and to act on them fast.” Nestle will be looking actively to acquire more businesses aligned with this new strategy, the group said. It may also spend USD 20 billion in 2020-22 in share buybacks, thanks in part to the USD 10 billion generated from the sale of its skincare business earlier this month. Looking forward, a company official forecast that the world population will have to reduce its consumption of sugar, salt and meat to switch to vegetables and cereals as a result of the limited resources combined with the obesity epidemic. 

Danone lowered its 2019 growth forecast slightly after disappointing quarterly results in part due to cool summer temperatures in Europe which led to lower sales in its Waters Europe segment. Overall, however, sales grew 3.7% in the quarter, up from 3% last year, thanks to a strong growth in the specialised and early-life nutrition units which grew by 10%, mostly driven by the demand from China. 

The group’s investment arm, Danone Manifesto Ventures, bought a minority shareholding in organic plant-based food company Forager Project. This is part of its goal to increase revenue from plant-based products to USD 5.7 billion by 2025, from USD 1.9 billion currently. In Asia, meanwhile, the company launched a ‘One Person, One Voice, One Share’ initiative which aims to get employees involved in the Danone 2030 roadmap – designed to be in line with the UN’s Sustainable Development Goals.

Cargill launched a new platform, Feeding Intelligence, to help keep ranchers on top of the information, news and technology that impact their business. The group is streamlining its animal feed business in the US, resulting in the closure of two plants in New York in North Carolina. On the other hand, it will invest USD 225 million to expand and upgrade its soybean crushing assets in Ohio. 

In India, Cargill successfully removed 225mt of annual plastic packaging by replacing paper labels with mould-labeling on its edible oil bottles and reformulating the plastic it uses so that 90% of it is recyclable. On the sweetener side, Cargill announced that it was able to make the first liquid ingredient stevia. Stevia previously could not be used to make a concentrate, which limited its ability to function in beverages and energy drinks. 

Olam is in the process of acquiring the California-based almond company Hughson Nut Inc (HNI) as part of its aim to have a vertically integrated almond supply chain and add to its existing businesses in Australia and Vietnam. In Nigeria, meanwhile, shareholders gave the green light to Olam’s offer to buy the remaining shares in Dangote Flour Mills for USD 331 million. Olam also announced it has been granted a USD 1.5 billion revolving credit facility in addition to the USD 525 million sustainability loan it secured earlier this month. 

In Brazil, the agriculture minister said that COFCO was planning on investing in four sugar mills in the country. She urged the group to also invest in railway and ports to ease export logistics. 

In an unusual twist, Cote d’Ivoire and Ghana are threatening to scrap existing sustainability certification programs for cocoa if buyers don’t contract next year’s crop at a premium of USD 400/mt over October 2020 futures. Sources quoted by Bloomberg say that while most buyers have, in theory, accepted the premium many have yet to contract the crop as they don’t know how to hedge that premium. The West African countries call the premium a “living income differential” (LID) to offset the collapse in world prices and argue that it is more effective in helping farmers than sustainability certification premiums. However, some have pointed out that the LID, too, has failed to be passed on to farmers. Regardless, Nigeria and Cameroon are looking to follow suit while Peru could impose a minimum price. 

Commodity prices initially bounced when the US announced that it had reached a partial trade deal with China, although they eventually dropped back down once it emerged that it might take five-weeks for an agreement to be drafted. China reportedly agreed to double its import of US agricultural products and review some of its currency and intellectual property laws. However, an analyst called the trade targets “meaningless” until a proper breakthrough is announced, while a Chinese trader mentioned that trade negotiations were always one Tweet away from breaking down. 

China has already started to increase the amount of US goods it imports, according to trade officials. Nevertheless, the country might be looking to buy more US products simply because the supply in other countries such as Brazil is starting to tighten, making US origins cheaper. Moreover, China has been very active in investing to improve Brazil’s export infrastructure so it is unlikely to completely switch to other import origins. 

In the EU, the trade chief announced that the bloc will subsidise olive growers to help them deal with US tariffs. Under the plan, companies will receive money to buy and store excess olive oil. EU officials mentioned that the focus remained on finding a solution with the US to remove duties and address concerns around Airbus. 

Indonesia and Malaysia plan to challenge the EU’s decision to phase out the use of palm oil as a renewable fuel at the WTO, while they warn that they will also limit European imports in retaliation. In response, a member of the EU Parliament said he was confident the WTO would agree with the EU’s environmental concerns. He also clarified that palm oil will still be allowed as a fuel feedstock although it will not be recognised in the Renewable Energy Directive II (RED II).

A French court announced a similar ruling as it maintained a law that would exclude palm oil from tax advantages in 2020 despite an appeal by Total. The group recently spent EUR 300 million to convert its La Mede refinery to process palm oil and warned that it will not be competitive if it has to use local rapeseed instead. 

Palm oil producers who are certified as sustainable complain that large food companies refuse to pay a premium and that they mostly buy certified palm oil for European markets. Nestle revealed that 56% of the palm oil in EU goods was sustainable, compared to just 4% in India and 0% in China. In response, the Roundtable on Sustainable Palm Oil (RSPO) announced that members, including Nestle and Unilever, will now face fines unless they increase the proportion of sustainable purchases by 15% every year. 

Meanwhile, India reportedly threatened to tax Malaysian palm oil in response to a comment by the Malaysian Prime Minister who criticised India’s Kashmir policies. A Malaysian minister said the country might import more raw sugar from India in order to ease trade relations.

The Mercosur bloc is planning to hold trade talks with Vietnam, Indonesia, South Korea and Singapore, according to Brazil’s trade minister. Mercosur also includes Uruguay, Paraguay and Argentina. Separately, Brazil’s space agency revealed that deforestation rates slowed in September but were still 96% above the same month last year. In the first nine months of the year, forest destruction was 93% higher, although the start of the rainy season should slow down burn rates. 

Environmentalists criticised large food companies in the UK for still using soya beans sourced from deforested regions in Brazil. Although 23 brands, including many fast-food chains, signed the Cerrado Manifesto in 2017, the pledge was not signed by Cargill who is responsible for a large portion of the UK’s soya imports. The firm argued that boycotting an area simply moved the problem somewhere else or left more room for other buyers. And a Brazilian official noted that boycotts could prevent sustainable economic development and make the problem worse. 

The CEO of Mondelez commented that food makers need to distinguish between consumer trends and actual purchasing behaviours. He argued that taste and not health will continue to be the main driver of purchases because of the “difference between what people say and what they do”. McDonald’s and Campbell Soup made similar remarks as their attempts to sell healthier products failed. KFC is another example and reportedly spent USD 8 million to make oven-grilled products, although consumers kept buying deep-fried food. 

Another major commodity group, this time Louis Dreyfus, reported lower results because of global trade tensions and the African Swine Fever in China, along with the bad spring weather in the US Midwest. The CEO said the situation will remain difficult for the second half of the year and will only improve in 2020. Nonetheless, the firm paid USD 428 million in dividends for the first half of the year, the highest since 2014, as the chairwoman is reportedly looking to repay loans she took to buyout minority shareholders. 

China could have lost up to half of its pig herd to swine fever and the Vice Premier has set a target to return to a normal herd size as early as next year. In the meantime, the country is facing a shortage of 10 million mt of pork, more than the global trade supply. To deal with the shortage, a local pig farmer imported 906 breeding pigs from Denmark, the first pig imports this year. And a breeder in Nanning is looking to raise pigs that weigh up to 500kg, compared to the usual weight of around 125kg. 

US producers are also looking to take advantage of the surge in Chinese pork demand. To that end, JBS USA announced that it will remove ractopamine from its pig supply. Ractopamine is a growth drug banned in China and the EU. A US competitor, Smithfield Foods, has already dropped the additive to export to China while Tyson Foods said it was considering a similar move. 

Global trade is due to see another wave of protectionism as the WTO ruled that the US could impose duties worth USD 7.5 billion on EU products in response to the EU support of Airbus. The US will levy a 25% duty on EU food goods starting on October 18, but an EU official said the US seemed uninterested in finding a way to avoid the tariffs. Food firms in the US warned that this could have significant repercussions on their businesses. A cheese importer said he was stocking up with USD 15 million worth of Italians cheeses ahead of the duties. 

A Dutch-based company, DSM, published some potentially good news for both the environment and meat lovers. It developed a new feed that can reduce the amount of methane emitted by cows by up to 30%. The feed, called Bovaer, could be available in late 2020. Cows are responsible for a third of the methane emitted in the US but experts highlight two common misconceptions: the methane comes from burps, not farts, and the natural gas infrastructure still emits more methane. 

A new evaluation of published research also tried to correct a misconception by arguing that there was not enough evidence to support the claim that eating red meat can have a negative health impact. Researchers analysed past observational studies and concluded that the impact of eating red meat was very small and not supported by strong evidence. Health experts were quick to criticise the paper and some argued that nutritional research can not be held to the same standards as medical research. A professor highlighted that years of studies consistently found a negative health impact. And the press revealed that the lead researcher had failed to properly disclose his past ties to an industry group. 

Ireland revealed that the average sugar content in drinks dropped to 23g in 2019, compared to 31g before a sugar tax was introduced in 2015. Nonetheless, the government noted that some of the decrease was offset by larger container size and the growth in energy drink sales. Similarly, the UK said the sugar content in soft drinks dropped 28.8% since the introduction of a sugar tax in 2017, although the total consumption of sugar gained 2.6% between 2015 and 2018. Public Health England explained that the overall increase in sales of sweet products was enough to offset the drop in sugar content. 

Nonetheless, PepsiCo’s said a good performance from its low-sugar and bubbly sparkling water brands will help with revenue growth in 2019. And Coca-Cola announced that it will launch its energy drink in the US, as it noted that sales in the sector have been increasing while regular soft drink consumption has been steadily declining. Separately, Coca-Cola unveiled a new bottle that uses recycled marine plastics. The plastic was collected in the Mediterranean sea and is used for 25% of the bottle packaging. 

Two very unusual products were unveiled this week. Glenlivet launched whisky cocktails contained in a seaweed-based skin that dissolves in the mouth. And Aleph Farms announced that it has successfully grown lab-meat using cow sells, on the International Space Station!