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Food connects us to nature

In his 2006 book The Omnivore’s Dilemma, Michael Pollan asked the question, “Where does your food come from?” He wrote,

“Imagine if we had a food system that actually produced wholesome food. Imagine if it produced that food in a way that restored the land. Imagine if we could eat every meal knowing these few simple things: What it is we’re eating. Where it came from. How it found its way to our table. And what it really cost. If that was the reality, then every meal would have the potential to be a perfect meal.”

In 2016, when Penguin published a tenth anniversary edition of his book, New Food Economy interviewed the celebrated author, asking him whether he thought his book had had an effect on the way food is produced and marketed, and how much had changed in the previous decade. His answer to both questions was “not much”. He did however concede that the market (in the US at least) for organic and local product has been growing strongly, and that the alternative food economy (as he called it) is gradually being co-opted by the main food economy. He told New Food Economy,

“One of the good things about having a handful of large companies dominate the food landscape is that monopolies can sometimes move quickly to change the system. When you persuade McDonald’s or Walmart or KFC to change what they do, you can rapidly drive a lot of change throughout the food system. Ultimately, I think many of the values that seem alternative now—cage-free eggs, for example—will be mainstream very soon. I think you’ll have major fast food chains switching to organic at some point as a marketing matter—and it’ll work, and others will follow suit.”

He added, 

“This is how change comes to America, right? We tend to make progress by co-opting challenges, rather than by revolution and replacement. There is no question that you’ll see this alternative food economy gradually co-opted.”

This is certainly something that we have seen over the past few years: sustainability has gone mainstream in terms of both the environment and human and animal rights. However the biggest challenge is still to come: to get (wealthy) consumers to pay for it. As Michael Pollan told New Food Economy in 2016,

“Still, the alternatives we’re talking about will probably never be as cheap as conventional food, partly because those low prices didn’t reflect the true cost of product. We pay for conventional food in other ways: in public health, in damage to the environment, in taxpayer subsidies. As we reform the system, I think we’re going to see that the low cost was illusory. You can’t really produce food that cheaply, without charging the real cost to the environment or the public health.

That, I think, is the big challenge of the food movement: to democratize sustainably and ethically produced food.” 

Describing his relationship with nature, there is one thing that Michael Pollan wrote in The Omnivore’s Dilemma that I particularly liked,

“The single greatest lesson (my) garden teaches is that our relationship to the planet need not be zero-sum, and that as long as the sun still shines and people still can plan and plant, think and do, we can, if we bother to try, find ways to provide for ourselves without diminishing the world. ”

I was thinking of this when I picked up a copy of Mr Pollan’s recently published How to Change Your Mind: The New Science of Psychedelics. This surprising new book describes the history of psychedelic drugs, such as LSD and psilocybin (from magic mushrooms), and looks at the new research being done around the effects of these drugs. Mr Pollan uses himself as a guinea pig, starting with some dried up magic mushrooms. Under their influence he rediscovers a connectivity with nature that he lost as a child. He writes,

“I stepped outside, feeling unsteady on my feet, legs a little rubbery. The garden was thumming with activity, dragonflies tracing complicated patterns in the air, the seed heads of plume poppies rattling like snakes as I brushed by, the phlox perfuming the air with its sweet, heavy scent, and the air so palpably dense it had to be forded. The word and sense of “poignance” flooded over me during the walk through the garden.” 

For many city dwellers (and I count myself in that category), our main—and sometimes only—connection to nature is through the food that we eat. It is no surprise that we need to maintain that connection. But to do that we have to know where our food comes from, and that its production doesn’t inflict damage on the environment, or cruelty to animals or our fellow human beings. Food is not only our connection to our agricultural past, but also to our environmental future.

My favourite quote from How to Change Your Mind is from Huston Smith.  Michael Pollan writes,

“Huston Smith, the scholar of religion, once described a spiritually “realized being” as simply a person with “an acute sense of the astonishing mystery of everything.” 

The author argues that when we treat nature and the environment as an object to be studied—and mastered—we are losing sight of the fact that we are in, and connected to, nature. We have no choice in the matter: everything we do that alters nature alters us in turn.

In his book Michael Pollard interviews Paul Stamets, a world expert on mushrooms and advocate of medicinal fungi.

“Mushrooms have taught me the interconnectedness of all life-forms and the molecular matrix that we share…. I no longer feel that I am in this envelope of a human life called Paul Stamets. I am part of the stream of molecules that are flowing through nature. I am given a voice, given consciousness for a time, but I feel that I am part of this continuum of stardust into which I am born and to which I will return at the end of this life.”

 Whether or not you need psychedelic drugs to feel this connectivity is another matter—and perhaps the subject of another blog.

All images from Pixabay under creative commons

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The last straw

Earlier today, when I went for my morning swim in the lake, I suddenly found myself caught up in a large semi-submerged plastic bag. My guess is that it  had once packaged a large-screen TV, possibly recently purchased for the World Cup. As to what it was doing in the lake, someone may have brought it down to one of the lakeside beaches to sit on during an evening barbecue. They had  inadvertently, probably after a few too many beers, left it there to wash out into the waves..

One moment I was swimming peacefully in crystal clear water; the next I was confused and panicked as I struggled to free myself from the plastic. At one stage my hands and arms were inside it and I had trouble staying afloat. My panic only lasted a few seconds, but as I brought the plastic bag back to the shore to dispose of in one of the rubbish bins on the beach, I thought of all the turtles and other marine life that get caught and perish in the plastic debris floating in our oceans. They too must suffer the same sense of panic and confusion that I had felt earlier today. One moment they are free; the next they are trapped in a thing of which they have no comprehension.

I had already been thinking about plastic last Saturday evening when my wife and I went out to dinner and we were served our cocktails with unnecessarily large—and unnecessarily plastic—straws. I thought about complaining to the waiter about them, but my habitual British fear of embarrassment stopped me. I didn’t want to spoil what was a lovely evening.

Starbucks announced this week that they would be completely eliminating plastic straws from their 28,000 stores around the world by 2020. And that is no small thing: the company currently uses more than one billion plastic straws per year.

McDonald’s also recently announced it will ban plastic straws at its U.K. and Ireland restaurants; other food outlets and airlines are following the trend. Cities are also joining in, with Seattle becoming the latest city in the US to do so. The UK environment minister has gone on record as saying he would like to ban plastic straws completely in the UK, while the EU has also proposed a ban on plastic straws and single use cutlery.

This week National Geographic published an excellent article on the history of plastic straws and how they took over the world. They write that in just the U.S. alone, one estimate suggests 500 million straws are used every single day. One study published earlier this year estimated as many as 8.3 billion plastic straws pollute the world’s beaches.

However, eight million tons of plastic flow into the ocean every year, and straws comprise just 0.025 percent of that.

Bloomberg argues that giving up plastic straws may make you feel better about yourself, but will have little effect on ocean plastic. The news agency cites a recent survey  that found that at least 46 percent of the plastic in the oceans by weight comes from a single product: fishing nets. Other fishing gear makes up a good chunk of the rest. (Bloomberg suggests that all fishing gear should be marked with the name of the ship that uses it: a complicated and difficult solution that will take time to implement.)

Banning plastic straws, like taxing calorific soft drinks, is a simple response to a complex problem. Doing so enables politicians to say that they are doing something to solve a problem, whether it is plastic waste or obesity, but in reality they must know that their actions will have little impact.

So what is the solution to plastic waste—and what can the food and agriculture industry do to help? The answer is, as usual, complicated.

The BBC published this week an excellent analysis of the issues involved with plastic packaging in the food industry. They argue that although plastic is viewed as bad, “the shrink wrap used on cucumbers for instance, can more than double the length of time the vegetable can last, allowing it to be kept for up to 15 days in the fridge and cutting food waste in half.

The BBC adds,

“Much of the food we now buy in supermarkets comes tightly wrapped in sealed plastic films and protective trays. This keeps fresh meat in an oxygen-free atmosphere, helping to prevent it from spoiling. Delicate fruit and vegetables are also kept safe from bumps that can degrade them, meaning they’re more likely to be sold. Putting grapes in their own individual plastic boxes has been found to cut food waste by 75%.”

The BBC also looks at the environmental cost of replacing plastic drink bottles with glass ones. They write that “it is generally not that much more expensive to produce a glass bottle versus one made from PET – about $0.01 more, according to some analysis. 

“However, when manufacturers start transporting produce in glass bottles, costs start to rise. A 330ml plastic soft drink bottle contains around 18 grams of material while a glass bottle can weigh between 190g and 250g. Transporting drinks in the heavier containers requires 40% more energy, producing more polluting carbon dioxide as they do and increasing transport costs by up to five times per bottle.

As a result, some, including those the packaging industry, argue that in many cases plastics are actually better for the environment than the alternatives.

But what about plastic made from renewable sources? There again the answer is not a simple one.

Coca-Cola became a leader in bioplastics when two years ago they launched the PlantBottle,  partially made with Brazilian sugarcane. However just because they are made from renewable green sugarcane doesn’t mean the bottles are biodegradable or compostable. They have to be recycled, but they also have to be separated from PET in the recycling process, driving up the costs.

France is a leader in the use of biodegradable and home-compostable plastic bags in supermarkets, and in 2017 took partial steps to ban single-use plastic bags. France’s Environment Ministry estimates that before the ban 17 billion plastic bags were used in France each year. Of those, some five billion were handed out at check-outs and 12 billion were for fruit and veg. An average plastic bag takes one second to make, is used for roughly 20 minutes and takes up to 400 years to degrade naturally.

The example of France shows that real progress can be made if the political will is there, even if only by one small step at a time. Further comfort can be taken from the fact that with petrol prices rising, recycled plastic is actually cheaper than fresh, virgin plastic made from oil. A tonne of virgin PET costs around £1,000 while clear recycled PET costs just £158 per tonne.

We can all be part of the solution by drinking from a reusable bottle whenever we can, and by conscientiously recycling the PET bottles whenever we can’t. As for plastic straws, they have become a totem for the anti-plastic movement; they help to focus our attention on the issue. So don’t wimp out like I did last Saturday evening: refuse a plastic straw whenever it is offered to you.

And one last thing: please don’t take any plastic with you when you go to the beach this summer. I had enough of a panic attack already!

All images from pixabay under Creative Commons

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Palm oil – a complex problem

A report published last week by the International Union for the Conservation of Nature (IUCN) highlighted the way that the palm oil industry is encroaching on rainforest and endangering biodiversity.

However the IUCN also highlighted the little-reported point that alternative oil crops, such as soy, corn and rapeseed, require up to nine times as much land as palm. Palm oil provides a third of the world’s vegetable oil, from 10% of the land used for all oil crops. Switching to alternative crops could result in the destruction of wild habitat in other parts of the world, such as Brazil and Argentina.

The director general of the IUCN told The Guardian, “When you consider the disastrous impacts of palm oil on biodiversity from a global perspective, there are no simple solutions. If we ban or boycott it, other, more land-hungry oils will likely take its place.”

The IUCN report’s lead author added, “Palm oil is decimating south-east Asia’s rich diversity of species as it eats into swaths of tropical forest.” But, quoting US writer HL Mencken, he said, “For every complex problem there is an answer that is clear, simple, and wrong.”

The answer is to not to ban palm oil, but to make its production more sustainable. That is easy to say and difficult to do. Indeed, the IUCN report criticised current sustainability efforts, arguing that certified palm oil is little better than non-certified palm oil.

A spokeswoman for the Roundtable on Sustainable Palm Oil (RSPO), which certifies almost 20% of all palm oil, disagreed. She told The Guardian that, “While we acknowledge that the certification system is not perfect, it has made a real contribution against deforestation.” She added that the RSPO is currently strengthening its standards.

So here we have two of the ten factors that Hans Gosling highlighted in his recent book Factfulness: Ten reasons we’re wrong about the world—and why things are better than you think. First, things are more complicated than they seem. Second, they are not perfect, but they are getting better.

An example of that second point can be found in the slowdown of soybean expansion in the Amazon basin following a moratorium by trading and food companies  on purchases of soybeans from newly deforested land. The annual rate of deforestation for soybeans in monitored municipalities has fallen 85 percent since 2008 and has accounted for only 1.2 percent of total cutting in the Amazon region in the period.

According to Greenpeace, the moratorium shows that zero deforestation is a possible pledge, and that similar protection should be expanded to other areas facing destruction.

The problem, of course, is that we still have to feed the world’s growing population. Agricultural expansion is the single largest driver of biodiversity loss, and it makes sense on a global scale to increase yields from existing areas rather than expand into new areas. This can be done by improving seeds, breeds and processes, or by planting more efficient crops.

As the IUCN study admits, a hectare of palm oil trees produces roughly 4,000 kg of oil per year, while a hectare of soybeans produces only 475 kg. (Cynics might argue that it is this difference in yields, and hence costs, that is driving the western world’s anti-palm oil lobby, not concern over biodiversity loss.)

Looking at different crops in terms of calories, palm is one of the most efficient at 3,520 calories per square metre, just behind sugar beet at 3,652 calories per square metres, but ahead of sugarcane at 2,781 calories. So if you really needed to feed the world, you would cover the planet with those three crops.

Of course nothing is that simple. First, calories alone are not enough: the body also needs proteins, vitamins, fibre and micronutrients. (Although my kids might disagree, you cannot live on Nutella alone.) Second, those three crops aren’t suitable for all climates; they don’t grow everywhere. Third, as the Irish potato famine showed us, monoculture can be extremely risky.

However there is a fourth issue here: fairness. The IUCN estimates the total area of industrial scale palm oil plantations at 18.7m hectares, with smallholder plantations taking the total to 25m hectares. This means that smallholder farmers grow about one quarter of all palm oil. Those smallholder farmers are no different from any of us; they are simply looking to provide for their families and ensure a better future for their children. It is difficult to tell them that they can’t do that.

In his book, Hans Gosling warns against another human instinct: to always blame someone when something goes wrong. Just as polar bears have become the totem of global warming, orang utans have become the totem of all that is wrong with palm oil. But unlike polar bears, whose numbers are increasing, Borneo’s orang utan population has fallen by an estimated 150,000 in the past 16 years.

The IUCN estimates that most of that decline has been caused by hunting, rather than through habitat loss as a result of agricultural encroachment. (There is an argument that agricultural expansion is bringing humans into closer contact with wildlife, and and that it is this that has lead to an increase in hunting.)

All in all, if you were to ask your friends and neighbours why orang utans are dying out, they will blame palm oil. If the palm oil industry wants to win back the hearts and minds of the world’s consumers, they will need to work with the local population to reverse that decline in the orang utan population.

As one of the coauthors of the IUCN report said, “We need to work with people to help them understand that orang utans are not dangerous and that it’s illegal to kill them. We know this decline has been largely due to hunting, and if we can turn that around, these orang utans could, over a long period, bounce back. When you lost the habitat, it’s gone forever, but the forests are still there. If we can stop the hunting and killing, we can reverse the trend.”

The conclusion has to be that boycotting palm oil is not a solution to the problem of biodiversity loss; it may in fact displace and aggravate it. The only (horribly complex) solution is to work with bodies such as the RSPO to improve sustainability, to help smallholder families lead better lives without cutting down virgin forest, and to educate the local population not to kill protected wildlife. The solutions are as difficult as the problems are complex, but they are nonetheless urgent.

Images from Pixabay under creative commons

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Are commodities a zero sum game?

A close friend (and ex-trader) recently contacted me to argue that unlike services or many manufacturing industries the supply chain for commodities is a zero-sum game. The market fixes the price of the end product, so if one participant in a supply chain makes more money, someone else in the supply chain has to make less. The same applies to market share. As demand is static, or at best growing very slowly, if one producer sells more, another must sell less.

It is an interesting point. Everyone in a commodity supply chain is a price taker—they have to take whatever margin the market allows them. They only way they can make a bigger margin would be to use their market power to squeeze other supply chain participants in order that they make less. And, argues my friend, widespread communication, instant information, and all the other things that I have written about in the past, have reduced the market power of the agricultural trade houses. As a result, they now capture a smaller share of the margins in the chain.

This would probably change if the supply chain was disrupted for external reasons, such as crop failure, natural disaster, or war (whether armed or trade), but as the CEO of Cargill said a couple of weeks back, it is no longer enough to “rely on the occasional crop failure, export ban, or supply shortage to save the day.”

If we accept that a commodity supply chain is a zero sum game, there is a way of increasing your margins without taking money from your suppliers and clients: you can do it by cutting your costs. This can be done in a number of ways.

Cutting labour costs is often (usually) a company’s first response to margin pressure. Reducing headcount can do this, making the remaining employees work harder or more efficiently. Reducing salaries or, in the case of traders, bonuses is another option.

Companies can reduce costs by outsourcing specific tasks in the hope that other companies will be able to perform a function more cheaply that they can. (We saw this recently with Bunge closing their sugar trading department and letting other trade houses merchandise their production.)

Innovation, either in processes or technology, can help companies reduce labour costs and gain efficiency. Obvious examples include better communication between offices, data handling in offices, and mechanization (including robots) in manufacturing and handling. There is no reason to think that innovation will suddenly end. Indeed there is reason to think that the trend will accelerate, (for example blockchain and AI), enabling further cost reduction along the supply chain.

Farming is the one part of the agricultural supply chain that has probably benefited the most from innovation and technology. Hybrid seeds, more efficient farm machinery, improved pesticides and insecticides, as well as drone and GPS technology have all helped to reduce costs.

Economies of scale are a common source of cost reduction; building a one million tonne commodity processing plant or port loading facility will not cost twice as much as building a 500,000 tonne one. However the best way to reduce unit costs is to increase throughput; make sure that the capacity you have built is being used to its maximum.

Lastly, and this in the interest of everyone, companies can cut cost by reducing waste. The UN estimates that food waste and crop losses amount to close to one trillion dollars each year. That is a huge cost not just to the environment but also to the agricultural supply chain. Even making small inroads into that waste could significantly benefit the profitability of supply chain actors.

In a zero sum supply chain, the only way to increase your profits without picking others’ pockets is by reducing your costs. Unfortunately, what may work for an individual company (or farmer) may not work collectively.

One farmer can take advantage of innovation and technology to grow the same size crop from a smaller area, but his instinct will be to plant all his available land and produce more. To capture economies of scale a processor will build a mega-plant, and to reduce his unit costs he will look to maximize throughput. And, obviously, any success in reducing wastage will also increase available food supply.

There is therefore a tendency for cost cutting in a commodity supply chain to lead to increased supply. And increased supply usually results in lower prices. Acting alone, an individual player in the supply chain may be able to increase his margins by cutting costs. However, if everyone does it, the resulting extra production could result in a fall in price that negates the costs saved.

Looking at this in another way, economic theory tells us that the price of any particular commodity is, in the long term, determined by the marginal cost of production of that commodity’s most efficient producer. The more efficient the producer, the lower the cost.

Or looking at it from yet another angle, you have to ask, “Who has the market power?” If you are talking about Apple, it is the producer. If you talk about apples, it is the consumer. Where there is no product differentiation—and there is none in commodities—the market power lies with the consumer and not the producer.

Transforming commodities into ingredients can shift market power from consumers to producers. Some commodities, such as coffee and cocoa, are already losing their commodity status and are differentiated by origin. End-consumers are already willing to pay more for gluten-free, or lactose-free, or organic, or non-genetically modified, or locally produced food. And the big brands are willing to pay more (hopefully) for specific food varieties that fit their particular recipes.

That takes us back nicely to the beginning of this blog. Cost cutting can help restore margins for individual participants in the food supply industry, but it is not a solution for the supply-chain as a whole. The only way for the food supply chain to restore margins is by recapturing the market power that they have lost over recent decades. Crop failures or other disruptions would do that in the short term, but product differentiation is the only solution in the long term.

Image courtesy of Pixabay under creative commons

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Factfullness: Sugar and Obesity

“We find simple ideas very attractive. We enjoy the moment of insight, we enjoy feeling we really understand or know something. And it is easy to take off down the slippery slope, from one attention grabbing simple idea to a feeling that this idea beautifully explains, or is the beautiful solution for, lots of other things. The world becomes simple. All problems have a simple cause—something we must always be completely against.

Or all problems have a simple solution—something we must always be for. Everything is simple. There’s just one small issue. We completely misunderstand the world. I call this preference for single causes and single solutions the single perspective instinct.”

So wrote Hans Rosling in his brilliant book, Factfulness: Ten Reasons Why We’re Wrong About the World—And Why Things Are Better Than You Think.

Obesity is one area where we are all looking for a simple solution to a serious problem. One food product, sugar, is singled out as the cause of obesity; reducing sugar consumption, or giving it up altogether, is seen as the simple solution.

Most health scientists admit that obesity is more complex than just excessive sugar consumption. Public Health England demonstrates the complexity of the problem of obesity with this “simple” representation of its causes on its website.

Meanwhile, the US Center for Disease Control writes: “There is no single or simple solution to the obesity epidemic. It’s a complex problem and there has to be a multifaceted approach. Policy makers, state and local organizations, business and community leaders, school, childcare and healthcare professionals, and individuals must work together to create an environment that supports a healthy lifestyle.”

The sugar industry argues that sugar is a calorie like all others, and that obesity is caused by excessive calorie consumption compared to physical activity. But what does the data say about calorie consumption?

In the UK, the Department for Environment, Food and Rural Affairs (DEFRA) has carried out annual surveys of the British diet since 1974. Their data shows that there has been a significant decline in UK daily per capita calorie consumption in the last forty years, from 2,534 in 1974 to 1,990 in 2012. This represents a decrease of 21.5 per cent.

What about sugar: has consumption also fallen? The DEFRA survey showed a 16 per cent decline in the consumption of ‘total sugars’ since 1992. Meanwhile, the Institute of Economic Affairs found that in the period 2002 to 2014, sugar consumption fell 7.4 per cent. Meanwhile, research carried out in 2014 by Czarnikow (a consultancy) found that UK sugar consumption peaked at 53 kg/head in 1957, dropped to 48.5 kg by1970 and has since fallen to 35kg/head.

This chart shows the reality of the situation in the US: obesity has risen while per capita calorific sweetener consumption has fallen.

In his book Mr Rosling warns,

“Being always in favour or always against any particular idea makes you blind to information that doesn’t fit your perspective…Constantly test your favourite ideas for weaknesses. Be humble about the extent of your expertise. Be curious about new information that doesn’t fit, and information from other fields.”

In a later chapter Mr Rosling writes about the human need to attribute blame—to always find a (usually evil) culprit. He calls it “The Blame Instinct” and defines it as, “the instinct to find a clear, simple reason for why something bad has happened.” He continues,

“It seems that it comes very naturally for us to decide that when things go wrong, it must be because of some bad individual with bad intentions. We like to believe that things happen because someone wanted them to, that individuals have power and agency; otherwise, the world feels unpredictable, confusing and frightening.

“This instinct to find a guilty party derails our ability to develop a true, fact based understanding of the world; it steals our focus as we obsess about someone to blame, then blocks our learning because once we have decided who to punch in the face we stop looking for explanations elsewhere.  

“This undermines our ability to solve the problem…because we are stuck with over-simplistic finger pointing, which distracts us from the more complex truth, and prevents us from focusing our energy in the right places.

In 2016, the Journal of the American Medical Association published a peer-reviewed article that alleged that the sugar industry had subverted health science during the 1950s and 1960s. The article received wide media attention and reinforced the public’s impression of the sugar industry as “evil”, on par with the tobacco industry.

Ask your friends and neighbours what they think about sugar and they will tell you that the world is getting fatter because sugar consumption is increasing, and that this is all the fault of the evil sugar industry. It is a simple explanation for an exceeding complex issue, with someone (evil) to blame.

I will leave the last word to Hans Gosling,

“If you really want to change the world, you have to understand how it actually works and forget about punching anyone in the face.”

Sugar photos from pixabay under creative commons

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Things are better than you think

In his book “Factfulness: Ten Reasons We’re Wrong About the World – and Why Things Are Better Than You Think”, Hans Rosling argues that although the world is far from perfect, real progress is being made. Things are bad, but they are getting better.

He writes,

“None of us has enough mental capacity to consume all the information out there. The question is, what part are we processing and how did it get selected? And what part are we ignoring?”

We all know that keeping mankind fed is one of the main causes of environmental degradation, and it is commonly accepted that the situation will only get worse as the world’s population increases.

However, although the first part of that statement is true (things are bad), genuine progress is being made in making it less so (things are getting better). That change is occurring within the supply chain, led by companies that are making a genuine impact in how your food is produced, and how it arrives on your plate.

So in case you screened out some of the good news, here are a couple of positive articles that have been published in the past week.

The first, published by Food Navigator, is entitled, “Why Mars thinks the commodities era is over”. It is an interview with Barry Parkin, the chief procurement and sustainability officer at Mars. The very fact that the head of procurement for Mars is also head of sustainability is good news in itself – and should give a clue as to where our business is heading (but more on that later).

Mars is at the forefront of change in terms of sustainable procurement and has mapped the origin of 23 different raw materials used in their products. The company buys either directly or indirectly from around one million farmers, half of which are smallholders. Parkin tells Food Navigator,

“We are in a transparency race. As a company we had better find out where our materials are coming from, and under what social and environmental conditions they are being produced. We need to get working on fixing it before somebody else tells us what is going on. I want to be on the front foot in this race. I want to win this race.”

Palm oil is one of the hottest issues in food production at the moment with a wide supply base. Mars buys only 0.2% of the world’s palm oil supply but is connected to “half” the palm oil mills in the world, more than 1,500 mills. The company has realized that they cannot “be on top of all the conditions in all those mills, each of which is probably connected to 20 plantations” and realizes that it needs to simplify its supply chain if it wants to really know what is going on.

Wilmar International Limited, the world’s biggest processor and merchandiser of palm oil, cannot simplify its supply chain, but it is in a fairly unique position (because of its market share) to influence the way palm is grown and harvested. The company aims to “to meet demand for certified sustainable palm oil by ensuring all suppliers become sustainable”. To further this goal the company has developed an online reporting tool to assess its suppliers in Malaysia, and plans to extend it to Indonesia and Latin America.

The company’s focus on sustainability is paying off not only in terms of brand protection, it is also lowering their cost of borrowing. Last week Singapore’s OCBC Bank announced that the interest rate on their existing US$200 million (S$267 million) revolving credit facility to Wilmar International will now be pegged to Wilmar’s sustainability performance.

But how will this affect the traditional agricultural trading houses? Better for some people may be worse for others. Barry Parkin warns

“You can no longer buy at arm’s length from unknown suppliers. You can no longer buy on price.”

 He adds,

“This is the end of the commodities era. Commodities were all about buying materials of unknown origin, on short-term contracts, with price being the only differentiator. What we now know is there are big differences in terms of the social and environmental impacts of what you source. It is no longer acceptable not to know where your materials are from. There are going to be very different sourcing models in the future.”

Bloomberg last week published an excellent “long read” on Cargill, and how the company is adapting to both technology and changing consumer demands. According to Bloomberg, Cargill Chief Executive Officer David MacLennan is transforming Cargill into “less of a trading operation and more of an integrated food company betting on growing global demand for proteins.”

Bloomberg continues,

“MacLennan, who became CEO in 2013, says he decided three years ago that the company could no longer rely on the occasional crop failure, export ban, or supply shortage to save the day. “I thought, Boy, if we wait for something to change without disrupting ourselves, we’ll be in trouble,” he says. “What’s that old adage? You put a frog in a pot of water and slowly turn up the heat, and the frog doesn’t notice it’s been boiled. I didn’t want to be the frog in the boiling water.”

No one wants to be the frog in boiling water, but the real question is “How do you get out of the pot once you are in it?” There is no clear answer to that question, but as Mr MacLennan realized, the most important first step is to realize that you are in hot water in the first place.

The second is to do what Wilmar is doing: map your supply chain and work to make sure that all your suppliers are sustainable. If all food were produced in a sustainable way the “tradeability versus traceability” dichotomy would go away.

So we know where we have to go. Let’s get going!

All photos sourced under creative commons from Pixabay

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As old as the hills

A friend recently sent me a link to one of the UK’s earliest-recorded “Commodity Conversations” – a letter sent by a certain Octavius to his brother Candidus in around AD 100. The letter is part of the Vindolanda tablets, a rich source of information about life on the northern frontier of Roman Britain. Written on fragments of thin, postcard sized wooden leaf-tablets with carbon-based ink, the tablets date to the 1st and 2nd centuries AD (roughly contemporary with Hadrian’s Wall – photo above).

The documents record official military matters as well as personal messages to and from members of the garrison of Vindolanda (photo below), their families, and their slaves. Highlights of the tablets include an invitation to a birthday party held in about 100 AD, which is perhaps the oldest surviving document written in Latin by a woman.

In his letter, Octavius uses a variety of financial idioms and a few technical terms. The letter shows entrepreneurial initiative; the sums of money and goods mentioned are significant. The two brothers are involved in the supply of goods, mainly animal hides and grains, to the military. There is no way of knowing whether Octavius is a civilian entrepreneur and merchant, or a military officer responsible for organising supplies for the Vindolanda garrison.

The letter refers to credit arrangements, evidence for the operation of a cash economy. He writes,

“I have several times written to you that I have bought about five thousand modii of ears of grain, on account of which I need cash. Unless you send me some cash, at least five hundred denarii, the result will be that I shall lose what I have laid out as a deposit, about three hundred denarii, and I shall be embarrassed. So, I ask you, send me some cash as soon as possible.”

He instructs his brother to

“See with Tertius about the 8½ denarii which he received from Fatalis. He has not credited them to my account. Know that I have completed the 170 hides and I have 119 modii of threshed bracis. Make sure that you send me cash so that I may have ears of grain on the threshing-floor. Moreover, I have already finished threshing all that I had.

He then writes about what appears to be a customer default,

A messmate of our friend Frontius has been here. He was wanting me to allocate (?) him hides and that being so, was ready to give cash. I told him I would give him the hides by 1 March. He decided that he would come on 13 January. He did not turn up nor did he take any trouble to obtain them since he had hides. If he had given the cash, I would have given him them.

As I wrote in my book, Commodity Conversations, commodity trading is much older than the Roman Empire:

In ancient Mesopotamia, around 1750 BC, the sixth Babylonian king, Hammurabi, created one of the first legal codes: the Code of Hammurabi. The code allowed for goods and assets to be sold for an agreed price for delivery at a future date. The code required contracts to be in writing and witnessed and allowed those contracts to be sold or assigned to others. This is the first recorded incidence of derivatives, in the form of forward and futures contracts, with trading carried out in the temples.

A few years back, Greg Page, at that time the executive chairman of Cargill, spoke at the FT Commodity Conference in Lausanne. He quoted Libanius, a Greek teacher of rhetoric, from his Orations III, written in the fourth century,

God did not bestow all products on all parts of the earth, but distributed his gifts over the different regions, to the end that men might cultivate a social relationship because one would have need of the help of another. And so he called commerce in to being, that all men might be able to have common enjoyment of the fruits of earth, no matter where produced.

Greg continued with his own view of the commodity business,

“Trading, or exchanging goods, has long underpinned human progress, and the interdependence that comes from trading creates the real capacity to raise living standards. Trading across national boundaries is a necessity, not a luxury, if the world wants to better serve the needs of its citizens. And as we face a global population reaching nine billion by midcentury, an even greater proportion of the world’s food will need to move across oceans to feed the people. National self-sufficiency in food will not suffice. Trading has always been important and will always continue to be so.”

There is not much I can add to that!

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One Belt One Road

I participated last Sunday in the Vogalonga in Venice. The 30km race was restricted to human-powered boats, of which there were about 3,900, with around 8,000 rowers and paddlers. It was quite a spectacle!

As we were rowing through the canal in Murano we stopped at a (random) landing stage to change our crew around. The owner of the landing stage (and house) appeared with a bottle of sparkling wine and invited us into his garden for lunch. We gratefully accepted, spent over an hour with him and his wife, and gave up any hope of winning the race—not that we had any hope of doing so anyway!

As I rediscovered Venice during the rest of the weekend I was reminded how oriental the city is; at times I felt that I could have been in Bukhara in Uzbekistan or Isfahan in Iran. The city’s architecture, and its immense wealth, came from the fact that it was at the end of the Silk Road.

A Chinese TV crew interviewed us as we launched our boats before the race, and I was struck by the number of Asian tourists in the town. One local told us that the city was “flooded” now not by the sea but by a wave of Chinese tourists who were “travelling the new silk road” to Venice.

China is indeed building a new silk road: they call it “One Belt, One Road”. It is really two projects: The Silk Road Economic Belt and the 21st-century Maritime Silk Road.

Costing as much as $8 trillion and affecting 65 countries, it will stretch from the edge of East Asia all the way to East Africa and Central Europe by the time of it’s estimated completion in 2049.

The Chinese government calls the initiative “a bid to enhance regional connectivity and embrace a brighter future,” while one speaker at the recent FT Commodity Conference in Lausanne described it as “the most important thing that is going on in the world that everyone is ignoring”.

The Washington Post recently criticised the initiative, suggesting that it might be a big mistake.  They wrote that the initiative “evokes romantic comparisons to the ancient Silk Road, but there is a more recent chapter of history that urges caution. More than a century and a half ago, the United States was a rising power racing westward, building transcontinental railways that delivered limited benefits and exacted a high cost from society.”

The first time I became aware of the One Belt One Road initiative was when I saw this sign a couple of years back above some road construction work in Central Asia,

This is a better map., originally from The Wall Street Journal, that shows the Maritime Belt stretching to Mombasa in Kenya and and the road/rail line to Rotterdam in Europe.

You can also find an excellent infographic here.

As we left our lunch hosts and headed back across the lagoon to Venice we were caught in an hour-long traffic jam as literally thousands of boats tried to enter the Canal Regio, the narrow but stunningly beautiful waterway that leads to the Grand Canal–and the end of our race in St Mark’s Square. As we inched our way forward through a tangle-mangle of dragon boats, rowing boats, canoes and pedalos, I couldn’t help thinking that if the Chinese had had anything to do with it they would have widened the Canal Regio years ago!

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Truth in nutrition

An article in New Food Economy this week warns that almost 40% of peer-reviewed dietary research is wrong, and that “we stop treating new nutrition studies like they contain the truth”. The online magazine argues that “Food research has some big problems: questionable data, untrustworthy results, and pervasive bias”.

In my book The Sugar Casino, I dedicated a chapter to nutrition and told the story of how two enterprising German journalists carried out a “scientific” study that “proved” that eating chocolate will help you to lose weight. They managed to get the study published in a scientific journal and sent out press releases to all the media. Within a week it was on the front page of all the newspapers. None of those newspapers verified the story or checked on how vigorous and exhaustive the study was; they based their stories entirely on the press release.

I wrote at the time,

 Nutrition is an inexact science. It is not possible to isolate the different elements or to establish the causality of any correlation. One test group may lose weight when they eat bananas, but that does not mean that they lose weight because they eat bananas. They could, because they were taking part in the study, have focused more than usual on their health and taken more exercise. Another point is that in the German study the test group that ate chocolate did lose more weight, but the sample size (4 people) was too small to be significant.”

As the New Food Economy wrote in their article, “it is not surprising if you are confused whether coffee causes cancer, or whether butter’s good for you or bad”.

Or whether sugar is a poison that should be regulated like nicotine, or just a calorie that can be part of a healthy diet. (A drunk at a cocktail party recently told me “sugar is toxic”. Sugar isn’t toxic, but alcohol is.)

Aeschylus, the founder of Greek tragedy, wrote “In war, truth is the first casualty.” Perhaps if he were alive today he would replace “war” with “nutrition”.

Julian Baggini touches on nutritional studies, and in particular on the sugar versus fat debate, in his book, A Short History of Truth: Consolations for a Post-Truth World.

He writes,

Hence in the early twenty-first century we find ourselves in a position where we know some truths are hidden by powerful groups to protect their own interests, we are not usually competent enough judges to know which claims about esoteric truths are correct, and we don’t have much confidence in experts to make those judgments for us.

When I read his book last year I found it flawed as I felt the author confused “truth” and “belief”. However I am now not so sure: what may be true for one individual may not be true for another. God may exist for some people, but not for others. Some people believe that the earth is flat or that NASA faked the moon landings.

And on a more mundane level, I may find that when I eat chocolate I lose weight—an individual truth—even though I screen out the fact that I at the same time I start to walk to and from work rather than take the bus. And I may not be able to be convinced otherwise. As Mr Baggini writes,

Reason works best in a blend, which includes not just logic but experience, evidence, judgment, subtlety of thought, and sensibility to ambiguity.

He adds,

“Despite the fact that intelligent people evidently disagree, we are inclined to think that what we believe really is rational and that those who disagree are being blinded by prejudices, ignorance or plain stupidity.”

Perhaps, rather sadly, he is right when he writes,

The relativist argues that there are no bare facts only interpretations of facts, mediated through culture. Nothing is true, period; it is only true for certain people, in certain contexts, or in certain senses. Truth has become personalized, with the individual sovereign over their own interpretation of reality.

So what should we do; who should we believe? In The Sugar Casino I wrote,

There is an old joke about a man who went to see his doctor and asked him what he should do to live to one hundred years old. The doctor replied that he should give up sex, sugar and alcohol and only eat fibrous vegetables mixed with unsweetened porridge.

“If I do that,” asked the man, “will I live to be one hundred?”

“No”, replied the doctor, “but it will seem like it”.

Oscar Wilde once famously said, “Everything in moderation, including moderation.” My grandmother used to say, “A little bit of what you fancy does you good” – and that is my first rule of healthy eating. So eat healthily, enjoy your food and don’t beat yourself up over that occasional slice of cheesecake.

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Merchants of Grain

I am enjoying (re) reading Merchants of Grain, written by Dan Morgan and published in 1979. Many of the comments and observations in the book are still relevant today. Perhaps the most important one is this:

“..the (trading) companies managed to stay in the shadows most of the time. Perhaps it was the ancient nightmare of the middleman-merchant that made them so aloof and secretive—the old fear that in moments of scarcity or famine, the people would blame them for all misfortunes, march upon their granaries, drag them into the town square and confiscate their stocks.”

Government intervention has always been a threat. Socrates once wrote, “No man qualifies as a statesman who is entirely ignorant of the problems of wheat”, while Lenin is credited with saying “Grain is the currencies of currencies”.

Describing the beginning of the US wheat trade in the 1850s, Dan Morgan writes:

“…margins of profit had to be extracted “upstream”—along the railway lines and at the storage terminals in the interior. In the struggle among farmers, merchants, millers, and exporters for their share of the wheat price that was determined in world markets, the advantage always went to those who controlled the storage and transportation of grain.”

But even, or perhaps especially, back then, technology was changing the way food was produced and distributed. Dan Morgan writes, “In 1837, it took 148 man-hours to plant, cultivate, and harvest an acre of wheat; in 1890 it was down to only 37 hours”. As for distribution, “In 1890, the four-masted Shenandoah, driven by a spread of two acres of canvas, left san Francisco with 5200 tons of wheat, the largest grain cargo on record up to that time.” One hundred years later it is now commonplace to ship cargoes of ten times that amount.

Profit margins have also changed in the past one hundred years. Dan Morgan writes, “Between 1883 and 1889, two large terminals in Minneapolis (Empire Grain and Minnesota and Northern Grain) averaged annual returns on capital investment of 40 percent and 30 percent respectively.” And in the 1920s a Federal Trade Commission study showed that US wheat exporters were making returns of more than 20 per cent on their funds deployed.

However, the good times were not to last forever. In the late 1940s a grain surplus “made for dull markets and extremely thin margins, and the zip went out of the business. It was a time when traders had to fight for a quarter of a cent a bushel, and this situation indelibly stamped and indeed altered the essential character of the companies…The grain trade was becoming not much more than a service business, which eked out a living on costs plus commissions”.

And as a reminder to those who forget the cyclical nature of our business, margins picked up with Russian imports in the 1960s and hit a zenith in the “Great Grain Robbery” of 1972 when millions of tons of grains were exported to Russia, restoring the fortunes of some traders and making the fortunes of others.

Dan Morgan describes the events of 1972 as “one of those economic events that, like the OPEC oil embargo the following year or the repeal of the Corn Laws more than a century earlier, can be truly to be said to have changed the world”. (He couldn’t get everything right!)

But most of his observations are still valid today. On the subject of farm surpluses, Dan Morgan writes, “Farm surpluses tended to occur in rich, industrial nations where had powerful, well-organised lobbies, rather than in developing countries where farmers were usually weak and underrepresented.”

And on the strength of character of the Russians. “If anything characterized the Soviet Union since the Revolution, it was its economic isolation and its determination to survive on its own. It was a Yugoslav Communist politician…who had told American officials in Washington in the late 1940s that his countrymen would rather eat grass than accept help from the West with strings attached.” (President Putin said the same thing last year.)

In 1912 Leopold Louis-Dreyfus wrote, “Our business fills a great human and economic need”. It did then, and it does now.

But I would like to leave the final word to Dan Morgan who sums it all up with, “Study grain long enough and the world shrinks”.