Tag: Sustainability

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Agriculture and Chemicals: Part Two

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

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

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

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

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

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

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

He continues,

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Images from Pixabay under Creative Commons

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Agriculture and Chemicals: Part One

Last week, Monsanto—the agribusiness company that everyone loves to hate—was ordered to pay $US289 million to Mr. Dewayne Johnson, a former school groundskeeper, after a San Francisco jury ruled that the company’s popular Roundup weed killer contributed to the cancer that is killing him.

Glyphosate, the main ingredient in Roundup, was first approved for use in Monsanto’s weed killer in 1974, and has since been the subject of much emotive debate both in and out of the scientific community.

In September 2017, the  U.S. Environmental Protection Agency concluded a decades-long assessment of glyphosate risks and found that the chemical was not likely to be carcinogenic to humans. However, back in 2015, the International Agency for Research on Cancer, which is part of the World Health Organisation, classified it as a “probable human carcinogen”. Since then, California has added glyphosate to its list of chemicals known to cause cancer.

Mr Johnson’s lawsuit was the first to go to trial among hundreds filed in state and federal US courts that claim that Roundup causes non-Hodgkin’s lymphoma. Monsanto has said it will appeal the verdict.

However, the trial was an important test of the evidence against Monsanto, and will serve as a template for litigating thousands of other claims over the herbicide. Shares in Bayer AG (Monsanto’s parent company) fell sharply as investors weighed the potential costs of protracted legal battles. Bayer bought Monsanto for $66 billion in June this year.

Among the varied lawsuits against Monsanto is one from a bee keepers’ cooperative in France that claims that glyphosate is now widely found in honey. The US’s Food and Drug Administration also recently found traces of glyphosate in US honey, even apparently in “organic mountain honey”. The U.S. Organic Consumers Association and Beyond Pesticides filed a lawsuit against Sue Bee Honey of Sioux City, Iowa, because its honey tested positive for traces of glyphosate. The lawsuit said Sue Bee’s labelling, advertising its honey as “Pure” and “Natural,” is false and misleading. Another class action was started last year in Canada against a honey producer

Meanwhile, a federal judge in Brazil has ordered the suspension of products containing glyphosate until the government re-evaluates the chemical’s toxicology. France has already ruled that the herbicide will be phased out completely within five years.

Unsurprisingly, Monsanto has been accused of a corporate cover-up, with many on social media arguing that the company knew all along that their product causes cancer. Some scientists accused the company of “ghost writing” the scientific studies into the herbicide, and of trying “to destroy the United Nations’ cancer agency by any means possible” to save glyphosate.

Some on social media were quick to draw attention to an arguably similar ruling back in March where a Californian judge ruled that coffee companies will have to carry a cancer warning label because coffee contains acrylamide, a carcinogen. The acrylamide in coffee is formed early in the roasting process. All the foods we roast or fry also contain acrylamide, with 5 micrograms in a slice of toast or 7 micrograms in a bag of potato crisps, as examples. A cup of coffee has around 0.9 micrograms to 2.4 micrograms per 150 millilitre cup.

Others drew similarities between the Monsanto ruling and the recent EU’s almost complete ban on the use of neonicotinoid insecticides across the EU. Just as glyphosate is the world’s widest used herbicide, neonicotinoids are the most widely used insecticides. Back in 2013 the European Union opted for a partial ban on the use of the three chemicals in this class: Imidacloprid, clothianidin and thiamethoxam. The restrictions applied to crops including maize, wheat, barley, oats and oil seed rape. The newly agreed Commission regulation goes much further, meaning that almost all outdoor uses of the chemicals would be banned.

The action was driven by a recent report from the European Food Safety Authority (Efsa), which found that neonicotinoids posed a threat to many species of bees, no matter where or how they are used in the outdoor environment.

The decision is likely to particularly affect sugar beet production across the EU. The French sugar beet growers group CGB said, “This decision has a devastating impact on beet growing. With this ban, all French regions are likely to be affected by viral jaundice, with potential yield losses estimated at 12 pct at national level, and up to 50 pct in certain ocean climate zones.” Producers in the UK and Germany expressed similar opinions while others questioned whether neonicotinoids actually cause bee colony collapse disorder

These two latest rulings follow on from one by the European Court of Justice (on 25th July) that organisms obtained by mutagenesis plant breeding technique (gene-editing) are GMOs and should fall under the GMO Directive. The decision shocked the agriculture industry, which described it as a severe blow to innovation in EU agriculture and warned about economic and environmental consequences.

In a piece for Foreign Affairs published in April, Bill Gates outlined the case for using CRISPR and other gene-editing techniques on a global scale to meet growing demand for food and to improve disease prevention, particularly for malaria. “It would be a tragedy to pass up the opportunity,” he wrote.

In agriculture, Gates argues, gene-editing technologies could be used to make animals more productive while editing crops to withstand harsher growing conditions, or to include naturally occurring pesticides and herbicides, would improve crop yields.

These three rulings will make life more challenging for some farmers and may have major secondary implications. I will take up some of the issues in next week’s blog.

Images under Creative Commons from Pixabay

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Food connects us to nature

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

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

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

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

He added, 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

All images from Pixabay under creative commons

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The last straw

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

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

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

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

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

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

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

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

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

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

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

The BBC adds,

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

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

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

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

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

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

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

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

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

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

All images from pixabay under Creative Commons

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Palm oil – a complex problem

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Images from Pixabay under creative commons

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Things are better than you think

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

He writes,

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

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

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

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

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

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

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

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

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

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

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

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

 He adds,

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

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

Bloomberg continues,

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

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

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

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

All photos sourced under creative commons from Pixabay

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Ten Questions for the Agtrade

Agricultural commodity traders are asking themselves key questions about the future of their businesses. Here are ten that we heard recently (with tentative, perhaps controversial, answers).

1/ How can we improve profitability in the supply chain?

At present the only way is to cut costs. This can be done by reducing headcount and by introducing new technologies and processes. Increasing traded volumes and the general scale of operations can also help. However, when everyone fights for increased market share competition gets tougher and margins suffer.

2/ Why is consolidation in the sector happening so slowly?

The main players are looking to increase scale to reduce their costs and diversify their risks. However once you get to a certain size you run into issues with the competition authorities. Consolidation is happening in the middle tiers. COFCO bought both Nidera and Noble Agri, but those two acquisitions show how tough it can be to integrate a business once you have bought it. Most M&A deals destroy rather than create value—and not just in the agtrade.

3/ Where is the value in the agricultural supply chain?

In recent years the value has seeped out of the agricultural supply chain as market power has shifted from producer to trader to consumer. This has resulted in lower food prices at the expense of farm incomes and traders’ margins. If people want to eat, that pendulum will have to swing back, at least partially.

4/ Is a sustainable supply chain a less profitable one?

No. To be sustainable a supply chain has to be profitable. If it isn’t profitable then it isn’t sustainable. Traders will have to be paid for what they do or they will stop doing it.

5/ Does increased traceability mean less tradability?

Maybe. Traders need optionality to be able to respond to price signals (for example changing freight rates) in order to supply their customers at the cheapest price. If one origin can’t be swapped for another then the supply chain becomes less flexible and more costly. However technological progress should soon mean that all commodities are traceable back to where they were produced. Traceability and tradability will then become co-dependent.

 6/ Is efficiency the key to a sustainable supply chain?

Yes, along with improved traceability. Increased efficiency should result in reduced crop loss and and fewer GHG emissions. A more efficient supply chain should also raise farm incomes and help local communities reduce environmental degradation caused by agricultural expansion.

7/ Is there still a role for speculation in agricultural supply?

Speculators absorb price risk. Risk has a cost. By transferring price risk to speculators the other actors in the supply chain (producers, consumers and traders) can lower their costs. This raises farm incomes and lowers food prices. Speculators also ensure that price signals are transmitted quickly, leading to faster supply responses.

8/ How will technology impact the agtrade?

In many ways, but most significantly, blockchain and a wider use of electronic shipping documents should make the whole supply chain more efficient and lower costs.

9/ Does the agricultural commodity trade have a future?

Absolutely. The world’s demand for calories continues to increase and the only way to meet that demand in an efficient and environmentally sustainable way is through trade. Someone will have to move these huge crops around the world—and to be paid to do so. The future for the sector as a whole is bright.

10/ Which companies will win and which will lose?

The winners will be those that embrace change, responding quickly to process innovation and technology. As Charles Darwin wrote, “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change”.

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A conversation with Alex Stewart, co-founder of Abercore

Hello Alex, thank you for taking the time to talk with me today. First, can you tell me how you got into commodities?

After graduating from Durham University I delivered a thirty-foot sailing boat from the UK to New Zealand. There were three of us on board, it took about six months. When I got back to London I felt I had to do something that involved an element of travel. I was less interested in the financial markets, but I liked to understand how things get from A to B—physical things. That is what attracted me to the business.

Please tell me a little bit about Abercore. What were your motivations for starting up a new company?

My co-founders and I were all previously traders at Czarnikow. Over time we could see that the big sugar producers were changing the way they were doing business. They were increasingly concerned about transparency and traceability, not only in the sense of CSR (Corporate Social Responsibility), but also in knowing where their sugar was going, how the transaction was being executed and how they may be able to extract more value from it. We began to see similar trends coming from the consumer too.

However, although both sides increasingly wanted to interact directly, they didn’t always have the expertise or the tools to do it. Yes, a consumer can buy direct, but what exactly does that entail in terms of documents, accountancy, risk management, pricing, hedging etc., and also in terms of where you source the sugar from?

We set up Abercore in 2013 to help producers and consumers achieve their goals of executing direct business.

Where did the capital come from to start the business, and where does the finance come from to keep it going?

Our vision with Abercore was to establish a company that was predominantly focused on advisory services to producers but with a trading arm that could complement this advisory business. For example, we might be working in an advisory capacity marketing sugar for a European client, and a buyer in Africa would come to us with a specific requirement that our client couldn’t meet. In this instance the advisory work could translate into trading opportunities.

We each put our own cash into the company at the outset and as the business grows we have developed a relationship with NatWest, and they now finance our proprietary business. We have the financial ability to manage our own physical and futures transactions, although perhaps not on the scale of some of the trade houses. But then we don’t want to be a traditional trade house.

Why do you concentrate on Africa?

Africa is hugely exciting. By 2050 Africa’s population is predicted to grow by 1.3 billion people. That is the size of India. India consumes 25 million mt of sugar each year—so you are talking of consumption potentially increasing by that much. It is a huge growth area. There is so much opportunity.

People tend to group the fifty-four countries in Africa as one market, but each one has different trade agreements, different customs requirements, different everything. Our local knowledge gives us a huge edge over our competitors. 

What are the specific challenges in Africa?

Risk is the biggest challenge—risk in three forms: country, counterparty and competitor. You have to know your client, your competitor and your local market.

As far as competition is concerned, the biggest change we have seen in the last five years is the growth of the local traders. Local, rather than multinational, traders now capture a lot of the trading opportunities. But this isn’t just limited to Africa; it is being replicated throughout the world. This is a big issue for the multinational trade houses.

But then everything is becoming more local. Look at the consumer side and what Heineken is doing for example: they want to source as much as possible of their raw materials for Africa from within Africa. It makes commercial and social sense, and the social aspect is becoming increasingly important.

To what extent are your clients concerned about social and environmental sustainability?

Different people have different views as to what is sustainable. Sustainability is often about employing the local population, and caring for the local social and physical environment, making sure that your workers are well treated and that revenue is flowing back to the local farmer or cane cutter. That can be more important than buying sugar with a sustainability certificate.

The multinational food manufacturers in Africa will ask for certified product while local, second tier food manufacturers may be less concerned about the social and economic impacts of their buying decisions. These local companies are increasing their market share because they produce at a price that consumers can afford. So price is very important for them, perhaps more so than sustainability.

Agricultural traders have been suffering recently. Do you think this is cyclical or structural?

If you are a big trade house and see a big deficit coming you can take big positions on the market, on both the futures and the physicals in anticipation. In my mind this is harder to do in a surplus market. And with many of the agricultural commodity markets having been in surplus for the past few years this has negatively impacted the trade houses’ bottom lines.

On a structural level, other people are now fulfilling the trade houses’ traditional role in providing finance and liquidity, and managing logistics. Producers are now willing to manage finance, freight, insurance, even hedging—all the things that once only trade houses did.

So it comes down to what the trade houses have left. They have cash to speculate. They have relationships. They have a global vision. They have analysis. And they have the ability to move huge volumes around the world. That will remain the case. But the competition [both from local traders and producers themselves] is growing.

What is the hardest thing about being a physical trader – and the best thing?

The answer is the same for both – clients! The best thing about the business is that it is real. We are involved in the movement of commodities around the world, and we are adding real value in term of getting food to consumers.

So you like what you do?

I love it!

Thank you Alex.

Disclaimer: Jonathan Kingsman’s son Timothy works for Abercore

 

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Screening out the noise

Traders among you will know how difficult it is to identify fundamental price trends, and to separate them out from market noise. The same applies to consumer trends: how can you differentiate a genuine trend from background noise?

This past week has been a particularly noisy one in terms of consumer food trends.

Back in October 2015 the International Agency for Research on Cancer (IARC)—the cancer agency of the World Health Organization—classified processed meat as a carcinogen and red meat as a probable carcinogen. Their conclusion was based on a review of more than 800 studies. After an initial flurry of headlines, the media largely discounted the warnings, arguing that eating processed meat only raises the average lifetime risk of developing colon cancer from 5% to 6%.

However, the story is back. The Guardian this week published a long read entitled “Yes, bacon really is killing us”, arguing that the nitrates in processed meats are giving us colon cancer. A French MEP has taken up the cause and launched a campaign demanding a ban of nitrites in all meat products across Europe.

The Guardian also published an opinion piece this week entitled, “Why what we eat is crucial to the climate change question”, arguing that “our food – from what we eat to how it is grown – accounts for more carbon emissions than transport…and roughly the same as the production of electricity and heat”.

Greenpeace meanwhile has gone on a campaign against meat consumption with a report titled Less is More: Reducing Meat and Dairy for a Healthier Life and Planet. The organisation wants to reduce global meat and dairy consumption by 50 percent by the year 2050. They argue that reducing meat and dairy consumption:

  • Fights climate change: a 50 percent reduction in consumption of animal products “will lead to a 64 percent reduction in greenhouse gases relative to a 2050 world that follows current trajectories”.
  • Means less deforestation: by eating less meat — particularly beef, which requires 28 times more land to produce than dairy, pork, poultry, and eggs combined — there is less incentive to clear cut forests for grazing and growing animal feed.
  • Protects endangered species: animals and the mono-crops required to feed them destroy the habitat for local wild species, particularly for large herbivores. Since 1970, the Earth has lost half of its wildlife but tripled its livestock population.
  • Protects water sources: studies suggest “if industrialised countries moved towards a vegetarian diet, the food-related water footprint of humanity could be reduced by around 36 percent.”
  • Makes us healthier humans: Greenpeace cites studies linking consumption of animal products to cancer, obesity, diabetes, cardiovascular disease, and more.

And as if meat wasn’t in enough trouble last week, South Africa has been hit by what has been called the world’s worst listeria outbreak; so far it has killed 180 people and affected hundreds of others. The country’s health ministry says the outbreak originates from a Tiger Brands processed meat factory in the northern city of Polokwane, something that the CEO of Tiger Brands denies.

The anti-meat movement is gaining such momentum that even Donald Trump is reported to be swapping his beloved beef burgers for salads.

However, if you are thinking of doing the same and ditching meat for a vegiburger, French media (France 5) broadcast a documentary last week on soybeans and how bad they are bad both for your health and for the environment (in terms of deforestation and agricultural expansion).

Soy products apparently contain oestrogen-like compounds that your body processes much like its own oestrogen. Women who ingest high levels of soy are reported to find changes in their hormone cycles, as soy can suppress hormones associated with ovulation.

But it is not just women that can be affected; soybeans have also been accused of reducing fertility in men. Soy-consuming men were found in one study to have only 65 million sperm in their semen, compared to non-soy-eating participants who averaged 120 million sperm per sample. However, the UK’s Nation Health Service warns that the study behind this has limitations: it was small, and mainly looked at overweight or obese men who had presented to a fertility clinic.

Rather confusingly, the French documentary went on to argue that soy not only has negative effects on human health, it is also bad for animals. This time the problem had nothing to do with hormones, but with the herbicide glyhosate that is sprayed on soybeans. Some argue that the herbicide works its way along the food chain via meat and dairy products, and causes cancer in humans. The documentary tested various dairy products sold in France and found trace elements of glyhosate in all of them, even the organic ones.

If you are getting the stage where you no longer know who to believe or what to eat, New Food Economy last week followed up on an earlier opinion piece arguing that pretty much all nutrition studies are flawed. They argue that food studies tend to be small and speculative; the effects of any given food or food component tend to be small; research designs are often faulty; and researcher bias is somewhere between rife and universal.

There is also a problem with the data. Most studies are conducted by asking people what they eat—and most people lie. All this presents a problem for health professionals looking to reduce obesity and its associated costs.

This is particularly relevant as Public health officials in the UK called last week on food sellers and manufacturers to cut calories in their products by 20% by 2024. Public Health England suggests that food producers have a number of options for meeting the target, including reformulating products, promoting healthy options and reducing portion sizes.

The report notes that children are overeating: obese boys consume up to 500 excess calories a day while girls who are overweight or obese consume up to 290 excess calories a day. On average, adults were found to consume about 200 calories beyond what is necessary in a day.

All that is a lot of noise for just one week. But can we discern any trends through the noise?

  • The way food is produced and consumed has moved to centre stage in terms of public concern and media focus. This is likely to continue: anyone involved in agriculture and the agriculture supply chain will remain in the spotlight (so get used to it!)
  • The anti-meat lobby is strengthening; plant-based protein looks as if it has much further to run. But having said that we are already seeing some push back with vegetarian (particularly soy-based) diets coming under attack.
  • One trend that may be fading is the willingness to blame particular foodstuffs for obesity or other health issues. Consumers are beginning to distrust the studies; there are simply too many of them pushing in too many directions.

But what would a trader do in such a situation? He would endeavour to screen out the daily volatility and look instead at the fundamentals.

The fundamental reality is that people are eating too much and moving too little. The market is slowly making its way in that direction.

 

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Investing in Brazil’s sugarcane sector

As the agricultural world waits for confirmation of ADM’s proposed takeover of Bunge, attention is turning to Bunge’s sugarcane business. ADM doesn’t seem to want it; nor, apparently, do other potential buyers. Brazil’s sugarcane industry was once considered the El Dorado for investment in agriculture. Here are ten reasons why it all went pear-shaped.

1/ The exchange rate moved against investors. At the start of the inward investment boom into Brazilian sugarcane in 2005, one US dollar would buy 2.36 Brazilian Reais. Investment inflows, accompanied by widespread optimism over Brazil’s economic future, pushed the Brazilian Real higher – so high in fact that by the peak of the boom in 2008 one US dollar would only buy 1.56 Brazilian Reais. Today, one US dollar will buy you 3.25 Brazilian Reais. So if you are an international, dollar based company, that converted US dollars into Brazilian Reais in 2008 at an exchange rate of, say, 1.6 Reais to the US dollar to buy a sugar mill in Brazil you would today be looking at an exchange rate loss of close to 50 per cent.

2/ The Brazilian economy stalled. We all committed an error in believing that President Lula’s good governance would continue in terms of the macro-economy and the exchange rate. As long as China continues to grow, we argued, Brazil would grow with it. China continues to grow, albeit at a slightly lower rate, but Brazil’s economy has stalled.

3/ Costs rose significantly. Whenever there is a gold rush, costs will rise: the price of a shovel can multiply many times over. Brazil experienced its own “gold rush” between 2005 and 2010 with the rapid expansion in its ethanol and sugar sector. This led to a shortage of just about everything, including qualified labour and machinery, and led to a considerable increase in production costs. A shortage of qualified labour also led to an increase in costs elsewhere. Field inputs such as fertilizers, herbicides and pesticides were not applied in an optimal way, resulting in a drop in agricultural yields.

4/ Bad weather hit production at a critical time. Although the new, or expanded mills, urgently needed cane to crush it takes time to prepare the land, to plant the cane and then to let the cane grow to maturity. A series of bad weather events slowed this expansion in the cane area and mills were forced to run at substantially reduced capacity, sharply increasing unit costs further.

5/ New cane varieties had to be developed for new areas. Agricultural (land and climatic) conditions in the new areas that were coming under cane were not the same as in the existing areas. The cane varieties that thrived in Sao Paulo State did not necessarily thrive in the new areas.

6/ Government intervention handicapped the sector. Back in 2005 a friend of mine was warning of the danger of investing in an industry where the price of half of your production (in this case the ethanol part) was effectively fixed by the government. As long as the Brazilian government set the gasoline price, the government also caps the ethanol price. At the time, however, it was inconceivable that the government could set the domestic gasoline price below both the international price of oil and the production cost of ethanol. But that is what the Brazilian government did for a prolonged period of time, severely damaging both the national oil company Petrobras and the domestic ethanol industry.

7/ Ethanol lost credibility. The vision we all had back in 2005 was that ethanol was a green renewable fuel that had a significant role to play in the battle against global warming. We imagined Brazil exporting this renewable green energy throughout the world. We did not foresee that ethanol would fall out of favour and that the media and consumers would push back against using food for fuel. Nor did we anticipate the push back against expanding sugarcane plantations into Brazil’s underused cattle-ranching areas.

8/ Oil prices crumbled as the shale oil sector grew in the US, mineral, undermining the economic rationale for alternative liquid fuel. We all want to protect the environment, but how much are we willing to pay to do so?

9/ Finance for the sector dried up as things stated to go sour—a situation aggravated by the global financial crisis of 2008. Planting and crushing cane is hugely capital intensive. With the exception of Raizen’s parent Shell, the new owners and operators of the sugar mills found it difficult to provide the finance necessary to keep going.

10/ Traders don’t make good farmers  (or do they)? Processing cane is not the same as crushing soybeans. With cane you have to get actively involved in growing the cane; with beans they just turn up at your factory gate. Traders tend to concentrate on the short term; farmers on the long term. Traders like to quickly get out of a losing position; farmers don’t sell their farm just because of one bad crop. 

However, this is a controversial issue (and will be one of the points of discussion at our June conference.)  Trading companies have learned some hard lessons in Brazil over the past ten years, and they are putting what they have learnt into practice. This is helping a turnaround in the sector; Bunge’s sugarcane business, for example, is now profitable. 

But there other reasons why now may be the time to invest in Brazil’s sugarcane sector.  Here are five (of them.

1/ Brazilian ethanol once again has government support.The Brazilian government has recently taken its foot off the neck of the domestic ethanol industry. It has allowed domestic gasoline prices to fluctuate in line with world prices and helps the competitiveness of Brazilian hydrous ethanol as an alternative domestic fuel. At the same time, the government’s ambitious RenovaBio programme sets out guidelines for future support.

2/ Food prices have fallen over the past couple of years and ethanol has largely dropped off the radar screen of public opinion. Poor weather and poor harvests were the main drivers for the increase in food prices that we saw a few years ago. The fact that corn prices are low even with 40% of the US corn crop going to ethanol takes the sting out of the food versus fuel debate.

3/ Global warming isn’t going away. Ethanol is a green renewable fuel with a much lower carbon footprint than mineral oil and as such could see a revival of interest, or a reduction of opposition, from the environmentalists. As for the farming lobby in the US, ethanol is an important alternative outlet for corn when food prices are low. Political support may once again grow within the US for ethanol.

4/ Electricity co-generation from bagasse is profitable. The country is short of electricity and returns are likely to remain high. Brazil should also have an advantage in terms of green plastics. With world oil prices low it will be hard for green plastics to compete but (for the moment at least) consumers seem willing to pay a premium for a “green” bottle. Brazil already has a couple of green plastic plants.

5/ Ethanol in Brazil currently gives millers a better return than sugar. This should result in a shift within Brazil towards making more ethanol and less sugar and may result in sugar prices bottoming. This flexibility gives Brazilian sugarcane sector gives operators valuable optionality, something that traders love! Brazil is not only the price regulator in the world sugar market. It is the lowest cost producer for the next marginal tonne of sugar that the world will need as consumption expands. If the Brazilian Real remains weak it will be difficult for other sugar producing countries to compete.

So there are some strong reasons to be optimistic. Are they strong enough for someone to make a stand and purchase Bunge’s Brazilian sugarcane business? We will soon find out.