Side effects: Fuel demand crash shuts U.S. ethanol plants, meatpackers lack refrigerant

By Stephanie Kelly and Tom Polansek

NEW YORK/CHICAGO (Reuters) – A slew of U.S. ethanol plants have shut down as fuel demand has collapsed during the coronavirus outbreak, and meatpackers have been hit by a worrying side-effect: less carbon dioxide is now available to chill beef, poultry and pork.

“We’re headed for a train wreck in terms of the CO2 market,” said Geoff Cooper, president of the Renewable Fuels Association industry group. The RFA said 29 of the 45 U.S. ethanol plants that sell carbon dioxide, or CO2, have idled or cut rates. The U.S. ethanol sector is the top supplier of commercial carbon dioxide to the food industry, accounting for around 40% of the market, according to the American Farm Bureau Federation.

That has put the U.S. meat industry on high-alert. It uses carbon dioxide as a refrigerant and preservative for meat, and also uses the gas to stun animals before slaughter.

The CO2 crunch is the latest supply chain disruption threatening the food industry as it struggles to keep workers on the job during the coronavirus outbreak while meeting rising demand at grocery stores.

Cargill Inc [CARG.UL], the world’s biggest supplier of ground beef, and chicken processor Perdue Farms said they are seeking to make sure they have enough supplies.

“We are working with our partners to ensure they understand that we offer an essential service to the world – providing the ingredients, feed and food that nourish people and animals – and maintain our supply,” Cargill spokesman Daniel Sullivan said. He added that the company is aware of “potential shortages or limited allocations” in certain areas.

Perdue Farms has enough CO2 “for now” and back-up plans if supplies run low, spokeswoman Andrea Staub said.

But if shortages of carbon dioxide worsen, meat companies may not be able to produce food at regular rates, said Rich Gottwald, president of the Compressed Gas Association.

“If they don’t have CO2, then it will slow their production of those food products,” he said.

The North American Meat Institute, an industry group that represents processors like Tyson Foods Inc <TSN.N> and WH Group Ltd’s <0288.HK> Smithfield Foods Inc [SFII.UL], said it was helping connect carbon dioxide suppliers with meat companies that anticipated possible problems obtaining CO2.

While supplies remain available, Veronica Nigh, a farm bureau economist, said some meat companies already were paying more for CO2.

“They’re certainly feeling the impact of limited supply and the price that ends up translating to,” she said on a conference call on Friday.

(Reporting by Stephanie Kelly in New York and Tom Polansek in Chicago. Additional reporting by PJ Huffstutter in Chicago; Editing by David Gregorio)

Brazil Amazon deforestation soars to 11-year high under Bolsonaro

By Marcelo Teixeira

SAO JOSE DOS CAMPOS, Brazil (Reuters) – Deforestation in Brazil’s Amazon rainforest rose to its highest in over a decade this year, government data on Monday showed, confirming a sharp increase under the leadership of right-wing President Jair Bolsonaro.

The data from Brazil’s INPE space research agency, which showed deforestation soaring 29.5% to 9,762 square kilometers for the 12 months through July 2019, sparked an uncharacteristic admission by the government that something needed to be done to stem the tide.

It was the worst level of deforestation since 2008, heaping further pressure on the environmental policy of Bolsonaro who favors developing the Amazon region economically.

The Amazon is the world’s largest tropical rainforest and is considered key to the fight against climate change because of the vast amounts of carbon dioxide it absorbs.

Risks to the forest drew global concern in August when fires raged through the Amazon, drawing sharp criticism from France’s President Emmanuel Macron.

At a briefing to discuss the numbers, Environment Minister Ricardo Salles said the rise in deforestation showed the need for a new strategy to combat the illegal logging, mining and land grabbing which he said were to blame.

Environmentalists and nongovernmental organizations placed the blame squarely on the government, saying that Bolsonaro’s strong pro-development rhetoric and policies to weaken environmental enforcement are behind the rise in illegal activity.

“The Bolsonaro government is responsible for every inch of forest destroyed. This government today is the worst enemy of the Amazon,” said Marcio Astrini, public policy coordinator for Greenpeace, in a statement.

Bolsonaro’s office directed Reuters to remarks made by Salles and another official and did not comment further on the issue.

In August, Reuters reported Bolsonaro’s government had systematically weakened environmental agency Ibama, grounding a team of elite enforcement commandos and forbidding agents from destroying machinery used to illegally deforest.

Brazil’s Climate Observatory, a network of nongovernmental organizations, said the 2019 increase in deforestation was the fastest in percentage terms since the 1990s and the third fastest of all-time.

In response to the numbers, Salles vowed to roll out a series of measures to counter the rising deforestation, including stepping up enforcement efforts assisted by high-resolution satellite imaging.

The minister said he would meet governors of Amazon states on Wednesday to discuss tactics to counter deforestation.

All options are on the table, according to Salles, including mobilizing the military for use in environmental enforcement operations.

GOVERNMENT REVERSAL

Salles’ recognition that deforestation is indeed on the rise comes after months of the government casting doubt on preliminary monthly data showing destruction was skyrocketing.

At multiple press briefings earlier this year, Salles alleged the monthly data was unreliable and contained inconsistencies. He had urged journalists not to report the monthly figures and wait for the annual data, announced Monday.

Bolsonaro had accused the INPE space research agency of lying about the monthly data. In a high-profile dispute, then-INPE chief Ricardo Galvao stood by the data and called Bolsonaro “a joke of a 14-year-old boy that is not suitable for a president of Brazil.” Galvao was later fired.

The annual figure accounts for seven months under Bolsonaro, but also measures five months under the previous government.

It also does not account for destruction after July. Preliminary data for August to October shows deforestation more than doubled compared to the same period a year-prior to 3,704 square kilometers.

NGOs say they fear that protections could be weakened further as the government considers allowing commercial agriculture on native reserves, expanding wildcat mining and allowing for illegally occupied land to be “regularized.”

Beef prices are also at record highs in Brazil, leading some environmentalists to fear it could fuel land grabbing for cattle ranching – one of the biggest drivers of deforestation.

“The coming years could be even worse,” said Carlos Rittl, executive-secretary for Climate Observatory.

 

(Reporting by Marcelo Teixeira; Writing by Jake Spring and Stephen Eisenhammer; Editing by Alex Richardson and Andrea Ricci)