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France's groundwater level drop is cause for concern

In France, the Bureau of Geology and Mineral Research (BRGM) reported that the reduction of groundwater in much of the country is worrying.



In the status report published by BRGM, it was stated that as of December 2022, the groundwater levels were not satisfactory and the rainfall was not sufficient to close the deficit in 2022.

Pierre Pannet, Deputy Director of BRGM, stated at the press conference that the situation is more unfavorable than the winter of 2021-2022.

Noting that if the drought continues in 2023, the situation will be worse than at the end of the summer of 2022, Pannet reminded that there were water restrictions in almost all provinces of France at the end of summer last year.

These restrictions still apply in about 12 provinces in the country.

Two-thirds of drinking water in France comes from groundwater.

 

contricusc

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The green agenda is mostly madness and the creeping regulations is going to make people poorer and poorer.

Indeed. Some people are taking this CO2 thing too seriously. It makes no sense to destroy the economy to cut CO2 emmissions in a small country like Netherlands while India and China are burning coal like there is no tomorrow.
 

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FrqbTzaWAAEE26T
 

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It's No Pain, All Grain for Vladimir Putin​


The exit of Cargill and other western wheat traders from Russia will benefit Moscow’s war in Ukraine.


Vladimir Lenin is credited with calling wheat “the currency of currencies.” If so, the departure of the biggest names in global grain trading from the Russian domestic market should send shivers down the spine of another Vladimir. But Russian President Putin has nothing to worry about.

Neither does the rest of the world, even though Russia is, by far, the world’s largest exporter of wheat, making it a vital contributor to global food security. The country is also a giant producer of corn, barley and sunflower seed.

Despite the exit of top Western traders, Russian grain and other crops will continue to flow into global markets. Inside the country, local traders will replace the foreign ones. And outside it — where the authority of Russian ports ends and the activity of foreign-flagged ships begins — Western traders will continue shipping Russian grain.

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This isn’t comparable to the departure of Big Oil from Russia in 2022 — the result of Western political pressure on companies including Exxon Mobil Corp. and BP Plc. The exit of Big Grain is largely the product of pressure from within Russia. As one industry executive put it, Putin showed them the door.

What changes? Not much. The Kremlin will carry on collecting grain export taxes to finance its war against Ukraine. Moscow will also keep using its food exports as a diplomatic lever in the Global South. Russian grain ends up in countries like Egypt, Bangladesh and Turkey, all sympathetic to Putin — or, at least, uncritical.

The only adjustments will be to the names on the brass plaques indicating the ownership of the logistical assets that move grain from the farms along the Volga to the ports of the Black Sea. The western traders will be forced to part ways with those silos and export terminals, in the process taking write-downs worth a few hundred million dollars each.

The new owners will be Russian — a cadre of grain oligarchs keen to use the war to strengthen their grip over the local farming sector. They will buy chunks of the supply chain on the cheap. The Russian trading teams who worked for the foreign companies will receive business cards reflecting their new bosses. And Russian traders will set up offices in cities in the Middle East and Asia, ready to connect the new owners with the old ones. I’d be surprised if someone doesn’t register a company with the name of Exportkhelb — the old Soviet grain trading body — in Dubai or Hong Kong.

Local farmers are the likely losers: They’ll have fewer options to sell their crops. Already, Russian-owned agriculture commodity trading houses such as RIF, Grain Gates and United Grain Company control a large chunk of the country’s wheat export, taking the fat margins available from moving wheat from farm-to-port.

Cargill Inc., the American company that's the world's largest grain trader, was very careful explaining its departure. In a statement this week, it said that by July, it would end its Russian grain “elevation” activities — trading jargon for the business of buying crops from local farmers, storing them in silos and using an export terminal to “elevate” the grain from the ground into a ship. But Cargill said it “intends to continue shipping grain from Russia to destination markets in line with our purpose to nourish the world.”

Viterra, a grain trader backed by commodities giant Glencore Plc, plans similar moves. Another big trader, Bunge Ltd., already left Russia last year. Others in the industry, like Louis Dreyfus Co., Archer-Daniels-Midland Co., and Olam International Ltd., would surely have to follow Putin’s bidding.

As in the oil trade, Russian grain will move into the shadows. Without Western traders buying and selling crops in the Russian heartland, Washington and Brussels will lose a key source of intelligence. If anything, the Kremlin will have a stronger say about where — and at what price — its grain goes, a potent economic weapon. Obscurity, money and political influence is what Putin will get. Lenin would be proud.
 

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Your Daily Bread Will Now Come From Fewer Hands (Unidet States)​


It hardly generates headlines, but it puts your daily bread on the table. The grain-trading industry is one of the most inconspicuous — and yet crucial — businesses powering the global economy. And it just witnessed its biggest shakeup in a generation.

Bunge Ltd., a US-based food trader and processor, is buying rival grain trader Viterra, which is controlled by commodity behemoth Glencore Plc and two Canadian pension funds. The price tag is $8.2 billion in shares and cash, plus debt. When the deal closes, likely in 2024, Bunge’s shareholders would control about two-thirds of the company, and Glencore and the Canadians the rest.

The resulting entity would become the world's second-largest agricultural trading company by revenue, dominating the soybean and wheat markets. It's a consolidation that should concern antitrust regulators — and worry anyone who eats or farms.

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For the last quarter of a century, four companies have largely controlled the agricultural market. The quartet comprises Archer-Daniels-Midland Co., Bunge, Cargill Inc., and Louis Dreyfus Co. — or “ABCD” for short. Now the “B” is getting a lot larger, overtaking the “A”, and only trailing the “C”; the concentration has boosted margins, particularly in the last couple of years, when record earnings were the norm.

Cargill became the king of agricultural commodities by buying another “C,” in this case the grain-trading business of Continental Grain Co. in 1998 for about $450 million, plus inventories and debt. It was the last big industry shakeup and one that prompted regulatory scrutiny. Ultimately, the US Department of Justice forced Cargill to sell some assets, arguing that without the remedy, “many American farmers likely will receive lower prices for their grain and oilseed crops, including corn, soybeans, and wheat.”

Antitrust regulators should take a similarly aggressive approach 25 years later.

Crucially, the Bunge-Viterra merger isn't just two companies getting together, but, in reality, four of them. That’s because Viterra is the product of an M&A race that started in 2012 when Glencore bought the original Viterra for about $6 billion. Soon after, in 2016, Glencore spun off the enlarged business, attracting two Canadian pension funds that took almost half of the shares. The new entity kept the Viterra name and bought US-based trader Gavilon in 2022 for about $1.1 billion.

Together, Bunge plus Glencore-Viterra-Gavilon would have had revenue of about $140 billion last year, above the $102 billion of Archer-Daniels-Midland, and just under Cargill’s $165 billion. Adjusted net income would have been around $3 billion, and underlying earnings, excluding interests, taxes and depreciation, would have come in close to $5.5 billion.

Bunge and Viterra claim that their geographical footprint is complementary, with little overlap. That’s technically true, but only if regulators consider, for example, the US and Canada as separate markets, or that Argentina and Brazil have little in common. I doubt regulators would take such approach.

“We'll have to file in a number of jurisdictions, because of the footprint of both companies. I will never predict regulatory timelines,” Greg Heckman, Bunge’s chief executive officer, told shareholders in a conference call after the deal announcement. “We will see how it plays out.”

Both Bunge and Viterra are important for China, and Beijing will also likely take a hard look at the deal. China is trying to expand its own state-controlled global grain trader.

It isn’t just horizontal consolidation, over geography, but also vertical, up and down the supply chain. Bunge is more weighed toward processing, and Viterra towards trading. Together, they would control a larger share of the path from farm to fork. Farmers and the food companies that are the clients of the traders would all have significantly less choice going forward.

The Bunge-Viterra deal makes sense from a business perspective, even if the former is buying the latter at the top of the cycle. But it requires robust due diligence from regulators. Last year, the International Monetary Fund described the commodity-trading industry as one of those “corners of global financial markets that were little known by the broader public.” That should not be the case.

 

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Jefferies Says Banks Are Failing to Price in Water Risk​


  • Non-financial corporations increasingly alert to water risks
  • Finance industry ‘absent in this conversation’: Jefferies

As extreme heat dominates news headlines, the gate-keepers of global capital are failing to keep pace with a key associated risk: water scarcity.

That’s according to an analysis by Jefferies, which indicates that even though non-financial corporations are increasingly alert to such risks, the finance industry is lagging far behind.

A lack of clean water, once mostly associated with third-world and developing nations, is now also a regular feature of the rich world. Much of that vulnerability is associated with out-of-date and poorly maintained water works, with the UK standing out as a recent example of dysfunction. Thames Water Ltd., which services roughly 15 million people, has been gripped by scandal after failing to prevent sewage from leaking into rivers.

Water shortages, meanwhile, stand to impact a huge array of sectors, including food and beverages, agriculture, power generation, textile and semiconductors, Luke Sussams, an ESG strategist at Jefferies, said at the Oxford Sustainable Finance Summit on Thursday.


“Water scarcity and water stress are absolutely financially material for those sectors,” he said. But the finance industry “is absent in this conversation.”

Scott McCready, chief strategy officer at Alliance for Water Stewardship, said he received his first ever inquiry from a commercial bank seeking to understand water-related risks this month. By contrast, major corporations such as Coca-Cola Co. and Danone SA have been looking at water risk for more than a decade, McCready said at the same summit.

 

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Turkey's role after the Black Sea grain deal collapse has become even more critical​



During the 500 days since Russia’s invasion of Ukraine, the Middle East avoided a catastrophic food crisis, thanks in part to the Black Sea grain initiative. Russia’s decision to cancel that agreement is raising fears that the return of supply shortages and skyrocketing wheat prices could quickly plunge the most vulnerable countries of the region into crisis.

Countries such as Syria and Yemen, which are struggling to emerge from conflict and civil strife, may be most at risk. How grim the picture will become for these countries does not simply hang on decisions made in Moscow and Kyiv. A decisive role will also be played by Ankara, not only on account of its central position in Black Sea geopolitics, but because of Turkey’s central role in the Middle East’s wheat-to-bread supply chain.

Prior to the invasion, Ukraine was the world’s fifth-largest wheat exporter and one of the main suppliers to many Middle East countries located relatively short distances from its Black Sea ports. With the outbreak of the war, shipments out of these ports came to a complete standstill, stranding 20 million tonnes of grain. By the end of March 2022, the price of wheat shot to 64 per cent higher than the previous year and bread shortages began appearing across the Middle East.

The Black Sea grain initiative eased the crisis. According to a deal brokered by Turkey and the UN, Russia guaranteed the safe passage of grain-laden cargo ships from Ukraine’s Black Sea ports to Bosphorus Strait in exchange for Russian inspections of the ships in both directions to ensure they were not carrying weapons.

During the 360 days that the deal lasted, Ukraine exported a combined 32.8 tonnes of wheat, corn (maize), sunflower oil, and other agrifood products, according to UN figures. Wheat shipments, 51 per cent of the total, made up lion’s share of the exports. Even for the countries that did not directly receive any of these cereal grain shipments, there was an immediate benefit, as the additional supplies in the global market caused a desperately needed easing of prices. From July 2022 to June 2023, the UN Food and Agriculture Organisation’s Cereal Price Index witnessed a 14 per cent drop.

For highly vulnerable nations such as Syria and Yemen, Ukrainian grain also came via the food aid provided by the UN’s World Food Programme (WFP). Yet even under the Black Sea grain deal, the WFP’s cost to purchase grain rose by almost 40 per cent and the organisation sent significantly less food aid. The impact in the Middle East was greatest in Syria and Yemen, countries in which the WFP is most active.

Prior to this year’s earthquake, 51 per cent of the Syrian population (about 12.1 million people, according to UN figures) was deemed food-insecure, making Syria the sixth-highest food-insecure nation in the world. 2.7 million people in Syria live in a state of severe food insecurity. In Yemen, as high as 19 million people are deemed food-insecure, with about 3.5 million acutely malnourished.

Despite the great humanitarian need in distressed nations across Africa and Asia, most of the grain from the Black Sea deal went to high- and middle-income countries, with the top three – China (25 per cent), Spain (18 per cent) and Turkey (10 per cent) – receiving the majority. Turkey’s large portion, however, served to help ensure Iraq, Syria and Yemen’s food security due to its crucial role in Middle East food supply chains. While Turkey is customarily among the world’s top-five wheat importers, it is simultaneously the world’s 10th-largest wheat producer.

Turkey’s unusual profile in the global wheat market stems from the fact that it is the world’s largest exporter of flour as well as one of the largest exporters of pasta. Due to government regulation to safeguard its own domestic wheat supplies, Turkey’s lucrative flour and pasta exports must be made from imported wheat.

The top three export markets for Turkish flour are, in order, Iraq, Syria and Yemen. In Marketing Year 2021-22, Turkey exported 1.31 million tonnes of flour to Iraq and typically supplies about 87 per cent of Iraq’s flour imports. Because of rising oil prices concurrently increasing Iraq’s revenues, the country has been able to cope with the rising price of wheat.

Although Syria is a close ally of the Kremlin and imported about 1.5 million tonnes of wheat from Russia, the war-torn country has yet to restore its flour-milling capacity to pre-war levels. With only half of Syria’s flour mills able to operate at full capacity, the country increasingly relies on Turkish flour imports. In 2021-22, Turkey exported 330,660 tonnes of flour, equivalent to about 43 per cent of Syria’s domestic milling capacity. Despite its ties to Moscow, Syria is partially fed by Ukrainian wheat via its Turkish flour imports. Turkey performs the same role in the wheat supply chain to Yemen, having exported 249,713 tonnes of flour in the same timeframe.

Additionally, Turkey is reported to have exported about 400,000 tonnes of flour for humanitarian purposes in calendar year 2022.

If Ukraine chooses to continue its Black Sea grain exports, Turkey could continue to provide escort and inspections. Under such circumstances, it is unclear whether Moscow would risk a naval confrontation with Ankara. It is equally unclear whether Ankara would be willing to take the risk.

To ensure sufficient supplies of bread in many of the Middle East’s distressed regions, the international community needs to work to ensure an adequate wheat is supplied to Turkey. For Iraq, Syria, Yemen and other countries in the region, Turkey is the indispensable link in the wheat-to-bread supply chain in the Middle East.

 

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