Compiled: 09/10/2021

Inflation tests pricing power of global brands


Topic: Global brands seek to offset record rises in input costs, risking shares

Global brands such as Nestlé, Procter & Gamble, and Unilever are planning for price rises in their latest market updates amidst high commodity price inflation and an uptick in transport and packaging costs. Many global brands have noted that while they had raised prices in the first quarter, much of the cost increases “had yet to pass through to consumers’ shopping baskets.” As is, raw material prices have reached record highs due to the impact of the COVID-19 pandemic on labour and logistics, bad weather, and countries such as China bulking up their inventories. For example, in Europe, milk prices have risen about 50 percent since the start of 2021. Commodity market tightness “is expected to continue through 2021,” with Richard Cook, head of the analytics product team at NielsenIQ, noting that “essential categories” such as bread, cheese, eggs, and wheat would easily be able to increase prices. Cook also noted that premium products that serve specific needs such as skin tanning lotions and vegan products may also bear increases, while Bruno Monteyne, a Bernstein analyst, argued that “weaker” portfolios like dairy products and Danone’s bottled water business “could be vulnerable to losing market share if prices are increased too quickly.” Different companies intend to take different approaches to navigating these price hikes; however, the response of households to these hikes may be affected by the unequal impact of the pandemic. Will Hayllar, a global managing partner at strategy consultants OC&C, explained that “the last real wave of commodity inflation was in 2012, and that added to price sensitivity in the marketplace . . . [but] this time there is a segment of consumers for whom there is pent-up spending power.”

Grains-Corn hits 8-year high as dry weather in Brazil raises supply concerns


Topic: Dry weather in Brazil raises supply concerns, grains and corn futures hit 8-year high

Dry weather in Brazil and subsequent concerns about global supplies led to Chicago corn futures rising for a third consecutive session in the first week of May of 2021—hitting their highest since March 2013. Soybeans rose for a second straight session, while wheat extended gains. Safras & Mercado reported that Brazil’s 2020/2021 total corn crop estimate lowered by almost 8% to 104.1 million tonnes due to dry weather impacting Brazils second corn plantings yields.

Argentine firms ink deal to produce genetically modified wheat-based foods


Topic: Argentine firms sign deal to produce genetically modified wheat-based foods

In a joint statement in May 2021, two Argentine firms—Argentine biotech company Bioceres and local food company Havanna—announced that they had signed a deal to produce food based on genetically modified HB4 wheat. HB4 wheat is drought-resistant and has received interest for its potential to increase wheat production, with Argentina already gaining its title as the world’s top exporter of soymeal livestock feed in large part due to being a producer of genetically modified soybeans. However, some scientists are concerned as to whether the herbicide used with HB4 is safe for consumers and the environment. To this, the companies announced that “the food products will be made under the Havanna brand and will offer the highest level of information to the consumer regarding the origin of the wheat, the environmental footprint generated.” The Argentine government gave approval to farmers to produce HB4 wheat in 2020.

Ag-tech plants seeds of hope as Canada farm outlook brightens


Topic: Farm outlook in Canada in 2021 grows positive

Canadian farmers are growing hopeful about 2021. The possible end of the pandemic approaching in addition to stronger commodity prices and new ag-tech—such as GPS livestock collars and agriculture data tools—have brightened the outlook after recent years of hardship. In the past few years, farmer mental health and wellness has reached high levels of stress and exhaustion as a result of income pressures, bad weather, the pandemic, tense China-Canada and China-US relations, and debt (the agriculture sector was $115 billion in debt in 2019 according to Statistics Canada). However, government forecasts anticipate that total net income on Canadian farms rose by 22 percent in 2020 to $16.5 billion as a result of strong growth in oilseeds and grain, and in 2021 people in the industry continue to rally against the odds. That being said, according to Jon Driedger, an analyst with LeftField Commodity Research, “lasting prosperity will depend on new technologies.” Groups such as Winnipeg-based Farmers Edge (which collects and analyses farm data to help boost crop yields and sales) have taken on the innovation game. However, innovation still necessitates government assistance. 

China’s record soybean demand forecast to support prices till 2022: sources


Topic: China’s record soybean demand forecasted to support prices until 2022

According to market sources speaking with S&P Global Platts on May 13, China’s high demand forecast for soybeans will most likely boost international soybean prices until at least 2022. China’s soybean imports forecast for the 2020/2021 marketing year was revised up 2 million megatonnes to a record high 100.4 million megatonnes, the Chinese Supply and Demand Estimates report noted. The same report said that the 2021/2022 demand was projected at a colossal 102 million megatonnes. US soybean futures prices for nearby shipments rose over 90 percent on the year to a nine-year high of $16.3538 per bushel, while Brazilian domestic prices reached all-time high levels of Real 161/60 kilograms in April, which is up 85.5 percent on the year. In the first four months of 2021, China imported 28.63 million tonnes of soybeans, up 17 percent from the same period last year. As of May 2021, in the current marketing year, US soybean inspection for exports are estimated at 55.7 million megatonnes (compared to 34 million megatonnes last year), with majority volumes headed for China. In Brazil, the country’s foreign trade department reported that Brazil has shipped 33 million megatonnes of soybeans between January and April, up 3.5 percent year on year, with China accounting for 73 percent of those shipments so far in 2021. Additionally, demand for soybean-based animal feed has risen in 2021. After the devastating impact of the African swine fever epidemic in China between 2018 and 2020, China’s swine herd is expected to cross 440 million heads by the end of 2021 (compared to 406 million in 2020). Since late 2019, China’s pig farming sector has experienced rapid consolidation, with small-scale farms amalgamating into large entities under a government directive and supported by over $30 billion invested into the consolidation. 

Russia wheat output expected to fall in 2021-22


Topic: Russia’s wheat output forecast to decline by 9 percent in 2021/2022

According to a May 13 Global Agricultural Information Network report from the US Department of Agriculture (USDA), Russia’s wheat production for the 2021/2022 marketing year is forecast to decline by 9 percent (to 77.5 million tonnes) due to poor weather in recent months reducing yield prospects. This drop in output is projected to offset increases in barley and corn production of 7 percent and 6 percent, respectively. The USDA forecasts Russia’s total grain production to decline by 5 percent (to 118 million tonnes) in 2021/2022. The report also noted that in 2021 and in following years, intensified government regulation in the Russian Federation will significantly impact pricing and overall regulation of the agricultural sector. In December 2020, to address sharply increased domestic prices, the Russian government introduced an export quota of 17.5 million tonnes of grain from 15 February to 30 June of 2021. The USDA projects total grain export volume to reach 48 million tonnes in 2021/2022, including 40 million tonnes of wheat exports.

US West Coast imports exceed 1m TEU in nine out of ten past months


Topic: US West Coast imports reach 1.10m TEU

West Coast loaded imports amounted to 1.10 million TEU as the surge in US container imports continued in April 2021. Imports never exceeded this level until August 2020, with developments between August and April meaning that April imports were only the sixth highest on record. In the first four months of 2021, volumes were up by 40.3 percent, representing an increase of 1.2 million TEU from the same period in 2020 (volumes are still up by 22.8 percent compared to 2019). These record-high US West Coast imports made March the busiest month recorded for global container shipping, with 15.5 million TEU being exported globally.

Australia’s top beef exporter predicts tenfold UK sales surge on trade deal


Topic: Australia-UK zero tariff, zero quota trade deal predicts tenfold UK sales surge

The Australian Agricultural Company, Australia’s largest beef exporter, predicted it could boost UK sales tenfold if UK Prime Minister Boris Johnson backs a zero tariff, zero quota trade deal. However, cabinet ministers clashed over the deal regarding its likely impact on British farmers, with cabinet ministers such as environment secretary George Eustice arguing that “any deal must include strong protection for UK farmers.” Eustice feared that total tariff liberalisation “would set a precedent for future trade deals, including with the US,” with Eustice arguing that only a certain quota of Australian imports should be tariff-free in order to avoid the risk of a surge in low-cost imports. According to a July 2020 study of the prospective deal, a “full tariff liberalisation” deal would result in British exports to Australia to rise to 7.3 percent, but it would also provoke an 83.2 percent rise in Australian exports to the UK. The study noted that while most of the UK would benefit from the trade deal—even suggesting that national GDP might rise by 0.02 percent—Northern Ireland would be left up to 0.25 percent worse off due to its large farming sector. Under the current trading regime, Australian beef exporters face a blanket 12 percent tariff on beef products and an annual lower tariff quota of 3,761 tonnes. Moreover, the UK Government is under pressure from environmental groups such as Green Alliance, WWF, and Sustain. These groups argue that the UK-Australia trade deal “would see the UK ‘aligning with laggards on climate’ and force UK farmers to compete with more environmentally destructive farming methods,” with WWF pointing out that Australia has high deforestation rates linked to livestock farming.

Canadian wheat market to tighten in 2021-22


Topic: Canadian wheat market expected to tighten in 2021/2022

The Agriculture and Agri-Food Canada ministry noted that in the 2021/2022 marketing year, Canada’s wheat market output is anticipated to fall to 31.06 million tonnes from the 32.75 million tonnes forecast in April and the 35.19 million tonnes forecast for the 2020/2021 year. This lower forecast comes as seeded areas for wheat were revised down to 9.41 million hectares for next year from 9.93 million hectares in April and 10.19 million hectares seeded this year. Canadian farmers are expected to partially switch to canola and corn, with both crops seeing a stronger price rally compared with wheat in 2021. However, strong Canadian wheat exports for 2021—which is now projected at 26.75 million tonnes—imply that stocks by the end of this marketing year could be as low as 4.75 million tonnes, which is revised down from 5.31 million tonnes in April.

Tractor Hacking: The Farmers Breaking Big Tech’s Repair Monopoly


Topic: Nebraska Farmers “Hack” Equipment Repairs

Motherboard (VICE) reveals how the modernization of tractors and other farm equipment has led to large manufacturers like John Deere holding monopoly over the diagnostic software necessary for repairs. Motherboard interviews several Nebraska farmers and mechanics who are at the forefront of this “right to repair.”

Canadian barley growers exploiting Australia’s troubles with China expose a vulnerability in any democratic alliance against Beijing


Topic: Canadian barley growers take advantage of Australia-China conflict

After Beijing put up tariff walls to block imports of Australian barley, Canadian barley farmers took advantage of the situation, resulting in record cash receipts of approximately $1.1 billion (a 14 percent increase from 2019) and the second time barley fetched more than $1 billion in a single calendar year, according to Statistics Canada. Canada’s barley exports to China rose by 18.5 percent in 2020, with shipments in the first quarter of 2021 reaching more than $290 million (an increase of 175 percent from the same period in 2020). 

Global food prices post biggest jump in decade


Topic: Global food prices surge by the biggest margin in a decade

As commodity prices surged, a closely monitored global food price index in the UN Food and Agriculture Organization (FAO) jumped 40 percent in May, the largest jump since 2011. Many fear that the inflation first prompted by pandemic disruption is accelerating. This higher inflation will hit poorer countries that rely on imports for staple goods, while in wealthier countries the rise in raw material prices is such that big companies such as Nestlé and Coca-Cola have said that they would “pass on any increases.” Additionally, transport, shipping, and labour costs are expected to push prices higher in the coming months. According to the FAO, the world’s consumer price inflation for food already jumped 6.3 percent in 2020 (up from 4.6 percent in 2019) as a result of the pandemic wreaking havoc on global supply chains, thereby impacting the production and distribution of food.

BHP approaches final decision on Canadian potash project


Topic: BHP Group to make a final decision on Jansen mine

BHP Group is preparing to make a final decision on Jansen, a large potash project in Canada that could cost as much as $5.7 billion to complete. BHP has opened talks with a Canadian rival, Nutrien, “about a potential partnership that could help make the project less risky and provide critical infrastructure.” Fertilisers will play a key role in increasing crop yields to meet growing food demands, with Scotiobank forecasting that the potash market will grow at approximately 2 million tonnes a year between 2022 and 2030. BHP has already spent more than $4 billion on sinking two 1-kilometre shafts at the Saskatchewan site but between $5.3 billion and $5.7 billion is needed to bring the mine into production. Jansen would be BHP’s biggest investment if the decision were approved. 

China’s import appetite raises prospects in US farm belt


Topic: Record shipments and high crop prices boost prospects in US farm belt

Rising exports and food prices have fueled a recovery in the US agricultural economy after former US President Donald Trump’s trade war with China left many American farmers dependent on government subsidies. The US Department of Agriculture anticipates that the US will ship a record $37.2 billion worth of farm goods to China in 2021, with the sum being 23 percent of total US agricultural exports estimated at $164 billion. Increased demand from China in addition to supply constraints on corn and soybeans as a result of a drought in Brazil has resulted in a surge in global food prices, which have given a further boost to American farmers’ prospects. Although soybeans were the US’s biggest agricultural export to China, China has now taken interest in US corn, with 23.2 million tonnes either shipped or booked for the marketing year ending in August (compared with less than 200,000 tonnes five years ago). Despite an early growing season in the US, forecasters this year anticipate healthy crops, with soybeans selling for more than $15 per bushel and corn above $6 per bushel. 

Worst drought in a century hits Brazil as it fights to overcome Covid


Topic: Worst drought in a century hits Brazil amongst Covid struggles

Many Brazilians face water shortages and the risk of power blackouts as a result of the worst drought in almost a century, complicating Brazil’s efforts to recover from the pandemic. The drought has had a devastating effect on the country’s farming industry, which accounts for about 30 percent of Brazil’s GDP. As consumer prices increase more than 8 percent in the year to May, inflation “has combined with high levels of unemployment to hit the nation’s poorest citizens.”

Good UK trade policy should start at home


Topic: Opinion piece on the importance of domestic by-in to agreements

The Financial Times’ Editorial Board discusses how the trade deal agreed in principle between Britain and Australia, the provisions of which will “set a framework for other trade talks, showing what the UK is willing to give away to achieve its goals. Just as important, however, is the unfortunate precedent it sets in how the country’s trade policy is managed.” The Editorial Board notes how “there has been little parliamentary scrutiny” of the Australian trade agreement, with “the most controversial aspect” being the trade agreement’s impact on British farmers, who fear facing price and standards competition from industrial-scale Australian producers in addition to being asked to absorb the costs of “the green transition.” In response to the Scottish National Party’s interest in scaremongering over the deal’s impact on Scottish farmers and the Northern Irish protocol meaning that any trade agreements will not fully apply to the province, the Editorial Board calls for “a balance to be struck,” where “negotiations require a country to present a united front and speak with one voice.”

Biden launches assault on monopolies


Topic: Biden launches executive order to reduce monopolies’ hold on major industries

US President Joe Biden announced a sweeping executive order intended to promote competition throughout the US economy as part of both the country’s economic recovery from the pandemic and a larger attempt to reduce the stronghold of monopolies and concentrated markets in major industries. Other elements of the order are designed to lower the price of prescription drugs, increase scrutiny of abusive business tactics in the tech industry, and protect consumers’ privacy. The impact of the order could be felt in industries such as agriculture, banking, and health, such as the order’s inclusion of the initiative to guarantee farmers and motorists the right to repair their own vehicles without voiding warranty protections. Moreover, top White House officials noted that the order also “seeks to ensure small businesses and consumers have access to fair markets.”

Why processing beans, peas and lentils could solve Canada’s “commodity conundrum”


Topic: Interest in plant-based protein an opportunity to build Canadian food-processing into a global powerhouse

Historically, Canada’s ability to grow crops has outmatched its ability to process those crops into higher-value consumer goods. However, federal cabinet ministers, food processors, and industry advocates see increasing interest in plant-based proteins, which are made from pulses, as an opportunity to build the Canadian food-processing sector into a global powerhouse. Homegrown processors could capture 10 percent of the $250 billion plant-based products market (compared with the 3.3 percent Canadian processors currently have). This opportunity also comes at a time when a dependence on exporting processed, packaged goods during times of crisis poses a problem. However, to increase production of pulses to meet this new demand for plant proteins, a major wave of private-sector investment, regulatory reform, and infrastructure development is needed. According to Protein Industries Canada, in the next decade, Canada will need to process an additional 6 or 7 million tonnes to have a shot at that 10 percent of the plant-based products market.

Canada’s farmers brace for new heat wave as scorching summer leaves cherries roasting in trees


Topic: Devastating Canadian heat waves leading to crops baking in fields

A series of heatwaves in Canada have led to numerous crops quite literally baking in fields. While farmers have been planning “for slow, constant climate change,” farmers could not have predicted 2021’s immense spike in summer temperatures. The heat has also challenged other factors of farm life, such as reducing the amount of time labourers can work in the fields. Many livestock farmers are turning to grain growers to consider using some of their unsellable yield as feed, with Saskatchewan recently changing its crop insurance regulations to ensure just that. The threat of wildfires has also grown. Agriculture and Agri-Food Minister Marie-Claude Bibeau has promised to leverage government programs to support those producers affected by extreme weather and droughts, such as through the AgriStability program, which operates like an income insurance program. Bibeau has also been encouraging provinces to trigger the agricultural sector’s disaster relief program.

Extreme heat and drought in Western Canada wreak havoc on food system


Topic: Extreme weather and drought in Western Canada wreak havoc on food system

Weeks of devastating heat, drought, and wildfires in Western Canada have led to massive disruptions to food production in Canada. Stunted crops, fruit baking on trees, and an 80 percent mortality rate at some commercial shellfish operations are only some of the issues such extreme weather and climate disasters have caused, thousands of dollars in loss notwithstanding. 

Op-Ed: Feeling the drought on my family farm


Topic: Opinion piece on impact of drought on farmer’s family farm

David Mas Masumoto recounts his difficulties farming during the severe two-year drought drying out the West and Southwest in the US, citing concerns over water scarcity, price inflation in grocery stores, and climate change. Ultimately, Masumoto argues that “we must re-envision water as something scarce and sacred and shared by all.”

Wheat posts biggest weekly climb in 6 years on weather woes


Topic: Chicago wheat futures reaches highest weekly climb in six years following weather troubles

In July, Chicago wheat futures rose about 3 percent, recording their largest weekly gain in six years amidst concerns about global supplies. These concerns have been prompted by dry conditions for North American spring wheat and adverse weather in Europe and Russia leading to sub-par yields in the key southern export region. Soybean futures ended higher on uncertainty about US crop weather, while corn futures declined.

Russian wheat prices up on worsening crop outlook


Topic: Increase in Russian wheat prices due to worsening crop outlook

Due to a worsening outlook for Russian wheat and stronger markets in Chicago and Paris, Russian wheat prices rose in the last week of July. Sovecon, an agriculture consultancy, recorded a $10 rise to $255 per tonne of wheat, while barley was up $10 at $244. IKAR, another agriculture consultancy, cut its forecast for Russia’s 2021 wheat crop by 3 million tonnes to 78.5 million tonnes due to low yields in the Central and Volga regions. Sovecon noted that it could cut its forecast by 4 million tonnes from 82.3 million tonnes of wheat as a result of Russia’s statistics service reporting the pre-harvest winter wheat area at 15.6 million hectares last week versus the 16.8 million hectares that Sovecon previously estimated.

Why right to repair matters – according to a farmer, a medical worker, a computer store owner


Topic: The importance of Biden’s executive order prioritising consumers’ “right to repair”

Many in the agriculture, technology, and health industries are hopeful for the changes Joe Biden’s executive order will bring, particularly in regard to the order’s prioritization of consumers’ “right to repair” their own devices (and thus outside of the stranglehold of manufacturers). The Guardian interviews a farmer, a nonprofit repair store, a medical worker, and a computer store owner to share their frustrations and hopes with right to repair laws.

Young farmers lose hope as drought closes in: “It’s like a sad country song”


Topic: Young American farmers lose hope as drought impacts Western US

The Guardian interviews young farmers of the Klamath Basin, an agricultural community on the border of Oregon and California, who “fear they might be the last generation of their kind” as a result of increased water scarcity due to the historic drought infiltrating the area. In May, the federal government cut off all irrigation to farmers to conserve water for the endangered fish sharing the landscape, which sparked concern among farmers. The Guardian notes that hotter temperatures have resulted in snowpack being low in winter, rainfall being sparse in spring, and forest fires more prevalent and dangerous. Moreover, what was once a string of wetlands is now a completely transformed system of farmlands as a result of 19th-century agrarian efforts. Many young farmers in the Basin have encountered increased costs associated with pumping water, compounding other costs such as mortgages, land leases, and labour costs. 

As their numbers dwindle and voice becomes fractured, those in ag need to show what’s good for them is good for others


Topic: Opinion piece on farm support programs

In her opinion piece, Laura Rance discusses the role and future of farm support programs in Canada. She notes how the Canadian Agricultural Policy Institute has turned to agricultural economist Douglas Hedley “to analyze where Canadian farm policy has come from and where it might need to go.” Hedley notes that “policy approaches need to be nimble, able to respond rapidly to events domestically and internationally, and founded on an improved and strengthened relationship with provinces and territories.” However, Rance emphasises that farmers “will be looking for policy solutions they can take to the bank out of these consultations,” while Hedley emphasises that “the focus needs first to be on sound processes for decision making.”

CFA Applauds Federal and Alberta Governments Commitments to Drought Relief


Topic: CFA applauds federal and Alberta governments’ commitments to drought relief in Canada

In a 9 August 2021 announcement, the Canadian Federation of Agriculture (CFA) applauded the federal government’s decision to earmark $100 million for drought relief through AgriRecovery and the Alberta government’s announcement of $136 million for Alberta livestock ranchers impacted by drought. The latter also included a request for an additional $203 million from the federal government for a total relief package of $339 million for Alberta farmers. The CFA has called for the Manitoba, BC, Ontario, and Saskatchewan governments to follow Alberta’s lead and to “develop AgriRecovery assistance packages for the affected producers in those provinces as well.”