Fronde contre la réglementation des marchés agricoles

Par Pierre-Alexandre Sallier
Une étude de l’OCDE démontre que les fonds dit indiciels n’ont pas provoqué la bulle de 2008. Le débat est relancé alors que Washington veut limiter les activités des banques
«L’activité croissante des fonds d’investissement entre 2006 et 2008 n’a pas causé de bulle sur les marchés à terme des matières premières.» Enoncé par l’Américain Scott Irwin – figure de proue de l’économie agricole –, ce constat sans appel semble faire voler en éclats les suspicions ayant entouré ces marchés il y a deux ans. Publiée jeudi dernier sous l’égide de l’OCDE, l’étude de ce spécialiste de l’Université de l’Illinois et de son collègue Dwight Sanders déboule également avec fracas dans le débat visant à limiter l’influence des institutions financières sur les marchés alimentaires.

Un débat d’une actualité brûlante alors que, vendredi dernier, sénateurs et représentants américains se sont entendus sur les deux milles pages du plus important tour de vis réglementaire imposé à Wall Street depuis les années trente. Attendant le vote du Congrès, ce projet de loi vise notamment le rôle des grandes banques sur les marchés des produits de base. Et pourrait les forcer à se séparer de certaines de leurs activités de «trading» sur les hydrocarbures, les grains ou les minerais.

Retour en 2008. Déclenchant des émeutes de la faim dans plusieurs métropoles du Sud, l’envolée des cours agricoles avait attiré l’attention sur l’activité financière sur ces marchés. En particulier sur un type précis d’intervenant: les véhicules dits indiciels, par le biais desquels les institutions financières – mais aussi les simples épargnants ou les futurs retraités – achètent des produits de base afin de profiter de leur appréciation. Des véhicules dont les achats sont orchestrés par les banques d’affaires, via des opérations de gré à gré échappant à tout contrôle.

A l’issue de son long travail statistique, Scott Irwin conclut pourtant que ces fonds indiciels «n’ont pas causé de bulle sur les marchés à terme». Pour lui, «contrairement à la vision populaire […] certains éléments laissent à penser que [leur] activité accrue a réduit la volatilité de ces marchés». L’envolée des cours de 2008 refléterait donc des facteurs bien réels: crainte de récoltes trop faibles, de pénurie face aux besoins accrus de biocarburants.

L’argument massue de cette étude? Au fil du temps, l’influence de ces achats spéculatifs s’est certes accrue. Mais l’activité des «industriels» utilisant ces mêmes marchés à terme pour vendre leurs grains – céréaliers, grands négociants – a également redoublé. En proportion, la spéculation n’aurait donc pas explosé. «L’argument est imparable», admet Tancrède Voituriez, chercheur au sein du Cirad, centre français de coopération agronomique. Avant de rappeler néanmoins que c’est précisément l’afflux d’acheteurs financiers «qui a créé un risque pour ces vendeurs industriels, qui, craignant que les cours plongent, ont multiplié les ventes à terme». En clair, les fonds n’ont pas directement fait exploser les cours. Mais ils ont mis en effervescence l’ensemble des marchés, permettant à tout élément inattendu – comme une prévision de récolte décevante – de mettre le feu aux prix.

Concluant que les spéculateurs sont «un bouc émissaire» et que les réglementations envisagées «ne régleront en rien le problème supposé des prix élevés», l’étude de Scott Irwin vient apporter de l’eau au moulin des opposants à une limitation de l’activité financière sur les produits de base. Bunge, le géant mondial des huiles végétales, a rappelé la semaine dernière, lors d’une conférence à Londres, que «les spéculateurs fournissent la liquidité sur le marché dont les fermiers ont besoin». Un tour de vis dont s’est même inquiété mercredi dernier la FAO. Très critique en 2008 vis-à-vis de la spéculation sur les marchés, l’agence des Nations unies pour l’alimentation et l’agriculture a certes estimé «souhaitable» une «certaine régulation des marchés à terme de produits alimentaires». Dans une note de synthèse, elle n’en souligne pas moins que «la limitation – ou l’interdiction – des transactions spéculatives puisse faire plus de mal que de bien».

Investing in Ukraine: Top 10 picks of 2010

Published: 24 June 2010
Posted in: Ukraine

The Kyiv Post has teamed up with five of Ukraine’s leading investment banks – Renaissance Capital, Sokrat, Foyil Securities, Phoenix Capital and ART-Capital – to pick out 10 of the best Ukrainian companies to invest in this year.

The choices were made not simply on the basis of upside potential, but in terms of long-term growth potential, transparency and the possibility of entering and exiting the investment.

Given the huge upside in the sector and the flurry of investment activity under way, the list is unsurprisingly dominated by agriculture companies. Some have recently completed – or are targeting – initial public offerings (IPOs) or secondary public offerings (SPOs) in 2010.

Disclaimer: The Kyiv Post bears no responsibility for any choices made by investors using this or other material prepared by the paper. The findings of this report represent subjective decisions made by analysts and are merely intended to provide a general overview for the reader.

Sintal
Sintal is one of Ukraine’s leading grain cultivators and traders which, in the middle of the crisis in October 2009, raised $13 million for land bank and storage expansion in an SPO on the Frankfurt Stock Exchange (FSE). Sintal is planning to join Ukraine’s most liquid agriculture stocks on the Warsaw Stock Exchange (WSE) by the end of 2010, which we believe will significantly boost the name’s liquidity. The current holders of Sintal’s depository receipts traded on the FSE will be likely offered a swap.

The company controls 100,000 hectares of land in fertile regions of Ukraine and intends to increase its land bank to 180,000 by the end of 2013. Grain yields outperform Ukraine’s average, with 40 percent of the company’s land covered by irrigation systems. Three quarters of Sintal’s land bank is located in Kherson Oblast, which means that Sintal’s fields are 50 kilometers to 170 kilometers away from the country’s main sea ports in Odesa, Kherson, and Mykolayiv. This makes the company’s port transportations costs some of the lowest in the country.

Shareholder structure: Mykola Tolmachev – 52.9 percent; management – 10.8 percent; free float – 36.3 percent.
Sources: Renaissance Capital, ART-Capital and Sokrat

Creativ Group
Creativ Group is one of the most dynamic agricultural holding company in Ukraine and a leading manufacturer of oils and fats. A threefold increase in capacity in the third quarter of 2009 should drive sales up by 44 percent in 2010. Creativ has a 25 percent share of the Ukrainian vegetable fat market, 8 percent of the refined oil market, and in 2010 it should achieve an 18 percent market share for soy products. The group offers growth potential in terms of sales and profitability, due to the higher margins earned on soy products.

Creativ has built a strong, vertically integrated business model, starting with cultivation and harvesting and extending to processing. In 2009, sales grew 38.3 percent on the year due to the launch of its new oil extracting plant and soy processing plant in the second half of the year. The plant has almost tripled the group’s capacity in terms of final product output.

In 2009, almost 70 percent of group sales were directed towards the business-to-business sector, ensuring stable prices and constant demand for end-products. Key clients include international and domestic food industry leaders such as Nestlé and Kraft Foods. Domestic sales are balanced by an increasing share of exports, which are forecast to account for 54 percent of total sales in 2010, compared to 39 percent in 2009.

Shareholder structure: Management – 34.1 percent, Creativ Group (Cyprus) – 42.5 percent; free float – 23.4 percent.
Source: Sokrat

Mriya
Mriya is an agricultural holding company that controls a land bank of close to 200,000 hectares in four regions in western Ukraine. The company has a well-diversified crop portfolio and in addition to its main activity – grain crop cultivation – it also grows sugar beet and potatoes, posting yields that outperform its peers.

Mriya raised 58 million euros in a 20 percent placement on the Frankfurt Stock Exchange in June 2008.

The company has announced grand, aggressive expansion plans for the coming years. It plans to increase its land bank by 165,000 hectares in 2010 and by a further 515,000 hectares by 2013. Considering Mriya’s track record for successfully increasing its land bank under cultivation, analysts foresee most of its plans being successfully realized. In the past, the firm has achieved high yields on newly acquired land; initial yields are generally in line with Ukrainian averages, but the company’s high levels will be attained within 2–3 years. Mriya has secured a $75 million credit from the International Finance Corporation for its expansion plans, including build grain silos, purchasing new farm machinery, acquiring land lease rights and producing grain.

Shareholder structure: Management (Huta family) – 80 percent; free float – 20 percent.
Sources: Renaissance Capital, Sokrat

Astarta
Astarta was the first agricultural company in Ukraine to go public, completing a 2006 listing on the Warsaw Stock Exchange. The firm is the largest sugar producer in Ukraine with an 18 percent share of the market. It benefits from the current growth in the global sugar price, which recently reached a 28-year high. ART-Capital estimates revenues will grow 52 percent in dollar terms in 2010.

Astarta plans to increase its land under cultivation to 300,000 hectares by 2015, concentrating on yields and gross profit improvement per crop. Its crop rotation should remain 20 percent sugar beet-based. In sugar production, the company will continue working to cut production losses through the modernization of its sugar mills, and further increasing vertical integration. Astarta’s strategy is not solely sugar-based: A planned increase in the number of milking cows and milk yields, as well as the start of grain and oilseeds trading operations, are additional strategic priorities for the company.

The company has reliable business clients, with over 80 percent of its sugar sold to big industrial consumers such as Coca-Cola, Kraft Foods, Nestle, Vitmark, Slavutych, Wimm-Bill-Dann, AVK, Danone and Sandora.

Astarta also benefits from a good reputation, which has enabled it to secure financing to improve energy efficiency.

Shareholder structure: Viktor Ivanchyk – 40 percent; Aleksei Korotkov – 35 percent; Aviva Investors Poland – 5 percent; free float – 20 percent.
Sources: ART-Capital, Phoenix Capital, Renaissance Capital

Dakor
Dakor is a vertically integrated, closed-cycle sugar refiner, which allows the company to greatly reduce costs and sell a higher added value product, as opposed to low-margin sugar beets. Moreover, should sugar prices drop again this year, Dakor is well hedged since it has diversified into grain cultivation

One of the competitive advantages Dakor has is that it owns grain and sugar storage capacities. Dakor operates 130,000 tons of grain storage, which represents about 80 percent of last year’s harvest by the company, and 95,000 tons of refined sugar storage, which fully covers 2010 production plans. This allows the company to benefit from price growth during the off-season instead of having to unload it at the low prices offered at harvest time.

Last year, Dakor announced that it was merging with Landwest, a western Ukraine farming group, to form Dakor Agro Holding (DAH). According to the management, the plan is to offer a 20 percent equity stake in DAH for $50 million, which should result in an aggregate market capitalization of $250 million
The company is projecting a 36 percent gain in revenues in 2010.

Shareholder structure: Danylo Korylkevych – 77 percent; free float – 23 percent.
Sources: Foyil Securities, Renaissance Capital

Avangardco
Avangardco is the largest producer of eggs and egg products in Ukraine. In April the company placed a 22 percent stake on the London Stock Exchange, raising just over $200 million.

According to the company’s initial public offering prospect, the firm’s net profit before tax has more than quadrupled over the last three years, from $31.5 million in 2007 to $135 million in 2009. It holds a 39 percent share in Ukraine’s egg market and 53 percent in the egg product market.

The company will use the proceeds to upgrade its facilities with a view toward exporting to the European Union. The world is facing a huge deficit of protein products, which Avangardco should benefit from as eggs are the cheapest source of protein. Worldwide production of chicken eggs rose almost 10 percent from 2005 to 2009.

Avangardco is also expanding into the production of pedigree cattle.

Shareholder structure: Businessman Oleh Bakhmatyuk – 77 percent; free float – 22-23 percent.
Source: ART-Capital

Kernel
Kernel is one of the the largest sunflower oil producers in Ukraine, with a 35 percent share of the domestic bottled oil market. It also trades grain (10 percent share in Ukrainian grain export) and bulk sunflower oil on export (11 percent share). Kernel has the highest free-float in the agriculture sector at $729 million and the lowest debt-to-income ratio.

At an SPO in Warsaw in April, Kernel placed a 5.9 percent stake, raising $81 million. The company will use part of the proceeds to fund its acquisition of Allseeds, the second-largest bulk sunflower oil exporter in Ukraine with a 13 percent market share.

The Allseeds acquisition, agreed in June, will increase Kernel’s oil crushing capacity, making the company a market leader, competing with international majors such as Cargill. It will also contribute additional storage capacities, along with an oil transhipment terminal in Mykolayiv, strengthening Kernel’s position across the whole value chain.

Shareholder structure: Lawmaker Andriy Verevsky – 41.23 percent; ING Bank – 9 percent; free float – 49.77 percent.
Source: Renaissance Capital


MHP
Mironovskiy Hlibproduct (MHP) is the largest vertically integrated poultry meat producer in Ukraine, with a 25 percent market share. It also grows grains and sells other meat products, such as bacon. The company went public in London in 2008.

MHP’s market share expanded from 39 percent of domestic industrial poultry production in 2008 to 43 percent in 2009.

MHP is fully self-sufficient in corn and sunflower, which are used for fodder in poultry production. Given that corn and sunflower prices in Ukraine nearly doubled in 2009, self-sufficiency in these crops has allowed the company not only to sustain margins, but also to generate additional revenue.

MHP confirmed that it will undertake a large capacity expansion project, which should increase poultry capacity by one-third by 2013, and double it by 2015.

Shareholder structure: Top executive Yury Kosyuk and partners have controlling stake of nearly 78 percent; free float – 22.32 percent.
Source: Renaissance Capital

Horizon Capital invests $40m in agriculture company

02 Jun 2010. Source: AltAssets

Horizon Capital, a firm focused on Ukraine, Belarus and Moldova has acquired a stake in Agro-Soyuz, a diversified agricultural corporation, for $40m.

The investment is Horizon’s first since the onset of the financial crisis, and the second from its $390m Emerging Europe Growth Fund II, which closed in 2008, and will be used by Agro-Soyuz to expand its business activities and restructure debt.

Natalie Jaresko, co-managing partner, Horizon Capital, said, “Agro-Soyuz stands out as a leader among Ukrainian agricultural enterprises as a result of its commitment to the advancement of state-of-the-art agricultural technologies and farming techniques in the Ukrainian market.

“We are pleased to back our newest partners and look forward to supporting the company in helping Ukraine realise the full potential of its agricultural sector,” she added.

Agro-Soyuz operates four lines of business across the agricultural sector. The corporation manufactures agricultural equipment, has a 20 per cent market share of the agricultural equipment spare parts and servicing sector, farms 11,000 hectares of vertically-integrated pork production, and provides business solutions for farming, pork production and ostrich breeding.

Serhiy Prokayev, founder and director, Agro-Soyuz, said, “Our partnership with Horizon Capital is a key to our expansion and will help us to accelerate our growth further as the nation’s leading agricultural supplier and manufacturer."

Horizon targets mid-cap investments in Ukraine, Belarus and other emerging European markets.

$1b Arab fund to buy Aussie farms

The Land | 22 Jun 2010

A NEW entrant into the Australian financial market, Western Gulf Advisory (WGA), plans to invest $1 billion into the Australian economy over the next few years.

WGA is a European and Middle Eastern financial services company, which has already invested about $370 million into property developments in NSW and South Australia.

The company is owned by Indian born, Bahrain-Zurich based entrepreneur, Mr Ahsan Ali Syed.

Mr Ali and his chief financial officer, Mr Omer Khan, are currently developing a 10 year plan to grow WGA’s assets internationally.

Mr Omer Khan said WGA was committed to long term investment in Australia, and was impressed with Australia’s economic durability.

“Australia’s internationally competitive, advanced market economy and liberal business policies are among the reasons we are committed to this plan,” Mr Omer said.

“We are developing a long term plan for Australia, and intend on investing in various projects from property development and infrastructure to agriculture and mining.”

The Bahrain-Zurich based company is currently engaged in negotiations with Cubbie Group for a 53 per cent share of the rural company, with a $300 million injection of funds.

Cubbie Group owns the Queensland cotton farm, Cubbie Station, which went into receivership in 2009 after years of drought affected crops and revenue.

Last week, WGA announced that it would loan retirement village developer, Special Purpose Vehicle Holdings – Total Group US $180 million to develop further villages throughout NSW.

The loan will fund retirement property developments at Kantarra Life Style Village at Austral and Waterbrook developments in Greenwich and Yowie Bay, as well as industrial projects through FGD Property Holdings.

WGA’s first step into the Australian market was a loan of $220 million to property development company, Landmark Business Developments, to fund housing projects at the industrial hub in Gawler, South Australia.

Mr Ali established WGA to manage and grow his family’s wealth, to preserve 150 years of tradition.

WGA has total assets of US$8-9 billion.

WGA’s offices in Bahrain, Zurich and Hong Kong are family owned and have been established as part of WGA’s plan to grow Mr Ali’s family wealth.

The company does not borrow money from outside institutions or investors but instead uses its own money to fund new projects.

As a legal graduate and entrepreneur specialising in law and finance, Mr Ali is committed to transparent business practices, and has rapidly risen in stature and reputation as a trusted financial entrepreneur across the world.

Ex-Citi trader Hall raises $1 bln for hedge fund

NEW YORK June 21 (Reuters) - Former Citigroup trader Andrew Hall, who became a lightning rod for criticism over excessive Wall Street bonuses last year, has raised $1.08 billion for an offshore commodities hedge fund.

The Westport, Connecticut-based fund, Astenbeck Offshore Commodities Fund II Ltd, said it had raised the funds from 37 investors in a U.S. Securities and Exchange Commission filing on Monday.

Citigroup Inc (C.N) had come under fire last year for a contract that entitled Hall to a roughly $100 million bonus even after the struggling bank had accepted government funds to support itself. Hall had been the head of the bank's Phibro LLC energy trading business, which Occidental Petroleum Corp (OXY.N) bought from Citigroup last October.

The Park Hill Group, an asset placement agent subsidiary of The Blackstone Group (BX.N), will receive commissions for recruiting investors for the Astenbeck fund, according to the filing.

Qatar Said to Invest $2.8 Billion in AgriBank IPO

By Bloomberg News - Jun 20, 2010

The Qatar Investment Authority, the Gulf country’s sovereign wealth fund, agreed to invest $2.8 billion in Agricultural Bank of China Ltd.’s initial public offering to tap growth in the world’s third-biggest economy.

The $58 billion fund signed an agreement with Agricultural Bank on June 17, two people with knowledge of the matter said, declining to be identified because the deal is private. The bank has allocated more than $5 billion for corporate investors such as QIA in the Hong Kong part of its IPO, the people said.

Agricultural Bank, China’s largest lender by number of customers, is seeking to raise as much as $15 billion in the Hong Kong part of what may be the world’s largest IPO, according to an e-mail sent to investors last week. The Beijing-based lender may sell as much as $28 billion of stock in Hong Kong and Shanghai combined, exceeding the $22 billion sale by Industrial & Commercial Bank of China Ltd. in 2009.

Global economic growth “is very much in favor of the Bric countries,” Brazil, Russia, India and China, Abdul Kadir Hussain, chief executive at Mashreq Capital DIFC Ltd., said in a phone interview from Dubai yesterday. “I think that these sovereign wealth funds are just latching on to that trend.”

Standard Chartered Plc, the London-based bank that gets most of its profit from Asia, will invest about $500 million in the IPO, said a person with knowledge of the matter.

A spokesman for QIA declined to comment. Agricultural Bank Vice President Pan Gongsheng and Standard Chartered spokeswoman Gabriel Kwan didn’t immediately return calls.

China Growth

China’s economy, is forecast to grow 10 percent this year and by 9.9 percent in 2011, according to the International Monetary Fund. It will allow a more flexible yuan, the central bank said June 19, signaling an end to the currency’s two-year- old peg to the dollar a week before a Group of 20 summit.

Investing in China is part of QIA’s “diversification strategy,” Giyas Gokkent, chief economist at the National Bank of Abu Dhabi PJSC, the United Arab Emirates’ second-biggest bank by assets, said yesterday. Qatar, holder of the world’s third- largest natural gas reserves, will likely generate a trade surplus of $22 billion this year helped by oil and gas sales and some of that surplus will flow to the QIA, he said.

Kuwait Investment Authority, the Persian Gulf country’s sovereign wealth fund, is interested in Agricultural Bank’s initial share sale, Managing Director Bader al-Saad said June 13. Kuwait, the third-biggest oil producer in the Organization of Petroleum Exporting Countries in May, is likely to generate a trade surplus of $45 billion this year and “will be an exporter of capital this year,” NBAD’s Gokkent said.

‘Major Player’

The Qatar Investment Authority owns stakes in financial institutions including Credit Suisse Group AG and Barclays Plc. The fund bought Harrods Ltd. department store in London in May for 1.5 billion pounds ($1.9 billion) and a stake in Volkswagen AG last year. Barwa Real Estate Co., controlled by the fund, on June 18 agreed to buy Park House, an office and retail project on London’s Oxford Street, for 250 million pounds.

Qatar “is going to be a major player on global markets, both developed and emerging, for years to come,” Simon Williams chief economist for the Middle East at HSBC Holdings Plc said in a phone interview from Dubai yesterday. Regional sovereign wealth fund managers “will accumulate assets in traditional western markets and in emerging markets where they see value,” he said.

Agricultural Bank is pushing ahead with its offering after Europe’s sovereign debt crisis spurred more than 30 companies worldwide to postpone or withdraw IPOs globally since the start of May, according to data compiled by Bloomberg.

Cornerstone Buyers

Corporate, or cornerstone, investors are guaranteed shares in IPOs in exchange for a pledge to hold the stock for a period of time. Companies use the cachet of the investors, who may be institutions, companies or billionaires, to drum up interest in their offerings among other potential buyers.

Agricultural Bank is reserving as much as 40 percent of the Shanghai part of the IPO to cornerstone investors, including the over-allotment, the company said on June 16. Such investors will be required to hold 50 percent of their stock for at least 12 months and the remainder for 18 months in exchange for a guaranteed number of shares, according to the filing.

Cornerstone investors may account for about 40 percent of Agricultural Bank’s Hong Kong sale, according to people with knowledge of the matter. ICBC, the world’s largest lender by market value, set aside 28 percent of the Hong Kong part of its October 2006 IPO for such investors, before exercising a so- called greenshoe option.

Hong Kong, Shanghai

Agricultural Bank is selling 25.4 billion shares in Hong Kong and 22.2 billion shares in Shanghai, according to a draft prospectus. It can expand the offer by 15 percent after excising an over-allotment option, the prospectus says.

Middle East sovereign-wealth funds may invest 25 percent of their new capital in the developing world by 2016 as economic growth there surges, George Pavey, a managing director at the global markets solutions group at Credit Suisse Group AG, said in November. Middle East funds were anchor investors in 2009 in the $3.3 billion initial public offering of Kuala Lumpur-based mobile phone operator Maxis Communications Bhd and the $1.79 billion IPO of property manager CapitaMalls Asia Ltd. of Singapore, which were managed by Credit Suisse, Pavey said then.

Abu Dhabi Investment Authority, one of the worlds’ largest sovereign wealth funds, raised investments in emerging markets where it sees greater growth opportunities, Sheikh Ahmed Bin Zayed Al-Nahyan, the fund’s late managing director told German daily Handelsblatt in January this year. Emerging market economies are likely to outperform those of developed economies over the medium-to-long term, he said then.

Sovereign Funds

Sovereign wealth fund assets fell 3 percent to $3.8 trillion in 2009 as the funds invested $60 billion last year to buy assets mainly in Europe and North America, according to International Financial Services London. Sovereign wealth holdings funded by commodity exports, primarily oil and gas sales, stood at $2.5 trillion at the end of 2009, while non- commodity funds had $1.3 trillion.

Middle East funds have bought stocks in financial service companies. Abu Dhabi Investment Authority invested $7.5 billion in November 2007 to buy equity units in Citigroup Inc. Kuwait Investment Authority said in 2009 it purchased a $3 billion stake in Citigroup and a $2 billion holding in Merrill Lynch.

BlackRock buys agri shares to cap volatility

Reuters | 11 June 2010

By Martin de Sa’Pinto

GENEVA – Blackrock prefers to buy shares in companies involved in the agricultural industry to investing directly in grains and other commodities, which are more exposed to price volatility, a fund manager said.

Richard Davis, who oversees two natural resources funds with a total of $200 million in assets, said he takes long-term positions in companies that own land, produce crops, raise livestock or sell agricultural equipment.

“Equities remove some of the intrinsic volatility of investing in commodities,” said Davis, a portfolio manager in the natural resources team at BlackRock, which manages a total of some $3.3 trillion.

“Corn prices have been volatile, but John Deere, who make tractors and agricultural machinery, don’t really care about the shape of the corn curve,” said Davis at the Jetfin Agro 2010 conference in Geneva this week.

While prices of agricultural commodities are volatile, the reaction by the supply-side dampens any major disruptions over the long term, Davis said.

“I don’t think the corn price can ever go to $10 per bushel from around $3.50 today, because as soon as it reaches say $7, farmers will do whatever it takes to increase their production,” he said.

“If we did not see a supply-side response, prices would continue to go higher and higher. Governments won’t allow that to happen, food security is a major issue,” he added.

LIKES GM, POTASH COMPANIES

Natural resource funds also can soften the effects of volatility by buying stocks exposed to various phases of the production cycles, Davis said.

“If the corn price goes up, fertiliser companies do well. If prices pull back, it could be good news for companies that transport and store, while a fall in prices could be good news for companies who process food,” he said.

Two of his favourite themes are fertiliser producers and suppliers of genetically modified (GM) seeds.

“This year the European Union gave the first GM license since the end of the 1990s. Countries are beginning to rethink their policies towards GM,” Davis said.

Two of his top sector picks are U.S.-based Monsanto and Switzerland’s Syngenta, which, he said, have “fantastic intellectual property”.

As for fertilisers, potash is a 65 million tonne market, with Brazil, India and China together accounting for 23 million tons of demand, he said. To get the best yields, these three countries would have to double their potash consumption, he added.

What’s more, potash is a scarce commodity, with only seven countries in the world producing it, he said.

His top pick is Potash Corp, which he said controls the best potash assets in the world.

The two BlackRock funds are investing in companies closely associated with agricultural production but will not go further downstream by investing in, say, restaurants or breweries.

“As close as possible to the farmer; that’s where the best returns are going to be made,” Davis said.

Energy investor exodus according to BAML survey

Author: Charles Gubert Source: Hedge Funds Review | 15 Jun 2010


Global fund managers have significantly reduced their exposure to energy in the wake of the BP oil spill in the Gulf of Mexico, according to a survey by Bank of America Merrill Lynch.

The report said global investors had slashed the energy weightings to 7% overweight from 37% in May. This "is the largest single-month fall ever seen in energy", said the report.

"It was a surprise," said European equity specialist at BAML Gary Baker. "People expected a significant fall but we have never seen such a fall in the context of the survey."

The exodus from energy has seen technology become the most favoured sector among fund managers with the majority currently 41% overweight.

Baker said many fund managers who had reduced their energy weightings would be looking to invest in telecommunications and pharmaceutical industries.

The survey also revealed that 27% of investors now expected a weakening in China's economy over the coming 12 months. This is the most pessimistic reading since January.

"China has been growing at 13% to 14% a year, so there has to be a slowdown otherwise they will face a major inflation problem. The fact fund managers have still focused on emerging markets is good because it suggests that they are comfortable with events unfolding in China," said Baker.

In a separate survey of European fund managers, BAML discovered concerns about the eurozone. Only 7% of European investors felt the eurozone economy would be stronger in the next 12 months. This was a major fall from the 62% who predicted a stronger eurozone only two months ago.

Global fund managers remained slightly more optimistic about the eurozone than European fund managers. The survey revealed that the eurozone was starting a "modest rehabilitation process" as investors wanting to underweight Europe fell to a net of 12% compared with 30% in May.

"There was an easing of concern in the eurozone this month. People think there is value in Europe. It is the most undervalued region," added Baker.

SEC Charges Phony Western Gold Sales Team in $300 Million Ponzi Case

Case names Merendon Mining of Nevada plus 4 Canadians and 2 Americans

Joyce Hanson 6/14/2010
In a fraud case that sounds like it came straight out of the Wild Wild West, the Securities and Exchange Commission (SEC) charged Friday, June 11, that a group of swindlers persuaded more than 3,000 U.S. and Canadian investors to put their savings, retirement funds, and home equity into a $300 million Ponzi scheme for a phony gold-mining operation.
The SEC charges that as “primary architects” of the scam, Milowe Allen Brost and Gary Allen Sorenson of Calgary, Alberta, put together a sales team posing as an independent financial education firm that had discovered profitable investment opportunities with companies involved in gold mining.

“They held seminars where they promised investors they could earn 18% to 36% annual returns by investing with these companies, and they claimed the investments were fully collateralized by gold,” the SEC charged in its litigation release.

The complaint names four other individuals and four companies in the securities fraud: Larry Lee Adair, of Fort Lauderdale, Florida; Ward K. Capstick, a Canadian citizen living in Snohomish, Washington; Bradley Dean Regier, also of Calgary; Martin M. Werner, of Boca Raton, Florida; Syndicated Gold Depository; Merendon Mining Corp. Ltd.; Merendon Mining (Nevada) Inc.; and the Institute for Financial Learning Group of Companies Inc.

Sorenson allegedly hosted tours by potential investors at his Honduran refinery and demonstrated the pouring of gold bars while making false claims about the profitability of his company. Brost and Sorenson concealed their ownership and control of SGD by using personal aliases, corporate entities and trust agreements with nominee shareholders. Brost and his sales team, calling themselves “Structurists,” sold investors shares in shell companies and then put their money through a "structuring" process that culminated with the transfer of funds from Syndicated Gold Depository to Merendon Mining.

“Unbeknownst to investors, they were actually investing in shell companies owned or controlled by Brost or Sorenson,” according to the SEC’s injunctive action taken in U.S. District Court for the Western District of Washington. “Investor funds were often transferred multiple times through numerous bank accounts held as far away as Asia, Europe and South America, and then ultimately used to make ‘interest payments’ to investors, fund the few unprofitable companies that actually had operations, and personally enrich Brost, Sorenson and others involved in the scheme.”

Brost and Sorenson apparently spent millions of dollars to buy and renovate extravagant homes, ranches, and recreational vehicles. Sorenson also purchased and outfitted a luxury fishing resort in South America. His wife and daughter are named as relief defendants in the case in order to recover investor assets now in their possession

Hedge funds hit by rise in coffee price

Hedge fund managers may be off their double espressos after losing thousands of pounds betting on coffee price.

By Helia Ebrahimi and Harry Wilson

The idea of not drinking coffee is as foreign to Italians as the idea of having to explain its rituals The cost of a cup of coffee in London's Mayfair may be enough to cure most of their caffeine addiction. But it's a fair bet that some of the area's hedge fund managers will also be off their double espressos after losing millions of pounds betting on the coffee price.

Yesterday, the price of New York-traded Arabica coffee hit a two-year high as an unidentified company called time on this profitable trade and demanded funds make good on the futures contracts they had been selling.

Return of the day trader: introduction to spread bettingTrading in Arabica – premium coffee beans bought and sold on the Intercontinental Exchange in New York – breached the 150¢ level, its highest in more than two years.

The price spike echoed moves on London's Liffe exchange where Robusta - used in instant coffee production - has jumped 20pc in the last three days.

Hedge funds had made millions in recent years betting on a falling coffee price. A spike in its price in the last week, however, has left many investors nursing large losses.

The unexpected request from the as -yet unidentified company left hedge funds scrambling to buy actual coffee beans, leading the price to shoot up.

ETFS Coffee, an exchange traded fund listed in London, saw its value shoot up by more than 10pc in the last week on the back of the price rise.

Sudakshina Unnikrishnan, a commodities analyst, said that ultimately the price spikes in Arabica and Robusta coffee were not linked to underlying supply and demand issues. "There is no fundamental reason for coffee prices to have increased so much in recent weeks," she said.

"Although global inventories have come off over the last few years for the 2010-2011 marketing year we are expecting Brazilian production to be very high."

One coffee trader said the price moves where unusual but it was unclear how much was driven by hedge funds.

TPG eyes cleantech sectors in China

By Deborah Kan and Maggie Lu Yueyang

HONG KONG, June 8 (Reuters) - U.S. private equity firm TPG Capital [TPG.UL] sees opportunities in China's clean tech sector and financial restructuring, its top dealmaker said in China.

"We will focus on new and emerging sectors, for instance, new tech, clean tech or health care," Mary Ma, partner and managing director at TPG said in an interview with Reuters Insider. "These are really high-growth and high potential sectors in China."

Although large buyout cases are rare in China, Ma still believes a lot of deal opportunities are likely to come out in a year or two, especially in the financial investment industry.

"I still believe that there is some sort of restructuring cases coming out, not only the SOE's (state owned enterprises, but also the private companies," she said.

Ma didn't confirm market talk that TPG is going to set up a RMB fund, but she said that "definitely with RMB fund we can see more opportunities".

TPG, which has been present in China for 15 years, will accelerate its localization in the country with some hiring plans, added Ma, who joined TPG three years ago from Lenovo (0992.HK: Quote, Profile, Research, Stock Buzz), the Chinese personal computer-maker.

In May, the private equity firm made a $2.4 billion profit, sixteen times its money on a six-year investment in a Chinese lender, Shenzhen Development Bank. (Reporting by Maggie Lu Yueyang; Editing by Anshuman Daga)

AgBank dismisses reports China asking for IPO delay

By Victoria Bi and Jason Subler

SHANGHAI, June 9 (Reuters) - An executive with the Agricultural Bank of China on Wednesday dismissed as "nonsense" reports that its government shareholders were pushing it to postpone its planned share issue due to weak market conditions.

The Hong Kong-based South China Morning Post on Wednesday cited two unidentified sources involved in the offering as saying AgBank's two state shareholders -- the Ministry of Finance and Central Huijin -- wanted AgBank to postpone its listing as it was having a difficult time drumming up interest in the sale.

Central Huijin is the domestic arm of the country's sovereign wealth fund.

Contacted by Reuters by telephone, AgBank [ABC.UL] Vice President Pan Gongsheng said reports that Beijing was pressing for a delay of the massive share issue had no grounding in fact. Some domestic media outlets have also suggested the government was pushing for a delay of the IPO.

"Many potential investors have expressed great interest," Pan said, in AgBank's first public denial of the reports.

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For AgBank TAKE A LOOK [ID:nSGE65307X]

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AgBank is expected to obtain formal approval from China's securities regulator for the Shanghai portion of its dual listing on Wednesday, and to get the green light from Hong Kong's stock regulator a day later.

However, the timing of the listing, which could be the world's largest, is still unclear, and the weak stock market and flood of fundraising plans by other lenders and companies have created some uncertainty about how much it will ultimately raise.

A Reuters poll of 18 fund managers, strategists and analysts conducted this week suggests AgBank could command a valuation of 1.5 times its book value.

That would mean AgBank could raise close to $20 billion, far from the $30 billion that sources with direct knowledge of the process have said it was initially aiming for, which would have made it the world's biggest IPO ever

Premier fonds africain de développement durable «focus forêt»

02-06-2010

L’agence britannique de développement (CDC) a consacré 50 millions de dollars ce mercredi 2 juin dans le premier fonds de capital investissement dédié à la forêt en Afrique subsaharienne.

Le GEF Africa Sustainable Forestry Fund (GASFF) sera géré par le fonds Global Environment Fund (GEF), un professionnel connu qui compte dans son portefeuille plus de 1 milliard de dollars sous gestion. Le premier closing de la GASFF, intervenu le 24 mai dernier, était fixé à 84 millions de dollars, souscrits entièrement par l’agence britannique CDC, initiatrice du projet, à hauteur de 50 millions de dollars et par des institutions de développement. L’implication du secteur privé, prévue dans un second temps, portera la taille du fonds à 150 millions de dollars.

Dans l’angle de tir, l’exploitation de 5 à 10 forêt africaines déjà identifiées. Le fonds investira dans des projets moyens de 15 à 30 millions de dollars dans des pays à potentiel forestier élevé comme le Mozambique, la Tanzanie, le Swaziland, l’Afrique du Sud, l’Ouganda, le Ghana, le Malawi et la Zambie.

Les initiateurs du fonds entendent surfer sur la demande grandissante de l’industrie de la construction, de l’énergie et du bio diesel. «le CDC est l’artisan de la création de ce fonds, première du genre en Afrique. De l’identification du besoin, à la sélection du manager, à la souscription de 50 millions de dollars. Nous continuons à jouer notre rôle dans l’apport des investissements vitaux et de l’innovation dans les pays en développement », explique Richard Laing, patron de CDC. Il faut dire que le lancement des mécanismes pour la réduction des émissions de carbone favorise la rentabilité de tels investissements

SilverStreet Fund Focuses on Agriculture in Africa

28 May 2010 SilverStreet’s farmland fund seeks sustainable yields of crops — and investments.

Gary Vaughan-Smith is no slouch at growing assets. As head of ABN Amro Asset Management’s alternative investment group, he boosted assets from less than $50 million to more than $5 billion in just five years. Now he wants to apply the same skill to growing crops. As a founding partner of London-based SilverStreet Capital, he aims to buy up farms in Africa; raise productivity by using sustainable agriculture, such as no-till farming; and sell the produce domestically. He also wants to teach local farmers better techniques.

“The problems with food production in Africa arise from the low productivity on the part of small-scale farms — and the majority of Africa’s farms are small-scale,” says Vaughan-Smith. “We thought that if we could improve that scenario by training people to farm more effectively and getting productivity up, agricultural communities across the region could boom.”

He also learned that the interest of pension funds, postcrash, in real-asset strategies providing robust diversification and steady income was considerable. And he found the funds also had an appetite for social accountability. So he focused SilverStreet’s flagship Silverlands Fund on agriculture in Africa, in part because he knows the continent well. Vaughan-Smith, 46, grew up in Zimbabwe’s capital, Harare, and received a BA in mathematical statistics from the University of South Africa before earning a master’s in finance from the University of Cambridge.

He sees enormous potential. Although Africa possesses roughly one third of the world’s arable land and some of its best soil, it suffers from chronic food shortages. Most farmers have little access to high-quality seeds and fertilizer and don’t know how to prevent erosion and nutrient depletion. More-sustainable practices, Vaughan-Smith contends, can produce tremendous yields: On commercial farms in parts of Zambia, corn output rivals that in the U.S.

Vaughan-Smith and his team of seven professionals — which includes 17-year Gartmore Investment Management veteran Edwin Doeg, who joined SilverStreet in 2008 — are scouting for commercial farms in five countries — Malawi, Mozambique, Tanzania, Uganda and Zambia — where conditions are deemed to be the most favorable. Although the fund will concentrate initially on row crops like wheat, corn and soybeans, it plans to branch into sugarcane, fruit, tea and livestock. African farmland is still cheap. A hectare in Zambia sells for $1,500, says Vaughan-Smith, compared with $9,600 for a comparable-size plot in the U.S. corn belt.

Nevertheless, finding suitable farms is not easy. “Buying land in Africa is very inefficient,” he says. “There is no way to go into a central database and see which farms are for sale, and for what price — you have to have a very good network of contacts in the country and an ability to source potential acquisitions.”

The team plans to develop training hubs at each of its major agricultural centers. Education has been delegated to a charity, Foundations for Farming. Silverlands’ farm management team intends to help local farmers by giving them better access to high-quality seeds and fertilizer, helping them negotiate group discounts and providing assistance in buying, processing and distributing locally grown crops.

Farming takes patience, and that goes too for investing in farming. A private equity fund, Silverlands has an investment cycle of ten years, with a 2 percent management fee and a 20 percent performance fee (over an absolute hurdle of 7 percent). SilverStreet has raised $100 million so far and will close Silverlands at $300 million. “I find it really exciting to be able to bring this sort of investment capital to Africa,” says Vaughan-Smith. “There is so much we can do to have a positive social impact.”

Global food prices plummet, UN reports

The cost of the average food basket is 69 per cent higher than six years ago

3 June 2010 – International prices of key food staples dropped in the first five months of this year, driven largely by plummeting prices of cereals and sugar, according to a new United Nations Food and Agriculture Organization (FAO) report.
The FAO Food Price Index – the average of commodity prices, including meat and dairy – averaged 164 points in May, down from 174 in January and substantially less than its peak of 214 reached in the spring of 2008.

Sugar prices have plunged by half from their peak earlier this year due to possible significant production increases.

But the Food Outlook report said that despite the fall in the Index, the cost of the typical food commodity basket globally today is still nearly 70 per cent higher than it was between 2002 and 2004.

“The 2008-2009 food prices boom spurred plantings and production of many crops, which has resulted in a recovery in inventories and boosting stocks-to-use rations, a tendency likely to prevail in 2010/11,” the publication said.

The global drop in prices, it cautioned, masks the ongoing high costs of food imports due mainly to higher expenditures on non-cereal products, including dairy products and vegetable oils.

The new report also predicted continued growth in cereals, with world production this year on target to match the record set in 2008.

Gulf farmland search switches to richer countries

Reuters | May 28, 2010

■ Gulf buyers looking for less risky farmland
■ Australia, East Europe in focus
■ Lower infrastructure costs for land in developed world

By Amena Bakr

DUBAI, May 28 (Reuters) – Gulf nations seeking farmland for food security have shifted their focus to East Europe and Australia after a buying spree in the developing world as they look for land that comes with less political and financial risk.

The Gulf is one of the world’s biggest food importing regions. It stepped up efforts to buy and lease farmland in developing nations to secure food supplies after global commodity prices rose to record levels in 2007-2008.

Gulf investors initially targeted Sudan, Iraq, Pakistan and Thailand, among others.

“If you have a look at the countries that have so far been targeted you’ll find that all of them have a degree of political risk,” said Sudhakar Tomar, managing director of Dubai-based Hakan Agro DMCC, one of the largest food trading companies in the Gulf region.

“But there are other options that are commercially attractive, ethically justifiable and legally more secure.”

Hassad Food, owned by Qatar’s sovereign wealth fund, formed a Sydney-based subsidiary in December, Hassad Australia, to buy farmland for wheat and livestock production.

It plans to have the capacity to produce 150,000 sheep and 50 tonnes of wheat per year, the company said.

Last year Pharos Miro Agriculture Fund, a joint venture between UAE-based Pharos Financial Group and Miro Holdings International, was launched and aims to develop farmland in eastern Europe.

The $350 million fund had attracted the attention of Gulf sovereign wealth funds, said Miro Chief Executive Oliver Barnes.

“We are looking for land across that area in countries like Romania, Bulgaria and Moldova,” he said.

Last month, UK-based Swire Group went to the Gulf in search of a buyer for their agricultural business in Australia, Clyde Agriculture.

“We came to the Gulf region because we noticed that there’s an interest in not only agriculture investment but also in locations that are more sustainable in the long term and are already developed,” said John McKillop, managing director of Clyde Agriculture.

The company owns 165,000 hectares of farmland in New South Wales, in eastern Australia, McKillop said.

While land in developed countries is more expensive, the cost of building infrastructure in developing countries can quickly make cheap land look pricey, analysts said.

“Many people think that land in Africa is cheap but it’s not because you have to invest in infrastructure which is not there so costs around $1,500-2,000 per hectare,” Barnes said.

In eastern Europe the company would be able to have freehold rights over the land which roughly costs around $2,000 per hectare, Barnes said.

AVOIDING CRITICISM

Foreign land acquisitions have provoked opposition from some sectors and from farmers in developing nations.

In Madagascar, an attempt by South Korea’s Daewoo Logistics to lease an area of land larger than Qatar to grow food for export contributed to the unpopularity of former leader Marc Ravalomanana, who was toppled in March last year.

The United Nations continues to express concern that farmers’ rights in developing nations could be compromised as rich countries buy farmland to secure food supplies.

This caused Gulf states to rethink rather than risk tarnishing their reputation with the deals, described by some who oppose them as land grabs.

“But as more investors look into the opportunities that developed nations present there will be no need to go underground or be ashamed of these deals,” said Hakan Agro’s Tomar.

Buying land in countries that can barely feed themselves and exporting produce from it has exposed investors to popular unrest and political disapproval in their target countries in the developing world.

Developed countries offered less political and ethical obstacles to shipping food out, Clyde Agriculture’s McKillop said.

“Investors can ship back all the produce without having to share it with the local market,” McKillop added.

Pakistan and Iraq are in the process of finalising laws that would govern long-term foreign land leases. Both countries have conditions where investors have to share a percentage of the produce with the local market.

“(Investors) goal is to produce food to ship in back to their countries, but our priority is to feed our own people. So, if any land leases take place, the majority of the produce will have to be for the local Iraqi market,” Fawzi al-Hariri, Iraq’s minister of industry and minerals, said.

Changes in legislation combined with political upheaval in target countries have made farmland in the developing world less of a magnet for Gulf cash.

“Investing in developing countries was attractive in the beginning, but we just came to a point where laws and govenments are changing overnight and it was just not a secure option,” said a UAE based investor who spoke on condition of anonymity. (Editing by William Hardy)

France sets up $120 million Africa agriculture fund

Reuters | 2 June 2010

France will set up a $120 million fund to help Africa’s farming and food distribution sectors, a communique from the 25th Africa-France Summit said on Tuesday, as the continent looks to ensure security of food supplies.

African agriculture faces multiple constraints, ranging from poor rural infrastructure, to lack of access, sufficient water, fertilisers, and machinery.

To ensure sustainable food production and achieve food security, the agricultural sector needs to attain significant growth rates over the next four decades.

“France has announced the establishment of an investor fund … destined to support the development of farming projects in Africa and the distribution of food stuffs,” the communique said.

In 2008, Africa produced 152.3 million tonnes of cereals, 12 percent more than the previous year, while projections for 2009 indicate that the continent’s cereal production could have reached 160 million tonnes, according to the United Nation’s Food and Agriculture Organisation. Sub-Saharan Africa has around 395 million hectares of unused farmland.

The fund will start at $120 million and could increase to as much as $300 million. The communique did not specify where or how the fund would operate.

President Nicolas Sarkozy and African leaders, including South Africa’s Jacob Zuma and Nigeria’s Goodluck Jonathan, also agreed to work together towards creating a framework to fight volatility of commodity prices and to reinforce food security, when France takes the helm of the G8/G20 group of large economies in 2011.

In sub-Saharan Africa, since 2009, over 265 million people are malnourished and 30 percent of the population suffers from hunger, FAO’s Director-General, Jacques Diouf, has said.

The Africa-France Summit, which closed on Tuesday, has been held since 1975. France is looking to claw back some of its historical economic influence in the continent, given the emergence of new rivals such as China, which has become Africa’s biggest trade partner.

France welcomed about 40 African leaders in the French Riviera city of Nice to discuss issues ranging from Africa’s political position globally to the environment and security.