Trade Wars

In Imperial Twilight: The Opium War and the End of China’s Last Golden Age Stephen Platt, a professor of history at the University of Massachusetts, takes a long look at the events leading up to the Opium War that Britain fought with China from 1839 to 1842.

I found the book rather long, and it only seems to get moving in the last chapter when the war finally begins. However it is an easy read, and exceptionally well written and researched. It is therefore worth the effort, particularly as the book has relevance to current events, namely the trade war between the US and China, as well as the US’s current opiate epidemic.

In the late 18th century, Qing China was among the richest and most powerful empires in the world. However decline set in with a series of internal rebellions, increasing corruption, and (arguably) a rise in opium use by China’s ruling classes. The opium was grown in British India by, among others, the East India Company, and sold from British (and American) ships to Chinese traffickers who brought it into China, paid off customs officials, and distributed it domestically.

At that time China was the sole supplier of tea to the world, and demand was rising fast with Britain’s industrialisation. China was also a major exporter of silk, some of which travelled overland on the Silk Roads. The tea was mainly exported by sea, and trade was limited to Canton; Westerners were not allowed to trade from any of China’s other ports. This suited the East India Company, which had a monopoly on the trade to Britain, but was a bone of contention to the “free traders” such as Jardine and Matheson.

The British and Americans exported Indian opium to China in exchange for the silk and tea that China exported. Opium was illegal in China but the ban was only loosely enforced, at least until the late 1830s when the Chinese decided to enforce the ban, confiscating heroin from the Western traders and briefly holding them hostage in Canton.

Twenty years earlier, in July 1817, when Napoleon (Bonaparte) was living in exile on Saint Helena, his Irish physician Barry O’Meara (who had accompanied Napoleon in exile) told him that it didn’t matter if the British had the friendship of the Chinese because they had the Royal Navy. Platt quotes Napoleon’s response to his physician,

It would be the worst thing you have done for a number of years, to go to war with an immense empire like China…You would doubtless, at first succeed, but you would teach them their own strength. They would be compelled to adopt measures to defend themselves against you… they would build a fleet and in the course of time, defeat you.”

But twenty-two years later Britain did go to war with China. After intense lobbying from free traders, the British government agreed that the Chinese had to be punished for their treatment of the British traders and be taught to respect British superiority, to no longer have Canton as the only trade port, and to open further ports for trade. But behind it all perhaps the real motivation for the war was to force the Chinese to pay compensation for the opium that they had confiscated and destroyed, and to lift their domestic ban on opium, allowing the trade to once again flourish.

The young British politician William Gladstone—later to become four-time prime minister—said at the time, “a war more unjust in its origin, a war more calculated in its progress to cover this country in permanent disgrace, I do not know, and have not heard of.”

The war lasted for three years and ended with a British “victory” that was enshrined in the Treaty of Nanning, signed on 29th August 1842. Platt writes that it “was the first of what would come to be known as China’s “unequal treaties.” There would be many to join it over the course of the nineteenth century, for it marked a watershed in the Western discovery that one could get what one wanted from China through violence.”

He writes that the treaty “opened five of China’s port cities to British trade and residence, including Canton, Ningbo and, most importantly, Shanghai. The treaty gave Hong Kong to the British as a permanent colony.”

The Chinese regard the treaty as a major landmark in what they call their “century of humiliation” (1839-1945). However, Platt disagrees with their interpretation. He argues,

Only after the fall of the Qing dynasty in 1912 did historians in China begin to call this war “The Opium War” in Chinese, and only in the 1920s would republican propagandists finally transform it into its current incarnation as the bedrock of Chinese nationalism—the war in which the British forced opium down China’s throat, the shattering start to China’s century of victimhood, the fuel of vengeance for building a new Chinese future in the face of Western imperialism, Year Zero of the modern age.” 

He adds,

“The Opium War was not part of some long-term British imperial plan for China but rather a sudden departure from decades, if not centuries, of generally peaceful and respectful precedent. Neither did it result from some inevitable clash of civilizations.”

The debate will continue for some time as to whether the war was about British pride, or about finding an outlet for opium, one of British India’s most profitable export, or about forcing China to open up to foreign trade. Whichever of those three alternatives you chose, however, none are particularly glorious.

The first question that comes to mind is whether Britain, the world’s leading military power at the time, had the moral right to force their terms of trade on China? That question may have relevance today in the current trade war between China and the USA.

The second question is whether the US’s current opiate epidemic can be compared to the opium epidemic that contributed to China’s decline.

I am not qualified to answer either question and I will leave the final word to the review of the book from the New York Times:

Stephen Platt has written an enthralling account of the run-up to war between Britain and China during a century in which wealth and power were shifting inexorably from East to West. But if this history holds a lesson today — as wealth and power shift equally inexorably back from West to East — it is surely the same one that Karl Marx identified just a decade after the Opium War, that men make their own history, but they do not make it as they please.

Images from Pixabay under creative commons

Commodity Conversations Weekly Press Summary

A new study by Cambridge scientists and researchers from 17 organisations across the globe found that high-yield agriculture is the most sustainable method of farming, as it uses less land and causes less environmental damage in terms of greenhouse gas emissions, fertiliser and water use. An example is the European dairy sector, where organically produced milk causes one-third more soil erosion and takes up twice as much land than conventional dairy farming.

Competitive logistics, and especially freight, is another important component to efficient farming. Brazil, for one, is seeing a revival in farming with a 35% increase year on year in farm credit in the June-July period. However, analysts warn that the country’s agribusiness performance will depend in big part on its ability to maintain competitive freight – something which is threatened by the government’s minimum truck freight rates. The higher local freight costs have already led to a surge in the import of cereals from Paraguay where transport costs are much lower.

The escalating trade war between the US and China is now seen by many as a major concern and not just a small irritant. Analysts now predict that the dispute will slow the US GDP growth to just 2% by the end of 2019, compared to 3.1% for the current quarter, according to a Reuters poll. China has consistently targeted the agricultural sector, just as Iowa’s corn and soy farmers are about to start their harvest. The National Farmers Union estimates that corn, soy and wheat farmers lost USD 13 billion in June alone.

On the other hand, some producers are seeing benefits to the new trade flows, like the US garlic company Christopher Ranch who welcomed the 10% duty on Chinese garlic. And in an unusual twist, Brazil may import 500,000-1 million mt of soybean from the US this year, according to Anec, which represents Cargill, ADM and Louis Dreyfus. An adviser explained that Brazil’s soybean supply was tightening because of a surge in export demand following Chinese duties on US origins.

While the USDA said it was confident it would be able to regain market access once trade issues are resolved, Chinese industry representatives claim that they will be able to completely move away from purchasing US soybeans. The vice chairman of a China-based Wilmar subsidiary said the country would support the government amid escalating tensions, while experts noted that feed processors could easily half the amount of soybean used without affecting livestock growth.

In a bid to improve supply chain efficiency, Cargill has tied up with South America’s Agriness to launch a digital farm management platform, initially to boost pig harvest and then expand to other species like poultry and dairy. Agriness, which manages 2 million sows, will provide real-time data on key indicators such as the number of piglets/sow, weight gain, and production cost. Cargill’s vice-president believes the platform will ensure food safety, food security, sustainability and transparency.

Cargill is also expanding in Poland where it announced it had signed a deal to purchase Polish group Konspol’s feed manufacturing plant, five broiler farms and two processing centres along with the brand and customers and suppliers.

With the use of satellite technology, Nestle said it hopes to prevent deforestation in its palm oil plantations, especially in Malaysia, Indonesia and Papua New Guinea. The company wants all its products to be deforestation-free by 2020 compared to 63% in 2017.

In Pakistan, meanwhile, the Supreme Court has appointed a forensic auditor to conduct a detailed inquiry into Nestle’s USD 49 million mineral water operations. The order came on a petition accusing the company of exploiting groundwater and selling water that is unfit for human consumption. The apex court noted that Nestle was paying a negligible tariff for extracting water while selling its product at high rates.

In the US, Starbucks has developed a six-pronged approach to make 10,000 out of its 28,000 stores greener by 2025. According to the strategy, which will be made public to encourage others to follow, the company plans to reduce energy use by 25%, use only renewable energy, reduce water usage by 30% and save food aggregating about 50 million meals/year. To reduce food wastage further up the supply chain, Rabobank is inviting startups to submit tech-based solutions for reducing food wastage in its Food Loss Challenge Asia.

Finally, Coca-Cola is reportedly looking into launching a functional wellness cannabis drinks. Coke is said to have held talks with Canada’s Aurora Cannabis. Its drinks became cocaine-free in 1929 when scientists found a way to remove all psychoactive ingredients from cocoa leaves.

This summary was produced by ECRUU

Commodity Conversations Weekly Press Summary

A coalition of 60 US associations covering all layers of the economy, from Silicon Valley to oil producers, formed Americans for Free Trade to publicly campaign against the ongoing trade war and urge the administration to ease tariffs. Many in the industry did not believe that the dispute would go this far, with the President now threatening to tax virtually all Chinese imports. The groups  warn of layoffs as they face higher costs and smaller export markets.

In a similar vein, Cadbury has joined the list of companies preparing for a hard Brexit and is stocking up on raw materials, including sugar, wheat and cocoa. The UK’s imports will increase by GBP 38 billion (USD 49.37 billion) if companies stockpile three months worth of goods from the EU, according to estimates.

Cargill introduced a software in the Philippines to help the feed and animal industries transition to science-based digital nutrition models. The tool will first be aimed at poultry and swine businesses and will ensure higher margins, according to a company official.
The company has also started meeting startups as part of the CO2 Challenge it launched in June along with Rainmaking and DNV GL. The challenge aims to support technologies which will help reduce the emissions of cargo vessels by 10%. “The solutions are there – we just need to uncover and implement them,” Cargill said.
In the US, Cargill’s Sidney plant in Ohio launched a new USD 10 million line which cuts packaging material waste and uses completely recyclable plastic. This will help customers source sustainable materials.

In Ghana, Cargill said it will expand its direct sourcing programme Cocoa Promise to include four more districts. Under this service, farmers can deliver products to warehouses, effectively cutting out the middleman. This comes at a time when the Cocoa Board is trying to fight the Cocoa Swollen Shoot Virus Disease by replanting 40% of the country’s unproductive cocoa.

The Dacsa Bunge joint venture will build a USD 14 million plant to process corn in Ukraine which should start operating by the end of 2019, according to market sources. Almost 80% of the 100,000mt capacity plant is expected to be destined for exports. Also in Ukraine, the Saudi Agricultural & Livestock Investment Company (Salic) has almost finalised a deal to acquire Mriya Agro, which grows corn and barley among other crops. The takeover would make Salic one of Ukraine’s largest farming operations.

The US investment fund Castlelake is looking into picking up controlling stakes in up to five sugar and ethanol companies in Brazil, according to a source. This comes at a time when a lack of investment in the sector is causing it to shrink. Looking at the finances of 75 mills in the Centre South, Itau BBA bank found that 18 units were not making enough to sustain production. With even profitable mills not investing to expand, because of the poor return on capital, some say that cane production next year could drop by 100 million mt.

During a trip to Morocco this week, the head of Danone promised consumers a series of changes, including lower prices and a more transparent supply chain. This comes after months of a boycott by consumers who accused the company of setting unfair prices, among other things, causing a significant drop in sales. The CEO said the crisis was “unprecedented anywhere in the world”. As such, and although he did not know why the boycott specifically targeted Danone, the company decided it was better to find a solution instead of fighting it.

Similarly, Nestle spent USD 34 million to remove preservatives from two of its main milk brands in Brazil, in response to consumers’ demand for more natural products, adding that developing countries were quickly catching with global food trends.
In the US, the company’s USD 50 million frozen food research centre is paying off, as data showed that frozen food sales jumped by almost 6% in the first half of the year, compared to less than 2% growth over the past two years. Analysts say the revival of frozen food is due to companies like Nestle investing in nutritious and healthy meals, a change from the comfort food that frozen food used to be associated with.

The number of people going hungry around the world increased for the third year in the row in 2017, according to the UN’s latest report. The main drivers were climate change and conflicts, with Africa and South America the most affected. The report also noted that obesity rates now increased to cover one adult in eight. An FAO expert explained that nations were now shifting to offering more humanitarian aid without addressing underlying causes, and should instead focus on promoting transformative investments.

This summary was produced by ECRUU

Commodity Conversations Weekly Press Summary

Although he admitted it was a “really bad tax”, the Argentine President announced that crop exports will now face a tax based on the value of the exchange rate, which will hopefully help generate some much needed revenues, unlock IMF funds and avert a crisis. Analysts noted that corn cultivation will drop as a result, as profitably will be down 50% and the crop has not been planted yet, unlike wheat.

South African farmers are also worrying about upcoming policies,  as growers’ body Agri SA and the Congress of South African Trade Unions expressed their opposition to the proposed amendment to the constitution which would allow land acquisitions without compensation. But the National African Farmers Union backed the nationalisation of some agricultural land. A parliamentary panel is reviewing the proposal and has received around 450,000 submissions.

The Coca-Cola Company will spend USD 5.1 billion to purchase the Costa Coffee chain, the world’s second largest coffee chain, making it the first attempt at running a retail chain for the 132-year-old soft-drink giant. Although coffee represented only USD 83 billion out of the USD 513 billion market for soft drinks in 2017, the sector is growing much faster and could help Coca-Cola diversify into healthier products. Coca-Cola is now in a position to upset competitors such as Starbuck or PepsiCo by opening Costa stores in the US, or launching a bottled coffee drink.

Cargill’s Carval fund is said to have purchased Abengoa Bionergia‘s Sao Luiz mill in Pirassununga and Sao Joao sugar mill in Sao Joao da Boa Vista for USD 80 million, according to sources. The fund will invest BRL 100 million (USD 24.34 million) in the two Sao Paulo mills, which have around BRL 1.5 billion (USD 365.1 million) in debt.

Nestle will introduce the South American goldenberry in some of its products, after it bought a 60% stake in the snack company Terrafertil. The fruit is relatively unknown outside of Latin America, but the Nestle Americas CEO explained that it will cater to consumers who increasingly look too organic products with high nutrient content.

In Spain, the number of pigs has increased by 9 million since 2013, bringing the total to around 50 million, or more than the human population of 46.5 million. The supply has grown as Spain is a particularly large consumer of pork, at around 21kg/year per person. Environmentalist warned of the impact of the growing pig population on the water supply and greenhouse gas emissions.

A French parliamentary committee decided last week that the voluntary approach to cutting the salt content in food has not worked, and legislators suggested that a proposal to enforce reductions could come as early as September. They suggested something similar to the sugar tax which would come into effect over a specified level of salt. The committee highlighted the case of the baguette, after bread makers failed to reach the target to limit salt content to 18g/kg 16 years after making the voluntary commitment.

Sulfoxaflor, one of the pesticides poised to replace neonicotinoids, is just as harmful to bee populations as neonicotinoids, according to a new study published in Nature. In February, the European Food Safety Authority (EFSA) concluded that bee colonies were suffering because of the widespread neonicotinoids use and the EU decided to impose a ban later in April, which was followed by a similar decision from Canada.

Global food waste could end up costing USD 1.2 trillion per year by 2030, according to a new report by the Boston Consulting Group. The report lists a series of ways in which the sector could limit waste and save up to USD 700 billion per year, through specific solutions best adapted to the production, processing, distribution, storage and retail segments. The main driver, however, remains a general lack of awareness, the reports concludes.

Lego’s effort to switch away from using petroleum-based plastics could still be years away, according to the company, who has set a target to use only plant-based sustainable products by 2030. Although the firm has spent about DKK 1 billion (USD 156 million) on research, it is struggling to reproduce the exact feel of each block, which has more or less remained unchanged since 1958. The firm’s CEO said he did not know how the move would impact profit margins or whether the higher cost would be passed on to consumers.

And in case you missed it, Lego pulled an amazing engineering feat last week by building a full-size Lego Bugatti Chiron, complete with a working engine.

This summary was produced by ECRUU

The Pamir Highway

In Foreign Devils on the Silk Road, the author Peter Hopkirk traces the origin of the Silk Road back to Chang Ch’ien, a young Chinese traveler who was sent by Wu-ti, the Han Emperor to make contact with the Central Asian people, the Yueh-chih. The Emperor was looking for allies in his continuing conflicts with the Hsiung-nu, the ravaging Huns of our history books.

Chang Ch’ien set out in 138 BC but was captured by the Huns and held prisoner for ten years before escaping and continuing his journey. He eventually contacted the Yueh-chih only to find that they had no interested in joining forces against the Huns. Chang Ch’ien headed for home, only to be captured once again, and eventually made it back thirteen years after he had set out. Undeterred, the Emperor sent him out on another mission westwards and (as Peter Hopkirk writes),

Not long after his return from this mission, the Great Traveler died, greatly honoured by his emperor, and still revered in China today. It was he who blazed the trail westwards towards Europe, which was ultimately to link the two superpowers of the day—Imperial China and Imperial Rome. He could fairly be described as the father of the Silk Road.

The author continues,

Although one of the oldest of the world’s great highways, The Silk Road acquired this evocative name comparatively recently…As a description, it is somewhat misleading. For not only did this great caravan route across China, Central Asia and the Middle East consist of a number of roads, but it also carried a great deal more than just silk. Advancing year by year as the Han emperors pushed China’s frontiers further westwards, it was ever at the mercy of marauding Huns, Tibetans and others. In order to maintain the free flow of goods along the newly opened highway, the Chinese were obliged to police it with garrisons and watchtowers.

One branch of the Silk Road ran west from Kashgar, starting with a long and perilous ascent of the High Pamir, the “Roof of the World”. Here it passed out of Chinese territory into Central Asia…continuing through Persia and Iraq to the Mediterranean coast. From there ships carried the merchandise to Rome and Alexandria.

As Mark Twain is reputed to have said (but apparently didn’t), “History doesn’t repeat itself but it often rhymes”.

China (hopefully) does not want to conquer new territories, but it does want, and need, to conquer new markets for its goods. To do this it is investing heavily in new transport infrastructure eastwards through Central Asia and southwards through Pakistan to the Indian Ocean. Unlike (evidently) the US President, the Chinese realize that trade creates wealth.

Rather confusingly, the initiative is known in the western world as One Belt One Road, but the Chinese prefer to call it The Belt and Road Initiative (BRI) or the Silk Road Economic Belt, or even The 21st-Century Maritime Silk Road. The original Silk Road was not one road, but a network of land and sea routes. The new “Silk Road” is the same, although it includes both road and train routes.

The relatively short (albeit 1,500km) section of the Silk Road that I travelled last month is called the Pamir Highway, and runs from Osh in Kyrgyzstan to Dushanbe in Tajikistan. It first heads south along the Chinese border across the Pamir Mountains, and then turns west along the Wakhan Valley. The valley separates the Pamir Mountains and the Hindu Kush. It  is an isolated part of the world with an extraordinary mix of cultures: twenty-five ethnic groups and twenty-five languages.

The route follows the tumultuous and unnavigable Panje River, on one bank Tajikistan and on the other Afghanistan’s Wakhan Corridor, a narrow strip of land that was made part of Afghanistan in the nineteenth century to keep the Russian and British Empire apart. (For more on this fascinating period of history read Peter Hopkirk’s “The Great Game”.)

The Pamir Highway was in dire need of investment and improvement. Much of it was unpaved and single track, winding its way precariously along steep cliffs that dropped into the river below. I have no idea how the over-sized truck and trailer combinations that we saw on the road managed to make it from one end of the highway to another.

Some sections had been improved, and more works were being carried out, but the Tajik government is apparently wary of Chinese investment.

They probably shouldn’t be. Tajikistan is devoid of natural resources and is one of the poorest countries in Central Asia. Improving the transport infrastructure would not just permit Chinese goods to be imported more cheaply, it would help the country to develop as an important trading centre halfway between East and West.

Commodity Conversations Weekly Press Summary

As the US-China trade war continues to escalate, the US farm sector is increasingly worried that global trade patterns are dramatically evolving in a way that will not be reversible in the short term. Cost is only one factor behind the trade landscape, as relationships and reliability also play a major role, according to the Farmers for Free Trade group. The uncertainty around US policy is allowing competitors from Brazil, Ukraine, or Argentina, to dismantle some of long term partnership the US industry spent years building, they added.

In Europe, farmers are focusing on the bad weather, as the UK is set to witness a 5% increase in food prices because of damaged crops – this would translate to an increase of USD 8 per month for each household. The farm price of vegetables and dairy has already shot up, with meat and wheat expected to follow suit. Similarly, hailstorms in France have destroyed a significant amount of wine.

On the other hand, global food prices are likely to be stable over the next decade due to the tepid growth in demand, according to a report by the UN and OECD. Agribusinesses will take a hit, the report warns, as Chinese food consumption decreases because of an ageing population and a contracting economy. While regions like India and Africa will provide the volumes, the US and other developed markets will look for quality. Africa will help balance the consumption of processed foods and sugar as developed nations move towards healthier options.

Meanwhile, Cargill is trialling genetically-modified (GM) canola in Montana which it hopes will dramatically change the salmon and fish protein industry. Designed to yield more oil rich omega-3 fatty acid, this GM canola could replace the wild fish which is fed to salmon farms amid a falling ocean population. This is part of the group’s efforts to become the leader in aquaculture feed, according to a company official who said: “This is very much the new Cargill.”

In Brazil, Cargill announced a plan to build a USD 150 million plant to manufacture a food texturizer called HM pectin made from citrus fruit. The pectin, which is used in things like juices and jams, would add a high-margin product to the company’s portfolio at a time of low crop prices. Cargill is also reportedly looking at buying two struggling grains processing plants.

Bunge, the Santander Bank and The Nature Conservancy got together to design a program which gives loans to soybean farmers who commit not to clear forest or native vegetation in the Brazilian Cerrado. Most of the 9.6 million ha of land which came under soybean cultivation in the 2001-17 period in the Cerrado was previously native. Bunge also helped launch Agroideal.org last year which to help grow soybean in a sustainable way.

Olam is planning to increase its cocoa beans output in Ghana as well as to go further downstream into tertiary processing. Olam has become the country’s third biggest buyer of cocoa beans, having purchased 22% of the whole production in 2016/17.

Going from cocoa to coffee, Nestle and Starbucks have signed a USD 7.15 billion licensing deal which allows Nestle to sell Starbucks products all over the world. Both companies will work together and use their complementary advantages – coffee retailing on one side and single-serve home-based coffee machines on the other – to strengthen their position in the coffee market.

In Japan, meanwhile, Nestle is planning to turn its nutritional drinks and supplements segment into – literally – a billion dollar business after it witnessed the growing popularity of its subscription-based nutrition program. The program uses artificial intelligence to analyse people’s meals, DNA and blood sample to work out which supplements they need. Both moves are part of the company’s intention to move towards healthier products.

In Malaysia, the research centre Crops for the Future (CFF) has been promoting some of the 7,000 indigenous crops, such as spindly moringa trees, bambara groundnuts and the kedondong berry, as alternatives to wheat, maize, rice and soybean which provide two-thirds of the world’s food supply. The company is trying to change the approach towards food by diversifying diets while enabling farmers to measure crops in terms of nutrition rather than yield.

Wired’s cover story this week dives into how Maersk, who controls one-fifth of the world’s shipping capacity, was completely paralysed by a Russian-made virus originally made to destabilise Ukraine in June 2017. The virus ended up costing Maersk USD 300 million, and was only fixed thanks to a power cut in Ghana which shielded a single computer from the infection.

This summary was produced by ECRUU

The Heart of the Silk Road

The Jayma Bazaar, in Osh Kyrgyzstan, is one of the oldest in Central Asia and has existed on the same site for over two thousand years. The market stretches for more than one kilometre along the western bank of the Ak-Bura River, and has an estimated seven kilometres of alleyways and passages.

Osh is the second largest city in Kyrgyzstan and is situated near the country’s southern border with Uzbeckistan. The city is believed by some to be the location of the famous “Stone Tower”, which Claudius Ptolemy wrote about in his work Geography and which marked the midpoint on the ancient Silk Road between Europe and Asia.

Unsurprisingly for a city at the heart of the Silk Road Osh is known for its ethnic diversity. Traders from all China, Central Asia and Europe have been coming to Osh’s market for centuries and their social interaction has created a melting pot of different races and cultures. (Unfortunately this did not prevent strong anti-Uzbeck feeling from spilling over into a riot in June 2010 that left hundreds dead and destroyed parts of the market.)

The Jayma Bazaar is open seven days a week but I was lucky enough to visit it on Sunday, its busiest day. Many stalls are made from old container boxes and are grouped by product: one alleyway for shoes, another for hats. There is a meat and livestock section, as well as a square given over to craft blacksmiths making knives, horseshoes and cooking utensils.

The majority of the manufactured goods on sale were of Chinese origin, well-known brands that on closer inspection proved to be spelled wrong. Walking in the bazaar really drove home to me the extent to which China continually needs to expand the markets for its manufacturing sector. I began to understand better the important role that the country’s One Belt One Road initiative will play in China’s future development.

However a large section of the market was given over to seasonal fruits and vegetables with hundreds of stalls competing to sell apples, peaches, grapes and melons. There was also a huge quantity of dried fruits and nuts—raisins, apricots, dates, pistachios, walnuts, almonds and peanuts. China’s One Belt One Road project should also help Kyrgyzstan find export markets for its mainly agricultural economy.

That’s the good thing about trade and markets. They work both ways, and help all parties to better their lives.

Next week: Along the Silk Road from Osh to Dushanbe.

Commodity Conversations Weekly Press Summary

Bunge announced it has sold its sugar trading operations to Wilmar who confirmed it had acquired both the raw and refined sugar trading books. No financial details were given.  The acquisition will enable Wilmar, which was the chief buyer of Brazilian sugar exports this year, to continue its global expansion. Bunge, on the other hand, had earlier said it was also planning to sell its sugar production operations.

In Brazil, ADM announced it will buy Algar Agro’s oilseeds refining and bottling plants as well as its origination and storage silos. ADM said it was now “the most diversified oilseeds processor in the world.” Algar said it was getting out of the soybean crushing and trading businesses to focus on producing grains. ADM also concluded the takeover of probiotic supplements company Probiotics International. The new company – which will be known as ADM Protexin – will add to ADM’s health and wellness business. In Atlantic, meanwhile, ADM sold a grain elevator to Pipeline Foods, which focuses on non-GMO and organic supply chain solutions. The group explained that the elevator would give them direct access to farmers and therefore improve transparency and traceability in their supply chain.

Cargill said it was looking at expanding its salmon and shrimp feed business further downstream into farming. The aim would be to extend throughout the seafood value chain from feed to consumers directly. In the meanwhile, Cargill continues to expand its feed business. It has tied up with a farmer in Ecuador to test a new feed plant. Back in the US, Cargill Animal Nutrition has kickstarted a Facebook campaign to promote The Great American Milk Drive. The company will give three servings of milk to the Drive for every farmer who uses the HerdFirst Facebook frame and tells his story of caring for dairy animal along with the hashtag #putyourherdfirst. The Herdfirst initiative aims to encourage dairy farmers to balance the nutritional needs of young animals with their business requirements.

Russia is leasing out 1 million ha of farmland to foreign investors, about half of which are likely to be from China which is looking for land to grow soybeans after its spat with the US. With this, there is now about 3 million ha in the Far Eastern Federal District available for dairy farming, cultivating soybeans, wheat and potatoes among other crops.

Sustainability advocacy group As You Sow has started a global alliance of investors whose aim is to put pressure on major companies to reduce plastic waste. Investors representing USD 1 trillion of asset management have signed up. This comes at a time when Greenpeace found that while US supermarkets have made significant efforts to ensure the seafood they offer is sustainable there have been no improvements to reduce the consumption of single-use plastics.

As You Sow argued that pollution and sustainability issues were a brand – and therefore a business – risk. One telling example was the case of beverage group Monster Energy Drink. Earlier this year, a petition was signed by consumers threatening to switch to another brand if the group did not improve supply chain transparency. This happened after Monster was ranked among the worst performers for supply chain accountability.  

We talked a lot about agriculture and chemicals this week (see previous posts here). The latest is a US study which found significant levels of the weedkiller glyphosate in several brands of breakfast cereals, oats and snack bars which are marketed for children. Some 43 of the 45 oat-derived products tested positive and three quarters had levels considered unsafe for consumption by children.

This summary was produced by ECRUU

Agriculture and Chemicals: Part Two

Last week I wrote about three recent rulings that went “against” mainstream agribusiness. The first, by a Californian jury, found that glyphosate, a widely used herbicide, was carcinogenic and should be labeled as such. The second, by the EU Commission, was that partial bans on neonicotinoids, an important pesticide, should be extended and enlarged to prevent harm to bees. The third, by the EU Court of Justice, was that gene editing was a form of genetic modification and should come under existing GMO legislation.

The three rulings, coming as they did in close succession, made some wonder what the world has against agriculture in general and farmers in particular.

However, the rulings show the increasing disconnect between consumers and producers. The strong growth in demand for organic food highlights that consumers, particularly urban dwellers, increasingly want their food to be produced and delivered without herbicides or pesticides, and without its genes being modified or edited in any way. Farmers on the other hand want to produce as much food as they can from as little land as possible, and as cheaply as possible. Herbicides, pesticides and breeding techniques (whether genetic or “natural”) help farmers enormously in this task.

In a piece for Foreign Affairs Bill Gates put the case for research into gene editing, writing

This sort of research is vital, because a cow or a few chickens, goats, or sheep can make a big difference in the lives of the world’s poorest people, three-quarters of whom get their food and income by farming small plots of land…

Improving the productivity of crops is fundamental to ending extreme poverty. Sixty percent of people in sub-Saharan Africa earn their living by working the land. But given the region’s generally low agricultural productivity—yields of basic cereals are five times higher in North America—Africa remains a net importer of food. This gap between supply and demand will only grow as the number of mouths to feed increases. Africa’s population is expected to more than double by 2050, reaching 2.5 billion, and its food production will need to match that growth to feed everyone on the continent.

The challenge will become even more difficult as climate change threatens the livelihoods of smallholder farmers in Africa and South Asia. Improving the productivity of crops is fundamental to ending extreme poverty.

He continues,

Gene editing to make crops more abundant and resilient could be a lifesaver on a massive scale.

 In other words, we will have to improve agricultural yields if we want to feed the world and drag people out of poverty. Climate change will make food production even more difficult in the future, while at the same time we need to reduce agriculture’s carbon footprint, both in terms of its own emissions and in terms of forest erosion.

So we have a contradiction here: rich world consumers want their food produced organically, but at the same time they want farmers to use less land. This is a tough “ask” when the world’s population is increasing and when people are eating more meat. Adding a third objective of using agriculture to pull the world out of poverty makes the task even tougher.

However Bill Gates makes an important point when he mentions that cereal yields are five times higher in the US than they are in Africa. The EU beet producers were also right to point out that the extended ban on neonicotinoids would adversely affect beet yields. Against that, the recent increase in EU sugar production has helped to drive world sugar prices down to levels where many developing countries can no longer compete. (Huge production increases in India and Thailand were the main drivers, but the EU increase did contribute.)

You could therefore argue that advances in chemical and gene technology have already increased yields to such an extent that the world is producing too much food. You could add that the fact that these technological advances have largely benefited the developed world (and India and Thailand are part of the developed world), driving down production costs to a level at which under-developed countries, particularly in sub-Saharan Africa, cannot compete. This, as Bill Gates realizes, keeps them in poverty.

So maybe technology has got ahead of itself, (baring weather disasters) resulting in us producing too much food, too cheaply.

Some commentators have drawn parallels between the Californian ruling on glyphosate and the recent study that linked mobile phones and cancer. It is indeed curious that the press were quick to discount the mobile phone story on the basis that cancer rates haven’t increased with mobile phone use, but the media ignores the same logic when applied to glyphosate.

The media also ignore that logic when applied to sugar consumption and obesity. (Per capita sugar consumption has been falling for the past half century while obesity has been rising.)

Could it be that we apply different standards to products that we eat as opposed to products that we use? Could it be that we don’t care how the lithium is produced for our car batteries, but we do care how the wheat is produced for our bread?

Finally, there is the question as to whether the world is over-reacting in pushing back against farm chemicals. Some argue that every thing is to some degree carcinogenic (think sunshine and even toast), and that life is not risk-free.

However it may be appropriate to look back at the history of the insecticide Dichlorodiphenyltrichloroethane, commonly known as DDT. It was first synthesized in 1874 and was widely used in the second half of World War II to control malaria and typhus among civilians and troops.

DDT was made available for public sale in the United States in 1945 and was promoted by government and industry as an agricultural and household pesticide. Opposition to DDT was focused by the 1962 publication of Rachel Carson’s book Silent Spring, which claimed that DDT and other pesticides had been shown to cause cancer, and that their agricultural use was a threat to wildlife, particularly birds. The book’s publication resulted in a large public outcry that eventually led, in 1972, to a ban on DDT’s agricultural use in the United States.

Mosquitoes (not sharks or hippos) are the world’s most dangerous creatures. Over one million people die from malaria each year, mostly children under five years of age, with 90 per cent of malaria cases occurring in Sub-Saharan Africa. Some have argued that that fewer children would be dying if DDT hadn’t been banned.

However, DDT is still used in some parts of the world to combat malaria, and its use has been increasing since it was endorsed in 2006 by the World Health Organization. In many African countries, as well as India and North Korea, the pesticide is sprayed inside homes and buildings to kill mosquitoes. In 2007, at least 3,950 tons of DDT were sprayed for mosquito control in Africa and Asia, according to a report by the United Nations Environment Programme.

A panel of scientists from the United States and South Africa said DDT should only be used as a last resort in combating malaria. The 15 environmental health experts, who reviewed almost 500 health studies, concluded that DDT “should be used with caution, only when needed, and when no other effective, safe and affordable alternatives are locally available.”

The history of DDT may suggest that there is room for compromise on chemicals. Rather than outright bans, perhaps the solution would be to work where possible to reduce the use of chemicals in agriculture. But then compromises never make headlines or pay legal fees.

Images from Pixabay under Creative Commons