Farming in the US during a Pandemic: Video “Report from the Farm” in Iowa

Iowa corn and soybean farmer April Hemmes gives a quick video update here on farming in May 2020, as she deals with both planting a corn crop and juggling the social distancing needs during corona restrictions. It’s a peek at her field, a look at her tractor and discusses changes brought to farming families and farmers by COVID19.

May 2020 is a time when farmers are planting crops, despite knowing that the harvest prices are likely to be low. They are watching the heartbreaking choices that livestock farmers are making when there are few channels to send their livestock.

April Hemmes is an award-winning farmer-leader in Iowa and advocate for agriculture, for women in agribusiness and enthusiastic about sharing her insights from the field in the US. Her energy and practical optimism is something we at Meros really appreciate.

Our friends at Women in Agriculture (WIA) in the US produced this report from the field as part of their new Women in Agriculture Resource Center, which offers current insights and responses from US farmers and agribusinesses on the impact of COVID19 on global food and agriculture supply chains. WIA has kindly added Japanese subtitles to this video for us! 日本語字幕付き!

https://www.youtube.com/watch?v=Wkiy2MmFu0M&t=3s&fbclid=IwAR3_rLjbJf_XxlECNe6Mak0mGGKkXsXowphWzWqxu8cJF83leB69jx-ITPw

Meros in the Media: The Disappearing US-China Soybean Trade

Meros discusses how China was able to substitute US soybeans so quickly.

Meros’ Lucia Vancura recently chatted with Nathan VanderKlippe of Canada’s Globe and Mail newspaper about how China was able to so quickly and completely eliminate US soybean imports in the last few months since the 2018 marketing year started in September. Did they find alternative suppliers? Did they substitute for other feed ingredients?  How could US soybean exports to China, which are 25% of US production, really be substituted out so quickly, particularly since US soybeans are still price competitive with Brazil, Argentina and other sources, despite the 25% tariffs?

The Chinese government may not have explicitly forbidden Chinese traders from importing US soybeans, but as VanderKlippe reports from our conversation “in a country where political favour remains a key factor in corporate success, China’s reach extends deep into the private sector, too.” The Chinese government does not need to issue a ban on buying US soybeans. It just has to send a clear message that avoiding US soybeans, despite the favorable price, is the expected approach.

The full article is behind a paywall but available here:  https://www.theglobeandmail.com/business/article-soybean-trade-shows-resolve-of-china-as-it-pushes-back-on-us-demands/

In the short-term, since September, China has used a variety of tools to make up for the elimination of US soybeans. This has included increased soybeans from Brazil and other countries and increased use of soy protein substitutes, including rapeseed or canola meal, pea and domestic Chinese DDGS. The Chinese government also released new guidelines for a lower-protein swine feed ratio that decreases the amount of soy protein needed (the Chinese soy protein ratio in feed has been much higher than, for example, in the US swine feed ratio because the price of soy has been so reasonable but there is not necessarily a nutritional need for so much soy in China’s swine feed) and China’s major feed mills have agreed to these new standards. Other measures have included releasing soybeans from government stockpiles and using more of their domestic soybeans for feed (rather than food).

Looking at the longer term, China may import some US soybeans later this year to fill the remaining gaps, but their on-going efforts to find alternative suppliers, substitute products and a big-picture effort by China to invest and expand in agriculture supply channels world-wide are only opening more opportunities and risk diversification for Chinese traders. The longer the trade war goes on, the more chance Chinese traders will more permanently replace US soybeans in their trading portfolio.

 

Meros Consulting is a Tokyo-based strategic business advisory. We work with companies and governments globally to advising on trade dynamics and support business development in food and agriculture industries.

 

Meros presents overview of agricultural opportunities in the Russian Far East

Meros presented an overview of the agricultural opportunities in the Russian Far East at a seminar on September 13 held by the Japanese Ministry of Agriculture, Forestry and Fisheries (MAFF) and hosted at Nomura Research Institute. Japanese industry players and government authorities are watching Russian Far East development closely and over 40 participants from Japanese corporations, investment firms and think tanks attended the event.

With dramatic ongoing depopulation in the region – population is projected to decline by over 30% in next 30 years – the Russian government has been implementing various measures to attract people and industry to the region and to increase economic development. These measures have included establishing fourteen Territories of Advanced Development (ToR) sites where the federal government have put particular effort into helping local governments attract foreign direct investments (FDI) through numerous schemes, as well as granting one hectare of land for free to Russian citizens who can utilize the land.

Due to the stagnating prices of oil and other energy resources, the importance of the agricultural, forestry and fishery sectors in the regional economy is rising. The share of agriculture and forestry in gross regional production of the Russian Far East increased from 3.4% in 2010 to 4.8% in 2014. Moreover, the Russian government has placed an import ban on many agricultural products from countries including the US, the EU, New Zealand and Australia as a counter measure against economic sanctions. This has all led to the new Russian policy of aiming for complete food self-sufficiency by 2020. Thus, agriculture is one of the key sectors emphasized by the Russian government in their regional development plans.

Because of the geopolitical importance of the Far East region for Japan, the Japanese government also considers Japanese involvement in regional development to be important. For this reason, the Japanese and Russian governments have agreed to have a series of agricultural vice-ministerial dialogues in 2016, and the first dialogue was held June 19, 2017. This year MAFF has also organized the Russian Far East Agriculture, Forestry and Fishery Platform to exchange information with the Japanese private sector as well as to facilitate private investments in the region. The Platform’s first meeting was in Feb 2017.

Meros sees various opportunities in the Russian Far East, in terms of import substitution as well as future export potential of certain Russian agricultural products. Oilseeds (soybean), grain, livestock and vegetable industries are already attracting various investors.

However, successful business development in the Russian Far East also faces serious challenges, including an unpredictable political climate, extremely high distribution costs, labor scarcity, difficulty in long-term financing and ongoing international sanctions against Russia. There are also complaints of lack of transparency or availability of information on Russian business partners or investment targets. Since the much of the current large-scale agricultural development in the Far East is strongly driven by Russian government policy and rely on government support like subsidies and tax exemptions, potential opportunities must be evaluated within the full context of the economic and political environment.

The Far East agricultural industries also face domestic risks such as difficulty in livestock disease control, possible wheat export taxes and competition with Chinese products, along with the most critical challenge – the small and increasingly shrinking regional market. Therefore, export market development is expected to be an unavoidable.

Some opportunities that appear particularly bright, based on the current supply and demand situation, include:

Soybeans

Soybean production in the Russian Far East was around 1.5 million mt in 2016, which accounted for more than 40% of the total production in Russia. Since Russia does not have enough soybean and other protein feed ingredient domestic production, to expand Far East soybean production was one of the ag-policy agenda. The Amur region established a “Soybean Cluster” and has expanded production and processing rapidly. Major oil mills in the Far East region include Rusagro, Amuragrostsentr and ANK holdings. Amuragrostsentr is currently planning to develop an isolated soy protein factory in the Soybean Cluster with a Chinese co-investor.

The Russian government had been providing a 50% subsidy for soybean transportation from the Far East to European Russia in order to increase soybean self-sufficiency. After Russia’s WTO accession in 2012, the export tax (20%) on soybeans was eliminated, and export opportunities become a reality. Although it is unclear if transportation subsidies from the Far East to European Russia are still in effect, non-GM soybean exports to Asian countries could expand under the current circumstances, which include favorable exchange rates.

Soybean meal production also has exceeded regional feed demand, which also indicates the potential to increase export of soybean meal or other vegetable protein products.

Livestock

Livestock is another area attracting investment, especially swine production. Current regional production supplies only 26% of the regional demand. Chicken accounts for 36% of meat production; pork is 32%; beef is 24%. Only swine production has been gradually increasing over the last five years, which will be doubled or tripled within another 2-3 years with investments from Mercy Trade, Rusagro and Skifagro. Although the region is struggling to control diseases, like African swine fever and avian flu several meat processing companies have received approval to export heat-treated products to Japan.

Vegetables

Vegetable production is another industry expected to expand. Regional vegetable production currently supplies only 46% of regional demand.

The Russian government reimburses 20% of the cost to buy and set up greenhouses, under its overall policy to increase self-sufficiency by 2020. With such government support, it is planned to expand 350 ha greenhouse area in Russia, which is 15% increase from the current greenhouse area of 2,300 ha in 2016. There are various plans on investments in Far East too, and Meros estimates these will add another 40 ha of greenhouse area within the next few years if these current plans materialize.