Trading with a purpose

A conversation with Greg Morris

Good morning Greg. Could you please tell me about your current role within ADM?

Good morning Jonathan. Earlier this year, I was asked to bring together our Origination and Oilseeds business units into what we call today, Ag Services and Oilseeds, which I now lead. This new combined business unit constitutes a significant portion of the employees, the revenues and the profitability of the corporation. Fortunately, it is also made up of some of the best talent in the company and the industry, so I am fortunate to work with a great team every day.

What tonnage of commodities does ADM trade each year?

We process about 60 million tons of ag commodities each year. We don’t disclose the tonnage that we trade, but it would certainly be bigger than that.

Some people would say that ADM is an industrial rather than a trading company. Would you agree?

Many companies that operate in this space feel that their job is to trade. Our philosophy at ADM is different. We trade with a purpose. We don’t trade just to trade; I think that is yesterday’s model.

We trade to support higher utilization rates in our assets. We trade to help provide products for our customers. So no, I wouldn’t say that ADM is necessarily a trading company. We trade as a critical function of managing our portion of the supply chain to serve our global customer base.

Are you affected by the current overcapacity in agricultural production and logistics?

We’ve certainly had some challenges with oversupply of some of raw materials, such as grains and oilseeds, and this has led to margin compression. However, it goes back to having the right philosophy.

Recent trade policies and decisions have resulted in regional dislocations, as has the terrible weather in some of the growing areas in the U.S. Some parts of the U.S. have been badly hit by flooding; others have been relatively okay. Our global footprint has allowed us to keep supplying our customers – when we can’t get something out of the U.S., we can often get it out of Europe or South America, and vice versa. That’s really the critical role for our industry – companies with global reach like ADM are the ones that can move agricultural and food products from areas of supply to areas of demand. So it’s been a dynamic situation, but overall, I think we have fared pretty well in a challenging environment.

Are there any ways that the sector could better meet the challenges it faces?

Looking forward, I believe that partnerships will become more interesting for the industry as a whole.

At ADM we’ve done some partnerships, as have others in the industry, in order to reduce the risk of an investment, or to participate in a new region of the world. For example, we’ve recently entered into two separate joint ventures with Cargill: one, called SoyVen, which owns and operates a soy crush facility in Egypt, and another, called GrainBridge, that is developing a single digital platform for farmers to consolidate information on production economics and grain marketing activities. We’re also a founding member of an industry initiative to standardize and digitize global agricultural shipping transactions.

What advice would you give to a young person starting a career in commodities?

In a trading role, and in the current environment, the best advice I could give would be to keep your head on a swivel. You have to pay constant attention, whether to global economics, geopolitics, the weather, currencies, or the latest consumer trend. As a commodity trader, you can’t read a newspaper or watch the news without naturally connecting it back to your business, because it all matters.

From a career growth perspective it’s important to think beyond whatever your current role is. I would advise any young person in this business to stretch themselves and find other ways to contribute to the corporation and develop good business management and leadership skills. Trading can be a great foundation, but don’t limit your professional options.

Is there anything that you’d like to add?

I think for me it’s important to recognize that ADM has undertaken a lot of change in the recent past but there is one thing has remained constant: we are proud of the role that we play in the world.

Our purpose statement says “We unlock the power of nature to enrich the quality of life.” We believe that is a noble cause. But at the same time we are evolving. We are transforming our portfolio of businesses, our capabilities and the way we interact with our customers across all of our businesses. We are more process focused and disciplined and our growth strategy includes a very robust agenda.

ADM is a much different company than the company I joined 24 years ago. We’re a stronger company and I’m proud to have been part of the evolution.

This is an excerpt of a full-length interview with Greg that I will publish in my book later this year.

September 5, 2019

Commodity Conversations Weekly Press Summary

Just when there seemed to be no limits to the possibilities of plant-based meat alternatives, the CEO of Whole Foods‘ warned that these alternatives were highly processed, rich in salt and fat and therefore not very good for you. Whereas he did concede that it was better than eating meat in terms of the environmental impact, a researcher at Oxford argued that it would be better still to consume unprocessed plants. He explained that “while [plant-based meat] products have about half the carbon footprint than chicken does, they also have 5 times more of a footprint than a bean patty.” And if this was making you think of waiting for lab-grown meat to be financially viable, a food anthropologist warned that it was not yet clear that this option would be much better for the environment either.

Eating fruits and vegetables might not be as healthy as we think, according to a recent study published in the British Medical Journal. Researchers noted that, as expected, people who consume meat have a higher chance of reporting a coronary heart disease when compared to vegans and vegetarians, although it also found that vegans and vegetarians have a 20% higher stroke risk. The reasons are unclear, although experts said it could be linked to the lack of B12 vitamins in a vegetarian diet. Overall, dieticians argue that the healthiest diets involve eating a wide range of foods.

We might also have to rethink whether buying unpackaged fresh food is better for the environment. A new study argues that the carbon footprint of food that wastes faster because it is not packaged is bigger than the environmental impact of the actual packaging. The solution, then, seems to be better packaging.

The media backlash against Brazilian agriculture policy – which is being blamed for the fires in the Amazon – continues. ADM, Bunge and Nestle are some of the groups that have officially committed not to source from the newly deforested areas. They are using satellite data as well as ground teams to identify the affected areas. Some have blamed the Amazon fires on the US-China trade war which has led to a boost in exports from Brazil. However, Brazil’s soybean exports dropped to 5.3 million mt in August, a fall from over 8 million mt in the same month last year at the start of the trade war. On the other hand, Brazil exported a record high 7.65 million mt of corn in August, double what was exported in the same month last year.

In the US, Cargill tied up with White Dog Labs to work on a sustainable alternative to fishmeal in aquafeed using corn feedstock. It is also investing USD 75 million in Puris, which supplies plant-based meat companies such as Beyond Burger, to set up a new pea protein plant in Minnesota.

In Ghana, the 20,000 certified cocoa farmers who supplied Cargill in 2018/19 benefitted from a combined USD 2 million in sustainability premium, an increase of 33% on year. The group buys directly from farmers who bring the cocoa to local warehouses where they are registered, allowing full traceability. Cargill also announced a USD 121 million investment in expanding its cocoa grinding plant in the Ivory Coast.

As it continues to look for innovative solutions for the food and agriculture industry, Cargill announced the official opening of a research lab at the University of Illinois. Similarly, ADM said it would donate USD 2.5 million to the University of Illinois’ Feed Technology Center.

Bunge continues on its cost-cutting tracks and announced it was reducing headcount at its New York headquarters, which will be moving to St Louis as part of the company’s strategy to become more globally integrated. Analysts forecast that the group will probably look at selling its fertilizer business and could split the commodity trading side from food ingredients ahead of a possible sale. Glencore is seen as a potential acquirer, on the assumption that antitrust regulators would not approve a takeover or merger with ADM.

Launched at the last G7, Danone is chairing a new initiative, Business for Inclusive Growth (B4IG), which aims to help all member companies encourage diversity and fairness throughout their supply chain. The program, which will be managed by the OECD, has already identified some 50 projects worth USD 1 billion in funding. The head of Mars, which also signed up, said, “It isn’t about philanthropy, but rather an understanding that a business can only be successful if it also enables all of its partners, community and the environment to thrive.”

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September 4, 2019

AgriCensus Report

China says using ASF vaccine could spread disease

China’s government said Monday that pig-breeders or farm industries that use vaccines against African swine fever could be responsible for spreading the disease further, as the country seeks to crack down on the dissemination of the drugs.

China’s ministry of agriculture and rural affairs said in a statement that it had yet to approve any vaccine and that the makers of the drugs would be banned from producing any vaccine in China if caught.

“As of now, countries around the world including China have not yet approved an African swine fever vaccine to be sold in the market. They are all illegal vaccines,” the ministry added.

The world’s largest pig-producing country is attempting to develop a vaccine to combat African swine fever, a disease that has caused the size of China’s pig herd to fall nearly 33% in July this year compared to the same month last year.

However, over the past few months several vaccines have reportedly been found in the Chinese market, raising fears that they could lead to further oubtreaks of the disease.

Activities involving producing, selling and using one of those vaccines is “serious illegal conduct” and individuals or companies who were involved in such activities will be “banned for life”, the ministry said.

China has reported more than 140 outbreaks of ASF disease across all provinces in the country since August last year.

The development of ASF has been closely watched by both the animal feed and meat industry in China, as a large part of China’s total soybean imports are crushed into soymeal to feed the country’s massive pig industry.

Pork prices in China have risen to an all-time high this month as pork supply has shrunk in the country.

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September 2, 2019

Feeding the world in 2050

Jason Clay, the head of agriculture at WWF US in Washington, once famously calculated that the world’s farmers will need to produce as much food in the next forty years as they produced in the past 8,000 years. Can they do it?

The UN’s FAO believes that they can. At a world summit back in 2009 the Organisation predicted that in order to feed the world in 2050 global agricultural production would have to be 60 percent higher than it was in 2005. Although that sounds a lot, it would be a smaller increase than the agriculture sector achieved over the previous past half century.

Where will that 60% extra production come from?

The FAO expected that, in aggregate, more than 85 percent of the increase in production would come from improved yields. They projected global cereals yields would increase from 3.3 tonnes/ha in 2005 to 4.30 tonnes/ha in 2050. World average yields for other major crops were expected to follow similar patterns.

The rest would have to come from bringing more land under agricultural production. The FAO estimated that the world has a total of around 7.2 billion ha of land suitable for rain fed food production. After discounting for areas already in production, under forest cover or put to other uses – as well as land that is only marginally suitable – the world has some 1.4 billion ha of prime land that could be brought into cultivation.

Much of this, however, would have to come at the expense of pastures, and would require considerable investment. In addition, some of that spare land is not readily accessible due to lack of infrastructure and its distance from markets, making production uneconomical.

The FAO estimated that land under crops would increase by some 70 million ha by 2050. However it warned that much of the spare land is concentrated in a small number of countries, for example in Brazil. Some countries may find it difficult to increase the amount of land under food crops.

All this means that, at the global level, the FAO was optimistic that agricultural production could be increased enough to satisfy the 60 percent increase in demand projected to 2050 for both food and non-food uses.

Where are we ten years later? the World Resources Institute, a non-profit organization, still believes the challenge can be met, but only if certain “gaps” can be overcome. In a recent report entitled “Creating a Sustainable Food Future” the WRI identified three gaps. The first is the food gap, the difference between the amount of food produced in 2010 and the amount necessary to meet likely demand in 2050. They estimated this gap to be 7,400 trillion calories, or 56 percent more crop calories than were produced in 2010. (Their numbers are pretty much aligned with those of the FAO.)

The second, the land gap, is the difference between global agricultural land area in 2010 and the area required in 2050 even if crop and pasture yields continue to grow at past rates. They estimated this gap to be 593 million hectares, an area nearly twice the size of India. The third, the Green House Gas (GHG) mitigation gap, is the difference between the annual GHG emissions likely from agriculture and land-use change in 2050 compared to emissions that have been targeted under the Paris Agreement to limit global warming to below an increase of 1.5°C.

The foundation argued that closing these three gaps would be harder than often recognized. The report’s lead author said, “If we tried to produce all the food needed in 2050 with today’s production systems, the world would have to convert most of its remaining forests, and agricultural alone would produce almost twice the emissions in 2050 allowable from all humans sources.”

The Intergovernmental Panel on Climate Change (IPCC)—a global group of scientists convened by the United Nations to study climate change—is also worried about agriculture’s GHG emissions. In a report published last month, the panel warned that cutting emissions from major polluters like factories and power plants won’t be enough to keep global warming below the two degrees Celsius agreed under the Paris Climate Agreement. They concluded that land use and food systems have to change, too.

The report found that food production (including post-harvest activities like transportation) accounts for between 21 and 37 percent of greenhouse gas emissions caused by humans. The scientists emphasized the need to manage land better and recommended diversifying cropland, reducing food waste and transitioning to vegetarian or vegan diets. The report found that methane emissions are rising again after a no-growth period between 1999 and 2006. Methane is a particularly potent greenhouse gas, and cows and global rice production are largely to blame.

They also warned that climate change will exacerbate food insecurity even in the best-case scenario. In fact, they say that climate change is already affecting agricultural production.

Many of the solutions outlined in the IPCC report—farming techniques that prioritize soil health, reforestation—take time. It can take years to rebuild soil that’s healthy enough to withstand a flash flood or a dust storm; a tree can’t start capturing carbon until it’s several years old. The IPCC warn that the time to act is now.

A failure to do so would lead to increased degradation of land because of intensive farming, while a rise in deforestation would accelerate climate change that would in turn make land less fertile and productive, the IPCC added.

We all agree that the way forward for agriculture, and for a sustainable food future, is through producing more food per hectare, per kilogram of fertilizer, pesticides, and herbicides, and per litre of water.

Are our farmers up to the challenge? You bet!

August 29, 2019

Commodity Conversations Weekly Press Summary

The concerns over the Amazon fires continued to grow this week as some fear the environmental reputation of Brazilian food producers will be jeopardised for years to come. Norway’s Mowi, the largest salmon producer in the world, said it would source soy outside of Brazil unless the government addressed the fires, and the biggest meatpacker in the world, JBS, said it was closely monitoring its suppliers in the area using satellites. Although it admitted that monitoring indirect suppliers was challenging. Many other Brazilian agribusinesses, including from the paper and pulp sectors, argued that the President’s environmental stance has been ‘disastrous’ in terms of what was being communicated to the outside world.

In contrast, the sugar union, UNICA, said the current government could not be blamed for the fires, adding that the environment minister was committed to protecting the forest. The CEO of Summit Agricultural Group, which owns a corn ethanol plant in Brazil’s Mato Grosso, argued that the media was not covering the Brazilian President’s response fairly and that sending in the army had been the right thing to do.

The US President is also potentially facing a growing backlash from farmers for undermining the ethanol standard, a key political topic in Iowa where it involves at least 40,000 jobs. Most Democratic Presidential candidates for 2020 have come out in strong support of the ethanol industry, but environmental activists note that their stances often contradict earlier pledges. They also argue that supporting ethanol goes against the goal of completely phasing out fuel-based engines, as proposed in the Green New Deal.

The wavering support for the ethanol mandate, along with the damage caused by the trade war, pushed some to believe the President is losing farmer support. But this poll conducted at the end of July suggests the opposite, as 66.6% of farmers said they would vote to reelect the President, up from 59.6% at the same stage last year. Analysts suggested this could be thanks to the generous cash payouts he offered farmers.

In Indonesia, the government is taking action to protect its palm oil industry by banning the use of “palm oil-free” or “no palm oil” messages on food products. The government highlighted that the messages pushed consumers to think the product is not healthy, a claim that has not been proven. A similar move was implemented in Malaysia, the home of FGV Holding, the world’s largest producer of crude palm oil. FGV reported poor results for its second quarter, which it mostly attributed to the sharp drop in palm oil prices. The group is also looking to restructure its struggling sugar business, with Wilmar reportedly one of the investors interested in buying a stake.

Still in Malaysia, Nestle reported a good growth momentum in the second quarter, as product innovations and portfolio enhancements sustained strong consumer demand. The same cannot be said about its tinned milk product in Australia – Nestle announced plans to close its tinned milk factory in northern Victoria. Consumers are less interested in the products and it cannot compete with cheap imports, the group said. In Europe, Nestle expanded its plant-based meat offer by launching Incredible Mince and renewing the recipe of its Incredible Burger.

Meanwhile, a recent survey in the US found that the proportion of people who identify as vegetarian or vegan has remained steady over the past 20 years and only represent a small portion of the population, at 5% and 3% respectively. But experts note that this hides the growing popularity of semi-vegetarian diets. Regardless, in Argentina, beef consumption is not dropping even after a 15-20% hike in prices. The depreciating currency has led to a recent surge in prices but consumers are reportedly willing to lower their budget elsewhere before cutting down on beef purchases.

Japan’s second-largest beer company, Kirin, announced a plan to spend USD 1 billion to buy a 30% stake in Fancl, a maker of health foods and cosmetics, in order to deal with a shrinking local beer demand. In contrast, Coca-Cola will launch its first alcoholic drink ever in the country, a lemon-flavoured fizzy drink mixed with a grain-based alcohol called shochu. In India, Coca-Cola will launch a non-alcoholic malt-drink through its Barbican brand. Both products are seen as new alternatives amid a global shift away from soft drinks.

The most exciting Coca-Cola innovation, however, comes from the UK, where the group will be testing the use of robots to deliver drinks in Alton Towers, a theme park resort. The self-driving robots will use AI technology to manoeuvre and deliver drinks to outlets across the park.

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August 28, 2019

AgriCensus Report

Brazil-US soybean spread hits nine-month as trade war heats up

The difference in price between Brazilian and US soybeans loading out of the US Gulf has hit its highest level since November as the bilateral trade war between the US and China heats up in the wake of new Chinese US soybean import tariff announcements.

The price of soybeans loaded out of the Brazilian port of Santos for October shipment hit $374.50/mt on Friday compared with $327.50/mt from the US Gulf, according to Agricensus data.

The spread, which stands at $47/mt, is the highest level since November 12 last year as China’s announcement that it would increase soybean import tariffs to 30% from the current 25% starting September 1 weighed heavily on both the futures and US cash markets Friday.

Cash premium offers for loading out of the US Gulf in October slumped by 7 c/bu as sellers eyed little prospect of renewed Chinese demand anytime soon and bids remained scarce.

Flat prices fell by more than 2% on the day as a result, from $335.50/mt on Thursday.

Yet Brazilian premiums soared with offers up by 12 c/bu as exporters anticipated an increased of Chinese purchases both on a FOB and CFR basis which outweighed a weaker board and kept flat prices just $1.50/mt weaker on Thursday’s value to settle at $374.50/mt.

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August 26, 2019

CRISPR Crisps

Grown commercially since 1997, GM (genetically modified) corn now accounts for about one third of the corn grown in the world, most of which has been genetically modified to tolerate glyphosate, sold as Roundup, a relatively inexpensive herbicide that kills all plants except those with genetic tolerance.

Monsanto released glyphosate resistant soybeans under the name Roundup Ready Soybeans in 1996 and within ten years 80 percent of all soybeans grown in the US were Roundup Ready. Roundup Ready corn received FDA approval in 1997 and it was commercially released in 1998. It used much the same technology as in soybeans, but also had built-in insect protection in the form of a Bt protein, a naturally occurring bacterium that lives in the soil and is toxic to insects.

Scientists also modified corn genes to make the crop more drought tolerance. Drought tolerant GM corn was approved by the USDA in 2011, and commercialized in 2013.

As Christine Du Bois writes in her book, “The Story of Soy,” some 80 percent of all soybeans in the world are genetically modified to be resistant to Roundup. In the Americas, that figure rises to 95-100 percent. In terms of acreage, GM soy accounts for around half of all GM crops in the world.

GM soy largely came about as a result of the introduction of Roundup in the 1970s, with Monsanto trying to find a gene that was resistant to the herbicide. They eventually one in bacteria in a Roundup factory’s waste pond, and engineered it into soy plants. The introduction of Roundup Ready soybeans allowed farmers to increase yields by planting rows closer together. Without it, farmers had to plant rows far enough apart to allow weed control by mechanical tillage.

The Monsanto Company was no stranger to controversy; it once manufactured the insecticide DDT, as well as the defoliant Agent Orange that was widely used in the Vietnam War. Bayer, a German multinational pharmaceutical and life sciences company bought Monsanto in 2018 for $66 billion. Since then Bayer has been entangled in litigation over claims that Roundup causes cancer, something that the company obviously denies.

Over the past twenty years, GM technology has revolutionised farming and transformed the seed and agricultural input business. Previously, much of a farm’s cost of production was in purchasing chemicals: fertilizers, herbicides and pesticides; chemical companies made their money selling these inputs. Now the cost is in seed development . The result has been a merging of the chemical and seed businesses: over recent years, the large chemical companies have bought up the seed companies.

Although GM technology has revolutionised the industry, its effect on yields is sometimes questioned. By one estimate, about 50 percent of yield increases since the 1920s have been the result of breeding, including genetic modification, while the other half have come from improved farming practices: better farming techniques have been just as important as genetics. However, that is hardly surprising when you consider that the primary objective of genetically modifying crops has not been to increase yield potential. The increases in yield that have come with genetically modified corn have come in the form of yield protection and stability, not actual increases in yield potential.

In “Seeds of Science: Why We Got It So Wrong on GMOs”, Mark Lynas, an early anti-GMO activist, admits that the scientific evidence for the safety of GMOs is robust. He writes, “I cannot deny the scientific consensus on GMOs while insisting on the strict adherence to the one on climate change, and still call myself a scientific writer.”

Meanwhile, Amanda Little, in her book “The Fate of Food: What We’ll Eat in a Bigger, Hotter, Smarter World, quotes Tamar Haspel, a journalist for the Washington Post, as saying, “The argument against GMOs has never really been about the GMOs themselves. It is about a corporate-dominated, industrialised food system for which GMOs serve as a kind of proxy.”

She argues that the public may be more accepting of the new gene editing technology, CRISPR (pronounced CRISPER). Gene editing involves the deletion, insertion, or modification of the genome at a specific site in a DNA sequence. She writes,

“CRISPR may not win minds and hearts overnight, and we still have much to study and learn about it. But here’s hoping that transparency, community involvement, and applications in the public interest will bring gene editing sceptics to the table — disbelief at least temporarily suspended — to give it a chance.”

However, as The New Food Economy argues, these new techniques are already creating a debate about what “genetic modification” really entails. Most people use the term to refer to inserting foreign DNA from one organism into another. This process, known as transgenic mutation, cannot happen on its own in nature.

CRISPR doesn’t require the insertion of foreign genetic material. The technology allows scientists to precisely edit in, or edit out, targeted traits. In this sense, CRISPR is an acceleration of traditional methods of plant and animal breeding, and not an unnatural mutation that could not occur outside of a laboratory. The United States Department of Agriculture (USDA) seems to agree, and has decided not to regulate gene-edited crops in the same way as GMOs.

Of all the new developments and new technologies in agriculture, CRISPR seems to be the one with the most potential to increase yields, something that is essential if we are to stop deforestation and biodiversity loss. But to do that, it will first have to be accepted by consumers. Fingers crossed that it is!

August 22, 2019

Commodity Conversations Weekly Press Summary

Last week, Nigeria’s President said he was “taking [the] focus on agriculture to the next level” as he banned the central bank from giving foreign exchange to all food importers. This policy started in 2015 when the President came to power and blocked foreign exchange access for 41 items, including rice, which was then extended to dairy products in July. An analysis by the BBC argues there is a lack of reliable data to assess the success of the policy but it did lead to domestic rice production increasing to 8.9 million mt in 2018, from stagnating around 7.1 million mt in the 2013-17 period. However, the policy also pushed domestic prices up and caused a surge in smuggling. Commentators argue that the idea is not a bad one but it needs to be accompanied by other measures, such as assisting farmers to increase yields.

Farmers in the UK are facing a different kind of pressure – a target of net-zero emissions by 2040. They have placed their bets on several technologies, including battery-powered precision robots that would simultaneously reduce diesel used in tractors and allow targeted pesticides use. Keeping grass fed cows outdoors – instead of soybean fed livestock indoors – will also help reduce emissions while lowering soybean demand.

In India, too, the Prime Minister has appealed to farmers to reduce their use of pesticides on crops by 10-25%, saying chemicals were hurting “Mother Earth.” He said that the government would soon launch a campaign aimed at ending the use of chemical fertilisers completely while sticking to its commitment to double farm income. However, the FICCI pointed out that Indians use 0.27kg/ha of chemicals, compared with 4.58kg/ha in the US.

The International Maritime Organization (IMO) rule requiring all ships to switch to low-sulfur fuel from January 1, 2020, could be a game changer for wheat trade flows. The analysis by Platts quoted traders as saying that it was easy for big buyers, such as Indonesia, to switch between Australian, Black Sea and Argentinian origins as the quality was almost at par. As such, freight costs were usually the determining factor. The IMO2020 rules will make freight more expensive which means that Australia, which recently lost market share to the Black Sea, could become more competitive in Asia again.

Another environmental concern that could affect tradeflow is the fate of the EU-Mercosur trade deal. Analysts warned that the Brazilian President’s stand on the environment – and notably his recent denial of deforestation data – could push some countries such as France not to ratify the deal. Brazil’s National Institute for Space Research (INPE) said it had tracked 72,843 fires in Brazil so far this year, including half of them in the Amazon region, an increase of 80% on year. Environmentalists have blamed the President’s policies on the increasing deforestation, while he, in turn, accused NGOs of starting the fires as part of a media campaign against him.

At the same time, Brazil is focusing strongly on China. The Brazilian delegation which recently went there came back with a USD 1.5 billion coffee deal. The Santa Monica group will be setting up to roasters in the country, distributing some 100,000 coffee vending machines and eventually open a series of coffee shops.

After a successful pilot project in the US, Coca-Cola is rolling out on a national scale its Dasani PureFill water dispenser line. This is part of a move towards “package-free delivery at scale” as well as part of its commitment to scrap 1 billion virgin PET plastic bottles from its supply chain. The group will also start selling its Dasani water in aluminium cans and bottles, also in abid to reduce plastic use.

Similarly, Nestle Waters North America launched an Instagram #NotTrash campaign to encourage consumers to ask, via the social media platform, if they need help to figure out how to recycle its Poland Spring bottled-water products. The company explained that consumers tend to be confused about recycling, which explains why only 30% of plastic bottles are recycled in the US.

Bunge CEO said the company was focusing on improving risk management through better coordination with the commercial team and by doing more analysis. The company, which just moved headquarters from New York’s White Plains to Saint Louis in Missouri, is aiming to have completed its “portfolio transformation and optimization work” by the middle of next year.

Meanwhile, data analysed by Bloomberg showed that the 125 family members who own Cargill received a USD 643 million payout this year, the highest since 2010 and over USD 5 million each. Some say that this will likely postpone any potential plan of going public despite diluting shares over time. Based on the share value of its publicly traded competitors, Cargill could be worth an estimated USD 50 billion.

Last but not least, and we bet you didn’t see this coming, a global survey found that the UK has the healthiest packaged foods and drinks in the world, followed by the US and Australia. What is less surprising is that the survey also found that the poorest countries had the unhealthiest packaged foods.

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August 21, 2019

AgriCensus Report

Brazil output of corn-based ethanol to hit 1.4bn litres in 2019: USDA

Brazil’s production of corn-based ethanol will rise 75% this year as new capacity comes onstream and domestic demand surges as the country prepares to roll out its RenovaBio mandate program, the USDA said in a report late Monday.

Most of Brazil’s ethanol production is derived from sugar cane and is a significant exporter to the US and Europe, but its output includes a growing share of corn as that segment generates much better returns than the ailing sugar cane sector.

The USDA said total ethanol output from corn this year is estimated at 1.4 billion litres, an increase of 609 million litres compared with 2018.

The US government researchers noted that there are currently 10 plants producing ethanol from corn in Brazil in the states of Mato Grosso and Goias.

It added that four plants under construction that should start operations in the next 1-2 years and cited figures from the country’s Corn Ethanol National Union (UNEM) that the Latin American nation is forecast to produce 2.6 billion litres of corn ethanol in 2020 and 8 billion litres by 2028.

Brazil’s overall production of fuel ethanol is expected to rise 4% this year as the world’s second-largest producer of the biofuel finalises rules and trading mechanisms for its mandate programme and prepares to step up exports, the USDA said.

The research said Brazil’s total ethanol production for 2019 is estimated at 34.45 billion litres, an increase of 4% compared with the revised figure for 2018.

Brazil’s consumption of fuel ethanol is expected to rise to 31.75 billion litres in 2019, up 7% from 29.7 billion litres last year, as “steady and strong demand for hydrated ethanol at the pump is pushed by continued high gasoline prices in the majority of the Brazilian states,” the USDA said.

The researchers added that decisions made by Brazilian consumers are usually made on the basis of the ratio between hydrous ethanol and gasoline prices.

“The 70% ratio between hydrous ethanol and gasoline prices is the rule of thumb in determining whether flex car owners choose to fill up with hydrous ethanol (price ratio below 70%) or gasoline (price ratio above 70%),” the USDA said.

It added: “This decision is tied to the energy content of each fuel and the fact that ethanol’s energy content is approximately 36% lower than pure fossil gasoline.”

International trade

The USDA’s Sao Paulo-based research team said Brazil’s total ethanol exports are estimated to be 1.8 billion litres this year, up 11% compared with total exports in 2018, which totalled 1.62 billion litres.

“In spite of the competition to supply domestic demand, exports have benefited from windows of opportunity opened by spikes in US ethanol prices,” the USDA said.

Brazil’s total ethanol imports for 2019 are estimated to be 1.2 billion litres, a decrease of 495 million litres relative to the previous year.

The Latin American nation’s imports of ethanol are for fuel use only and originate almost entirely from the US, the research pointed out.

The USDA estimated that Brazil’s production of soybean-based biodiesel, which is estimated at 5.8 billion litres, would rise 8% relative to 2018, based on an estimated 0.8% growth rate for the Brazilian economy in 2019 and the increase of the biodiesel blend to 11% (B11) next month.

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August 19, 2019

The History of Agriculture

My book on the grain merchants has reverted to the title I first thought of, “Alphabet Soup—The Seven Companies at the Centre of Your Food Supply.” I am still aiming for publication in early-November.

There is a saying in the book business that “the wastepaper basket is a writer’s best friend.” In putting together the first draft of my book, I deleted large chunks of what I had previously written. I have fished out some of the least bad bits, and I will share them with you over the coming weeks. This is the first:

As Richard Manning wrote in “Against the Grain: How Agriculture has Hijacked Humanity,” of the roughly 300,000 years that mankind has wandered this earth, we have spent 290,000 of those as hunter-gatherers. Agriculture is a relatively new game for us and, as you have realised when visiting your local supermarket, we still have hunter-gatherer genes.

And even during the last 10,000 years, farming has changed little. Fields were regularly left fallow, and animal manure was the sole fertiliser. It was only in the early 1800s that scientists began to understand that inorganic minerals such as nitrogen, potassium, lime, and phosphoric acid could replenish depleted soils, leading to the production of mineral fertilizers.

The search for fertiliser led merchants and scientists to the dry seabird islands off the South American and South African coasts, where immense deposits of bird droppings, rich in nitrogen and phosphorus, had accumulated over centuries. Guano mining became a profitable business. Between 1840 and 1880, guano nitrogen made a vast difference to European agriculture, but the best deposits were soon exhausted. Rich mineral nitrate deposits were found in Chile, and nitrate mines gradually took the place of guano in the late 19th century.

However, as Michael Pollen writes in The Omnivore’s Dilemma, the great turning point in the modern history of agriculture can be dated to the day in 1947 when a huge munitions plant at Muscle Shoals, Alabama, switched over from making explosives to making chemical fertilizer. He explains that at the end of World War II, the US government found itself 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 (along with that of pesticides, which are based on the poison gases which were also developed for war) was the product of the government’s effort to convert its war machine to peacetime purposes.

Even though the earth’s atmosphere is about 80 percent nitrogen, nitrogen atoms have to be split and joined to hydrogen atoms (“fixed”) before they can be used for fertilizer or bombs. A German Jewish chemist named Fritz Haber worked out how to do that in 1909. Before he made that discovery, all the usable nitrogen on earth had to be fixed by soil bacteria or by electrical lightning, which breaks down nitrogen bonds in the atmosphere.

In his book, Enriching the Earth: Fritz Haber, Carl Bosch and the Transformation of World Food Production, Vaclav Smil explains that “there is no way to grow crops and human bodies without nitrogen.” Without Haber’s invention, the amount of life on earth would have been limited by the small amount of nitrogen that bacteria and lightning alone could release. Mr Smil argues that as a result, the Haber-Bosch process for fixing nitrogen (Bosch commercialised Haber’s idea) was the most important invention of the 20th century. He estimates that 40 percent of the people on the earth today would not be alive if not for the invention. Without synthetic fertilizer, billions of people would never have been born.

Although Fritz Haber won the Nobel Prize in 1918 for “improving the standards of agriculture and the well-being of mankind,” he has since largely been airbrushed out of history. During World War I he helped the German war effort by making bombs from synthetic nitrate. Worse, he also developed poison gases including Zyklon B, the gas used in the Nazi concentration camps.

Michael Pollen argues that once mankind had acquired the power to fix nitrogen, the basis of soil fertility shifted from a total reliance on the energy of the sun to a new reliance on fossil fuel. The Haber-Bosch process works by combining nitrogen and hydrogen gases under immense heat and pressure, the energy supplied by electricity. The hydrogen is supplied by oil, coal or, most commonly today, natural gas.

Growing crops, which from a biological perspective had always been a process of converting sunlight into food, has become a process of converting fossil fuels into food. More than half of the world’s supply of usable nitrogen is now man-made—and more than half of all the synthetic nitrogen made today is applied to corn alone.