The battle at the intersection of ag retail and e-commerce has been heating up. And now it’s boiling over into the courts.
In early January, an Illinois farm family filed suit against a ‘who’s who’ of crop input manufacturers, distributors, and retailers claiming collusion. Those in the hot seat include Bayer, Winfield, CHS, Nutrien, and many other notable farm input giants.
The key claim: The ag defendants banded together and boycotted online sales platforms, like Farmers Business Network, to avoid price transparency and lock in high prices with cozy profit margins.
Where this goes: E-commerce drama and the ag input stratosphere are old pals. Time will tell where this most recent litigation will land.
Happy hour came early on Tuesday for Archer Daniels Midland with an epic 4th quarter earnings announcement.
The U.S. agrigiant noted revenue jumping 10.1% to nearly $17.98 billion while profits soared +36%. A shaky 2020 ended on a high note for the company despite lingering pandemic market dynamics, volatile commodity prices, and a mischievous Mother Nature.
So what led to the big gains?
→ Record-speed soybean processing crushed volume expectations while margins flexed.
→ Record-large U.S. crop exports [China wants all the corn] were very positive for the grain trader.
→ Record-high hand sanitizer sales plus the quarantine baking trend boosted the carbohydrate segment.
Talk about record-setting…
What’s ahead: ADM sees more green in its future. CEO Juan Luciano feels bullish, noting, “Based on the continued delivery of drivers under our control and improving market conditions as the year progresses, we expect strong growth in segment profit and another record year of earnings per share in 2021.”
Grain bin manufacturers and contractors will be rolling up their sleeves for the foreseeable future.
“On-farm storage demand is through the roof,” noted Nathan Luff, a Sukup/Brock dealer in Missouri. His take reflects industry vibes that demand this heavy hasn’t been seen in 10+ years.
How we got here: With the price of corn and soybeans soaring to recent highs and a solid 2020 harvest for most, many farmers are flush with money and are looking for a place to stash that cash. Hello, grain storage.
But it’s not just corn and soybean farmers who are driving demand…
- Wheat prices are up.
- Rice farmers had a strong production year.
- Even pistachio growers, who are experiencing record production, need – you guessed it – grain bin components.
And that’s not all. When the derecho ripped through the Midwest last August, it damaged or destroyed 120 million bushels of grain storage in Iowa. Bin builders are playing catch up like mad.
Add in strong export demand from China and commercial grain traders are begging for more storage, too.
Bottom line: With dealers booked solid through late summer and demand funneling from all corners of the industry, wildly long waitlists will become the 2021 norm.
In a nutshell, COVID-19 and export issues are putting a lot of pressure on the nut industry. Almonds and pistachios and walnuts, oh my, farmers in the nut industry are worried.
What’s COVID doing now? Some operations simply had fewer workers because of outbreaks while others had to shut down at the busiest time of the year, resulting in a loss of crop and revenue.
And it’s not just the pandemic. Exports also matter. With the retaliatory tariffs from China in 2018 and 2019, the nut industry was hit hard. One grower said China isn’t importing at the same levels as previous years.
Add in a top-notch harvest, and one grower summed it up by saying, “Record crops and poor economic conditions in importing countries are depressing prices.”
The big concern: 94 percent of nut growers are worried about where prices are headed.
The writing’s on the walnut. California ranks first in the production of almonds, walnuts, and pistachios in the U.S. Plus, California almond exports make up the majority of the world’s supply. All in, the California nut industry could lose between $486 million to $728 million.
Migratory bird patterns have accelerated the bird flu spread across Europe and Asia, and it’s not slowing down anytime soon.
New strains in wild birds upped the deadliness in recent weeks. Here’s a quick roundup of where things stand:
Europe: Battling the spread since November, Germany ordered another 37K chickens to be culled while France’s total slaughtered bird numbers will reach 600K by month’s end.
Middle East: The virus ventured south to Iraq, wiping out 92% of a 69K-bird flock.
South Asia: The world’s #6 poultry producer, India, is in the cross-hairs. A $450 million (USD) economic hit is estimated, and chicken prices fell almost a third as consumers become leery of the protein.
East Asia: Possibly facing the worst conditions, Japan and South Korea have collectively culled 20 million chickens since last fall. Precautions for domestic producers are on overdrive to stop the spread.
Cargill might need an extra shot of espresso in its morning brew to tackle its to-do list these days. But that comes with the territory when you’re one of the largest privately-held companies in the U.S.
Lots of industry news has Cargill’s name floating into headlines. Here’s just a sample:
Collaboration is the name of the game when it comes to blockchain, and Cargill wants to lead the pack. Working in partnership with several unidentified agrifood businesses, the company has revealed ‘Splinter,’ a new open-source software to tackle some million dollar problems.
The goal? To fix tracking and communication issues across supply chain partners – think producer → processor → distributor → retailer – while maintaining independent partners’ data privacy.
On its urgent and important docket, Cargill is playing nice with Canadian labor groups. Union groups claim Cargill undermined their leadership when they attempted to better protect workers at the High River beef plant in Alberta.
The plant saw nearly half of its 2,000 workers test positive with COVID-19 last May. The talks come just as a new investigation begins for one of the two worker deaths due to the virus.
To focus on food-processing and meat production, the company is in negotiations to sell its 50% stake in Alvean, the leading global sugar trader. While sugar prices may be high now, the trading group struggled when yields soared and prices plunged the majority of the past six years.
And they’re following suit: ADM, Bunge, and Louis Dreyfus Co. are all saying ‘hasta la vista’ to their respective sugar-related investments.
Drought trigger warning. 2021 precip conditions are looking parched for the southwestern U.S.
Early January’s drought index, with 46%-ish of the U.S. experiencing moderate drought or worse, is raising concern for what’s to come. Looking at you, La Niña.
Refresher: A few degrees difference can be disturbing. In a La Niña year, fierce winds over the Pacific Ocean push warm water west. Cold water rises to the surface. The eastern Pacific Ocean becomes a hair colder than normal. And we end up with a drier southwestern U.S. and a wet Australia and Indonesia.
USDA Meteorologist Brad Rippey says La Niña dryness should last through the spring of 2021 and possibly longer. “Multi-year La Niña episodes have occurred several times, including 2010-12 and 1998-2001.”
Wut. 2010-12 drought conditions? Pause. Breathe. We aren’t there yet. But if La Niña keeps being as grosera (Spanish word of the day: rude) as forecasted, states like CA, NM, AZ, TX, and FL could be on that track. Plus, crispy conditions can equal wildfire risk. And Cali’s snowpack was only 52% of its average as of Jan. 1.
Zoom out: Despite the leery forecast, CoBank set a positive tone for the second half of 2021 in their quarterly report. Optimism was tied to the steady rise of corn, soybean, and wheat prices in 2020’s fourth quarter and hope of a rebounding foodservice sector.
But cattle folks cringe. Drought conditions and slightly tightened supplies of these crops have feed costs estimated to climb 29% during 2021.
Last week, the USDA peeled back its report on the latest forecast for the 2020-2021 Florida citrus crop. And well…it’s worse than they thought.
The January outlook dropped by 2 million boxes from last month’s forecast, resulting in a projected 20% decrease from the 2019-2020 growing season.
By the numbers:
- 90 pounds, the industry standard for a “box” of oranges
- 67.3 million boxes, the final yield from the ‘19-’20 season
- 54 million boxes, the projected crop for this growing season
How we got here: Since it was first detected in 2005, citrus greening disease has caused a +75% decline in Florida’s production of oranges. The disease results in bitter fruit, and eventually…a dead tree. Plant breeders are working around the world and around the clock to develop resistant varieties of orange trees.
Citrus processors are also feeling the squeeze. Most of the Florida orange crop goes to filling your orange juice jugs. And although the pandemic has resulted in a slight uptick in OJ consumption, a long term downtrend paired with greening disease uncertainty has stressed the capital-intensive industry.
Glass half full: Even with the projected yield decline, the Florida Department of Citrus is staying positive: “Grapefruit production is up, growers continue to make great strides against citrus greening, and consumers are more focused on health and wellness than ever before.”
What’s a billionaire technology titan to do when he’s looking to diversify his mega net worth?
Head to the farm.
The Land Report revealed that Bill and Melinda Gates are the largest private farmland owners in the United States. The couple owns 242,000 acres across 19 states with the largest stakes in Louisiana, Arkansas, and Arizona.
The backstory: The land portfolio has been pieced together over the past several decades by Gates’ personal wealth manager and director of holdings for the Bill & Melinda Gates Foundation. The goal was to diversify Gates’ investments away from tech holdings, a majority of his portfolio.
But when it comes to agriculture, it’s not Gates’ first rodeo.
Gates and his foundation have made headlines for investing +$100 million in international agriculture development programs. He’s also become a notable early-stage investor in a wide array of agrifood startups like AgBiome, Apeel Sciences, Stellapps, Pivot Bio, and more.
+ Also on the ‘Land Owners Leaderboard’? The ‘Wonderful Company’ owners, Stewart and Lynda Resnick. Known for their pomegranate and pistachio brand, the couple has racked up 190,000 acres.