Can a new commodities boom revive Brazil?

The country has become one of the leading producers of foodstuffs, but traditional manufacturing is in steep decline

Michael Pooler in São Bernardo do Campo and Bryan Harris in Ribeirão Preto 

     © Silvio Avila/AFP/Getty


Roughly every other glass of orange juice drunk around the world comes from the orchards of São Paulo state, boasts Duarte Nogueira.

“We have everything beginning with the letter ‘C’,” says the mayor of Ribeirão Preto, a city four hours inland from the state capital, before reeling off the Portuguese names of produce cultivated in the region.

“Coffee, sugarcane (cana), citruses, meat (carne) and cellulose,” the main ingredient for paper. 

“Agriculture is growing more and more and it is not only a virtue of our region but of Brazil.” 

The South American nation is now one of the world’s top producers of foodstuffs — from soyabeans to sugar and beef to bananas. 

Blessed with an abundance of natural wealth, such as vast iron ore deposits and deep sea oil reserves, Brazil also supplies some of the most important raw materials for modern economies. 

Latin America’s largest economy is now riding a rally in prices for many of these basic goods, as Covid-19 restrictions lift and worldwide growth returns. Among bullish traders there is even talk of a new commodities “supercycle”.


Duarte Nogueira: ‘Agriculture is growing more and more and it is not only a virtue of our region but of Brazil’ © Ricardo Lisboa/FT


After disruptions in global supply chains constrained availability for certain items, demand has been stoked by a resurgent China sucking in resources and governments spending on recovery programmes, notably the US. 

The Bloomberg Commodity index, following a sharp drop around the start of the pandemic, has rebounded to levels not seen since 2015. 

Global food costs dropped for the first time in a year last month, with price declines for vegetable oil, cereals and dairy products according to a UN index, but the gauge was still more than 30 points higher than its level for the same period in 2020.

The impact is being keenly felt in Brazil’s agribusiness sector. 

Combined with a weakened exchange rate, which boosts revenues from products quoted in dollars, it is a boon to many Brazilian farmers and surrounding communities.

Maurílio Biagi Filho, a tycoon from a sugar and ethanol family in Ribeirão Preto, describes as “very rare” the confluence of high agricultural prices and record production. 

“When that happens, when you have both things going for you, it’s extraordinary,” he adds.

The region around Ribeirão Preto, or the “Brazilian California” as it is sometimes called, is testament to the prosperity that has flowed from an explosion in the country’s agriculture over recent decades. 



Porsche and BMW car dealerships are interspersed among rows of luxury high-rise apartments in a southern district of the municipality. Its population has expanded by two-thirds over the past 30 years. 

However, the affluence is a far cry from the problems now assailing large parts of the nation of 213m people.

Millions have lost work because of the public health crisis, leading to a record unemployment rate of almost 15 per cent. 

In a country of plenty, hunger has risen as inflation — in no small part driven by higher prices for Brazilian goods on international markets — pushes everyday items out of reach.

For ordinary citizens and investors alike, how the commodities upswing plays out will have an important bearing not only on Brazil’s convalescence from Covid-19 but on its destiny in the years to come. 

There are hopes it will kickstart an economy that was sluggish even before the pandemic and help to unlock the country’s long-promised potential.

A “window of opportunity” is opening for Brazil, says Gustavo Arruda, an economist at BNP Paribas. 

“There is a boom that we can take advantage of. You can spend [the gains] and do nothing. Or else make the most of it and get things done,” he says, alluding to structural reforms to make the economy more competitive that have been promised for two decades.

The South American nation is now one of the world’s top producers of foodstuffs © Yasuyoshi Chiba/AFP via Getty Images


Yet despite the renewed optimism, there are obstacles that might prevent the commodities upswing from translating into a broader recovery.

It will require policymakers to avoid the mistakes of the previous commodities bonanza of the 2000s. 

Then an emerging markets darling, Brazil’s performance would later disappoint as opportunities were missed to boost productivity by improving infrastructure and slashing red tape.

And in parallel to the farming boom, a drawn-out deindustrialisation is occurring in Brazil, with factory closures and lay-offs as many traditional manufacturers struggle to remain competitive.

How Brazil grapples with these two trends may determine whether the country can break free from an age-old pattern of boom and bust that goes back to its origins as a resource colony.

At the metalworkers’ union headquarters in the ABC region, named after three industrial towns south of São Paulo, where former president Luiz Inácio Lula da Silva made his name as a strike leader during the military dictatorship, director Aroaldo Oliveira da Silva says booming agriculture by itself will not be sufficient to lift society.


“[When] it’s over once and for all, we’re actually going to be an agrarian country. 

But then we will be in absolute misery. 

Because nowadays, agriculture is so mechanised that it does not absorb labour,” he says. 

“Brazil will not sustain itself with agribusiness alone.”

Breadbasket of the world

Throughout its history, Brazil’s fortunes have often been tied to export manias. 

From sugar in the early days of Portuguese conquest through to gold, coffee and the Amazonian rubber rush of the late 19th century.

During the 2000s it surfed the wave of the commodities supercycle, a prolonged period of high prices. 

Under Lula, poverty rates fell as his left-leaning administrations spent part of the fiscal dividends on social programmes.

But as that boom cooled, there followed a lost decade in which living standards tumbled. 

A huge corruption scandal, failed interventionist policies under Lula’s successor Dilma Rousseff, and mass protests that foreshadowed her impeachment provided the backdrop to what was then the country’s worst ever recession in 2015-16.

The region around Ribeirão Preto is testament to the prosperity that has flowed from an explosion in the country’s agriculture over recent decades © Nelson Almedia AFP via Getty Images


Despite the tumult of recent times, though, its farming belt has continued a quiet revolution that has cemented its status as an agricultural powerhouse.

“In the 1970s, Brazil was food-insecure. We imported everything: meat from Europe, milk from the US, beans from Mexico, apples from Argentina,” says Celso Moretti, president of Embrapa, a government-run agricultural research body.

“In less than five decades, we were able to establish sustainable and competitive tropical agriculture that has no parallel in the modern world,” he adds. “We have areas that we crop twice or three times a year.”



Much has centred on the Cerrado, or savannah, in the highlands of central Brazil that occupies more than a fifth of national territory. 

New techniques and technological developments, as well as the conversion of forest land, has transformed huge expanses in places such as Mato Grosso into plantations reminiscent of the American midwest.

The results have been remarkable. Today, the South American country is the largest producer of soyabeans and coffee as well as the biggest exporter of both beef and sugar. 

“Brazil is already the breadbasket of the world. 

We have the largest agricultural trade balance,” says José Carlos Hausknecht of agribusiness consultancy MB Agro Consultoria. 

“When we look at future projections, Brazil increases its share of the world market.”

Expensive goods: key measures of food price inflation are currently at high levels © Nelson Almedia AFP via Getty Images


This has offered a rare bright spot from the domestic gloom. 

As Brazil’s gross domestic product contracted 4.1 per cent last year during the pandemic, only agriculture registered positive growth, of 2 per cent.

Agribusiness as a whole, comprising inputs, farming and livestock, processing and services, has increased its share of the economy during the pandemic and could surpass more than 30 per cent of gross domestic product this year, according to estimates by the Centre for Advanced Studies in Applied Economics at the University of São Paulo (USP).

And despite the worst drought in almost a century in central Brazil and a more modest growth forecast, a record-breaking harvest of grains, cereals and oilseeds is expected in 2021, according to Brazilian statistics authority IBGE.

“In the years of poor performance we had in the economy, GDP performance would have been worse if not for agricultural exports,” says Pedro Dejneka at market intelligence group MD Commodities.


While this has enriched a relatively small number of landowners and ranchers, it is less clear whether the new commodities boom, including the windfall from higher iron ore prices, will spread wealth more widely throughout society. 

Marcos Fava Neves, an agribusiness expert at USP, points to Ribeirão Preto as an example of how agriculture can fuel urban development. 

“When you go to these cities built in the last 30 years, they have fancy hotels, nice restaurants, fitness centres and ice cream stores. 

Agribusiness brings the money, and then you see the service business booming. 

Ribeirão has four big malls — even by the US standard that is too much,” he said. 

“The growth of opportunities will be in the countryside.”

Arruda from BNP Paribas acknowledges that while there are positive knock-on effects from the commodities sector, it has a concentrating effect on income which can exacerbate inequality. 

Modern agriculture requires large properties, but little need for labour and has less dependence on other sectors, while effective taxes levied on the exports are typically low. 

“There is very high productivity in few hands,” he adds.

When Ford decided this year to quit manufacturing in Brazil after a century in the country, it stunned thousands of workers © Amanda Perobelli/Reuters


Factories floored

The ascendancy of Brazil’s agricultural sector is taking place at a time of malaise in its manufacturing sector. 

When Ford decided this year to quit manufacturing in Brazil after a century in the country, it stunned thousands of workers and dealt a blow to national pride.

Yet it was just the latest in a string of exits that has rung alarm bells. 

Mercedes-Benz ceased passenger car production not long before (though it still builds trucks), while brands including Sony and Canon have also ended operations.

Finance minister Paulo Guedes recently commented on the fact that the agribusiness sector’s share of GDP has overtaken that of “transformation” industries, a broad term covering all forms of manufacturing from plastics and pharmaceuticals to beverages and cars. 

He did not mince his words: “We are slowly being deindustrialised, which is bad for the country.”

One of the ironies of this process is that shortages of steel and components have resulted in slower deliveries for farm equipment.

With its smokestack petrochemical plants, car factories and metal workshops, the ABC region has for decades been the beating industrial heart of Brazil’s most developed state.

But the biggest of the three, São Bernardo do Campo, was already having to cope with Ford’s earlier closure of a factory with the loss of almost 3,000 jobs in 2019.

Mayor Orlando Morando insists the decision was down to the US automaker’s global strategy at the time, rather than local factors. 

The old site is now being converted into a logistics centre, as the municipality looks to further diversify its economy.

However, the ABC region is no longer the magnet it once was for internal migrants from poorer states. 

“In the past, great fortunes were concentrated in the metropolises,” says Morando. 

“Today there is a big concentration of wealth in the countryside.”

The trend of deindustrialisation is long-running. 

Since the mid-1980s manufacturing’s share of GDP has halved, according to analysis by the Getúlio Vargas Foundation. 

Between 2013 and 2019, 1.4m industrial jobs were lost, or 15 per cent of the workforce, IBGE figures show. 

Experts say this matters as industry tends to create more secure employment and has a stronger “multiplier effect” on other areas of economic activity.

Rafael Cagnin, an economist at the Institute of Studies for Industrial Development think-tank, describes Brazil’s experience as “premature”, compared with more advanced economies that were richer when the hollowing out began.

Outsourcing of low-tech activities such as clothing, textiles and shoes to lower-cost countries often happens as an economy becomes wealthier, he explains. 

“But in the Brazilian case, much of the premature deindustrialisation comes from activity of greater technological intensity, like machinery and equipment, chemicals, petrochemicals and the automobile industry.”

“[It] has blocked the continuation of the country’s development,” he adds. 

There are still undoubted examples of excellence. 

The world’s third-largest aircraft maker, Embraer, is the jewel in the crown of Brazilian engineering. 

But for Cagnin, the “industrial fabric” as a whole has decayed.

An employee prepares the ‘Stella Pearl’ cargo ship heading to China at the Tiplam terminal in Santos, Brazil © Patricia Monteiro/Bloomberg


Export dependency

As commodity prices tend to be quite volatile, greater dependence on such exports risks leaving a country more exposed to the ups and downs of global cycles.

But Brazil’s farming sector blurs the distinction that economists sometimes draw between producing commodities, which is often a low value-added activity, and the more sophisticated products and services that generate greater wealth for a society.

“Agribusiness now is not just farms, because we export technology, machines and software. 

We have a lot of start-ups,” says Denis Arroyo Alves, director at Orplana, an association of sugarcane producers. 

“It is a new economy based in the countryside.”

To optimists, this offers an opportunity to revitalise Brazilian industry and expand other connected advanced activities. 

From “smart” heavy-duty machinery and self-driving tractors to “green” chemistry, electronics and computer programming, they say there is considerable potential given the right support and conditions. 

A thriving scene of “agritech” start-ups shows many entrepreneurs are already grasping this.

“Agribusiness can be a catalyst for re-industrialisation,’‘ says Cagnin. 

“Although this does not yet exist on a large scale, there are instances.”

As sellers of soyabeans and beef in particular come under pressure to prove their supply chains are free from deforestation, for example, there will be greater need for satellite tracking and reliable tracing systems.

With threats of products boycotts from European consumers and supermarkets over the Amazon, environmental protection — given short shrift by President Jair Bolsonaro — is likely to become an even more important theme for big agribusinesses, as will decarbonisation. 

Both will involve innovations, technology and R&D investments. 

Brazil’s farming sector blurs the distinction that economists sometimes draw between producing commodities and the more sophisticated products that generate greater wealth for a society © Carl De Souza AFP via Getty Images


Yet many economists stress the need for deep reforms to help tackle the notorious custo Brasil — the cost of doing business in Brazil — which holds back manufacturers. 

This will include dealing with byzantine taxes, burdensome bureaucracy and creaking — or nonexistent — infrastructure, particularly in transportation. 

A tax reform bill is now making its way through Congress. 

But with elections in just over a year’s time, there are doubts about the political desire to enact the sweeping changes necessary.

Unlike the last commodities boom, this time around China is unlikely to return to the astronomical growth rates that transformed it into a commercial superpower. 

Many analysts predict a strong but shorter upswing as warehouse stocks are replenished following the chaos of Covid.

“There will be a two to three-year wave of accelerated growth,” says Welber Barral, co-founder of BMJ Consultores Associados. 

“A great recovery, but after that it is unknown.”


Additional reporting by Carolina Pulice

Taliban triumphant

America may pay dearly for defeat in Afghanistan

Joe Biden defends his decision, but it could haunt his presidency


JOE BIDEN may have more foreign-policy experience than any American president in 30 years, but he is haunted by the brutal assessment of his judgment by Robert Gates, who was secretary of defence under the president both men served, Barack Obama. 

Mr Gates called Mr Biden “a man of integrity” whom it was impossible not to like. 

Yet, writing in “Duty”, his memoir, he added: “I think he has been wrong on nearly every major foreign-policy and national-security issue over the past four decades.”

It is too soon to know whether history will add Mr Biden’s decision to withdraw from Afghanistan to a list of calls that includes support for the war in Iraq and opposition to the raid to kill Osama bin Laden. 

But in the short term the abandonment of Afghanistan to Taliban rule after nearly 20 years of American commitment—the images of Afghans clinging to departing jets and then falling to their deaths, the stench of great-power humiliation that recalled the evacuation of Saigon in 1975—mocks Mr Biden’s claims that “America is back”; that conviction in democracy and compassion for the oppressed have a place beside self-interest at the centre of his foreign policy; and that at least, after four years of buffoonery, American leadership is once again competent.

Under withering bipartisan criticism for the first time in his presidency, Mr Biden staunchly defended his decision in an address to the nation on August 16th. 

Although he said “the buck stops with me”, he reserved plenty of blame for his predecessor, Donald Trump, saying that reneging on a peace deal agreed with the Taliban by Mr Trump would have trapped American soldiers once again in an escalating conflict.

President Biden also blamed Afghan leaders who “gave up and fled” and Afghan security forces who did not fight. 

The velocity of the collapse, he said, showed he had made the right decision. 

“American troops cannot, and should not, be fighting in a war, and dying in a war, that Afghan forces are not willing to fight for themselves,” he said. 

In essence, he argued the Afghans failed their American allies, rather than the other way around. 

He was the fourth president to preside over this war, he said, and he refused to hand it on to a fifth: “How many more generations of America’s daughters and sons would you have me send to fight Afghanistan’s civil war?”

Mr Biden claimed his team had planned for “every contingency” but acknowledged the collapse came faster than he expected. 

As recently as on July 8th Mr Biden had dismissed any chance that American diplomats might wind up scrambling for an exit as they did in Vietnam. 

“None whatsoever,” he said. “Zero.” 

He said the possibility of “the Taliban overrunning everything and owning the whole country is highly unlikely”.

Republicans, including Mr Trump, said Mr Biden had botched the exit. Mike Pompeo, Mr Trump’s secretary of state, rejected any suggestion that Mr Trump’s deal was the problem as “pathetic blame-shifting”. 

Yet, appearing on August 15th on “Fox News Sunday with Chris Wallace”, Mr Pompeo also apportioned blame to the Afghan president, Ashraf Ghani, calling him more interested in accumulating American money than in talking to his own people, and he said the American armed forces had failed across two decades to train Afghan forces. 

Reporting by the Washington Post and others has shown the armed forces and civilian leaders misled the public throughout the war, insisting on progress that did not exist, including in training Afghan soldiers. 

In fact, by supplying so much combat experience, America appears to have been more effective in training Taliban fighters. 

Veterans are stepping forward to say they now feel their sacrifices were for nothing, a conclusion that should help force a reckoning within the armed forces, as after Vietnam.

Americans’ reaction to the disintegration of the 20-year mission in Afghanistan—to the gruesome images on their television screens—is not yet clear. 

Polling as recently as on August 9th has shown that, if asked to express a view, Americans said they supported Mr Biden’s withdrawal. 

The left within the Democratic Party wanted America out long ago, and his establishment Democratic critics have no other political home. 

Mr Trump’s own disdain for America’s involvement in Iraq—he previously criticised Mr Biden for not pulling troops out sooner—has blunted attacks by Republicans, leaving them to attack the manner of the withdrawal rather than the fact it happened. 

Further, the overnight evaporation of the Afghan security forces, after the commitment of more than $80bn from America, may lead many Americans to agree with Mr Biden that it was the Afghan leadership that failed. 

That said, images of Taliban brutality may shift the politics against the administration.

From the left and right, critics of Mr Biden’s withdrawal insist that America could have indefinitely sustained the recent, uneasy status quo in Afghanistan by maintaining a small support presence of perhaps 2,500 soldiers. 

These critics view Mr Biden as repeating the mistake Mr Obama made in Iraq in 2011—at the urging of Mr Biden. 

In withdrawing American troops then, Mr Obama opened the door to a takeover by Islamic State.

Mr Biden’s aides respond with their own counter-factual. Antony Blinken, the secretary of state, insisted it was only the American commitment to withdraw that had led the Taliban to suspend attacks on American troops. 

Had the Biden administration reneged, he said on the NBC program Meet the Press on August 15th, “I would be on your show right now explaining why we were sending tens of thousands of forces back into Afghanistan to restart a war that we need to end.”

Mr Blinken noted the Americans had expended a trillion dollars and more than 2,300 lives in Afghanistan. 

He said they had stayed longer than the British in the 19th century and twice as long as the Soviets in the 20th century. 

“There is nothing that our strategic competitors would like more than to see us bogged down and mired in Afghanistan for another five to ten to 20 years,” said Mr Blinken, appearing weary and pained. 

“That is not in the national interest.” 

Pressed on whether the administration was closing its embassy, Mr Blinken said it would maintain a core presence of diplomats and “in effect, an embassy, at a location at the airport”.

Mr Biden has said he will be judged in the end on whether a terrorist threat to America emerges again from Afghanistan. 

His aides insist that advances in military intelligence, tactics and capabilities since the 9/11 attacks mean that American forces will be able to pre-empt any danger. 

Along with the probable resistance of Pakistan to future counter-terrorism operations, the evident failure of American intelligence to anticipate the Taliban’s onslaught calls that assurance into question.

So does Mr Biden’s own inconsistent advocacy over the years for the use of force. 

He supported NATO air strikes in the Balkans, and opposed George H.W. Bush's war against Iraq before supporting George W. Bush’s second one. 

In the years since he has been more frequently an advocate of restraint, opposing Mr Obama’s intervention in Libya as well as his decision, in response to a renewed Taliban threat in 2009, to dispatch 30,000 soldiers to Afghanistan. 

Since Mr Biden was a child he has always been a risk-taker, trusting in the end in his own judgment. 

That pattern led to another appraisal that has long troubled him, from a largely admiring portrait in the great chronicle of American presidential politics, “What It Takes”, by Richard Ben Cramer. 

“Joe Biden had balls,” Mr Cramer wrote. 

“Lot of times, more balls than sense.”

 Milking it

As food prices soar, big agriculture is having a field day

How long will it last?


TROUBLE IS BREWING in America. 

The reopening economy’s hunger for goods from China, and for the containers that carry them, has left importers of coffee, of which the average American guzzles two cups a day, struggling to ship the stuff from Brazil. 

They are using whatever they can get, says Janine Mansour of Port of New Orleans, where much of America’s raw coffee lands. 

That includes much bigger boxes, which reach maximum allowed weight before they are full. Importing part-empty containers adds extra costs, Ms Mansour says, and these will ultimately be swallowed by consumers.


It isn’t just coffee prices in America that are rising. 

Transport logjams and paltry harvests in producing regions have conspired with surging demand to stoke food inflation across the smorgasbord. 

The UN Food and Agriculture Organisation (FAO) expects the value of global food imports to reach nearly $1.9trn this year, up from $1.6trn in 2019 (see chart). 

In May its index of main soft commodities hit its highest value since 2011, after rising for 12 straight months. 

Another benchmark index, by S&P Global, a research firm, has risen by 40% since July 2020. 

On July 22nd the boss of Unilever, the Anglo-Dutch maker of everything from Ben & Jerry’s ice cream to Hellmann’s mayonnaise, said that pricier raw materials have caused his firm’s costs to swell at their fastest pace in a decade.


Some economists warn that the price spikes could feed broader inflation, which is already on the rise in many countries. 

That would be bad for consumers. 

But their loss is a gain for the giant firms that source, store and ship foodstuffs on behalf of state buyers and multinational companies. 

These opaque traders, which possess the networks of silos, railways and vessels, as well as the data and relationships, necessary to redraw supply routes, thrive on volatility. 

The four biggest—ADM, Bunge, Cargill and Louis Dreyfus, collectively known as the ABCDs—have been adding to their total workforce of 240,000 and ploughing billions of dollars into new businesses that rely less on cycles of feast and famine. 

Their prospects offer a foretaste of global food markets in decades to come.

The ABCDs have been matching buyers and sellers of foodstuffs for more than a century. 

The youngest of the four, ADM, was founded in 1902. 

The oldest, Bunge, dates back 84 years before that. 

In the decades to the early 2010s they thrived on the back of population growth, rising prosperity and accelerating globalisation.

Down on the farm

Then they began to wilt. 

A prolonged glut of crops kept prices low and stable, squeezing margins. 

Smartphones and other technology put real-time data on local conditions and global prices at farmers’ fingertips, reducing the middlemen’s market power. 

Producers bought storage to ride out price swings, which decreased arbitrage opportunities. 

Challengers emerged, including Viterra, the agricultural arm of Glencore, a large commodity-trader-turned-miner, and COFCO International (CIL), the overseas trading arm of China’s state-owned food giant. 

Between 2013 and 2016 the ABCDs’ combined sales plummeted from $351bn to $250bn.

The revenues have stayed flat since. 

But last year was nevertheless a bumper one for the ABCDs, whose combined net profits doubled, to $4.5bn. 

Analysts expect ADM and Bunge, which are publicly traded and report second-quarter results this week, to do even better in 2021. 

All four benefit from abruptly changing patterns of demand for crops and of their supply.

Start with demand. 

For one thing, the pandemic has altered diets. 

When covid-19 began to spread in early 2020, lockdowns and crimped incomes meant that people stopped eating out and started cooking at home. 

Meat, fish and dairy (for all those lattes) gave way to more vegetables and cheaper packaged foods. 

As restaurants, canteens and cafés reopen, and wages rise thanks to the economic rebound, the reverse is happening. 

“A year ago we were trying to get rid of milk,” says Alain Goubau, a farmer in Ontario. 

“Now we are adding as many cows as we can.” 

China has been rebuilding its vast hog herd, which an epidemic of swine flu in 2018 had halved in size.

This has had a multiplier effect on demand for crops, since more grain is needed to produce an animal calorie than if the plant were consumed directly, says Sebastian Popik of Aqua Capital, an agribusiness buyout firm in Brazil. 

Alfonso Romero of CIL expects China to buy a record 30m tonnes of corn (maize), one of the world’s most-traded crops, this year, in large part to feed all its new pigs. 

That is up from 11m tonnes in 2020, which was itself an all-time high.

Another boost to demand comes from high oil prices, which make energy crops look like an attractive alternative. 

The more crops are turned into fuel, the less is left in the food system. 

The volume of American soyabean oil used to produce energy could rise by 39% between 2020 and 2022, according to the US Department of Agriculture (USDA). 

Brazil’s production of ethanol from corn shot up by more than half last year and is forecast to increase by another quarter in 2021.

Even as demand for crops has surged, a confluence of factors has conspired to squeeze global supply. 

Droughts in North and South America have curtailed output. 

Brazil’s winter-wheat harvest is down by a fifth—and that fifth was meant for export. 

Besides the container shortage that affects specialty crops such as coffee, the grounding of commercial flights is stranding fresh fruit and vegetables. 

Rising bulk-shipping rates, up by 150% this year, are adding to the squeeze. 

Part of that is the result of rising oil prices, which also increase the cost of petroleum-derived fertiliser and other chemicals, and of running farm equipment (which is itself more expensive to buy as farmers take advantage of high crop prices and cheap credit to invest in new tractors and other kit).

This cocktail of forces is buoying global wholesale prices. 

Soyabeans and corn are, respectively, 56% and 68% more expensive than a year ago. 

This has filtered through to consumer prices: the cost of a home-grilled cheeseburger is up by 11 cents from 2019, says the USDA. 

The uncertainty and shrinking stockpiles are creating volatility. 

IFPRI, a think-tank in Washington, DC, has had corn on high “excess price variability” alert for nearly four months. 

Wheat and coffee prices have been volatile, too.

Big traders are enjoying the ride. 

Higher prices give the ABCDs more margin to play with. 

Bigger volumes, as farmers sell more to lock in the high rates, let them recoup fixed costs more quickly. 

And more volatility makes it possible to exploit price discrepancies across time and space. 

Despite a recent dip, the share prices of ADM and Bunge are still up by a third since 2019. 

Rumours of Bunge’s takeover by rivals, which swirled in 2018 as it embarked on a painful restructuring, have quietened. 

Dreyfus, the most troubled of the four, has been steadied by market conditions (and a cash injection by Abu Dhabi’s sovereign-wealth fund, which bought a 45% stake in the family-owned business). 

Cargill has not reported its annual profit for last year but was headed for record earnings after the first three quarters of 2020.

In the short run conditions for the traders look clement. 

Demand is likely to stay strong. 

Analysis by Josef Schmidhuber and Bing Qiao of the FAO suggests global agricultural trade volumes will grow by 16bn tonnes, to 444bn, in 2021. 

Although prices have softened a bit in the past two months, thanks to better-than-expected planting forecasts in big regions and the near-completion of China’s hog splurge, they are much higher than before the pandemic.

They will probably stay that way until at least next year, reckons Carlos Mera of Rabobank, a Dutch lender. 

Mr Popik says that the food businesses in Aqua Capital’s portfolio, which export to 45 countries, must now finance two months of stock instead of the usual one. 

This implies that it will take time to iron out supply-chain wrinkles. 

And meteorologists place a high probability on another La Niña—a weather event of the sort that caused droughts in late 2020 and early 2021—before the end the year.

Crop rotation

To deal with their longer-term structural challenges, the ABCDs are diversifying. 

All of ADM’s recent capital spending has gone into less cyclical and more lucrative businesses such as flavouring, colouring and other ingredients for fast food, fizzy drinks or vitamin supplements, says Seth Goldstein of Morningstar, a research firm. 

In the first quarter of this year its nutrition-ingredients units generated $154m in operating profit on revenues of $1.6bn. 

That is about 8% of its total, and growing fast. ADM expects this business to expand twice as fast as its core business, which tends to track global GDP.

Bunge has sold dozens of mills, elevators and other assets to invest in plant-protein and edible-oil factories. 

Cargill now derives most of its profits from animal feed and animal protein. 

Its food-production facilities include a fish farm in Norway, a poultry farm in the Philippines and cultured-protein factories in America and Israel. 

It has become one of America’s largest meat processors, as well as a big investor in venture-capital funds focused on food and life sciences. 

Dreyfus has invested in Leong Hup International, one of South-East Asia’s biggest integrated producers of poultry, eggs and livestock feed.

As the traders become ever larger producers of foodstuffs and consumers of crops in their own right, they may come to prize stability a bit more. 

But probably not too much. 

They are not about to stop trading. 

As the populations of Asia and Africa grow bigger and richer, the middlemen will be called upon to supply them with crops from surplus countries, says Jos Boeren, a former Bunge executive now at Stafford Capital, an investment firm. 

The policies of big hoarders such as China, India and Russia look ever more unpredictable and their stocks less transparent. 

Climate change will ensure mismatches between supply and demand of foodstuffs. 

With six centuries of experience between them, the ABCDs will be evening out soft-commodity cycles well into the future.

After 50 Years Of Fiat Currency, Guess What Looks Good


Let’s start with a look at how the dollar has fared since the Federal Reserve gained control of it:

A depreciating currency typically causes a chain reaction in which soaring debt leads to financial instability which in turn forces the central bank to intervene ever-more-aggressively to prevent an implosion. 

This intervention frequently manifests as unnaturally low interest rates and/or a rising central bank balance sheet (a proxy for the amount of new currency being created):

A soaring money supply causes prices to rise and financial assets to fluctuate wildly. 

This forces the central bank into even more extreme interventions – like whatever it is the Fed is doing lately in the reverse repo market.


When a government’s finances spin out of control it frequently panics and clamps down on freedom of speech, assemply and commerce.


One typical response to this “creeping fascism” might be called the “Boston Tea Party” strategy.


Another, less overt but far more profitable way of rebelling is to shift capital away from financial assets like government bonds and bank stocks that depend on the value of fiat currencies, and into “real” assets like energy, farmland, possibly cryptos, and definitely precious metals.

So let’s sketch out a near-term scenario:

Consumers rein in their spending when stimmy checks stop coming (happening now) …


… but prices keep rising, in part because of broken global supply chains:


And voilà, we’re back in stagflation. 

Governments then respond in the only way they know, with easier money to relieve the “stag” part of the problem. 

This ignites a stampede into real assets and sound money.

And there sits gold, cheap in terms of the money supply, other commodities, and previous bull markets.


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