Category: ECRUU weekly

This past week has been a volatile one for the markets – a rollercoaster ride for commodity traders. First, Business Insider published an overview of the factors driving food price inflation, but it was quickly followed by a collapse in the corn and soybean markets. Bloomberg attributed the selloff to the prospects for better weather and fed tightening and wondered whether it marked the end of inflation worries.

Spring rains may have improved prospects for the approaching winter-wheat harvest in the Northern Hemisphere. However, Brazil is still struggling with their worst drought in a century, affecting crops and hydroelectricity generation. Brazil has announced that it will allow GMO corn imports from the US following the failure of the country’s second safrinha corn crop, responsible for over 70 per cent of the country’s corn output.

In an attempt to dampen prices, China ordered state-owned enterprises to limit their exposure to overseas commodities markets and, in a clear case of ‘shoot the messenger’, arrested key grain analysts. However, Bloomberg argues that it will be tougher than China thinks to dampen prices. Still, markets may do the job without government intervention: wholesale domestic pork prices have fallen by 50 per cent since their highs in January.

Top ag traders who attended last week’s FT Commodities Global Summit are still (moderately) bullish on grains and oilseeds. However, others who attended the event were less convinced, warning that a slowdown in Chinese growth rates will reduce their imports.

High commodity prices have increased food fraud: adulterating food, replacing it with an inferior product, or faking its origin. Traders not only have to watch out for fraud, but they also have to watch out for wild boars. Last week, Algeria rejected 27,000 tonnes of French milling wheat after two dead boars were found in the cargo. No one is quite sure how they got there.

Talking of meat, Reuters has published an interesting explainer on the US meat industry where four companies – Cargill, Tyson Foods, JBS and National Beef Packing – slaughter and process about 70 per cent of total US beef production.

Still on meat, yellow pea is the fastest-growing source of protein for plant-based meat alternatives. The yellow-pea market is expected to be worth $140 billion globally by 2029, up from $14 billion in 2019. Insect-based pet food continued to make the headlines with start-ups and pet food manufacturers trying to formulate meat alternatives from sources such as fly and mealworm larvae.

On the ethanol front, rumours circulated that the White House is looking to keep RFS biofuel blending targets unchanged from last year – or even lower them. There were suggestions that the government would provide oil refiners with more RIN waivers. Some small refineries are reportedly not purchasing credits, waiting instead for a Supreme Court ruling. Reuters estimates that US oil refiners have amassed up to a $1.6 billion shortfall in RIN credits.

And a warning to Brazil’s ethanol producers as the country’s motorists slowly switch to EVs. A recent study found that ethanol demand could start declining as early as 2025, falling about 40 per cent through to 2035 – and a further 20 per cent to 2040. This would leave demand at 40 per cent of current levels.

The famous Ever Green container ship that blocked the Suez Canal for six days in March is still stuck in a legal battle regarding compensation claims by the Suez authorities.

The EU is expected to propose the widening of its emissions trading system next month to include maritime transport. The International Maritime Organization, the UN agency that regulates shipping, concluded six days of meetings last week but failed to make much progress on the (admittedly difficult) issue of how to cut emissions.

ADM, Dreyfus, Cargill and Amaggi have joined forces with the payments company TIP Bank to create a joint logistics platform to handle road freight in Brazil. Bunge launched a similar initiative last year.

Brands are fragile and increasingly so in the era of social media. For example, Coca Cola suffered a $4bn fall in its share price when Cristiano Ronaldo removed two Coca-Cola bottles from his desk during a press conference, replacing the soft drink with water.

British food and drink exports to the EU fell by £2bn in the first three months of 2021, with sales of dairy products plummeting by 90 per cent. Brexit checks, stockpiling, and Covid have been blamed. Meanwhile, the UK meat industry is cutting production due to Brexit-induced labour shortages.

The U.S. Supreme Court threw out a lawsuit that accused Cargill and Nestle of helping to perpetuate slavery at Ivory Coast cocoa farms. The court sidestepped a broader ruling on the permissibility of lawsuits accusing American companies of human rights violations abroad. Unfortunately, child and slave labour continues in the cocoa supply chain, raising a dilemma for both chocolate companies and investors: disengage or engage?

From next month, you will be allowed to buy and sell farmland in Ukraine for the first time since it was banned in 2001. Transactions will be limited to 100 hectares.

Finally, in an opinion piece for the FT, a senior policy advisor for the UK government makes a case for genetically edited crops and livestock. CRISPR fried chicken, anyone?

© Commodity Conversations ® 2021

The news this past week has primarily focused on what effect sky-rocketing agricultural prices will have on price inflation. But, unfortunately, the problem is a serious one: the FAO has warned that the cost of importing food will rise this year by 12 per cent to $1.72 trillion, led by increases in grains, vegetable oils and oilseeds.

Inflation fears were further stoked by another fall in US corn stocks to their lowest levels since 2013. The only bright spot, it seems, is that despite climate change, the world could be heading for a bumper wheat crop.

China’s National Development and Reform Committee (NDRC) said it will take further action to stabilise hog production and pork prices and will impose additional price controls on other essential agricultural commodities. It will also set up additional temporary reserves and adjust an early warning system. Meanwhile, the FT takes a look at how Chinese demand is boosting revenues for US farmers.

Rising beef and mayonnaise (from soy oil) costs are already impacting the price of a burger. But before vegetarians start feeling too smug, the price of tofu is also heading higher. (The good news for vegans, though, is that Nestlé has launched a vegan version of their popular Kit Kat chocolate bar.)

Container freight rates continue to stoke inflation fires due to a shortage of containers in the right places, along with port disruptions in China due to renewed Covid outbreaks. These rising shipping costs are pushing up prices from coffee to toys.

Some warn that stretched global supply chains may keep ocean-freight rates high into 2022. However, capsize rates have recently begun to ease in what may prove to be a warning sign to the freight bulls. In the meantime, vessel owners are making three times what they were making just six months ago.

Landowners are also gaining from higher agricultural prices. As a reminder, Bill and Melinda Gates are the largest farmland owners in the US, with almost 270,000 acres. Observers are curious as to how they will divide it up in their impending divorce.

The food versus fuel war continues to rage with the publication of a study by the University of Illinois that found that vehicles using E30 can have significantly lower GHG emissions than EVs in certain conditions, like in rural Illinois during the winter where most generators rely on fossil fuels.

There has been a lot in the press about the $11 million ransom that JBS, the world’s biggest meat producer, has paid after a cyber-attack shut down their US, Australia, and Canada operations. But, unfortunately, cyber-attacks are not the only thing we have to worry about. Fraud is driving banks out of commodity trade finance.

In what may have a long-term effect on animal farming in the EU, MEPs voted last week in favour of a resolution (not a law) calling for a ban on the use of cages across the EU for farmed animals by 2027. They also called on the EU Commission to ban the force-feeding of ducks and geese to produce foie gras.

New research claims that when you take the entire food system—including crops and livestock, the conversion of land to agriculture, transportation, retail sales, food consumption and food waste—food could be responsible for up to 40 per cent of the world’s GHG emissions. (Most people estimate that figure at around 25 per cent.)

Cargill has announced a project that will use corn to make spandex and biodegradable plastics. Cargill will add the $300 million plant – a joint venture with Germany-based HELM – to their existing corn-processing complex in Eddyville, Iowa. They expect to open in 2024.

The UK faces a shortage of fruit and vegetable pickers this season as tighter post-Brexit immigration rules kick in.  And in sad news, the International Labour Organization and the UN children’s agency report that child labour is increasing worldwide (but not just in farming).  It marks a reversal of a downward trend that had seen child labour numbers shrink between 2000 and 2016.

A private-public coalition of 34 diverse partners is pushing to create Canada’s first agri-food sustainability index in an interesting development. If they succeed, it could be the world’s first sustainability benchmark.

Finally, this week’s long read recommendation is on the future for the oilseed markets.

© Commodity Conversations ® 2021

The UN FAO monthly food price index has reached its highest since 2011, up 6 per cent so far this year and up 40 per cent versus a year ago. The Bloomberg Agriculture Spot Index is up 70 per cent in the past year.

Ahead of its first-ever Food Systems Summit in September 2021, the UN has launched a ‘Transformative Partnership Platform’ on agroecology (regenerative agriculture). The UN has called for a transformation in the global food system to end hunger and reverse the environmental degradation caused by farming.

The worst drought in 20 years is affecting almost three-fourths of the western US. Mountains across the West have seen little precipitation, robbing reservoirs of snowmelt.

Following the cyberattack on meat giant JBS SA, Bloomberg argues that giant food companies have become ‘sitting ducks’ for hacker groups. The news agency blames the recent wave of consolidation in the sector. However, the major trading companies have been aware of the risk for some time. JBS’s plants are only slowly recovering after the attack.

One example of this consolidation is Poet Biorefining. Already the largest ethanol producer in the US with a capacity of two billion gallons per annum across 27 plants, the company has acquired the bioethanol assets of Flint Hills Resources, the US’s fifth-largest biofuels producer. The acquisition includes six bioprocessing facilities located in Iowa and Nebraska and two terminals in Texas and Georgia.

This consolidation may be occurring in a shrinking market for ethanol as drivers witch to electric vehicles. The Star Tribune asks whether US farmers are ready for a world without ethanol, a fuel that currently absorbs 40 per cent of US corn production.

Meat companies may also be wondering how to grow their businesses in what may become a declining market. Cargill’s CEO has warned that in ‘three to four years plant-based (meat) will be perhaps 10 per cent of the meat market.’

The FT writes that the buzz around insects is growing. VC funding to the insect protein sector has been creeping up since 2018, with $210m in equity investments last year. The most significant investments are going to start-ups focused on feeding livestock, fish and pets.

The Guardian is concerned about the falling number of farms in the US, particularly in the dairy sector, where there has been a 55 per cent drop between 2002 and 2019. The dairy herd increased over the same period, explained, in part, by increased demand for cheese and butter. US per capita cheese consumption has risen 25 per cent since the early 2000s, while butter consumption is rising even faster.

The US is forecast to export a record $37.2bn worth of farm goods to China this year, 23 per cent of total US agricultural exports. Cargill’s CEO says that China will continue to import and their feed grain industry is unlikely to become self-sufficient despite government efforts to ramp up domestic production. “They need to depend on trade,” he said.

Goldman Sachs has warned that China’s attempts to dampen rising commodity prices are likely to fail in the long term. However, China is not the only country struggling to control food price inflation. Russia is trying to manage their domestic supplies through export restrictions on grain and price caps on other food commodities. At the same time, Russia is looking to build a new berth and increase silo capacity for grain transshipments in Novorossiysk.

Cocoa hit the news last week with the upcoming US Supreme Court case against Cargill and Nestlé.  Former plantation workers claim the two companies were complicit in human rights violations in cocoa production in Ivory Coast.

Meanwhile, the FT looks at Ghana’s plans to capture a larger share of the value chain by exporting more chocolate and fewer beans. The FT estimates that the world’s cocoa farmers retain only 7 per cent of the value chain.

The FT also looks at how Nestlé can move on from their ‘unhealthy food’ problem. Nestlé is trying to manage the fallout from last week’s leaked internal document that showed that 60 per cent of its product lines fail to meet health standards. The company says that the true figure is less than 30 per cent and that the media took the news out of context.

Cargill has announced that it is building a $200-million palm oil refinery in Indonesia. It hopes to complete construction in late 2022. The company said the new refinery is part of a push to oversee its palm oil supply chain “from plantation to customer”.

Maersk has warned of increased congestion and vessel delays in ports in Southern China. Further positive COVID cases have been confirmed in Shenzhen and Guangzhou, where major ports are located.

The UK is expected to soon remove EU-imposed restrictions on gene editing, such as CRISPR, in plants and animals.

This week’s ‘long read’ concerns over-fishing: how government subsidies encourage it and what to do about it.

Finally, ex-floor traders continue to regret the end of open outcry trading in Chicago. Some suggest that price volatility has increased since the industry moved to electronic trading.

© Commodity Conversations ® 2021

China’s banking regulator has told banks to stop selling to retail customers any investment products linked to commodities futures and to unwind any existing positions.

Chinese customs authorities are restricting corn imports into free trade zones. Importers may have cancelled up to 1 million mt of corn purchases as a result.

The International Grain Council has warned that global grain stocks could reach 595 million mt in 2021-22, the lowest level in seven years. The IGC says the drop is due to rising animal-feed demand and drought in Brazil.

In a sign that environmental concerns may soon affect trade flows, British supermarkets have announced that they will look at alternatives to Brazilian soy if Brazil passes new legislation to weaken environmental protection for the Amazon rainforest.

New Zealand’s Fonterra, the world’s biggest dairy exporter, has forecast that milk prices could hit a record over the next year due to surging demand from China.

Ceres Global Ag Corp has said it will build a $350 million canola-crushing facility near the US-Canadian border in Northgate, Saskatchewan.

A leaked internal company presentation shows that 60 per cent of Nestlé’s traditional packaged consumer food and beverage products do not meet internationally recognized health standards. Although many of their products will never be healthy, the company is on a mission to make other products healthier.

Mondelez has agreed to buy European snack maker Chipita SA for about $2 billion. Chipita has a portfolio of croissant and baked snack brands that will broaden Mondelez’s presence in the snack market.

European officials have rejected changes to food regulation that would have banned the use of dairy terminology and imagery to describe plant-based cheese and milk alternatives.

Despite being four to seven times the price of ordinary eggs, organic and bird-friendly speciality eggs account for about a third of the US egg market and are predicted to hit 70 per cent within five years. Eggs from birds grown on farms using regenerative agriculture are expected to be the next ‘big thing’.

According to a recent survey, about a third of US adults say they are making a conscious effort to consume less meat. Hispanic shoppers, in particular, are trying to curb their meat intake due to its relatively high cost.

New research from Michigan State University has found that while caffeine may help you stay awake after a night of sleep deprivation, it won’t necessarily help you get through the day’s tasks.

On the good news front, Twitter lit up last week with the reemergence of a 2016 mega-analysis that found that coffee reduces the risk for alcohol drinkers of developing liver cirrhosis. And the more coffee you drink, the better. One cup a day resulted in a 22 per cent lower risk of cirrhosis. With two cups, the risk dropped by 43 per cent, while it declined 57 per cent for three cups and 65 per cent with four cups.

Leading confectionery companies, including Mars, Mondelēz, Ferrero, Nestlé and Unilever, have called on the EU to reverse a decision to delay legislation governing cocoa supply chains in West Africa.

Nigeria may lose as much as $700 million in cocoa bean export earnings because of a shortage of jute bags. The Covid situation in India coupled with floods in Bangladesh has curtailed global jute production. Ivory Coast produces its own jute bags, while Ghana and Cameroon appear to have stocked up in advance.

US Farmers are looking at new oilseed crops to feed the anticipated surge in demand from renewable diesel. They may have found a candidate in ‘stinkweed’ that has been genetically modified to remove the stink. Carinata and camelina – known as false flax – are other candidates.

A federal judge in California has once again turned down a request by Bayer to settle potential future cancer claims against Roundup weed killer. The company is reported to be considering removing Roundup from the US residential market.

In shipping news, the cost of moving a 40-foot container from Shanghai to Rotterdam rose to $10,174 last week, up 3.1 per cent from a week earlier and up 485 per cent from a year ago, according to the Drewry World Container Index. Drewry’s composite index of eight major routes rose to $6,257, up 293 per cent from a year ago.

At the end of this month, Turkey will begin digging the 45-kilometre Canal Istanbul to link the Black Sea with the Sea of Marmara. The project will cost $15 billion and ease shipping traffic and the risk of accidents in the Bosporus.

In an opinion piece close to my heart, RealAgriculture writes, ‘it is not surprising that many of the best fed, most food-secure people in the history of the human species are convinced that the food system is broken. Most have never set foot on a farm or, at least, not on the sort of farm that provides the vast majority of food. Consumers have developed a romantic view of food production that chases the lore of a past that never existed in most of our farms’ lifetimes.

Finally, in what I initially thought was fake news (and I still have my doubts), Cargill is backing a plan to reduce methane emissions by making cows wear masks. Are cow nappies next?

© Commodity Conversations ® 2021

In what some commentators suggest might be the beginning of the end of the recent commodity boom, the Chinese government is tightening credit in the domestic market. It has also announced a ‘zero tolerance for monopoly behaviour’ in the spot and futures markets and the ‘hoarding’ of commodities’. The moves are likely to impact the oil and metals markets more than agriculture, but they could make it harder for the country’s smaller agricultural commodity importers.

Even so, China has already bought 8.2 million tonnes of corn for 2021/22, nearly one-third of their expected new-crop corn purchases.

Thousands of people attended the funeral last week of Yuan Longping, the Chinese ‘Father of Rice’.  Yuan, who did for rice what the Nobel prize winner Norman Borlaug did for wheat, developed the world’s first commercially viable hybrid rice varieties in 1973, saving millions of people from starvation.

Indonesia’s plans for food self-sufficiency by increasing rice acreage have raised worries over increased GHG (methane) emissions.

California’s drought was in the news again last week, with almond farmers looking to uproot older trees to save water for younger, higher-yielding trees. Water shortages were also a topic in France where citizens accuse Volvic, the mineral water bottler, of drying up rivers and lowering the water table.

Britain’s heir to the throne has stepped into the debate over renewable agriculture, emphasizing small farmers’ role in rural communities and ensuring a sustainable supply chain. The EU agrees. It has announced plans to reform its current subsidy schemes to halt the decline in the number of small farms. The EU agriculture commissioner said: “The European food sector in the past was based on small farms, and it should be in the future as well.” *

Moving in the opposite direction (as usual), the UK is on the verge of signing a trade deal with Australia that critics claim will push the UK’s small livestock farmers into bankruptcy.

The first shot has been fired in the next ‘food versus fuel’ war with an article entitled ‘Global Food Prices Soaring as Demand for Biofuels Continues to Climb’. We expect to see many similar articles in the months ahead. (However, the award for the most alarming headline of the week goes to Bloomberg with ‘Cannibal Mice Plague Threatens Sydney Homes and Australian Farms’.)

Argentina’s port workers went on strike last week over work conditions and pay, temporarily interrupting grain and oilseed shipments. Water levels in the Parana River continue to drop, reducing the draft and limiting the tonnage loaded on each vessel in Rosario.

Lamu, Kenya’s new Indian Ocean container port, began operations last week. Once finished, the port will have 32 berths.

An Egyptian court has refused an appeal by the owner of the Ever-Given container ship to let it leave the country. The Suez Canal Authority claims more than $900 million in damages, while the vessel’s owners have offered to pay $150 million.

In bad news for fish eaters, a recent study has found that fish are less carbon-friendly than previously thought. The study found that bottom trawling emits about the same amount of carbon dioxide globally as the aviation industry. Salmon farming is environmentally friendlier.

Bloomberg reports that Cargill made almost $4.3 billion in net income during the first nine months of its fiscal year, surpassing its best-ever total annual profit.

A planned €150 million cheese factory in Ireland has hit the headlines as Dutch dairy manufacturers try to bypass limits on the size of their herds by outsourcing production to other countries.

Bowery Farming, an indoor-agriculture company, has raised $300 million in a funding round that sets its value at $2.3 billion. It brings the total raised by the company to $472 million.

US President Biden is taking a careful approach to the livestock industry’s GHG emissions. In an interview with the BBC, John Kerry, the President’s environment tsar, said that the US government would not tell Americans to eat less meat. He said, ‘there’s a lot of research being done now that will change the way meat is produced, cattle are herded and fed’.

Australia’s meat consumption is the lowest it has been in the past 25 years, primarily driven by a reduction in pork consumption.

Chinese wholesale pork prices have plunged more than 40 per cent this year on slow demand, increased imports and panic selling by domestic farmers after fresh outbreaks of African swine fever.

For ADM’s take on the future of plant-based protein, take a look at this Bloomberg interview with the company’s CEO.

It seems that everyone wants to revolutionize agriculture. Greta Thunberg has taken up the cause. The Rockefeller Foundation has launched what they call the ‘Food Systems Game Changers Lab’, inviting ideas, initiatives and innovations for change in the way food systems operate. The Foundation will present the best ideas at the UN Food Systems Summit in September.

Some would argue that agriculture and food distribution systems have been in a state of permanent revolution for the past half-century, if not longer. Artificial Intelligence is another stage in that revolution.

* Jason Clay from the WWF once told me: “We have a lot of well-meaning people who’ve never set foot on a farm but have strong opinions about maintaining small farmers, and by extension, whether they realize it or not, poverty.”

© Commodity Conversations ® 2021

Researchers at Aalto University in Finland have warned that a third of global food production will be at risk by the end of this century if greenhouse gas emissions continue to rise at their current rate.

As part of a recently published roadmap on reaching net-zero carbon emissions by 2050, the International Energy Agency (IEA) has called for a 60 per cent increase in the use of energy from biomass. The IEA says that this will require an additional 410 million ha of land under crops but argues that farmers can achieve this by using currently unproductive marginal land.

Farmers in Brazil’s Centre-South region are concerned that, they may run out of water to irrigate their coffee and orange juice trees if the current drought continues. Analysts are already marking down sugar cane production but expect the lack of rainfall to impact ethanol more than sugar. Drought is also affecting farmers in some areas of California.

After a blocked Suez Canal and a hacked pipeline, a crack in a road bridge near Memphis, Tennessee, has highlighted the fragility of global supply chains.  Authorities closed the Mississippi River for four days, blocking more than 60 vessels and 1,000 barges, before reopening it last Friday.

In Australia, a plague of mice is creating havoc across New South Wales and Queensland, contaminating grain stocks and threatening new crop planting. Farmers are concerned that the mice will eat newly sown seeds before they can germinate.

China is looking to join the CPTPP, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and has already held informal talks with member nations. The CPTPP is the successor to the Trans-Pacific Partnership. The US is also considering (re)joining.

Oatly, a plant-based milk company, plans to raise $1.65 billion in their IPO this week: $1.1 billion in new shares and the rest from current investor share sales. If it succeeds, the IPO will value the company at $10 billion, five times more than at the time of its most recent round of fundraising last year.

Cofeed, a Chinese agricultural data provider, has suspended operations without explanation. Traders relied on Cofeed for data on China’s soybean and soymeal stocks, crushing volumes, crushing margins and corn pricing.

Vicentin, the cash strapped Argentine soy crusher, is talking with Viterra, Molinos Agro and the Argentine cooperative ACA to sell a majority stake in the company. Vicentin owes more than $1 billion to banks and farmers. Still in Argentina, the government has banned beef exports for one month to dampen an inflation rate approaching 50 per cent.

The US ethanol producer POET is in talks with Flint Hill Resources to purchase the firm’s six ethanol plants with a combined capacity of 800 million gals/year. The purchase would increase POET’s total capacity to 3 billion gals/year.

Ivory Coast has asked the EU to be flexible when it introduces new legislation later this year to remove deforestation and child labour from the cocoa supply chain. Ivory Coast has asked the EU to phase in the measures over five years.  The EU buys almost 70 per cent of the Ivory Coast’s cocoa. However, in a good news story, Ivory Coast’s cocoa farmers are finding increased demand in the EU for organic cocoa.

A Seattle-based start-up is developing fake coffee made from sunflower seed husks and watermelon seeds. The company says that the resulting grounds are brewed just like a regular cup of coffee and contain caffeine. (I think I will stick with the real thing.)

Meanwhile, Canadian coffee lovers can now appreciate two unusual (real) coffee varieties: Liberica beans from Malaysia and Racemosa from South Africa.

In a ‘Farm to Face’ situation, Global Bioenergies has launched a range of cosmetics made from sugar beet residue. Meanwhile – in what could be called ‘Root to Race’ – some Formula One teams are pushing for a delay in an increase in the sport’s use of ethanol.

US households are consuming less cow’s milk. Sales dropped by 12.2 per cent from 2013 to 2017, the latest year data is available. The sales of plant-based alternatives such as almond and soy milk increased by 35.7 per cent over the same period.

Meat producers are worried that beef is the new coal. As previously reported, the Boston Consulting Group has forecast that meat alternatives will make up 11-22 per cent of the global protein market by 2035. A recent Kearney study has projected global meat sales to peak in 2025 and decline by 33 per cent by 2040.

Finally, two of Bloomberg’s top commodity journalists have written an opinion piece in the NY Times calling for increased government regulation of physical commodity trading. The article focuses on resource extraction in the oil and mining businesses, but it also contains the somewhat surprising misstatement that seven trading companies supply half the world’s food. As I wrote in my book – Out of the Shadows, The New Merchants of Grain – seven trading companies account for half of the world’s shipborne trade in grains and oilseeds, not half of the world’s food.

© Commodity Conversations ® 2021

The FT reports that the rising demand for commodities is having a dramatic impact on bulk freight rates. The Baltic Dry Index has risen to its highest level in more than a decade, soaring over 700 per cent since April 2020. Capesize rates have nearly doubled in the past month and are almost eight times last year’s average.

Although grain prices are rocketing to the moon, rice is being left behind on earth – good news for the more than 3 billion people that rely on the crop for most of their daily calories. Good harvests in Vietnam, Thailand, and India have helped keep prices relatively low. Also, as Bloomberg points out, rice is grown mainly for human consumption. In contrast, the surge in crop prices has been driven by China’s booming demand for livestock feed.

Road blockades and anti-government protests in Colombia have stopped coffee from reaching the country’s ports and halted exports during their main harvest. Nearly 50 people have died in the protests.

Still in Colombia, the country’s Coffee Growers Federation has identified six new subspecies of coffee leaf rust in the country, plus nine new variants of the fungus. Although approximately 84 per cent of Columbia’s coffee trees are disease-resistant varieties, the FNC is worried that the disease is constantly mutating.

The CME is closing – or not reopening – its last few remaining agricultural trading pits in Chicago. The Exchange had already replaced all futures transactions with electronic trading but kept its options pits open until March 2020, when it closed them due to Covid-19. The trading pits in Chicago date back 173 years; it is the end of an era.

ADM plans to build North Dakota’s first-ever dedicated soybean crushing plant and oil refinery. The plant will cost approximately $350 million and, once completed, can process 150,000 bushels of soybeans per day. ADM expect to complete the work in time for the 2023 harvest.

Cargill is expanding further in the gourmet food sector and has acquired Belgium-based Leman Decoration Group, a cake decoration company. Leman Decoration’s R&D hub is near Cargill’s House of Chocolate complex due to open in early 2022.

Glencore Agriculture in Australia has rebranded as Viterra in line with last year’s global rebrand. Viterra Australia has 800 employees and operates six ports in South Australia and one in western Victoria.

Bunge has announced that they are opening Vector – their Brazilian logistics and trucking platform – to outside companies. Vector is a joint venture between Bunge and Target, a logistics company. Bunge has been using the Vector app to digitize their in-house domestic grain trucking. Meanwhile, Bunge’s shareholders have voted for the company to evaluate and disclose its efforts to eliminate deforestation from its supply chains.

Unilever’s shareholders have voted to reduce greenhouse gas emissions “as much as possible” across the company’s supply chain to reach net-zero by 2039. Unilever plans to achieve this by focusing on reducing emissions rather than purchasing and retiring carbon credits.

Competition heated up in the alternative milk sector last week when Nestlé launched a new plant-based milk product called Wunda (nothing to do with the 1988 film, The Fish Called Wanda). Nestlé will make the drink with yellow peas, and they describe the product as “epic in everything”.

Nestlé is targeting Oatly, the “Wow! No Cow!” oat milk company that recently filed for an IPO in the US that may value the company at $10 billion. In July 2020, Oatly raised $200 million from a group of star investors, including Oprah Winfrey, Natalie Portman and former Starbucks CEO Howard Schultz. At the time, the Wall Street Journal valued the company at $2 billion.

The FT takes an in-depth look at the global battle for plant-based milk. They suggest that protein content may prove key. Nestlé’s Wanda will contain 2.2g per 100ml compared to Oatly at 1g per 100ml. Cow’s milk contains 3g of protein per 100ml.

Reducing GHG emissions is one of the main arguments in favour of plant-based proteins. The FAO says animal agriculture is responsible for 14.5 per cent of global greenhouse gas emissions. Still, a new paper in the Journal of Ecological Society argues that once you include the impact of deforestation, the figure is closer to (a hard to believe) 87 per cent.

Argentina’s Environment Ministry has launched a “Green Mondays” campaign to encourage citizens to substitute meat with plant-based proteins. At 22 per cent, Argentina’s cattle ranching industry is the most significant contributor to the country’s greenhouse gas emissions. Argentinians eat an average of 49kg of beef per year, almost twice the amount that their US neighbours eat each year.

Rolling Stone Magazine has listed eleven foods that our changing climate is already affecting. Wheat tops the list, but coffee, corn and rice also feature. A researcher from the International Food Policy Research Institute says, “It’s a race between innovation and the impacts of climate.”

But if we want to save the planet, The Guardian argues that insects are the future of food – if not for ourselves but for pet and animal feed.

Cargill seems to agree and has extended its strategic partnership with InnovaFeed to expand the use of insects in fish and animal feed, particularly for pigs. Insect fatty acids provide an 80 per cent reduction in carbon footprint compared to vegetable oils.

Talking of insects, the EU Court of Justice last week dismissed an appeal by Bayer against the European Union’s ban on three neonicotinoid insecticides. Despite the ruling, some EU nations have already partially lifted the ban, allowing sugar beet farmers to use neonicotinoids on seeds coatings through 2023.

In little-reported but good environmental news, the US Department of Energy’s Argonne National Laboratory found that, due to better corn and ethanol yields, the carbon intensity of ethanol fell by 23 per cent between 2005 and 2019. Ethanol can now reduce carbon emissions by 44-52 per cent compared to gasoline.

Finally, if you are looking to learn more about regenerative agriculture – what it is and what it isn’t – I recommend this well researched and well written long read from the Counter.

© Commodity Conversations ® 2021

In what may become big news, the EU is reconsidering whether to allow genetically modified organisms (GMOs). A study – requested by the European Council – argued that GMOs could play a role in the EU’s goal to be carbon neutral by 2050. They could also help the bloc’s Farm to Fork Strategy to make food systems ‘fair, healthy and environmentally friendly.

Rising soybean prices are resulting in a wave of farmer defaults in Brazil, where trade houses are finding it difficult to enforce contracts made when prices were lower. Farmers complain that trade houses are demanding delivery even when they struck a verbal agreement on Whatsapp, over the phone or by email.

High grain prices are impacting global trade flows. US chicken producers are buying Brazilian soybeans, and Brazilian chicken producers are buying corn from Argentina. Meanwhile, animal feed producers worldwide are increasing their wheat purchases.

Rising prices and disrupted trade flows may be bad news for the world’s consumers, but they boost revenues for the world’s trade houses. ADM’s quarterly profit to end March jumped 76 per cent on last year; their oilseed crushing unit saw a record quarter. As ethanol prices have risen, ADM has restarted two dry corn ethanol mills. However, the company has said that it still wants to sell them.

Bunge Ltd reported a 91 per cent rise in its third-quarter profit on strong soy processing margins and robust demand. Bunge agribusiness quarterly earnings more than doubled to $467 million and the company has raised its 2020 earnings outlook from $6.25 to $6.75 per share.

Cargill’s Brazilian unit has posted a record net profit of more than 2.1 billion reais ($385 million) and revenue of 68.6 billion reais for last year.

The French cooperative InVivo has agreed to acquire family-owned Soufflet in a deal that will create one of Europe’s biggest agricultural businesses. The takeover could be completed by the end of 2021, subject to regulatory clearance. InVivo’s CEO said he wants the combined company to be able to compete with global crop merchants.

State-owned Saudi Grains Organization (SAGO) – one of the world’s biggest buyers of wheat and barley – is preparing to sell some of its grain silos as part of the country’s privatization programme.  The company has 3.3 million tonnes of grain storage. SAGO sold its flour mills last year for about $1.5 billion.

Still on company news, Olam International has acquired California based spices and seasoning business Olde Thompson for $950 million.

Although container rates peaked in late 2020 – and have been relatively stable in 2021 – they are now heading higher again. Analysts warn that they could rise further as the world’s economic recovery gathers steam.

Meanwhile, Cargill has cut nearly 1.5 million tonnes of gross carbon emissions from its shipping fleet since 2017. Cargill’s gross CO2 emissions fell to 7.102 million tonnes in 2020 from 7.732 million tonnes in 2017. The company charters between 600 to 700 vessels each year.

Low water levels in the Parana and Paraguay rivers are leaving barges grounded and disrupting shipments. Water levels in the port of Rosario are forecast to drop to about 1.17 metres this week versus an average for this time of the year of 3.58 metres.

Drought is also affecting river levels in the north of the continent. More than 15 million salmon raised at hatcheries in California’s Central Valley will hitch a ride to the Pacific Ocean in about 146 trucks. Following two years of drought, water levels in the state’s rivers are too low for the salmon to make the journey alone.

There was further bad news for fish lovers this week when we learned that wild salmon are getting smaller, apparently because they’re returning from the ocean at a younger age, with climate change and overfishing possibly to blame. As a result, Whole Foods has reduced its salmon buying size guidelines.

But, to curb overfishing, the World Trade Organization has said that it is accelerating an effort to end the $22 billion in government subsidies that support fishing industries worldwide. The new WTO Director-General has made the issue her top priority and has called a conference for July to discuss the issue.

But it is not just fish that are in difficulty; America’s bees are also under pressure. American beekeepers have filed a suit against the country’s honey importers, claiming that fake honey from Asia is pushing American beekeepers out of business. Honey is the most adulterated food after milk and olive oil.

Tyson Foods has launched a range of vegan meat products, joining other meat companies in the rapidly growing market for alternative proteins.  Consulting firm Kearney has forecast that meat demand will peak in 2025 and that the alternative protein market will grow to $450 billion by 2040, a quarter of the $1.8 trillion meat market.

However, a survey of 1,000 adults found that 73 per cent of Australian men would prefer to reduce their life expectancy by ten years rather than stop eating meat. The survey also found that 79 per cent of Australian men say they would not eliminate meat from their diets to help reduce their carbon footprint.

Meat is fast becoming a politically partisan issue in the US. Contrary to some media reports, President Biden will not limit meat consumption – or force you to drink ‘plant-based beer’. However, it appears the meat wars are only just beginning.

Finally, there was an excellent article in the FT this week about corruption in the commodity sector. It focuses on the energy and metals sectors, but it is still worth a read.

© Commodity Conversations ®

With wheat prices soaring, Bioceres, an Argentinian company, hopes that the world will change its mind about genetically modified wheat. Consumers have accepted genetically modified soybeans and corn, mainly because they are fed first to animals. Still, they have pushed back on genetically modified wheat, possibly because we consume it directly. Brazil’s government is due to vote next month whether to allow GM wheat; if it does, Bioceres will have its first market.

Rising vegoil prices, along with the US’s planned expansion in renewable diesel, are encouraging traders to expand their processing capacity. Cargill has announced that it will build an additional canola-crushing plant in Canada, adding one million tonnes to its Canadian capacity. Viterra has also announced that it will have a new canola plant up and running by 2024. Cargill is also investing directly in the production of renewable diesel with a new plant in Hastings, Nebraska, a joint venture with the Love group of companies.

We reported last week that skyrocketing corn prices have led to (perhaps overly optimistic) suggestions that China’s livestock farmers could replace imported corn and soy with domestically produced grains and oilseeds. This week, the Chinese government, concerned about a recent uptick in African Swine Fever, has announced new rules that control the movement of live hogs within the country. They could completely reshape the domestic pig-rearing industry.

But it is not just the domestic hog market that China is reshaping; COFCO’s growing importance in China’s imports is reshaping the competitive landscape for global grain traders.

Closer to home, Nestlé published its strongest quarterly results in a decade, primarily driven by solid demand in coffee. While presenting the results, the company’s CEO put a strong emphasis on sustainability, arguing that consumers now insist on it. Putting words into action, Nestlé confirmed that it is joining LEAF – the Lowering Emissions by Accelerating Forest finance Coalition – a public-private project that aims to raise at least $1 billion in initial financing to reduce or reverse deforestation.

Meanwhile, Nestlé has confirmed that it is in discussions to buy US-based nutritional supplement maker The Bountiful Company.

Not everyone is as bullish on coffee demand as Nestlé. Neumann, the world’s biggest coffee trader, expects demand to remain under pressure as Covid lockdowns come and go. There is, however, hope for coffee-lovers. A new wild coffee variety has been discovered that grows in warmer climates and is less vulnerable to climate change. It also, apparently, tastes delicious.

Still looking to the future, New Food Magazine has made some predictions about agricultural supply chains. They will increasingly be driven by data and technology, with a strong dose of transparency thrown in. Neither snack foods nor pet foods will be excluded from these trends.

Trade houses continue to adapt accordingly. This week, ADM opened a new plant-based food innovation laboratory in Singapore while Cargill announced an investment in Bflike, a Dutch start-up in plant-based meat and fish alternatives.  Even Epicurious, the online food magazine, made headlines (and undoubtedly some enemies) when they announced that they would no longer publish beef-based recipes.

© Commodity Conversations ® 2021

This is ECRUU’s last Commodity Conversations media report. 

Thank you to all of you who have supported and read this report over the last 5 years. We have decided to focus all our energy and attention on exciting developments for our core products (sugar & ethanol media monitoring – check it out here). 

Make sure you follow commodityconversations.com to continue receiving insights and updates on sustainable agriculture. 

 

Bad weather conditions around the world are threatening to tighten grain stocks which are already at their lowest in the past five years. Brazil’s corn crop is at risk because of the dry weather, a cold wave destroyed seedlings in Europe and now the US Midwest is expected to suffer from abnormally cold and dry weather over the next few days. Demand has been increasing at the same time and governments are now looking to control food inflation. For one, Brazil announced that the suspension of corn import duties, among other grains, had been extended until the end of the year.

China issued new feed guidelines in response to the rise in grain prices which could have long-term repercussions on global trade flows. The directive recommends that livestock operators reduce the amount of corn and soybeans used and replace them with cheaper alternatives, such as rice, cassava, barley, rapeseed meal, cottonseed meal or peanut meal. Some doubted whether this would actually change consumption patterns as cost will remain the main factor. One analyst also noted that soybeans and corn maintain a significant supply advantage as “the volume of soybeans the US can load in a single day is larger than the yearly global export volume of cottonseed meal”. 

New data revealed that consumers globally cooked and baked more during the pandemic as global grocery sales were up 10% in 2020. The data highlighted some regional differences, such as alcohol sales which grew 20-25% in Western Europe and Latin America but dropped 10% in Asia. In the UK, consumers are also focusing on their health as the sale of berries remains higher than usual. A researcher noted that shoppers were no longer focusing on calorie count but on holistic health and the importance of nutrients.

Nestle saw its strongest quarterly sales growth in a decade in the first quarter thanks to the rise​_ in at-home coffee consumption. Dairy and pet food sales also reported strong growth, while the firm expanded its ecommerce and health science portfolio. In contrast, Danone witnessed a fall in sales in the first quarter. Essential dairy and plant-based foods sales were up but not enough to offset the poor performance of the bottled water and special nutrition segments. 

The EU’s agriculture commissioner expressed his support for a citizens initiative called “End of cage age”  which seeks to ban the use of cages to improve animal welfare. The petition gained 1.4 million signatures and the commissioner said he would now work on drafting legislation. In response, the livestock industry argued that oversimplifying the concept of cages could actually have negative consequences. The idea that “all enclosures are inherently bad for animals” overshadows the complexity of animal welfare and the specificity of certain animals. Instead, animal well-being has more to do with “housing parameters, enrichments, animals’ ability to move freely, the risk of injuries and diseases”, according to the livestock industry. 

Major food firms are also worried that the EU will vote in favour of new restrictions on the marketing of plant-based meat alternatives. Under the proposal, plant-based products will not be allowed to be marketed as dairy alternatives. Nestle would have to rebrand its Almond Latte which is marketed as a “delicious alternative to dairy” and some worry that soy drink makers will even have to change their packaging to avoid comparison to milk cartons. 

Oatly argued that the proposal would place unfair restrictions on plant-based products and hinder the effort to decarbonise food production. Otherwise, the firm officially filed documents for an IPO in the US. The papers revealed that Oatly’s loss widened to USD 60.4 million in 2020. Meanwhile, the sector is due to get more crowded with the launch of Coca-Cola’s Simply Oat drink. And the world’s largest meat supplier, Brazil’s JBS, announced the acquisition of Vivera BV, Europe’s third-largest plant-based food producer. The Dutch firm was acquired for USD 408 million.

After years of debate on the proper ratio of cow to goat milk in halloumi, the EU granted the cheese a protected designation of origins (PDO) status. Perhaps surprisingly, the decision could potentially have geopolitical implications and help with the reunification of Cyprus. The documents also recognised hellim, the Turkish word for the halloumi produced on the Turkish enclave on the island. The local community is now calling for a new production control mechanism that would involve both the Cypriot and Turkish communities. 

This summary was produced by ECRUU