Category: ECRUU weekly

The UN FAO world food price index fell for the fifth month in a row in August, averaging 138.0 points versus a revised 140.7 in July. The index has fallen from 159.7 points in March but is still 7.9 per cent higher than a year earlier.

As a hopeful sign, fertilizer prices are easing (a little). Even so, Forbes argues that farmers still need to up their N-game and use fertilizers more efficiently.

Freight rates are also falling. Container rates have fallen 40-46 per cent from last year, while Capesize time charter rates have dropped below $1000/day on the transatlantic route,  beating a March 2016 record low of $1,015 per day.

By the end of August, 62 ships had left Ukrainian ports, transporting about 1.5 mln mt of grains and oilseeds. However, the UN warns that Ukraine must ship millions of tonnes of grain from its previous harvest to make room in their silos for the new crop.

To facilitate shipments, Ukraine will allow merchant sailors to leave Ukraine if they receive approval from their local military administrative body. The government bans men aged 18-60 from leaving the country.

A new 320-nautical-mile route for shipments from Ukraine’s ports of Odesa, Chornomorsk and Pivdennyi/Yuzhny may also facilitate shipments.

The UN has scaled down its talk of a food crisis and says the problem is affordability, not availability. Business Insider disagrees. It predicts that next year’s food crisis will be worse than this year’s due to a drop in production, particularly in Ukraine. It quotes a McKinsey report that estimates Ukraine’s grain production will drop by 35-45 per cent next harvest.

As of 25^th August, Ukrainian farmers had harvested 25.3 mln mt of new crop grain, including 18.8 mln mt of wheat. The Food Ministry expects grain and oilseed production to reach 65-67 mln mt this year.

The FAO has lowered its forecast for global cereal production in 2022/23 to 2.774 billion mt, down 1.4 per cent from last season. The agency pegs world cereal use at 2.792 billion mt, leading to a projected 2.1 per cent fall in global stocks.

The USDA estimates US agricultural exports for the fiscal year 2023 at $193.5 billion, down from a record $196 billion in 2022. The USDA sees lower exports of cotton, beef, and sorghum partially offset by higher exports of soybeans and horticultural products.

For the past 30 years, the average return on US farmland, adjusted for inflation, has been around 5 per cent, making it an attractive investment. The USDA estimates that non-farming landlords own 30 per cent of the country’s farmland.

Canada’s wheat production will increase 55 per cent this year to 34.6 mln mt as yields improve amid better moisture and more moderate temperatures, making 2022 the third best harvest since records began in 1908. Last year’s drought-stricken crop was the worst since 2007. Canadian farmers will harvest more canola, barley, oats, soybeans, and corn in 2022 compared to last year.

Malaysia’s palm oil industry fears a significant drop in production this year due to a shortage of around 120,000 workers. Producers expect to leave six mln mt of fresh fruit bunches unharvested, equal to one mln mt of vegetable oil.

This year, drought and extreme heat have decimated Texan cotton production, costing farmers at least $2 billion.

Politico argues that the 350 companies that account for more than half of the world’s food and agriculture revenue are not doing enough to adapt to climate change.  It writes that many companies are continuing to operate as if it’s business as usual.

In an exception that proves the rule, wine producers may benefit from hotter and drier climates.

China is investing heavily in overseas agriculture.  Goldman Sachs reports that Chinese grain yields are 40 per cent lower than in the US, putting production costs about twice as high as America’s. It takes Chinese farmers between 6 and 26 per cent more grain to produce a kilo of pork or chicken than it does their American counterparts.

The UK’s Agriculture Minister has told the FT that British farmers have nothing to fear from newly signed trade agreements with Australia and New Zealand.

The container-shipping line AP Møller-Maersk has completed its $3.6bn acquisition of LF Logistics, announced in December. Maersk and other container shipping lines are reinvesting record profits to build integrated supply chains.

Synthetic milk, produced using fermentation, may threaten the dairy industry.  Unlike artificial meat – which can struggle to match the complexity and texture of animal meat – synthetic milk is touted as having the same taste, look, and feel as regular dairy milk.

Brazilian Presidential candidate Lula has pledged to step up the conservation of the Amazon rainforest by bolstering the environmental protection agency Ibama and increasing enforcement.

A new report finds that the US government drastically underestimates the social cost of carbon dioxide emissions. The US currently puts that cost at around $51/mt, but new research puts the figure at $185/mt.

Scientists are studying the effect of ozone pollution on crop yields and are working on new crop varieties.

Finally, Sifted questions whether vertical farming will survive a recession. Will people buy vertically grown basil in a cost-of-living crisis?

You can find Bloomberg’s weekly food supply summary here.

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Hot and dry weather in much of Europe will substantially reduce crop production, particularly corn, soybeans, and sunflowers.

The European Drought Observatory reports drought is affecting a staggering portion of Europe, with 47 per cent of EU land under the level of “warning” and 17 per cent at the more severe “alert” status.

French farmers are asking their government for billions of euros in compensation for crop and livestock losses.

Politico believes that European farmers have little choice but to adapt to climate change. On the same theme, the Guardian suggests five crops that could feed a climate-changed world: amaranth, fonio, cowpeas, taro, and kernza. (No, I hadn’t heard of them either.)

The world’s cotton crops are suffering from hot, dry weather, with yields falling in India, Brazil, and China. Drought has killed the cotton crop in Texas, but higher cotton prices could spark a revival of cotton in wetter Louisiana.

With almost all of Texas in drought, ranchers are sending more cattle off to slaughter.

Corn prices moved higher this week on evidence that the drought across the US Midwest would reduce yields.

The drought in China is threatening food production, prompting the government to order local authorities to take all available measures to ensure crops survive the hottest summer on record.

China is particularly concerned about its rice crop. The six worst-affected regions, Sichuan, Chongqing, Hubei, Henan, Jiangxi, and Anhui, account for almost half of China’s rice output.

More than 70 days of extreme temperatures and low rainfall have wreaked havoc along the basin of the Yangtze, which supports a third of the country’s crops. The government is using drones and chemicals to seed rainclouds.

The government warns that the country’s temperatures are rising faster than the global average and says it is a sensitive region in global climate change.

India announced restrictions on wheat flour exports. Wheat flour exports jumped 200 per cent after India banned wheat exports last May. There is talk that the country may import wheat and abolish its 40 per cent import tax.

Ukraine has exported almost ten mln mt of agricultural products since Russia invaded, including nearly two mln mt since the beginning of August.

Citing fake shipping documents, Turkey said it will re-impose phytosanitary certification requirements for imports from Ukraine.

Ukraine has restored a rail link to Moldova after a 23-year hiatus. The connection could carry ten mln mt of freight a year.

The UN is working with the EU and the US to overcome obstacles to Russian food and fertiliser exports.

Yara, one of the world’s largest fertilizer makers, is slashing ammonia production due to soaring gas prices. The company announced a 50 per cent cut to its ammonia-based urea and nitrogen fertilizer production in Europe, citing record high gas prices. There are worries that soaring fertiliser prices will deepen Africa’s food crisis

The closure of the UK’s biggest ammonia fertilizer plant could lead to a shortage of CO2, a by-product used in the beer and soft drinks industry and by abattoirs to stun animals before slaughtering them. The plant closure could result in beer shortages and pig pileups, causing alarm among the bacon and beer-loving British.

It is ironic that the world should suffer a shortage of CO2 when there is too much in the atmosphere. At the same time, global methane emissions are rising. The FT warns, “If you think of fossil fuel emissions as putting the world on a slow boil, methane is a blow torch that is cooking us today.”

On a more optimistic note, Brazil’s presidential frontrunner Luiz Inacio Lula da Silva said his country does not need to cut a single tree to plant more soybeans and sugarcane or raise cattle. He promised to restore law enforcement in the Amazon rainforest to curb deforestation.

The Boston Consulting Group has published a report on alternative proteins, writing that investing in the sector is the most efficient way to reduce global GHG emissions.

The Guardian has called for a windfall tax on food companies. The newspaper erroneously reports that the four ABCD companies – ADM, Bunge, Cargill and LDC– control 70-90 per cent of the global grain trade. (Seven companies – ABCD+ Wilmar, Viterra, and Olam – account for an estimated 45 per cent of the seaborne trade in grains and oilseeds.)

Earlier this year, the UK charity Oxfam also called for a windfall tax on food companies. They made a similar call in 2011 during the last food crisis. (I had forgotten that we had a food crisis in 2011.)

In 2015, the USDA, EPA and FDA set a goal to reduce food loss and waste by 50 per cent by 2030. They still have a long way to go, but new technology, such as an artificial ice cube, could help.

Finally, Bloomberg asks if sail is the future of commercial shipping. The news agency reports that adding a sail to an existing cargo ship can reduce GHG emissions by 20-30 per cent. You can find Bloomberg’s weekly food and agriculture summary here.

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Comment

The UN estimates that retail establishments and the food service industry waste around 931 mln mt of food each year worldwide. If food waste were a country, it would be the third biggest source of greenhouse gas emissions, accounting for nearly 10 per cent of global GHG emissions.

Deforestation in the Amazon reached a new record high in the first seven months of this year, up 7.3 per cent from last year. Environmentalists blame President Jair Bolsonaro for rolling back environmental protections. Luiz Inacio Lula da Silva believes he has a solution in subsidized “green” farm loans to spur planting in the Cerrado. However, the FT argues that Cerrado agriculture has reached critical levels.

Wheat prices fell this week to the lowest levels since Russia’s invasion of Ukraine on bearish news ranging from rising Ukrainian shipments to falling US export sales.

Ukrainian grain exports are moving more quickly and fluidly than I had expected. Five more ships have left Ukrainian ports carrying corn and wheat, three from Chornomorsk and two from Pivdennyi.

Although one of the ships was carrying humanitarian food aid for Africa, some people are disappointed that the first cargos have not all gone to the world’s neediest people. Corn has gone to the UK and Ireland, while Italy has received sunflower seeds and soybeans shipments.

The first vessel to leave Ukraine under the deal, the much-followed Razoni, was initially destined for Lebanon but arrived in Syria with its cargo of corn.

Ukrainian officials are working on releasing a detained vessel carrying wheat for Egypt following investigations over its alleged Russian owner.

Ukraine’s grain exports so far in this season are down 46 per cent last year at 2.65 million tonnes. Ukraine exported 948,000 tonnes in the first half of August, down from 1.88 million tonnes in the first 15 days of August 2021.

Russia is exporting wheat at a “painfully slow” rate and lags 28 per cent behind last year, despite a bigger crop. Analysts blame logistical and financial constraints, with some banks and shipping companies opting to shun the region.

With Ukrainian grain exports now flowing, the media is turning its attention to the weather as a factor driving the world food crisis. Politico reports that the drought in the Horn of Africa is worsening, while, in the US, 60 per cent of West, South and Central Plains are experiencing severe drought or higher this year. Plunging water levels on the Rhine River make transporting cargo harder in Europe. France’s drought threatens local biodiversity in the River Loire, and rocky beaches have emerged in Italy’s Lake Garda.

Some of the tributaries running into the Yangtze River are dry in China. The river winds through some of China’s most productive agricultural regions, and the lack of rain threatens crop development during harvest. Drought is also negatively affecting Syria’s pistachio crop.

Some French farmers are adjusting to climate change by experimenting with sorghum rather than wheat. Meanwhile, regulators worldwide are becoming more comfortable with GM drought-resistant crops. Brazil and the US are expected to approve GM drought-resistant wheat soon.

Even the Guardian is on board, with a report that soybeans genetically modified to absorb light more efficiently produced a 25 per cent greater yield. The newspaper called it “an advance that could significantly boost global food supplies when nearly 10 per cent of the world population was hungry last year.” (It fails to mention that 99 per cent of soybeans are fed to animals, not humans.)

The energy crunch has curtailed a quarter of Europe’s nitrogen fertilizer capacity, and there are fears that the situation will worsen. Faced with higher prices and tighter supplies, farmers may cut global fertilizer usage by as much as 7 per cent next season.

Economic mismanagement has led to a food crisis in Sri Lanka. The ousted government sought to improve its balance of payments crisis by banning the import of fertilizer, which led to the destruction of half the country’s rice crop. Fuel shortages are slowing a recovery.

Political mismanagement in the UK has led farmers to throw away up to £60 million of fruit and vegetables due to a shortage of workers. The UK’s post-Brexit visa scheme allows only three-fifths of the needed workers to enter the country.

The UK’s government-appointed food tsar said it must reduce meat and dairy intake to meet its climate goals. Surprisingly, organic pasture-grown beef and lamb are some of the worst foods for GHG emissions.

The UK has more than 1,000 CAFOs (Concentrated Animal Feeding Operations), some holding as many as a million animals, according to a new book called Sixty Harvests Left – How to Reach a Nature Friendly Future.

Marketwatch has an excellent round-up of the current state of the alt-meat market, writing that the “crusade to replace meat” has slowed. Meanwhile, Uruguay’s cattle industry is booming.

The BBC asks whether eating fish can be a sustainable option. The answer is that it can be, but you must choose the right fish.

The Guardian asks whether vertical farms could be a solution. Some believe so, while others argue that their future will be limited to growing “lettuce for rich people.”

If your local supermarket has run out of lettuce, here’s what to buy instead. Finally, here is why you can no longer find Dijon mustard.

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Comment

In a two-week experiment (reported in May), the BBC tracked the carbon emissions of vegetarian, vegan, and omnivore diets. The results were in line with expectations. Vegan CO2e emissions were 9.9kg per week, vegetarian 16.9kg per week and omnivore 48.9kg per week. Some takeaways:

• Waste less. Emissions stop if you eat food but continue until the food has decomposed if you throw it away.
• Focus on what you eat rather than its geographical origin. Transport makes up a small percentage of GHG emissions in the food chain
• The GHG emissions vary depending on how you cook the food. Batch cook and only use your oven on special occasions.

The Food and Agriculture Organization’s (FAO) index of world food prices declined again in July, averaging 140.9 points versus 154.3 for June. Wheat prices fell 14.5 per cent, while corn fell 10.7 per cent. Even so, the July index is still 13.1 per cent higher than a year ago.

The FT warns that the world’s food crisis* is not over just because prices are falling. The newspaper is cautiously optimistic about Ukrainian supplies but worries that drought and climate change will keep costs high.

The first grain cargo to depart Ukraine since Russia’s invasion, carrying 26,000 mt of corn, has found a new buyer after the original Lebanese buyer refused to take the shipment due to quality concerns. The ship will unload 1,500 tonnes in Turkey and sail to Egypt with the rest.

Two more ships left Ukraine’s Black Sea ports on Friday, including one laden with wheat. Over the past two weeks, fourteen ships have left Ukraine, mainly carrying corn.

The Joint Coordination Centre (JCC), which oversees Ukraine’s export programme, agreed that grain vessels moving through the maritime corridor would be protected by a ten nautical mile circular buffer zone.

In July, Ukraine exported 412,000 mt of wheat, 183,000 mt of barley, 1.1 mln mt of corn, and 362,100 mt of sunflower seed. The country has an estimated three mln mt of grain in its ports, which could take until around mid-September to clear.

Russia has banned imports of agriculture products from 31 of 34 regions of Moldova following a dispute over payments for natural gas.

India’s government has warned it could scrap a 40 per cent duty on wheat imports – and cap the quantity of stocks traders can hold – to dampen prices. Some suggest that India could import wheat later this year, but domestic prices are currently a third lower than world prices.

Global wheat demand may be falling faster than expected as consumers switch to alternative crops, especially for animal feed.

Drought is ravaging crops across large parts of Europe, including Spain, southern France, central and northern Italy, central Germany, northern Romania and eastern Hungary. Corn, sunflower and soya bean yields are forecast to drop by about 8-9 per cent, with cereal yields expected to fall 2 per cent overall, compared with the five-year average. Water levels on the Rhine are at critical lows because of the drought.

Europe’s farmers may face difficulties sourcing fertiliser for their new crop. The cost to produce ammonia and urea is up about 60 per cent from a year ago due to high gas prices. ICIS estimate that as much as 40 per cent of European urea production may have been cut this year. Farmers may increasingly turn to manure instead.

Analysts are concerned about inclement weather’s effect on global rice production.

Seaweed is one crop that should never (never say never) be affected by drought. The BBC has an explainer on the state of the farmed seaweed sector.

Meanwhile, Dutch farmers are in an uproar over plans to curb animal numbers and cut nitrogen emissions. The government wants to reduce livestock numbers by a third in its goal to halve emissions by 2030. Farmers have blockaded roads, airports, and train stations and dumped slurry at the home of the minister in charge of the programme.

Ireland’s government is planning similar measures, committed to a 25 per cent cut in greenhouse gas emissions from agriculture by 2030. The agriculture sector is responsible for about 37 per cent of Ireland’s emissions.

Something similar is brewing in Canada, where the government proposes cutting fertiliser emissions by 30 per cent by 2030. Farmers say they may have to reduce grain output significantly if the measures are passed.

In company news, Cargill reported that its fiscal year 2022 revenue jumped 23 per cent from a year earlier to a record $165 billion.

UAE state investor Mubadala Investment Co and energy company Raizen are in the final round to acquire Brazilian ethanol joint venture BP Bunge Bioenergia. The company owns 11 producing units with 33 mln mt of sugar cane crushing capacity and could be worth $1.8 billion.

Plant-based meat company Beyond Meat posted a second-quarter net loss of $97.1 million and lowered its revenue outlook for the year. The CEO said consumers are reluctant to pay a premium for environmentally friendly products.

*  I am not sure there is a global food crisis – at least not yet. The supply chain has multiple buffers if crops fail due to climate change or government GHG caps. Today only 55 per cent of the world’s crop calories feed people directly; the rest are fed to livestock (about 36 per cent) or turned into biofuels and industrial products (roughly 9 per cent).

Governments are beginning to try and reduce livestock production (see above), but the world is moving in the other direction on biofuels. The USA is looking to increase government support for the biofuels sector, while  Indonesia is considering expanding the biofuel mix in domestic diesel from 30 to 40 per cent.

The other buffer is food waste: a third of the world’s food is wasted. Spain is trying to do something about it.

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Russia, Ukraine, Turkey, and the United Nations may sign a deal next week to resume Ukraine’s grain exports. (It is not a done deal.) As part of a deal, the US will reassure banks, shipping and insurance companies that Russian exports of food and fertiliser will not breach Washington’s sanctions.

Ukrainian grain shipments have started to pick up through the Danube to Romania. Sixteen vessels are waiting to load, while more than 130 are awaiting their turn in Romania’s Sulina canal.

Russia looks set to bring in a big harvest with yields 0.1-0.2 mt/ha higher than last year, but Ukraine’s farmers are facing their most challenging harvest since independence. With the Russian incendiary bombing of Ukraine’s wheat fields, the country’s harvest has become a battlefield.

If there is one good thing to come out of Russia’s invasion of Ukraine, it is that consumers in the western world no longer take food for granted. Russia’s blockade of Ukrainian ports has launched a global awareness of where food comes from and how it ends up on your plate.

Much press coverage is critical of the systems that keep (most of) the planet fed. For example, an opinion writer on CNN writes, “The war in Ukraine is showing us how badly the food system provides for people and the planet.”

In an interesting report, the environmental NGO Replanet argues that governments should lift bans on GM crops, ditch biofuels and persuade their citizens to eat less meat. More interestingly, it wants governments to stop promoting organic farming. The NGO argues that the EU mandate to triple the area under organic production will reduce the bloc’s grain harvests by 20 mln mt.

I find the suggestion on organic farming particularly interesting. Time writes that the Sri Lankan government’s ill-thought-through move to organic agriculture precipitated the country’s economic collapse after a more than 30 per cent drop in rice yields. (Other newspapers are finally beginning to mention it.)

The ‘food versus fuel’ issue is an emotional one. This blogger may have a point when he questions the rationality of using biofuels to fuel planes once you calculate the additional cropland required. But could farmers survive without biofuels?

They can’t in Indonesia. The government is increasing the palm oil content in its domestic diesel from 30 to 35 per cent and testing a 40 per cent mix. It is another example of government intervention going wrong: the country is struggling with excess palm oil supplies following an earlier export ban.

And on GM crops, China could soon finally allow GM corn imports, allowing Brazil to export to China before the year-end.

So, what is the future of agriculture? Carbon credits may provide farmers with an alternative income to biofuels, but there is still the issue of fertiliser use and its contribution to GHG emissions. Vertical farming plays a role in growing some crops (let them eat lettuce).

Until then, the weather will continue to be the second most significant price driver for commodity crops (after price, in a feedback loop. Government intervention comes third.)  To emphasise the point, the worst drought in 70 years has put a third of Italy’s agricultural output at risk. (You can read the FT’s take on the issue here.) Drought has also led to a global shortage of mustard and hummus.

However, favourable weather conditions and high-quality seeds have led to a one per cent increase in China’s wheat output this year. (The BBC has a piece on the role of satellites in predicting future harvests.)

Finally, Bloomberg argues, “Commodities can make for great trades, but they are often lousy investments.” (Excellent advice!) The agency has again published a summary of its leading food and agriculture stories.

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The prices of palm oil, wheat and corn have fallen back to levels seen before Russia invaded Ukraine, easing fears of a global food crisis and proving, once again, that high prices are the best cure for high prices.

But how much damage has already been done? In a recent report, the UN says the number of people going hungry worldwide rose to 828 million last year, an increase of about 46 million from the previous year. The Guardian quotes the director of the UN World Food Programme as warning that the food crisis will result in “global destabilisation, starvation, and mass migration on an unprecedented scale.” He adds that 50 million people in 45 countries are just one step from famine.

Africa’s indigenous crops could be a long-term solution, but in the short term, Yemen is running low on wheat and is pinning its hopes on imports from India.

Brazilian fertilizer imports jumped 18.6 per cent in June to reach 4.15 mln mt, suggesting that the country’s farmers will have adequate supplies for summer crops.

Turkey’s president is close to brokering a deal between Russia and Ukraine to reopen Black Sea shipping lanes to grain exports from Ukraine (as opposed to Ukrainian grain exports from Russia).

Ukraine is trying to convince Turkey to arrest vessels that it believes carry stolen grain. There were reports early in the week that Turkish authorities had detained one ship, but they have since allowed it to leave port. Ukraine summoned the Turkish ambassador to complain.

The FT writes that annual food inflation in Turkey is 80 per cent. The newspaper warns, “There is no government that an empty cooking pot cannot bring down.”

Ukraine’s government has unveiled a $5 billion plan to improve road, rail and border checkpoints for the country’s agricultural exports. The country has appealed for private financing for the scheme. Meanwhile, Romania has reopened a Soviet-era rail line, and the Polish port of Gdansk is upping its throughput of Ukrainian grain.

Japan has donated $17 million to the UN FAO to help Ukraine store crops in plastic sleeves and modular storage containers. Ukraine still has 18 mln mt of last year’s harvest in storage, and the country is expecting to harvest another 60 mln mt in the current season. Around 30 per cent of its granaries are full as the harvest picks up pace.

Meanwhile, Russia is trying to convince Africa that the war is not responsible for the continent’s food shortages.

UK farmers may have no choice but to leave crops unpicked this harvest due to a shortage of foreign workers. The situation could lead to ‘catastrophic food waste’. UK food exports to the EU have fallen significantly since Brexit.

The WWF has called for a transformation of the UK’s food system, arguing that farmers use 40 per cent of the country’s arable land to grow wheat and barley to feed farm animals instead of people.

Barry Callebaut has suspended production at its manufacturing site at Wieze in Belgium after detecting salmonella. Ferrero recently faced a similar problem at Arlon in Belgium.

On the environmental front, Dutch police have fired on farmers protesting nitrogen emission cuts that could require farmers to use less fertilizer and reduce their livestock numbers.

Cargill is equipping some of their vessels with sails to see if they can cut GHG emissions. Researchers have found that feeding cows asparagopsis, a seaweed native to Australia, cuts cows’ methane emissions by 90-95 per cent. The FT asks what carbon labelling on food packaging might mean for the sector.

Finally, wheat lovers may be interested in the recent book “Oceans of Grain”, which examines the role of wheat in the rise and fall of empires.

Click here for Bloomberg’s excellent weekly roundup of their food and agriculture stories.

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At this week’s G7 meeting, the world’s wealthiest nations committed $5 billion to fight global hunger. Activists said that the sum falls short of what is needed, with millions of people on the brink of starvation.

Germany and the UK pushed the G7 meeting for a temporary waiver on biofuel mandates, but the proposal didn’t make it to the final communique.

The UN warns that the world faces an unprecedented hunger crisis, with a risk of multiple famines this year. There are worries that global crop problems could result in years of high food prices.

Talks continued this week to allow Ukraine to restart grain exports, but no one is optimistic about their outcome. Russia has accused the West of lying about the reasons for food shortages but at the same time bombed grain terminals in the Ukrainian port of Mykolaiv.

Egypt has bought 180,000 mt of wheat from India and is looking to add potato flour to subsidised bread. India is turning to rice bran for vegetable oil and animal feed.

Parts of Italy are suffering their worst drought for 70 years, with saltwater incursion adding to farmers’ problems. Heatwaves and fires threaten Tunisia’s grain harvest. Dry weather is impacting crops in Argentina.

The BBC reports that UK farmers are cutting production due to high fuel and fertiliser input costs.  High fertiliser prices are an acute problem in Africa, where up to 20 million people in the Horn of Africa could go hungry. Farm input shortages are also negatively impacting production in the US.

Malaysian authorities are encouraging palm oil producers to keep supplying factories despite a 22 per cent drop in palm prices over the past month. Times are also challenging for Indonesian palm oil farmers.

The US FDA has approved Argentine biotechnology firm Bioceres’ GM wheat. The USDA still needs to approve the drought-resistant HB4 wheat before it can be sold in the US.

The Guardian writes that farmers “are beholden to a handful of big corporations who set commodity prices” and “have little leverage to implement more sustainable practices.”

In a separate article, the newspaper asks why we feed crops to our cars when people are starving. It cites a report from the NGO Green Alliance.

The newspaper also worries that climate change is responsible for a shortage of (randomly) mustard, chilli peppers, coffee, and wine.

On the good news front, the Guardian cites a recent study that shows farmers can achieve high yields with less fertiliser. The newspaper wonders whether ‘peecycling’ could be a solution to the world fertiliser shortage. (Each of us produces enough pee a year to fertilise 145kg of wheat.)

Research by the University of Cambridge finds that intensive farming may reduce the risks of pandemics.

Nestlé and Unilever have promised to remove deforestation from their supply chains.

Finally, the FT has an excellent review of recent books looking to reinvent agriculture. They are all written by non-farmers (except for one writer who took up farming four years ago). Perhaps farmers don’t have time to write books.

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The UN FAO food price index fell in May for a second consecutive month after hitting a record high in March, although the cost of cereals and meat rose. The index averaged 157.4 points last month versus 158.3 in April. In their biannual Food Outlook, the FAO warns that the global food import bill will reach $1.81 trillion this year, up $51 billion from last year’s all-time high.

After jumping nearly two per cent last week, the Bloomberg Commodity Spot Index, which tracks prices for 23 raw materials, is up 36 per cent this year. The latest move was primarily driven by a jump in natural gas and wheat.

The FT has an excellent article on the developing food versus fuel debate (battle). The farming lobby is struggling to counter renewed attacks from the carbon fuel lobby.

With Ukrainian grain silos about half full in the run-up to this year’s harvest, the Kremlin reiterated its stance that it will only allow the resumption of Ukrainian grain exports once the West lifts all sanctions. (Turkey has backed Russia’s call for ending sanctions.)

The Kremlin that Ukraine must de-mine waters off the Black Sea coast, a task that could take six months.

Traders have little confidence that Russia is sincere in its efforts to allow Ukrainian exports after the Russians bombed two warehouses containing sunflower meal at the Nikatera export terminal in Mykolaiv.

Even so, Russian authorities say they are ready to export grains from Ukrainian ports currently occupied by Russian forces – including Mariupol and Berdyansk.

Ukrainian officials accuse Russia of stealing about 600,000 tonnes of its grain. A US official says there is evidence that Russia is exporting Ukrainian grain. A journalist confronted Russia’s Foreign Minister on the issue.

The Russian ambassador stormed out of a meeting of the UN Security Council after an EU official accused Moscow of deliberately creating a global food crisis by blocking exports from Ukraine.

The Guardian asks how Ukraine can export 20 mln mt of grain if sea routes remain blocked. The newspaper fails to offer an effective solution. Bloomberg wonders whether the rusty rail tracks along the Danube might provide a solution.

India has exported 469,202 mt of wheat since banning most exports last month. At least 1.7 mln mt of wheat is lying at ports and could be damaged by monsoon rains. Half a dozen countries, primarily Bangladesh and Egypt, have asked India to supply them with more than 1.5 mln mt of wheat.

The first Indian wheat cargo sold to Egypt in late April has reached Alexandria and passed inspection. The Egyptian government says it has enough wheat in state reserves to last until the end of this year but is looking to increase domestic wheat production.

US crop production may disappoint after a dry winter and wet spring in some key areas. (There are fears that this year’s Atlantic hurricane season could complicate grain exports.) France’s wheat crop still faces a moisture deficit, while the prospect of a normal monsoon in India may encourage farmers to increase acreage. China, meanwhile, is working flat out to bring in their harvest.

The FAO warns that spiralling input costs could deter farmers from expanding production. Farm input prices have increased more than food prices in the past year, suggesting lower actual returns.

Russian restrictions on fertiliser exports could significantly reduce new crop production. Farmers are looking for alternatives. Extracting phosphorous from human sewage could become economic if fertiliser prices stay high.

Undeterred, Nutrien Ltd, the world’s largest fertilizer producer, said it will increase its Canadian potash production by 20 per cent by 2025 to an annual 18 mln mt. (However, a glut of fertilizers at Brazilian ports may signal fertiliser prices are peaking.)

There are warnings of famine in Sudan and throughout the Horn of Africa, following the area’s worst dry spell in forty years. The EU is worried that food shortages could provoke a surge in immigration and is considering donating about 500 million euros to Africa for food.

Food will be on the agenda at the WTO meeting in Geneva this week (12^th – 15^th June), although India is expected to block a deal to help the World Food Program buy food for humanitarian aid.

An opinion piece in Aljazeera calls for the WTO to exclude agriculture from free trade agreements to allow countries to become self-sufficient.

Indonesia will reduce its maximum crude palm oil export and levy rate from $575 to $488 per mt to encourage shipments. Since restarting exports, the country has issued around 302,000 mt of export permits. India’s palm oil imports in May were their highest in seven months despite the Indonesian export ban.

Palm producers in Malaysia are dealing with a shortage of about 120,000 workers following Covid-related immigration restrictions.

Avian flu has affected nearly 38 million birds in the US, hurting egg-laying hens and turkeys the most.

A class-action lawsuit has been filed against Beyond Meat, alleging that the company makes false ingredient claims over the amount of protein in their products.

Investors managing $14 trillion in assets have written to the UN asking for a global plan to reduce agriculture’s GHG emissions. They note that food production accounts for a third of global GHG emissions and is the main threat to 86 per cent of the world’s species at risk of extinction.

New Zealand has published plans to have farmers pay for emissions from livestock. The country has 5 million people, 10 million cattle and 26 million sheep.

In Australia, the prices for lettuces have spiked after heavy rains along the west coast wiped out much of the crop. KFC said it would put cabbage in its burgers instead.

Finally, it was only a matter of time before people started blaming traders and hoarders for the rise in food prices.

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The food crisis was a major topic of discussion in Davos last week. Some participants argued that food supply chains have collapsed, with around 30 countries currently restricting food exports. (Thailand is one country that will benefit from other countries’ export restrictions.)

Malaysia this week joined the list with a ban on chicken exports, and India announced that it would limit sugar exports in the current 2021/22 marketing year to 10 mln mt. (Indian mills have signed contracts to export 9.1 mln mt of sugar and already exported 8.2 mln mt.) Bloomberg called the ban “an extreme case of precaution.”

India’s food and trade minister said India might relax its export curbs on wheat. He explained the ban ensured a fair distribution of grains to countries in need rather than allowing speculators to manipulate the market.  There have been fears that India might limit rice exports, but domestic supplies are adequate, and the government has decided that export restrictions are unnecessary for the time being. In the meantime, however, India could face a chapati crisis.

There have many media articles about Russia weaponising food.  European politicians have condemned Russia for blocking Ukraine’s access to the sea and accused the country of blackmail.

The EU and Ukraine want to impose a safe sea corridor for food exports. The Russian president said that he would comply if the West removed its sanctions. The UN suggested that the West could lift sanctions on fertilisers if Russia allowed Ukraine to export grain, but Russia wants all sanctions lifted.

The Kremlin argues that Ukraine caused the food crisis by placing mines in coastal areas. Ukraine is worried that removing the mines would allow Russia to launch a sea invasion. The EU called for talks with Moscow on the issue.

Speeding up rail shipments may be a solution in the short term. Lithuania has received its first rail delivery of grain from Ukraine for shipment from Klaipeda port and expects to receive up to one train per day, each with 1,500 tonnes of grain. The trains reach Lithuania via Poland. Ukraine also hopes to move 700/750,000 mt a month from two small ports on the Danube to Romania for onward shipment to North Africa and Asia.

The country is running out of time before the new harvest. The country’s spring crop sowing campaign is 89 per cent complete at 12.64 million hectares. The war makes further sowing progress unlikely.

China may have bought up to 400,000 mt of corn from Brazil for September/October shipment, replacing some of their lost Ukrainian corn imports.

US corn planting is running at the second-slowest pace in more than a quarter-century, and spring wheat planting is the slowest on record as wet and cool weather has plagued the northern plains. Some farmers may soon find it more profitable to file insurance claims and keep their land idle.

The BBC has a long read on palm oil in which they accuse plantation owners of depriving Indonesian tribes of millions of dollars. Aljazeera has a background article on the challenges facing the Malaysian palm oil sector, suffering from a shortage of foreign workers.

India’s palm oil imports could fall to an eleven-year low as the country imports more of the cheaper soy oil.

Indonesia will remove its subsidy on bulk cooking oil and replace it with a domestic price limit on the raw materials used to produce it. (Reuters explains Indonesia’s stop-start export policy here.) However, the country has no plans to reduce palm oil in its biodiesel mix.

The FT calls for a rethinking of global biofuels policies and argues that a 50 per cent reduction in grain used for biofuels in Europe and the US would compensate for all the lost Ukrainian grain exports. The US and many other countries face a dilemma over their biofuel policies as the prices of food, fuel, and feedstocks climb simultaneously.

Spot prices for the nitrogen fertilizer ammonia fell to $1,000 per mt last week, down 30 per cent in the past month. They are still 87 per cent higher than a year ago. Analysts attributed the price fall to demand destruction.

The CEO of Yara, the fertiliser producer, has said that sanctions have removed at least 15 per cent of the global fertiliser supply. Even so, Brazil is importing record quantities for its soybean crop. A Rabobank analyst said that even with higher fertiliser prices, Brazilian margins from soybean sales are at 56 per cent over operational costs for the next season.

Bloomberg offers this engaging investor guide to food protectionism but at the same time warns that the commodity price boom may be topping.

The New Scientist examines the ecological impact of farming in the Ishikari Lowland in northwest Japan, an area inhabited by hunter-gatherer communities until the 19^th century. The journal also reviews the book Regenesis: Feeding the world without devouring the planet, in which the author writes, “Farming is the most destructive human activity ever to have blighted the Earth.”

Finally, rising prices could end a great British tradition: fish and chips. Over the past year, the prices for cod and haddock are up 75 per cent, sunflower oil is up 60 per cent, and flour is up 40 per cent. What will we eat instead?  False bananas and fake meat, anyone?

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The Economist has an alarming cover this week (zoom-in), but the UN secretary-general is on the same wavelength, warning that the Ukraine war, warming temperatures, and pandemic-driven supply problems threaten to “tip tens of millions of people over the edge into food insecurity.” The FT agrees, arguing that food insecurity is a bigger problem than energy, and the Governor of the Bank of England says a surge in food costs could have “apocalyptic” consequences for the poorest people in society and the global economy.

The US Treasury Secretary agrees Russia’s invasion of Ukraine has created a global food crisis,  and the US Secretary of State has accused Russia of using food as a weapon. He demanded that Russia lift its blockade of Ukraine’s Black Sea ports to enable the flow of food and fertiliser around the world.

The deputy chairman of Russia’s security council, a former president of Russia, replied that Russia would not lift the blockade unless the west eased its sanctions on the Kremlin. “Countries importing our wheat and other food products will have a very difficult time without supplies from Russia. And on European and other fields, only juicy weeds will grow without our fertilisers,” he said.

Germany’s Foreign Minister countered, “We must not be naive. Russia has now expanded the war against Ukraine to many states as a war of grain. It is not collateral damage; it is an instrument in a hybrid war intended to weaken cohesion against Russia’s war.”

Ukraine is trying to find ways around Russia’s naval blockade, and the US is looking to end it by supplying Ukraine with advanced anti-ship missiles.

About 300,000 tonnes of Ukrainian wheat that Egypt’s General Authority for Supply Commodities (GASC) bought for delivery in February and March is yet to be shipped, with one cargo stuck in port and four others still to be loaded. Ukraine’s farmers are struggling to find storage for the summer crops and will use more silo bags.

Wet weather is delaying planting in the US Midwest. Farmers in North Dakota have planted 8 per cent of their wheat, while farmers in South Dakota have planted 60 per cent. Last year by this week, South Dakota had 90 per cent of its crop in the ground.

French farmers are becoming increasingly pessimistic over the prospects for their wheat harvest, and their crop is deteriorating fast. India’s Agriculture Ministry has reduced its 2022 wheat production estimate from 111.32 mln mt to 106.41 mln mt.

The President of AgResource told a conference in Geneva that global milling wheat supply in the 2022-23 marketing year (July-June) could fall short of demand by ten mln mt. He suggests that large milling wheat-consuming countries could use feed wheat for milling.

Although India has banned commercial wheat exports, the country has reportedly sold 500,000 mt of wheat to Egypt. The Egyptian government says the Indian ban does not apply to them. Turkey’s Agriculture Ministry reassured citizens that India’s ban would not affect them because the country imports wheat only to produce flour and pasta for export. The Sultanate of Oman has said it will replace Indian purchases with wheat from Australia and Argentina.

India’s government considers allowing traders to ship an estimated 1.8 million tonnes of the grain trapped at the ports by the ban. The government has already permitted grain awaiting customs clearance to be shipped out, but traders are pressuring the government to relax its ban further.

CNN looks at the background to the export ban and the rising risk of food protectionism, while the Guardian looks at how it affects the country’s wheat farmers.

Indonesia has ended its ban on palm oil exports but will reimpose a policy that requires producers to sell a portion of their output to the local market. Reuters has a good explainer on why Indonesia’s export ban has failed to dampen domestic vegoil prices, while Bloomberg looks at what the end of the ban might mean for world prices.

Higher vegetable oil prices threaten to drive one-third of the UK’s fish and chip shops out of business.

Malaysia’s Finance Ministry is still thinking about temporarily cutting the country’s tax on crude palm oil export to 4-6 per cent from the current 8 per cent.

Iraq is buying Thai rice again after halting its imports for many years, increasing Thailand’s domestic rice prices and raising questions over export availability later in the year. And the recent drought has led to a shortage of mustard in France.

South Brazil’s sugar millers have bought back an estimated 200-400,000 mt of sugar to produce ethanol instead.

The US is trying to decide whether it should adjust domestic biofuel policies in the face of the crisis. In Europe, the German government is considering reducing the production of biofuels made from grain or oilseeds.

The USDA released plans to distribute an estimated $6 billion to US farmers in crop disaster payments under the new Emergency Relief Program to offset crop yield and value losses in 2020 and 2021.

The global fertiliser shortage may prove the catalyst that finally allows Brazil to mine for potassium in the Amazon basin. Mexico is also looking to boost their domestic fertiliser production.

Sri Lanka faces a food shortage following the government’s decision in April last year to ban the imports of chemical fertilisers. Although the government has reversed the ban, no substantial imports have yet taken place.

In company news, Cargill announced plans for a new soybean crushing plant in Missouri, and ADM has announced it is partnering with California-based Eat Just, a lab-grown meat start-up.

US consumer food prices rose 9.4 per cent in April compared with a year earlier. Still, wholesale food prices increased 18 per cent from a year earlier, suggesting further consumer price increases are in the pipeline. Egg prices surged 220 per cent, butter jumped 51 per cent, and flour 40 per cent.

A famous hedge fund manager recommends investing in commodities as a hedge against inflation, but this study disagrees. If finds that commodities and inflation are not always the perfect fit.

The Guardian argues that one solution to rising food prices would be for all of us to grow more of our food. Bloomberg takes a more realistic approach to the problem, but the Guardian doubles down, arguing that the world food system is on the verge of collapse, just as the world financial system collapsed in 2008. The writer cites a 2012 Oxfam report that “just four corporations control 90 per cent of the global grain trade.”

Rising food prices add to poverty, hunger, and political instability concerns. They’re also shining a light on the role of agriculture in the climate crisis.  But if you want to reduce your carbon footprint, why not try sailboat coffee?

Finally, if you wonder which foods (and drinks) to buy or grow for your health, this article will give you the lowdown.

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