Ferré & Consulting Blog (English Version)

Reports that a company owned by Cargill and ABF bought all the available UK feed wheat last month has renewed calls for tighter regulation of commodity markets.

Traders reportedly told the Bureau of Investigative Journalism that Frontier Agriculture bought all available May Futures contracts on the London International Financial Futures and Options Exchange (Liffe) in the period running up to the tender date in the last week of April.

It has been described as an “unprecedented move” and an attempt to manipulate the market, which Frontier denies.

However, the BIJ says that Frontier is believed to have taken delivery of about 225,000 tonnes of feed wheat now worth about £40m.

Wheat prices have been particularly volatile, increasing by about 70 per cent in the last year. And the price of feed wheat has a knock-on effect on wheat used in food such as bread, as it sets the benchmark price.

Amy Horton, is a campaigner for the World Development Movement, which is calling for effective regulation to curb excessive speculation and improve transparency in commodity markets.

Horton told : “The fact that a single company can buy up the entire British feed wheat harvest for a month demonstrates the need for regulation to stop individual companies from dominating the market in order to drive up prices and profiteer.

“Regulation is also needed to limit the market share of financial speculators, who are not involved in the actual trade of food at all. Instead of trading on the basis of information about supply and demand, they are more likely to follow each other, leading to price bubbles.”

Horton said these bubbles are problematic for food producers, who can’t predict what price they’ll earn for their crops, and for European consumers who face higher food prices.

She added: “Food companies have been adversely affected by high and unstable prices too.”

Frontier is an independent company, with a turnover of more than £750 million, jointly owned by ABF Holdings (a wholly owned subsidiary in the Associated British Foods Group) and Cargill. It did not wish to comment when asked to do so by FoodNavigator.com.

However the Bureau quotes Frontier’s trading director, Jon Duffy, as stating that all the wheat contracts it took physical delivery for were made to secure enough grain to fulfil customers’ orders.

And Frontier strongly rejected any suggestion of an attempt to manipulate the market, without confirming or denying the unusually large trades.

The BIJ added that Frontier’s purchase sent May Futures even higher compared with other contracts.

However, other diverging forces impacting the wheat market have been at play.

Excess rain during harvest in Europe threatens to downgrade wheat quality for the second year running, according to a recent report by Rabobank.

Meanwhile Russia recently lifted its grain export ban (introduced in August 2010), which dragged world wheat export market prices lower in June.

FoodNavigator.com invited both ABF and Cargill to comment but neither felt it was appropriate.

Source: Bakery and Snacks

Milling industry ABF, Cargill, wheat prices

Prolonged drought in northern Europe has already capped yields of cereals and sugar beet and, without significant rainfall over the next two months, could significantly boost prices, warn analysts.

Rabobank analyst, Erin Fitzpatric told FoodNavigator that drought in France, Germany and parts of the UK had already reduced yield potential leading many regions to downgrade their harvest forecasts. “Some damage has already been done. It’s not a disaster yet but we do need significant rain to prevent it from becoming so,” said Fitzpatric.

Earlier this week, new crop grain futures soared £10.50/t after French analyst Agritel , forecast the French wheat crop down 11.5 per cent at 31.7m tonnes compared with last year.

The EU’s largest wheat producer, France has formed a national drought committee, limiting water consumption in many regions and lifting curbs on the use of fallow land for grazing.

Parts of Europe have received less than 40% of their long-term average rainfall between February and April.

Crop failure

Farmers in the south-west German region of Rhineland-Palatinate were fearing “serious financial losses” from crop failure and mounting irrigation costs, according to Deutsche Welle’s website. The German wheat harvest is forecast to be 7.5 per cent down on last year.

A spokesperson for the UK National Farmers Union told FoodNavigator: England and Wales have received only 61% of the long term average rainfall in the seven month period from October to April, making this the driest period since 1976.

“For non-irrigated crops grown on light land (wheat, barley, oil seed rape and outdoor herbs) and shallow rooting crops (such as peas and linseed), the situation, is becoming critical,” said the spokesperson.

Lower cereal yields will also impact livestock producers via higher costs for hay, concentrate feeds and straw.

But weather conditions have been good for planting vegetables and potatoes and for the demand and production of soft fruit, such as currents and berries, and top fruit, including apples and pears and asparagus.

Fitzpatric highlighted the impact of production elsewhere on European prices. Although wheat production is expected to recover in Russian this season, she estimated the nation’s exportable surplus at only 10m tonnes – the lowest level since 2004.

Russian plantings last autumn of the more productive winter wheat hit a four-year low intensifying the potential pressure on prices.

Toxic combination

The North American grains harvest is also predicted to be lower than expected due to a toxic combination of flooding, in states from Illinois to Louisiana and parts of Canada, combined with drought elsewhere.

The United States Department of Agriculture forecast last week that that the harvest of hard, red winter-wheat will fall 25 per cent to 762m bushels; the lowest for five years.

The European sugar industry is equally worried. Rabobank analyst Keith Flury said: “Without significant rainfall, we are looking at another 14m tonnes (EU) sugar crop – like last year which was much lower than the 16.5m tonnes expected.”

Drought worries are already leading some sugar suppliers to avoid agreeing contracts with food ingredient companies. “Worries about domestic prices are leading to the market shut down in contract signing,” said Flury.

Meanwhile, French weather forecaster Meteo France is predicting above-average temperatures for the country up until July.

Source: Bakery and Snacks

Milling industry cereal, prices, sugar

Global wheat production is set to increase in 2011, providing some welcomed relief for manufacturers currently fighting against spiralling commodities costs.

In a recently published report The United Nations’ Food & Agriculture Organisation said that worldwide production would be up 3.4% on last year’s levels.

As well as producers looking to cash in on the high price of wheat, the increase reflects improved yields for producers who suffered from adverse conditions last year.

One of the world’s largest producers, Russia, last year imposed a ban on exports after widespread drought led to poor returns, threatening their survival.

But the UN have warned that this year’s harvest would still be below the levels recorded in 2008 and 2009.

Milling industry wheat harvested

Current uncertainty suggests further price gains are likely in wheat over the coming months with EU prices expected to set record highs prior to the new crop harvest, predicts agri commodity specialists Rabobank, who foresee a downward movement on sugar prices.

In their monthly review of commodity market trends, the researchers note that global wheat values have rallied in early 2011 amid new supply shocks and a spate of political unrest in key importing countries, with governments in Africa and the Middle East increasing wheat imports to ease food insecurity as political chaos ensues.

They report that the multiple production setbacks in Germany and Canada compounded by the recent flooding in Australian have sorely reduced the amounts of high quality and high protein milling wheat available.

European wheat prices, report Rabobank, have seen impressive rallying with new contract highs being set by the Matif exchange. “Matif March 2011 contract prices have gained 12 per cent since early January to €274 per tonne with the nearby spot value now having almost doubled since the mid-way point of 2010,” said the researchers.

And the analysts stress that action is required to ensure adequate European carry over wheat stocks into the new season. They note French President Sarkozy’s threat to cap French wheat exports as a way to curb escalating grain and food prices.

However, in terms of sugar, Rabobank sees global prices easing in the middle of 2011 if production forecasts are met, as new crop supplies coupled with less demand will reduce pressure.

Sugar prices have risen from bad weather impacting crops and all indications are that the harvest in India will not support exports. But the analysts see the production response in 2011 from Brazil, the EU and Russia easing the skyward tendency of prices.

The experts expect the market, in the second half of the year, will be balanced between expectation of greater supply volume in the second half of the year, demand being down due to sugar users switching to substitutes to avoid the record input costs for the commodity and near term supply tightness.

Rabobank cautions though that sugar suppliers continues to draw from tight inventories, and this situation is not expected to change significantly in the short term.

Meanwhile, in a bid to address the shortfall in the commodity in the EU market, the Commission’s sugar management committee announced yesterday that it has drawn up a draft proposal with regard to releasing out-of-quota sugar onto the internal market.

And a source in the EU sugar management committee said that the EC may open a tender for EU operators to import raw and white sugar at reduced duties with no volume ceiling.

Source: Bakery and snacks

Ingredients, Milling industry sugar, wheat, wheat prices

Last summer’s drought in Russia pushed wheat prices to their highest levels in years, and the fallout is a reminder of how much humanity depends on the rain. Now, scientists are searching for novel approaches to make wheat less vulnerable to drought.

Some efforts are trying to replace the genes that made possible the dramatic boost in wheat harvests in the latter half of the 20th century in India known as the Green Revolution.

Few people can see the accomplishments of the Green Revolution more clearly than Kulvinder Gill, who grew up in a village in India where, half a century ago, some predicted catastrophe because food production wasn’t growing as fast as the population. “It was a common belief that this world is going to end because of the starvation,” Gill said. “People are going to fight for food and kill each other.”

But scientists such as Orville Vogel at Washington State University bred new varieties of wheat that included a mutant gene that kept the plant short. When you gave these plants lots of fertilizer and irrigated them, they didn’t just get tall and fall over like ordinary wheat — they produced more grain. A lot more.

“These dwarfing genes came and almost tripled yields, at least in Punjab area,” Gill said.

So Gill left his village in Punjab and became a wheat geneticist. He now occupies the Orville Vogel Endowed Chair in wheat breeding at Washington State.

Searching For A New Wheat Gene

And he’s hoping to not only repeat what Vogel did, but improve on it. That’s because the dwarfing genes of the green revolution — which are now in 90 percent of all the wheat that farmers grow around the world — have an unfortunate side effect, he says: They make it harder for the plant to thrive when water is scarce.

For instance, when it’s dry, farmers have to plant seeds deeper because that’s where the moisture is.

“And these semi-dwarfs don’t do too good pushing out of 6 inches of soil,” Gill says.

So he’s now on the hunt for a different and better dwarfing gene. He knows exactly what he’s looking for: It’s a mutation that already exists in corn and sorghum. It doesn’t shrink the whole plant the way the green revolution genes do. Instead, it blocks the normal flow of a crucial growth hormone.

“So the plant reduces in height, but at the same time, the cob is bigger, the stem is thicker and stronger, and the plant looks great,” Gill says.

To create this kind of wheat plant, Gill and a group of collaborators have treated thousands of seeds with a chemical that makes random changes in DNA. Now these mutant wheat plants are growing in the greenhouse, and Gill has to see if any of them have the one change he wants.

“It is very difficult to know at this point if the mutant is the one — the kind we are looking for,” he says.

A Global Effort To Reprogram Crops

Gill’s project is just one small part of a global campaign to reprogram crops genetically so they can survive water shortages. People are trying everything from low-tech traditional crop breeding to high-tech gene splicing.

One approach, somewhere in the middle, involves looking for useful genes in wheat’s ancestors. Scientists are retrieving seeds from the refrigerated vaults of gene banks and taking a fresh look at those plants. Thousands of years ago, three of them somehow combined in the wild to form modern wheat.

David Bonnet, a wheat geneticist at the International Maize and Wheat Improvement Center based in Mexico, says scientists can re-create that merger in the laboratory.

“So we can go back and bring in more genetic variation for a whole range of traits, but certainly drought tolerance is one of them,” Bonnet says.

But the approach that’s getting most of the attention and most of the money these days is genetic engineering.

Agricultural giant Monsanto has inserted a gene from bacteria into corn and it says this variety yields 8 to 10 percent more under drought conditions. The gene is called a transcription factor — a kind of master gene that activates many others when the plant is under stress.

The company says if it gets a green light from regulators, it will start selling the corn within two years. Monsanto has also donated the gene to a group of government-supported research institutions in Africa that are starting greenhouse trials of corn-containing the gene this year.

The Potential Of Genetic Enhancement

In the scientific community, there’s a lot of curiosity about the Monsanto product and some skepticism that it will work as advertised.

But many of them, including Mahyco, a leading seed company in India, also are looking for genes to splice into crops.

“In our program, we are looking at transcription factors from drought-tolerant crops — sorghum, acacia trees or other crops that are known to be drought-tolerant,” says Usha Zehr, Mahyco’s chief technology officer.

And geneticist Bonnet says there’s no shortage of genes that seem like they might possibly help a plant use water more efficiently.

“We have access to quite a lot of candidates ourselves, and we think they have as much or more potential as what Monsanto has,” he says.

Actually realizing that potential may become increasingly important as the globe warms up. Climate models predict that many parts of the world — including major crop-growing areas — will see more droughts in the coming years.

Source: NPR

Milling industry Monsanto, resistant wheat, wheat genetic, wheat prices

Cassava Root

American Key Food Products (AKFP) has applied for a patent for the production process of its gluten-free cassava flour and has begun initial production at its manufacturing facility in Brazil, the company has said.

A range of specialty flour and starch ingredients has come onto the market in recent years, as food manufacturers have looked for ways to tap into the market for gluten-free foods. But producing baked goods without gluten presents significant challenges, and can result in dry, crumbly, or gummy products. Gluten – the protein found in wheat, rye, barley and spelt – provides elasticity in kneaded dough products, allows leavening, and is important for the crumb structure and texture of many baked goods.

AKFP technical sales director Carter Foss told FoodNavigator-USA.com that while cassava flours found in their native regions are generally coarse, with a texture similar to corn meal, AKFP’s process produces a fine, soft flour. The company processes the whole root, Foss said, “so we are distinguishing ourselves like that too because there is still protein and fiber”.

He said that the company has spent more than a year developing the flour to have baking characteristics that closely mimic wheat flour in structure, texture and taste. The patent application covers various aspects of the manufacturing process, including particular milling and drying procedures, as well as the resulting flour itself.

“During the processing of it, we have to get the physical characteristics made correctly or the flour fails. It over-bakes and turns to dust,” Foss said.

The company said that its cassava flour can replace combinations of flours, starches and hydrocolloids in gluten-free baked goods, allowing for a simpler ingredient statement. AKFP said it has started pilot plant runs at its new Brazilian facility, but intends to have continuous production on line by the beginning of 2011.

Source: Food Navigator

Companies, Milling industry American Key Food Products, cassava flour, gluten-free

Co-ordinated EU-wide action is needed urgently to end food price volatility induced by market speculation, warns the European Flour Milling Association after wheat prices reached a 23-month high yesterday.

Speaking after Russian Prime Minister, Vladimir Putin announced a ban on grain exports leading to record price hikes, the association highlighted the corrosive effect of food speculators.

Laurent Reverdy, the association’s secretary-general told BakeryandSnacks.com: “We consider that this situation requires a significant reaction of public authorities to fight artificial and detrimental food price volatility induced by market speculation. We are convinced that European coordinated measures by public authorities are necessary to provide a clear signal to all operators on the futures commodity markets.”

Price inflation

Market speculation is a key reason behind the current price rises, he said. “The rise in cereal prices is market speculation, which seems to be fuelled by statements of speculators exaggerating the current uncertainty over harvest prospects in regions hit by adverse weather conditions. This leads to price inflation and affects the whole cereals chain.”

The association said it was difficult to gauge the impact of the temporary Russian grain export ban at this stage. But quotations on the EU cereals market have increased since the beginning of July by more than 40 per cent for wheat.

However independent market monitoring reports from the Food and Agriculture

Organisation (FAO), United States Department of Agriculture (USDA), European Commission (EC) and International Grains Council (IGC) all confirm that recent price rises are not supported by market fundamentals.

“Recent cereal crop estimates in key world growing regions (EU included) seem high enough to meet the global demand even with the severe setback in the Russian and Ukraine cereal harvest,” said Reverdy.

Yesterday, Putin confirmed a ban on the exports of grain and grain products from 15 August until 31 December 2010. “I think it is advisable to introduce a temporary ban on the export from Russia of grain and other agriculture products made from grain,” he said.

One of the world’s biggest producers of wheat, barley and rye, Russia exported a quarter of its grain output last year.

Following widespread drought and continuing wildfires, the country’s deputy agriculture minister Aleksander Belyayev recently predicted this year’s wheat harvest to be between 70-75m tonnes compared with 97m tonnes last year.

Speaking before the export ban the National Association of British & Irish Millers (NABIM) said it was too early to predict what effect the lower Russian harvest would have on the effect on European flour products such as bread and biscuits.

Too many variables

“The European wheat harvest is likely to be between 5 -10 per cent below forecast but, at present, there are too many variables, to predict the impact on bread and biscuit prices,” said a spokesman.

Meanwhile, EU’s internal market commissioner, Michel Barnier, condemned food price speculation last year. “Speculation in basic foodstuffs is a scandal when there are a billion starving people in the world. We must ensure markets contribute to sustainable growth. I am fighting for a fairer world and I want Europe to take the lead on that.”

Source: Bakery and Snacks

Milling industry grain exports, speculation, wheat prices