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Cargill could partner with ADM, Bunge and Amaggi to bid for the Brazil’s Ferrogrão railway concession, a 1,000km railway linking grain regions to the port of Miritituba. A Cargill official explained that it would reduce logistics costs by avoiding the poor quality roads, as well as providing an alternative port to Santos and Paranaguá in the south. A Chinese state-owned group is also planning to bid.

Almost all of the 239 locks in the US waterways systems are past their “Use By” dates. The American Society of Civil Engineers has said that this is resulting in delays for almost half of the ships that use the waterways. The Ohio River has seen its worse jams ever this year with at one stage over 50 miles of ships at a standstill, many of which were carrying grains. The resulting extra costs meant that the US has struggled to compete with South American grain, causing losses all across the supply chain. Some of the locks are slowly being replaced. (Original source: Reuters)

Olam is working on building an online marketplace to allow small-scale farmers to sell their products directly, as well as to source farm inputs and find financing. The company’s CEO  explained that this is part of “Olam Direct”, a program designed to leverage its network of small farmers (some 4.3 million of them) and offer them value-added services. The program also offers better  traceability to end buyers. The group already has over 100,000 farmers from 21 countries registered in its Olam Farmer Information System mobile app, which uses big data and artificial intelligence to help farmers improve efficiency, quality and traceability.

In the US, Cargill’s head of Corporate Affairs has called on farmers to take an active role in policy making, explaining that the US threat to withdraw from trade agreements such as the NAFTA could have a disastrous effect on the country’s farm economy. She said that trade fed the world, and drove productivity and economic growth.

Barter transactions supplied over half of farmers’ crop financing in Brazil’s Mato Grosso state this year, the first time in almost a decade that barter has such a key role. The research agency Imea explained that as a result of low margins and poor revenues, trading groups and agriculture product resellers have little choice but to exchange their crops for the necessary farm inputs.  (Original source: Reuters)

Nestle has announced that it has bought Canadian group Atrium, its fourth acquisition in the last few months, and another step in its strategy to become a “nutrition, health and wellness” company. Atrium makes vitamins and nutritional supplements with sales mostly in the US.  Some sources said that Nestle might also want to buy the German equivalent, Merck. (Original source: Reuters)

France has kept its place as the Most Food Sustainable Country in the Food Sustainability Index published by the Economist Intelligence Unit. The EIU estimates that France loses only 1.8% of its total food production each year thanks to its anti-waste policies. The UAE was at the bottom of the index with an estimated 1,000kg of food wasted per year person each year. The UN FAO estimates that one third of all global food produced each year is wasted.

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Anec, Brazil’s grain exporters association which includes ADM, Cargill, Louis Dreyfus among others, has warned that the sector could be seeing its worse performance in 10 years amid bumper crops and poor margins. A spokesman said that merchandising companies had to really look into their risk management practices, adding, “We have to rethink what we are doing.”

Cofco International Ltd (CIL) has announced plans to double direct grain purchases from farmers to 60 million mt by 2022 in its bid to rival the ABCDs of agricultural commodities. The CEO said that CIL would have a turnover of USD 37 billion this year as it is expected to handle 110 million mt grains, of which 80% will be sourced from global traders. The CEO added that plans to launch an IPO were still on.

Bunge has increased the number of executives eligible for cash compensation (if they lose their jobs without cause within two years of a takeover) to include five top executives, from just the CEO previously. A finance expert explained that the move would discourage these executives from trying to stop any acquisition process.

In the world of vegetable oil, Louis Dreyfus is buying Golden Agri’s crushing and vegetable oil refining business in China. The move is part of the trade house’s strategy to focus on core activities such as grains and oilseeds amid declining margins.

Wilmar is collaborating with ING to convert some of its USD 150 million loan into a sustainability performance-linked loan, the first company in Asia to do so, and the first in the palm oil industry. The trade house will improve its environmental and social performance in exchange for a reduction in the interest rate. Sustainalytics will be measuring the progress.

Chinese group CCCC continues on its acquisition binge and is now looking at Brazil’s railway sector, having just bought Concremat Engenharia and the São Luís port project in Maranhão. The group, along with Japan’s Mitsubishi and Sumitomo are each reportedly in talks with Rumo about taking a stake in the 7,208km railway concession in the South Malte.

The commodity trading group Citadel has asked the Commodity Futures Trading Commission to look into the “other reportables” category on the Commitment of Traders (COT) reports. Citadel argues that the category lacks transparency yet represents a significant share of the market – for example 13.8% of the Open Interest in Chicago soft red winter wheat futures. Some say that the category includes prop trading firms and quantitative funds, among others.

US growers and processors of cranberries are hoping that the government will give them the green light to turn excess fruit into fertiliser for the first time ever. Interestingly, Thanksgiving dinner this year was probably the cheapest since 2013 given the global surplus of meat and grains, which are successfully keeping prices low. Meanwhile, a study based on computer simulation of national data forecast that 57% of children aged between 2-19 years in the US are likely to become obese by the age of 35.

Last week we talked about the increasing sea freight costs but have you ever wondered how many vessels there are at sea at any given point? Check out MarineTraffic’s screenshot to see for yourself. It’s impressive.

Finally, for our tech update, the cryptocurrency is making its way into commodity trading with Ukrainian shipping firm Varamar announcing it would now accept payments in Bitcoin. This is expected to be a game changer for countries affected by sanctions that can’t use US Dollars.

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Mitsui & Co is spending USD 265 million to buy 30% of the shares in ETG, Africa’s top agricultural trade house, the FT reports, as part of Mitsui’s strategy to diversify away from energy into agricultural markets.

The FT also reports that Wilmar has agreed to buy Cargill’s palm oil business in Kuantan, on Malaysia’s east coast, in a bid to strengthen its sales and distribution network. Cargill said it would continue running its other edible oil plants in Port Klang and Westport.

In what could be set back to Bunge’s plans to grow its food and ingredients businesses, the company has cancelled a plan to acquire a controlling majority in Mexican corn miller Grupo Minsa, Reuters reports. The company explained that this was a result of Minsa’s decision to outsource sales to a third party company while  authorities in Mexico examines the deal. 

Kellogg is responding to changing consumer diets and is launching a range of plant-based cereals in the UK, it’s the first step into the country’s vegan and organic market.

Similarly, Nestle has reportedly initiated discussions to acquire the US organic and vegetarian food manufacturer Hain Celestial Group. In the last few months, the company has bought Sweet Earth, Blue Bottle Coffee and invested in Freshly. In another interesting development, Nestle has launched its own voice-activated speaker in China which will be given for free to those who buy their milk powder in bulk. The speaker will provide information about Nestle products and collect consumer information.  

The world of organic food is in for a revamp as EU countries have agreed to update the rules of organic farming, most of which were 20 years old. The new rules aim to apply the same standards to all EU and non-EU farmers so that consumers across the EU get the same quality. Among the changes, crops cultivated in greenhouses can no longer count as organic. The new rules still have to be approved by the European Parliament.

Greenpeace has filed a complaint against Coca-Cola with the Advertising Code Committee for advertising that ‘Our packaging is 100 percent recyclable’. Greenpeace argued that the point was not so much whether the packaging was recyclable but whether the recycling actually happened, which the organisation said happens too rarely.

Similarly, protesters in the UK are urging people to sign a petition demanding Coca-Cola to lessen its plastic footprint as part of the UK’s national campaign against the 12 million tonnes of plastic waste that is being thrown in oceans annually,. But in an ironic twist, The Guardian reported that for the past five years, the UK’s environment department has used 1,400 disposable coffee cups on a daily basis.

Blockchain technology is revolutionising the world of farm-to-table transparency. US consumers who buy Honeysuckle White turkeys this Thanksgiving will be able to see photos of the farm where the turkey comes from, along with other information by scanning the packaging code. The project – in partnership with Cargill’s in-house blockchain platform – could be used on a wider scale if it proves to be a success. The food traceability market is expected to reach an estimated USD 14 billion by 2019.

The tech world is also changing the relationship between farmers and banks as farmers become better informed. Farmers now change lenders more often. 

Finally, Rabobank has warned that agricultural commodity prices are likely to be more volatile in 2018 because a forecast La Niña phenomenon (known, among other things, to cause dry conditions in the Americas and abnormally wet weather in Asia) could lead to a tightening global supply and demand for many crops.

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Starting with company news from Asia, Olam International has reported a 17.5 percent rise in its third-quarter net profit to S$24.1 million for the three months ended September, compared with S$20.5 million a year ago.

Revenue grew 41.7 per cent to S$6.71 billion from the preceding year, as the company’s traded volume increased to 5.8 million tonnes from 3.8 million tonnes. Olam generated a free cash flow  of S$1.11 billion in the first nine months of this year, versus a negative S$150.5 million in the same period last year.

Olam also received the Singapore Apex Corporate Sustainability Award in the multinationals category. Meanwhile, the company’s CEO has been appointed as the new chair of the World Business Council for Sustainable Development for two years starting in 2018.

Wilmar International reported a net profit of $370 million for the three months ended Sept. 30, compared with $392.2 million for the same period a year ago. A stronger performance in its oilseeds and grains division was offset by lower results in the tropical oils and sugar businesses.

Wilmar’s chairman and chief executive has forecast a “satisfactory” performance for the tropical oils and sugar divisions in the current quarter, with the oilseeds and grains business should see its “good performance” continue.

The company is looking to list its China unit on the Shanghai Stock Exchange in the second half of 2019, eight years after the initial listing plan was first announced. Wilmar’s China operations contributes half of the group’s revenue and a significant portion of the profits.

Noble Group has started talks with stakeholders to restructure its debt and secure trade finances in a bid to keep its business running. Noble has almost $400 million of medium-term debt notes due March 2018 and $1.14 billion of senior unsecured revolving credit facilities and a term loan due May 2018, according to Fitch Ratings.

But while some companies contract, others expand. COFCO International plans to increase soybean sourcing in Brazil’s Mato Grosso state to 7.2 million tonnes from 4 million tonnes currently. Mato Grosso is home to 13 out of 19 elevators the Chinese trader operates in the country.

The chief executive of Glencore Agriculture discussed merger possibilities in a presentation to the Global Grain conference in Geneva. He said, “we have looked at three or four possibilities in our core area already this year but couldn’t reach agreement with the seller”. He added that Glencore remained focused on acquisitions for growth, and saw scope for consolidation in the grain sector due to excess capacity. “Finding value is the big challenge in the industry today,” he said.

In a presentation to the Morgan Stanley Global Chemicals and Agriculture Conference in Boston the chief executive officer of Bunge said he believed the grains industry is caught up in a cyclical period. However he indicated that some pieces of the agricultural chain may be experiencing a permanent shift.

“If there is one place in the world where we do see that there’s a shift and there is a structural amount of overcapacity that somehow has to be rationalized, it’s in the U.S. grain origination and export industry,” he said, adding U.S. grains “needs fixing.”

There is also over-capacity in Brazil’s sugarcane sector.  Biosev SA, the sugar and ethanol unit controlled by Louis Dreyfus Co, is idling its Maracaju mill in Mato Grosso do Sul state for an undetermined period of time. The cane processed at the mill will be transported to two other mills that Biosev operates in the region.

Raízen will also idle two mills in the main Sao Paulo cane belt for an initial period of two years, saying there will not be enough cane in the area where the plants are located. Raízen will transport the cane in the areas where the mills are located to other plants it operates in the country.

In response to “evolving customer preferences for antibiotic-free meat, milk and egg products,” Cargill has broken ground on a new 50 million dollar feed facility in Ohio that will be focused on antibiotic-free protein production. The plant will sit alongside Cargill’s existing facility on the site that will continue to produce medicated feed products. A spokesman said, “We understand our customers have different preferences and product requirements, and this new facility will help us deliver those choices.”

Continuing on the theme of consumer trends, the percentage of people in the US who consumed a sugary beverage on any given day has fallen to 60 percent for children and 50 percent for adults in 2014, down from 80 percent and 62 percent respectively in 2003. Consumption of fruit juices also dropped in the period, while water consumption was up for all age groups.

And…well, it had to happen: a headline this week read: “Forget everything you know – sugar could be good for you after all”.

Meanwhile, the New Food Economy has written a good piece on nutrition, bad science, and even worse journalism. The writer takes particular exception to a recent claim that giving up genetically modified organisms improves your health.

Lastly, Reuters has written a long read explaining Monsanto’s challenges with the weed killer dicamba.

Notes:

Chris Mahoney, CEO of Glencore Agriculture, will be speaking at the Commodity Conversations event in London on 6th June 2018.

Jonathan Kingsman’s new book, Commodity Conversations, is now available on Amazon

In company news, the Commodity Futures Trading Commission last week fined Cargill Inc $10 million for providing inaccurate information on swaps, and for failing to supervise the company’s swap dealers. The charges date from 2013. In an emailed statement, Cargill admitted no wrongdoing, but said it was “enhancing its internal controls and employee training programs” inside its swap dealer division.

Meanwhile Cargill has announced it is investing an additional $240 million in India over the next five years. The investment will be in Cargill’s core businesses, including edible oil, cocoa and chocolates, starches and sweeteners and animal nutrition. Last year, Cargill inaugurated its first wet corn milling plant in India; set up with an investment of $100 million.

Bunge Ltd has said it may be able to get the best value for its Brazilian sugarcane milling business through an initial public offering of the unit. The company began looking at selling the mills in 2013. Bunge is already in the process of separating the finances of its sugarcane-milling unit from the rest of the company. The CEO said that this would make it easier for the company to act quickly once it decides to launch an IPO or take other measures.

COFCO International has agreed to sell Nidera Seeds, its crop seeds business that operates in South America, to Syngenta AG. Financial terms were not disclosed. Syngenta, owned by ChemChina, has said it would pursue deals to become the third-biggest player in the seeds industry.

Ferrero, the Italian food manufacturer, attracted media attention last week after a German consumer group noticed that the company has slightly changed its recipe for its Nutella spread. It has increased the content of powdered skimmed milk from 7.5% to 8.7%, and sugar from 55.9% to 56.3%. Furious Nutella fans took to Twitter to criticise the changes, using the hashtag #boycottNutella. In a statement Ferrero confirmed the changes had been made but insisted, “the quality … and all other aspects of Nutella remain the same”.

The danger of changing recipes was also highlighted in a Bloomberg article this week. In the 1980s Coca Cola responded to the “Pepsi Challenge” advertising campaign by introducing a new formula. Loyal customers said they didn’t like the new taste and sales fell. The company reacted and relaunched “Classic Coke.”

Back in the future, the UN’s FAO warned last week that global hunger is on the rise for the first time in a decade. A total of 815 million people went hungry last year, an increase of 38 million on the previous year. The FAO blamed climate change and conflict for the increase.

The organisation’s Director-General said that “About one in three people globally suffer from at least one form of malnutrition: be it hunger, micronutrient deficiencies, or overweight and obesity. Unless we take urgent and effective action, more than half of the world’s population will suffer from at least one type of malnutrition by 2030.”

The journal Nature Geoscience has published a report that argues that the world could feed an additional 825 million people, produce 10 percent more food calories, and grow 19 percent more protein by adjusting what crops are grown where. Changing where crops are grown would also reduce farmers’ use of rainwater by an estimated 14 percent. The study’s authors did however acknowledge that cultural and dietary preferences could pose a challenge in changing where crops are grown.

People’s tastes do however change; we can get used to anything. To illustrate the point Reuters reports that North Koreans now eat the dregs left over from making soybean oil, which usually go to feed the pigs. They press and roll them into paste, stuff them with rice, and top it with chilli sauce. The dish’s name, injogogi, means “man-made meat”. If not a national dish, it has become a street food popular for its taste.

Meanwhile, Russia’s 2017-18 grain harvest is expected to hit a record 133 million tonnes. Of that amount, 44.5 million tonnes are earmarked for export, up from 37.7 million last year and only 1.3 million tonnes in 2001. Russia is set to overtake the United States as the world’s biggest wheat exporter this year – regaining the top spot it last held before World War One. However analysts warn that a lack of port infrastructure could limit further export expansion.

Lastly an opinion piece in the New York Times argues that we should stop talking about food in the negative sense. By fretting about food, we turn occasions for comfort and joy into sources of fear and anxiety. And when we avoid certain foods, we usually compensate by consuming too much of others. The writer adds, “All of this happens under the guise of science. But a closer look at the research behind our food fears shows that many of our most demonized foods are actually fine for us”. He adds, “If there’s one thing you should cut from your diet, it’s fear”.

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Low prices and thin margins continue to make for hard times in the agricultural trading business.

This week Archer Daniels Midland Co announced that their quarterly earnings had fallen 44 percent. The company handled 20 percent less grain than expected and average margins in the United States were 50 percent below expectations. The company’s CEO said that he will reduce capital spending next year by about 20 percent and reallocate funds away from oilseed crushing towards its higher-value businesses. However he added said he didn’t expect conditions to get better any time soon.

Bunge Ltd has forecast lower full-year earnings in its core agribusiness unit after posting a third-quarter profit that fell 28 percent on flat revenue. The company’s CEO was, however, optimistic about the future. He said that the company’s trading and processing next year would benefit from cost cutting and strengthening demand for oilseeds, a key driver of revenue. He added, “The third quarter was better than the second and the fourth quarter will be better than the third.”

The CEO of ED&F Man is leaving the company as part of a senior management reshuffle after “a very challenging year”. The company said that the move was part of a restructuring driven by difficult market conditions in its sugar business.

Mackprang jr. GmbH, a Hamburg-based trading house founded in 1878, is venturing into the consumer breakfast market in search for higher value businesses. The company said it will source oats, corn and raisins, then mix and pack them before shipping out to China. The company’s managing director said, “Being a grain trader is no more the place where you make your money so easily. Definitely not. Times are changing and we have to look for other opportunities.”

But at least one trading company is looking to expand during these tough times.   Sucafina, the Swiss-based coffee trader, has hired about 50 people in the past year, opened offices in Colombia and Brazil, reorganized its North American unit and is starting a business in Seattle. The company has taken out a $300 million 18-month syndicated loan to fund its expansion.

The company’s CEO told Bloomberg, “I like to consider Sucafina the smallest of the big trade houses or the biggest of the small trade houses. If we were content to stay at this size and we weren’t vertically integrated, we would eventually get acquired by someone.”

Goldman Sachs Group Inc. is also expanding their commodity operations during tough times, hiring traders from Morgan Stanley and Castleton Commodities. To be fair, though, the expansion seems to be more in energy and metals, rather than agriculture.

It is not just commodity trading companies that are facing headwinds; agricultural chemical companies have also been in the news this week.

US farmers have overwhelmed state governments with thousands of complaints about crop damage linked to weed killers that use a chemical known as dicamba. Farmers claim that the herbicides have harmed crops because they evaporate and drift away from where they are applied. Monsanto and BASF, who make the herbicides, say the herbicides are safe when properly applied.

One expert estimated that 3.1 million acres of non-targeted crops have been damaged by the herbicide. In Monsanto’s defense, the company says it investigated 1,000 such claims, and found that in 88 percent of those cases, the farmer was to blame for faulty application of the product because “the label was not followed.” However, as New Food Economy points out, the “label” is 4,500-words long.

Meanwhile, The New York Times has accused President Donald Trump of damaging people’s brains, not by his angry early morning tweets, but through his lack of action on the chemical pesticide chlorpyrifos. The newspaper claims that the chemical is found in food, air and drinking water, and that human and animal studies show that it damages the brain and reduces I.Q.s while causing tremors among children. The Environmental Protection Agency banned the pesticide for most indoor residential use 17 years ago, and was preparing to ban it for agricultural and outdoor use this spring, but the Trump administration has apparently rejected the ban.

Campbell Soup has announced it is joining the Plant Based Foods Association, acknowledging reduced consumer demand for meat and dairy food. Earlier this year the company left the industry’s top trade and lobbying group, the Grocery Manufacturers Association, citing the lobbying group’s opposition to labeling whether food contained genetically modified ingredients.

The PBFA counts more than 80 companies as members but Campbell Soup will be by far its largest., “We’re not trying to make the whole world vegan,” a spokesman for the association told Bloomberg. “All we’re doing is trying to make plant-based products available to more people.”

In a similar vein, McDonald’s Corp have announced that they will require suppliers to follow new standards for raising and slaughtering chickens. Under the new guidelines, suppliers such as Tyson Foods Inc and Cargill Inc must comply by 2024 with rules dictating the amount and brightness of light in chicken houses, provide birds with access to perches that promote natural behavior, and take other steps to improve animal welfare. Tyson and Cargill have said that they support McDonald’s moves.

And while we are on consumer trends, people are abandoning their supermarket trolleys for baskets. The annual Waitrose Food & Drink Report (which covers all UK supermarkets), reports that customers are increasingly shopping little and often. One in ten people buy what they are going to eat that night, on the way home from work. Two out of three go to the supermarket more than once a day. As the report puts it: “People treat supermarkets like giant walk-in fridges.”

Nestlé, Mars and Hershey have been accused of breaking pledges to stop using “conflict palm oil” from deforested Indonesian jungles. The Rainforest Action Network (RAN) says consumers have been “deceived” by promises from the brands to clean up their supply chains, which were subsequently delayed, revised or watered down.

Hershey’s communications director responded to the allegations by saying that, “While we remain deeply committed to pushing all stakeholders to accelerate traceability and bring full transparency to this supply chain along with our supplier partners, we realise it would take more time to achieve this goal than originally anticipated.”

Meanwhile Malaysia is bracing itself for a total ban on EU imports of palm oil as the European Parliament gears up to ratify a proposed resolution to ban palm oil imports. The European Parliament has already voted to phase out the use of palm-oil biodiesel by 2020. After India, the EU is Malaysia’s second-largest export market for palm oil. China is in third place.