Tag Archives: food industry

North American farmers profit as consumers pressure food business to go green

By Karl Plume and Rod Nickel

CHICAGO/WINNIPEG, Manitoba (Reuters) – Beer made from rice grown with less water, rye planted in the off-season and the sale of carbon credits to tech firms are just a few of the changes North American farmers are making as the food industry strives to go green.

The changes are enabling some farmers to earn extra money from industry giants like Cargill, Nutrien and Anheuser-Busch. Consumers are pressuring food producers to support farms that use less water and fertilizer, reduce greenhouse gas emissions and use more natural techniques to maintain soil quality.

Investments in sustainability remain a tiny part of overall spending by the agriculture sector, which enjoyed healthy profits in 2020.

Some companies, like farm retailer and fertilizer producer Nutrien, are also opening new revenue potential for farmers by monetizing the carbon their fields soak up. The companies say technology is improving measurement and tracking of carbon capture, although some environmental activists question the benefit of such programs and how sequestered greenhouse gas volumes can be verified.

Sustainable techniques farmers are adopting include refraining from tilling soil at times to preserve carbon. Some are adding an off-season cover crop of rye or grass to restore soil nutrients instead of applying heavy fertilizer loads over the winter that can contaminate local water supplies.

A study conducted by agriculture technology company Indigo Ag estimated that if U.S. corn, soy and wheat farmers employed no-till and cover crops on 15% of fields, they would generate an additional $600 million by reducing costs, bolstering soil productivity or selling carbon credits.

Indigo has a partnership with brewer Anheuser-Busch Inbev NV, which plans to buy 2.6 million bushels of rice this year grown with less water and nitrogen fertilizer than conventional rice. Anheuser-Busch said that is up from 2.2 million bushels last year and accounts for 10% of its U.S. rice supplies.

Bill Jones, the brewer’s manager of raw materials, said farmers voluntarily growing rice with a lower environmental impact along the sensitive Mississippi River would be less disruptive to supplies than having local authorities require such practices by legislating changes to water and nitrogen use.

“We look at supply chain security. I see this gaining traction,” he said, noting that Minnesota and other U.S. states and conservation districts worried about polluting the Mississippi are already introducing limits on how much manure farmers can spread on fields. Arkansas farmer Carson Stewart used the program for the first time this year, earmarking his entire 340-acre rice crop to Anheuser-Busch. Depending on milling quality, his rice may earn up to $1.50 a bushel more than conventional rice, a premium of about 27%, he said.

10 MILLION ACRE SHIFT

While companies expect Washington and Ottawa to grow more committed to funding and regulating sustainable farming, industry sources and activists said widespread adoption remains far off.

“They come with high up-front costs,” said Giana Amador, managing director at climate-focused NGO Carbon180. “We’re seeing a huge differentiation in quality among all these corporate commitments .” In September, privately held Cargill Inc said it would help North American farmers shift 10 million acres to regenerative practices during the next 10 years by offering them financial support and training.

Pushed by demand for greener foods from food companies that buy its products, Cargill has already signed up 750 farmers to green programs, representing 300,000 acres, said Ryan Sirolli, Cargill’s director of row crop sustainability. With projects like one that pays Iowa farmers to leave soils untilled or to create field buffers to prevent fertilizer runoff, Cargill hopes to cut 30% of its supply chain greenhouse gas emissions over the next decade.

“We’ve done a lot to stop soil erosion. And we’ve had a reduction of 538 tons of CO2, which is the equivalent of taking 104 passenger cars off the road,” said Iowa farmer Lance Lillibridge, who estimates he will earn about $37 an acre in a Cargill pilot project this year.

Environmental groups and consumer activists are skeptical about such corporate sustainability pledges, noting that Cargill has not made good on its promise to eliminate deforestation from supply chains by 2020.

As more premium-paying buyers emerge, more farmers will be enticed into sustainable growing, said Devin Lammers, CEO of Gradable. The unit of input dealer Farmers Business Network matches farmers using sustainable practices with buyers such as Unilever, Tyson Foods and ethanol producer POET.

CARBON CREDITS

Some farmers are making money by verifying the amount of climate-warming emissions their fields soak up and selling carbon credits to polluting companies seeking to reduce their net emissions. Agribusiness companies call that a double win for farmers as their fields become healthier and they earn extra cash.

This week, Saskatchewan-based Nutrien said it was launching a sustainable agriculture program on 100,000 acres in the United States and Canada, with expansion planned later in South America and Australia.

Nutrien Chief Executive Chuck Magro estimated that farmers will earn an additional $50 per acre in profits under the program – $20 per acre for carbon credits and $30 per acre worth of higher crop yields.

The announcement followed Nutrien’s 2018 purchase of digital farming company Agrible, which helps farmers log reduced emissions and water use. Magro said in an interview that the aim is to enable farmers to use that data to sell carbon credits. He noted that previous efforts produced meagre returns that were not worth the effort for farmers who had to wade through hundreds of pages of documents.

Agriculture accounts for 3% of the global carbon credit market, but that looks to grow to 30% by 2050, Magro said. “We see carbon being the next big agricultural revolution,” he said.

Matt Coutts, chief investment officer of 100,000-acre Coutts Agro in Saskatchewan, plans to sell carbon credits through Nutrien for up to 10,000 acres per year of canola, lentils and spring wheat. He expects they could eventually generate at least C$75,000 in annual additional revenue. Ohio-based start-up Locus Agricultural Solutions helped Iowa farmer Kelly Garrett create 22,400 tonnes in carbon credits by verifying his fields locked in about 1.4 tonnes per acre from 2015 to 2019. Garrett received a check for 5,000 of those credits in November, after e-commerce platform Shopify bought them on the carbon trading marketplace Nori for $75,000.

“The ability to sell our carbon credits through the Nori system and help the rest of the world be more green is a wonderful benefit to our economy and our finances,” Garrett said.

Still, Nori noted that Microsoft Corp passed on a deal to buy most of Garrett’s remaining credits because they were not verified by on-farm soil tests. Nori deems individual soil tests too costly, and instead verifies its credits based on soil type, crops planted and other data, said Alexsandra Guerra, the company’s director of corporate development.

Microsoft declined to comment. Few North American farmers have gone through the vetting process Garrett underwent, which also limits supplies of the high-quality carbon credits that some buyers seek. Some critics say carbon saved from no-till farming can easily escape if the soil is tilled again. “Statements that soils can sequester all of our emissions and more are overstated … There’s no way we could make that shift fast enough to address the climate crisis,” said Tara Ritter, senior program associate with the Institute for Agriculture and Trade Policy.

PAYING UP FRONT

Despite those doubts, food companies are banking more on carbon capture and regenerative agriculture. General Mills offers farmers technical advice while other companies pay growers up front to adopt greener practices. PepsiCo, maker of Quaker Oats and Frito-Lay chips, pays farmers $10 an acre to plant cover crops over winter, which can reduce erosion and control weeds and insects.

This helps PepsiCo meet its sustainability targets and secure its food supply, said director of sustainable agriculture Margaret Henry. PepsiCo subsidized cover crops such as rye and radish last year across 50,000 Midwest acres and plans to grow the program further.

Henry pointed to an added benefit: Cover crops soak up excess moisture, making many fields ready for spring planting two weeks earlier than fields that lay fallow. “We want this to be a win win for the long term,” she said.

(Reporting by Karl Plume in Chicago and Rod Nickel in Winnipeg, Manitoba; Editing by Caroline Stauffer)

U.S. factory activity slows as COVID-19 infections accelerate

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. manufacturing activity slowed in November, with new orders retreating from their highest level in nearly 17 years, as a resurgence in COVID-19 cases across the nation kept workers at home and factories temporarily shut down to sanitize facilities.

The Institute for Supply Management (ISM) on Tuesday warned that absenteeism at factories and their suppliers as well as difficulties in returning and hiring workers would continue to “dampen” manufacturing until the coronavirus crisis ended.

The softening in factory activity supports expectations for a sharp deceleration in economic growth in the fourth quarter.

“The feared economic slowdown is starting, but it is pretty slow off the blocks,” said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania.

The ISM’s index of national factory activity dropped to a reading of 57.5 last month from 59.3 in October, which had been the highest since November 2018. A reading above 50 indicates expansion in manufacturing, which accounts for 11.3% of the U.S. economy.

Economists polled by Reuters had forecast the index would slip to 58 in November. Sixteen manufacturing industries, including wood products, machinery and transportation equipment, reported growth last month. Petroleum and coal products, as well as printing and related support activities industries, contracted.

The United States is in the grip of a fresh wave of COVID-19 infections, with more than 4 million new cases and over 35,000 coronavirus-related deaths reported in November, according to a Reuters tally of official data. The virus is likely to disrupt production at factories. Manufacturing output is still about 5% below its pre-pandemic level, according to the Federal Reserve.

Coronavirus infections are exploding at a time when more than $3 trillion in government COVID-19 relief has run out. The fiscal stimulus helped millions of unemployed Americans cover daily expenses and companies keep workers on payrolls, leading to record economic growth in the third quarter.

Slowing manufacturing activity followed on the heels of data last week showing consumer spending cooling in October.

The economy grew at a historic 33.1% annualized rate in the third quarter after contracting at a 31.4% rate in the April-June period, the deepest since the government started keeping records in 1947. Growth estimates for the fourth quarter are mostly below a 5% rate.

A second report from the Commerce Department on Tuesday showed a solid increase in construction spending in October, but outlays in September actually declined instead of rising modestly as was previously estimated.

Stocks on Wall Street were trading higher, with the S&P 500 index and the Nasdaq hitting record highs on hopes that a COVID-19 vaccine would be available soon. The dollar fell against a basket of currencies. U.S. Treasury prices were lower.

MIXED VIEWS

“Rising COVID-19 cases in the U.S and the absence of additional fiscal stimulus could weigh on factory conditions over the next couple of months,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.

Manufacturers last month offered mixed assessments of business conditions. Transportation equipment makers said the flare-up in COVID-19 cases was straining suppliers, with labor the main issue, impacting production.

In the food industry, factories were “sending employees home for 14 days to quarantine,” and “had to shut down production lines due to lack of staffing.” But fabricated metal producers reported strong business and they expected demand to continue growing in 2021. Machinery manufacturers were also upbeat, though they said the coronavirus remained a concern.

ISM’s forward-looking new orders sub-index fell to a reading of 65.1 in November from 67.9 in October, which was the highest reading since January 2004. Manufacturing employment contracted after expanding in October for the first time since July 2019.

ISM’s manufacturing employment gauge dropped to a reading of 48.4 from 53.2 in October. That likely reflects the absenteeism due to the coronavirus as well as layoffs as demand softens. It fits in with economists’ expectations that job growth slowed further in November. Manufacturing accounts for more than 10% of private payroll employment.

“Today’s news of layoffs in the sector, either planned or unplanned, is a worrisome sign that shows there is not a clear path to winning here for the economic outlook as 2021 approaches,” Chris Rupkey, chief economist at MUFG in New York.

About 12.1 million of the 22.2 million jobs lost in March and April have been recovered. The government is scheduled to publish November’s employment report on Friday.

(Reporting by Lucia Mutikani; Editing by Dan Burns and Paul Simao)

British supermarkets battle to secure stocks as chaotic Brexit looms

By James Davey and Kate Holton

LONDON (Reuters) – Britons could face shortages of fresh food at their supermarkets, price rises and less variety if the country leaves the European Union next month without agreeing on trade terms, food industry officials say.

With no deal in sight as Britain’s March 29 exit date approaches, supermarkets are stockpiling, working on alternative supplies and testing new routes to cope with an expected logjam at the borders but say they face insurmountable barriers.

“You can’t stockpile fresh produce, you haven’t got any space and it wouldn’t be fresh,” said Tim Steiner, head of online supermarket pioneer Ocado.

The warnings, including talk of whether rationing would be needed, are part of a chorus of concern from businesses who say they are weighed down by uncertainty in what was once considered a bastion of Western economic and political stability.

The last time Britain’s food supplies were seriously hit was when fuel protests prompted panic buying almost two decades ago, forcing some supermarkets to ration milk and bread and others to warn that stocks would run out in days.

Executives within the food chain said Britain was better prepared than 2000, but disruption may be more widespread and last longer than the few days it took before the fuel dispute was settled.

James Bielby, head of the Federation of Wholesale Distributors, says its members’ retail and catering customers were asking for between one and eight extra weeks’ supply. But storage is limited in an industry that operates on a “just in time basis” to maximize the shelf life of goods.

Intense competition and slim margins in the British supermarket sector have also made contingency planning more complicated. James Walton, chief economist at IGD which works with the industry to improve supply chains, said storage had been reduced over many decades to hold down working capital.

What remains is now full. “So surplus space within stores is being used and containers are in carparks,” he said.

Mike Coupe, the boss of Britain’s second biggest supermarket Sainsbury’s, said supplies would not last long. “We don’t have the capacity and neither does the country to stockpile more than probably a few days’ worth,” he said in January, echoing the supermarket’s warning to then-Prime Minister Tony Blair in 2000 during the fuel crisis.

FILE PHOTO: An employee operates a forklift to move goods at the Miniclipper Logistics warehouse in Leighton Buzzard, Britain December 3, 2018. REUTERS/Simon Dawson/File Photo

FILE PHOTO: An employee operates a forklift to move goods at the Miniclipper Logistics warehouse in Leighton Buzzard, Britain December 3, 2018. REUTERS/Simon Dawson/File Photo

LET THEM EAT LEEKS

Britain imports around half of its food, and while some is flown in via air freight, most enter on trucks through Dover, Britain’s main gateway to Europe.

At peak times, 130 trucks a day are required to drive through Dover bringing citrus fruit alone, according to the British Retail Consortium. In March, inclement British weather means 90 percent of lettuce comes from the EU.

If it leaves without a trade deal, Britain will move on to World Trade Organization rules that require tariffs to be paid, goods to be checked and paperwork to be completed, demands that do not currently exist for goods coming from within the EU.

The English Apples & Pears group said British farms have been asked to provide more apples until the end of April by retailers who usually source more from the southern hemisphere from March.

Other substitutions are more difficult.

“People just say we’ll eat more British produce but … would people be happy to start eating tonnes of British leeks? I’m not sure,” said an executive at one of Britain’s four major supermarket groups, who declined to be named because of the possible business impact.

“We have to plan for the worst,” he said, before adding that he hoped Britain would delay its departure date from the EU.

‘BUNKER LINES’

Consultants, suppliers, company sources and trade groups said importers were looking at securing new routes into Britain in case customs checks clog up Dover, but no other port offers that frequency of ferry sailings or trains through the tunnel.

They would also have to compete with companies importing drugs, car parts and chemicals that are also looking to alternative ports on the south and east coast of Britain.

The Spanish wine federation said they had advised members to avoid shipping goods to Britain around the end of March.

Supermarkets could fly in more goods – as they did to bring in lettuce from America in 2018 when bad weather hit European supplies – but it is expensive and capacity is limited.

William Bain, a policy adviser at the British Retail Consortium, said clients and suppliers were having talks now to discuss how costs and risks would be shared if stock is delayed.

Elsewhere in the food chain, suppliers of TV dinners are considering changing ingredients to remove those with the shortest shelf life, according to the Fresh Produce Consortium.

All of these changes could lead to higher prices however, with changes to recipes requiring changes to labeling.

Dominic Goudie, in charge of exports, trade and supply chains at the Food and Drink Federation, told Reuters prices were likely to rise, regardless of the outcome.

“We know from our members that they are investing staggering sums into getting ready for the worst possible no-deal scenario,” he said. “The sums are so large that manufacturers need to pass it on to their customers, the retailers.”

Another senior executive at a major British food retailer told Reuters they had seen no signs yet of Britons buying so-called ‘bunker lines’ – toilet paper, bottled water and canned food. But it could happen before March 29.

“If you’ve got a limited amount of food, you want to distribute it fairly across the country,” he told Reuters. “So you almost get to this ridiculous notion of rationing.”

Some of Britain’s deeply-divided politicians who are seeking a complete break with the EU say the economy would soon recover from any short-term hit as it adapts to new trading routes after Brexit.

They argue that talk of food shortages and rationing is scaremongering driven by the government to rally support for Prime Minister Theresa May’s proposed Brexit deal, agreed with the EU but showing little sign of getting sufficient support from her own parliament.

Environment minister Michael Gove, who backed Brexit, has said leaving without a deal could lead to higher prices, but that the government has chartered extra ferries to maintain the movement of goods. “We are meeting weekly with the food industry to support their preparations for leaving the EU,” a spokesman said.

Tesco chairman John Allan said the retailer, Britain’s biggest with 3,400 stores and almost 28 percent of the market, was stockpiling goods with a long shelf life but that its options for fresh produce was more limited.

“So provided we’re all happy to live on Spam and canned peaches all will be well,” he added.

(Writing by Kate Holton; additional reporting by Blanca Rodriguez Piedra in Madrid; editing by Guy Faulconbridge and Philippa Fletcher)