Mon, Aug 16
BOSTON (Reuters) - Top hedge fund managers went bargain hunting in the oil patch in the second quarter, buying shares whose prices had tumbled after BP's Gulf of Mexico well disaster and in the face of lower oil prices.
Top managers including Carl Icahn, Eric Mindich and Dinakar Singh, whose stock picks are closely watched in investment circles, added energy stocks to their holdings even as billions of gallons of oil gushed into the Gulf, according to quarterly securities reports filed on Monday.
Others stocking up on energy shares included David Einhorn, former Fidelity Investments star Jeff Vinik, the $22 billion Boston-based fund Adage Capital and SAC Capital Advisors LP, the hedge fund run by Steven Cohen.
Fund managers must say what U.S. listed equities they own within 45 days after the quarter ends.
Energy stocks ranked among the worst performers during a quarter that also featured the still unexplained stock market "flash crash" on May 6 and new jitters about a double-dip recession developing in the United States.
Still, top fund managers staked out the sector much like they did with financial companies earlier in the year.
For investors bold enough to jump into the energy sector while the Gulf oil spill was gushing and doubts swirled about the future of U.S. offshore oil drilling, the payoff has been swift and handsome.
In particular, BP's (BP.L) (BP.N) shares are up 28 percent since the end of the second quarter, after losing roughly half their value in the weeks that followed the explosion and sinking of the Deepwater Horizon drilling platform in the Gulf of Mexico in late April.
After building his energy holdings slowly at the start of the year, billionaire Carl Icahn picked up the pace, committing nearly $1 billion to the sector during the quarter.
Icahn also picked up shares of oil and gas producer Anadarko Petroleum (APC.N) and offshore drilling specialist Ensco Plc's (ESV.N) sponsored American Depository Receipts, according to documents submitted to the Securities and Exchange Commission on Monday.
Other companies that attracted interest from one or more hedge funds included drilling services specialist Baker Hughes (BHI.N) and oil services company Halliburton (HAL.N).
Mindich, whose skills at Goldman Sachs helped him raise a record $3 billion when he started his fund in 2004, bought both shares and call options in BP, and a variety of other companies in the sector: Diamond Offshore Drilling (DO.N), Forest Oil (FST.N), Marathon Oil (MRO.N), Plains Exploration & Production (PXP.N) and Suncor Energy (SU.TO).
Einhorn's Greenlight Capital bought just over 5 percent of Ensco's shares. In a letter to investors last month, Einhorn said the Gulf oil spill "should not materially impact (Ensco's) long-term potential."
Einhorn's other actions centered mostly on technology, where he boosted exposure to Microsoft Corp (MSFT.O) and Xerox Corp (XRX.N), and took a stake in Apple Inc (AAPL.O).
The forms managers filed on Monday include only U.S.-listed equity securities and related derivatives. Bonds, other securities and short positions are typically not disclosed. Managers may also omit U.S.-listed equities under certain circumstances or file some holdings on confidential filings.
Einhorn and John Paulson of the Paulson Funds were among the managers taking larger stakes in drugmaker Pfizer Inc (PFE.N).
Paulson> also raised a few eyebrows by picking up one million shares of Goldman Sachs Group (GS.N) in the second quarter.
Paulson's was the hedge fund at the heart of the SEC's civil fraud case against the Wall Street bank. In April, the SEC charged Goldman with failing to disclose that Paulson's fund had a hand in picking securities for a complex mortgage-related deal that the hedge fund was betting against.
Regulators did not charge the fund with any wrongdoing, but his investors became so nervous that he was forced to hold a series of conference calls to explain the matter.
(Reporting by Svea Herbst-Bayliss and Aaron Pressman. Additional reporting by Emily Chasan in New York and Ross Kerber in Boston; Editing by Robert MacMillan and Steve Orlofsky)
NEWS - Commodites, Agriculture, Green Investment - NEWS
8/16/2010
Alarm bells at sovereign funds' farmlands foray
16 Aug, 2010 09:28 AM
SOVEREIGN wealth funds have become the central issue in the debate over foreigners buying up rural properties in Australia.
While there are many examples of foreigners buying land in the past couple of years, Qatar-based Hassad Food, which is backed by the Qatar Investment Authority, exemplifies sovereign wealth funds buying up rural land in Australia to feed not only Qatar but other Middle Eastern countries concerned about food security.
Hassad has bought more than $40 million worth of sheep stations in northern NSW and South Australia in the past six months and intends to increase its land holding, according to The Australian Financial Review.
The federal Minister for Agriculture, Tony Burke, has emphasised the value of foreign investment in the agricultural sector, saying investments by international agricultural and food groups "have allowed our farmers to maximise the prices they receive for the products they produce".
But Liberal senator Bill Heffernan warns sovereign wealth funds need to be watched because some were "already acquiring other sovereigns' wealth to protect their own food security tasks".
SOVEREIGN wealth funds have become the central issue in the debate over foreigners buying up rural properties in Australia.
While there are many examples of foreigners buying land in the past couple of years, Qatar-based Hassad Food, which is backed by the Qatar Investment Authority, exemplifies sovereign wealth funds buying up rural land in Australia to feed not only Qatar but other Middle Eastern countries concerned about food security.
Hassad has bought more than $40 million worth of sheep stations in northern NSW and South Australia in the past six months and intends to increase its land holding, according to The Australian Financial Review.
The federal Minister for Agriculture, Tony Burke, has emphasised the value of foreign investment in the agricultural sector, saying investments by international agricultural and food groups "have allowed our farmers to maximise the prices they receive for the products they produce".
But Liberal senator Bill Heffernan warns sovereign wealth funds need to be watched because some were "already acquiring other sovereigns' wealth to protect their own food security tasks".
8/13/2010
Commodity prices drop on signs recovery weakening
By TALI ARBEL (AP)
NEW YORK — Industrial metals and energy pared their losses Tuesday after the Federal Reserve said it would buy government debt, signaling that it will act to support the economic recovery as needed. Gold prices settled lower before the statement, but shot up in after-hours trading.
Commodities had been down more deeply earlier in the day as investors saw hints of a slowdown in demand in China and worried over a weakening economy in the U.S.
The Fed said Tuesday that economic growth would be "more modest" than it had predicted seven weeks ago. It said it would buy Treasurys using funds from its investments in mortgage securities to help support the recovery.
Gold, which investors buy as a safe haven asset, settled down $4.60 at $1,198 an ounce before the Fed announcement. But in after-hours trading, the December contract was up around $1,208 an ounce.
Silver for September delivery fell 8.4 cents to settle at $18.158 an ounce, while October platinum dropped $5.90 to $1,537 an ounce. Both rose higher after the Fed's statement.
September palladium fell $9.05 to settle at $470.60 an ounce, while copper slid 4.15 cents to $3.3125 a pound after a report showing China's appetite for imports weakening.
China is the world's largest importer of copper. The other industrial metals had also fallen more steeply earlier because of the Chinese report, which said China's imports rose 22.7 percent to $116.8 billion in July. That's down from the 34.1 percent rate of expansion in June.
Energy prices also fell, although they pulled off their lows for the day after the Fed's report.
Crude, which had risen about 10 percent through July and August, nearly touching $83 last week, ended down $1.23, or 1.5 percent, to settle at $80.25 a barrel Tuesday. The September contract had dipped below $80 a barrel earlier in the day.
Heating oil slid $2.84 to $2.1254 a gallon, while natural gas fell 1.2 cents to $4.297 per 1,000 cubic feet and gasoline dropped 3.34 cents to $2.0853 a gallon.
"We've seen such a run up in commodities and the market in general" this summer, said Spencer Patton, founder and chief investment officer for hedge fund Steel Vine Investments LLC. "This could be the start of a little of a leg down, a pull back in the market."
Grains futures ended lower, and wheat prices continued to pull back from a two-year high hit last week after Russia said it was banning exports for the rest of the year because of a drought-ravaged crop.
Wheat for December delivery shed 17 cents to settle at $7.2675 a bushel, December corn dropped 9 cents to $4.09 a bushel and November soybeans lost 13 cents to $10.22 a bushel.
NEW YORK — Industrial metals and energy pared their losses Tuesday after the Federal Reserve said it would buy government debt, signaling that it will act to support the economic recovery as needed. Gold prices settled lower before the statement, but shot up in after-hours trading.
Commodities had been down more deeply earlier in the day as investors saw hints of a slowdown in demand in China and worried over a weakening economy in the U.S.
The Fed said Tuesday that economic growth would be "more modest" than it had predicted seven weeks ago. It said it would buy Treasurys using funds from its investments in mortgage securities to help support the recovery.
Gold, which investors buy as a safe haven asset, settled down $4.60 at $1,198 an ounce before the Fed announcement. But in after-hours trading, the December contract was up around $1,208 an ounce.
Silver for September delivery fell 8.4 cents to settle at $18.158 an ounce, while October platinum dropped $5.90 to $1,537 an ounce. Both rose higher after the Fed's statement.
September palladium fell $9.05 to settle at $470.60 an ounce, while copper slid 4.15 cents to $3.3125 a pound after a report showing China's appetite for imports weakening.
China is the world's largest importer of copper. The other industrial metals had also fallen more steeply earlier because of the Chinese report, which said China's imports rose 22.7 percent to $116.8 billion in July. That's down from the 34.1 percent rate of expansion in June.
Energy prices also fell, although they pulled off their lows for the day after the Fed's report.
Crude, which had risen about 10 percent through July and August, nearly touching $83 last week, ended down $1.23, or 1.5 percent, to settle at $80.25 a barrel Tuesday. The September contract had dipped below $80 a barrel earlier in the day.
Heating oil slid $2.84 to $2.1254 a gallon, while natural gas fell 1.2 cents to $4.297 per 1,000 cubic feet and gasoline dropped 3.34 cents to $2.0853 a gallon.
"We've seen such a run up in commodities and the market in general" this summer, said Spencer Patton, founder and chief investment officer for hedge fund Steel Vine Investments LLC. "This could be the start of a little of a leg down, a pull back in the market."
Grains futures ended lower, and wheat prices continued to pull back from a two-year high hit last week after Russia said it was banning exports for the rest of the year because of a drought-ravaged crop.
Wheat for December delivery shed 17 cents to settle at $7.2675 a bushel, December corn dropped 9 cents to $4.09 a bushel and November soybeans lost 13 cents to $10.22 a bushel.
8/11/2010
Apollo Said to Shut Metals Hedge Fund in London
By Chanyaporn Chanjaroen - Aug 10, 2010 6:12 PM GMT+0200
Leon Black, co-founder of Apollo Management LP which is said to have closed its metals hedge fund in London.
Apollo Management LP, a private- equity firm co-founded by Leon Black, closed its metals hedge fund in London, according to two people with direct knowledge of the matter.
The New York-based firm put $40 million into the Apollo Metals Trading Fund, which started in March 2009, according to a U.S. Securities and Exchange Commission filing. An outside spokeswoman for the firm declined today to say why Apollo shut the fund or to give the number of fund employees.
The fund traded industrial and precious metals and mining equities, Apollo said in the March 22 SEC filing. Mark Thompson, the fund’s manager, left the company in June.
Hedge funds investing in commodities fell 5.3 percent on average in 2010’s first half after last year’s drop, according to figures from Hedge Fund Research Inc. An index of the six main industrial metals traded on the London Metal Exchange slid 12 percent in the half as immediate-delivery gold rose 13 percent.
Apollo hired Greg Beard in June from Riverstone Holdings LLC as a senior partner focusing on commodities, according to one of the two people. Riverstone is a New York-based private- equity firm focusing on energy and power that managed about $17 billion as of June, its website shows.
Leon Black, co-founder of Apollo Management LP which is said to have closed its metals hedge fund in London.
Apollo Management LP, a private- equity firm co-founded by Leon Black, closed its metals hedge fund in London, according to two people with direct knowledge of the matter.
The New York-based firm put $40 million into the Apollo Metals Trading Fund, which started in March 2009, according to a U.S. Securities and Exchange Commission filing. An outside spokeswoman for the firm declined today to say why Apollo shut the fund or to give the number of fund employees.
The fund traded industrial and precious metals and mining equities, Apollo said in the March 22 SEC filing. Mark Thompson, the fund’s manager, left the company in June.
Hedge funds investing in commodities fell 5.3 percent on average in 2010’s first half after last year’s drop, according to figures from Hedge Fund Research Inc. An index of the six main industrial metals traded on the London Metal Exchange slid 12 percent in the half as immediate-delivery gold rose 13 percent.
Apollo hired Greg Beard in June from Riverstone Holdings LLC as a senior partner focusing on commodities, according to one of the two people. Riverstone is a New York-based private- equity firm focusing on energy and power that managed about $17 billion as of June, its website shows.
8/09/2010
La spéculation, un bouc émissaire
Ram Etwareea - Le Temps
Quel rôle peut jouer la FAO dans la gestion des stocks de denrées alimentaires?
Le prix du blé reste élevé même si tout scénario de pénurie est écarté
Publicité Les pays producteurs de blé, y compris la Russie, se frottent les mains. Ils profitent d’un affolement des prix poussés par la spéculation. Les investisseurs qui détiennent des trésors de guerre, mais que ni les actions ni les obligations ne séduisent, parient sur les matières premières agricoles. L’argumentation est simple. La planète compte de plus en plus de bouches à nourrir et la production alimentaire ne suit pas. Les produits vaudront cher.
C’est ainsi qu’ils ont joué sur une pénurie pourtant improbable de blé et les placements à court terme ont rapporté gros.
Nous sommes loin de la crise de 2006-2007 lorsque les prix alimentaires avaient atteint des sommets et que des émeutes de la faim avaient éclaté dans de nombreux pays. Il n’y avait pas de pénurie, mais, poussés par la spéculation, les prix avaient atteint des niveaux inaccessibles pour beaucoup de monde.
Des propositions ont surgi pour bannir la spéculation sur les produits alimentaires. Il y a quelques semaines, le financier britannique Anthony Ward a acheté tout le cacao disponible à la bourse de Londres et compte sur une hausse des cours. Malheureusement pour lui, le prix du cacao baisse depuis. Cet achat exceptionnel n’avait rien d’illégal, mais les autorités ont évoqué le besoin de plus de transparence. L’idée fait son chemin.
La FAO a-t-elle aussi un rôle à jouer, non pas contre la spéculation, mais pour assurer une bonne gestion des stocks de denrées? Les pays consommateurs ne peuvent pas à ce point être vulnérables et payer le prix fort à chaque crise. L’Egypte par exemple va devoir débourser entre 400 et 700 millions de dollars de plus pour assurer l’approvisionnement en pain en 2010.
Quel rôle peut jouer la FAO dans la gestion des stocks de denrées alimentaires?
Le prix du blé reste élevé même si tout scénario de pénurie est écarté
Publicité Les pays producteurs de blé, y compris la Russie, se frottent les mains. Ils profitent d’un affolement des prix poussés par la spéculation. Les investisseurs qui détiennent des trésors de guerre, mais que ni les actions ni les obligations ne séduisent, parient sur les matières premières agricoles. L’argumentation est simple. La planète compte de plus en plus de bouches à nourrir et la production alimentaire ne suit pas. Les produits vaudront cher.
C’est ainsi qu’ils ont joué sur une pénurie pourtant improbable de blé et les placements à court terme ont rapporté gros.
Nous sommes loin de la crise de 2006-2007 lorsque les prix alimentaires avaient atteint des sommets et que des émeutes de la faim avaient éclaté dans de nombreux pays. Il n’y avait pas de pénurie, mais, poussés par la spéculation, les prix avaient atteint des niveaux inaccessibles pour beaucoup de monde.
Des propositions ont surgi pour bannir la spéculation sur les produits alimentaires. Il y a quelques semaines, le financier britannique Anthony Ward a acheté tout le cacao disponible à la bourse de Londres et compte sur une hausse des cours. Malheureusement pour lui, le prix du cacao baisse depuis. Cet achat exceptionnel n’avait rien d’illégal, mais les autorités ont évoqué le besoin de plus de transparence. L’idée fait son chemin.
La FAO a-t-elle aussi un rôle à jouer, non pas contre la spéculation, mais pour assurer une bonne gestion des stocks de denrées? Les pays consommateurs ne peuvent pas à ce point être vulnérables et payer le prix fort à chaque crise. L’Egypte par exemple va devoir débourser entre 400 et 700 millions de dollars de plus pour assurer l’approvisionnement en pain en 2010.
Icahn Wagered $1 Billion on Energy Stocks During BP Oil Spill
By Miles Weiss - Aug 9, 2010 6:00 AM GMT+0200
Icahn plowed about $929 million into energy stocks in the period, bringing the total to 18 percent of the hedge-fund group’s stock investments, according to a regulatory filing last week. The energy bet helped the funds record an 8 percent gain July, when oil stocks rebounded, Icahn’s holding company said in an Aug. 4 statement.
Icahn, who has a 30-year history of investing in energy companies when they trade at a discount to the value of their oil and gas reserves, bought the stakes as the April 20 explosion of BP Plc’s Macondo well pushed prices lower. The Standard & Poor’s index of major oil and gas exploration companies declined 12 percent during the second quarter. It has since rebounded 10 percent.
“Carl has often said he could buy oil cheaper on Wall Street than at the wellhead,” said Russell Glass, who served as president of Icahn Associates during the 1990s, when the billionaire was acquiring stakes in small exploration and production companies. “He has a very keen sense for intrinsic value in the energy space,” said Glass, who now runs RDG Capital LLC, a New York-based hedge-fund group.
Genzyme
Icahn declined to identify the energy investments when reached at his New York office, and none of the stocks were named in the quarterly report that his holding company, Icahn Enterprises LP, filed with the U.S. Securities and Exchange Commission. The companies may be listed in the quarterly Form 13F that money managers such as Icahn must file with the SEC by Aug. 15 if they oversee $100 million or more of equities traded on U.S. exchanges.
Icahn also benefited from his investment in Genzyme Corp., whose shares have gained 36 percent since the end of the second quarter because of speculation the world’s largest maker of medicines for genetic diseases may be acquired by Sanofi-Aventis SA. Sanofi, based in Paris, has outlined an offer of $67 to $70 a share in a letter to Genzyme’s board, according to a person with knowledge of the matter who declined to be identified because the discussions are private.
The gains in July offset a 3.1 percent loss in the second quarter as “core” equity positions declined in value, according to the SEC filing. On average, hedge funds fell 2.5 percent in the three months ended June 30, according to Hedge Fund Research Inc. in Chicago.
Energy Investments
The filing also showed that Icahn fund group entered into option contracts tied to the performance of the S&P 500 earlier this year as part of its “market hedging strategy.” Under these contracts, Icahn would have received as much as $1.6 billion if the S&P 500 fell to zero and $188 million if the benchmark rose above 1,220.
As of June 30, Icahn’s hedge funds had a $110 million paper gain on the contracts tied to the S&P 500, which fell 12 percent during the quarter. The benchmark has gained 8.8 percent since then.
Icahn’s energy portfolio, valued at $923 million as of June 30, may include securities other than publicly traded stocks. Only $608 million of the securities had price quotes available in “active markets,” according to the SEC filing, with the other $315 million valued through techniques used for convertible bonds, illiquid stocks, and custom derivatives sold by investment banks.
BP
Icahn previously has fought battles for control of energy companies such as Texaco Inc. and Phillips Petroleum Co. during the 1980s. In 2005, he pushed for board seats at Kerr-McGee Corp., an Oklahoma City energy producer that was acquired by Anadarko Petroleum Corp. the following year.
Two years ago, Icahn’s hedge fund group quadrupled its stake in Williams Cos. to 17.5 million shares during the second half of 2008, when the Tulsa, Oklahoma, natural gas company lost more than 64 percent of its stock market value, and bought a 3.3 percent stake in The Woodlands, Texas-based Anadarko during 2007 and 2008. He sold most of these oil and gas holdings in early 2009.
BP, which is based in London, had lost more than half its market value after the oil spill occurred, falling as low as $26.75 a share by June 28. During the second quarter, 6 of the 12 companies included in the Standard & Poor’s 500 Integrated Oil & Gas Index hit their 52-week lows and crude oil prices suffered their first quarterly decline since 2008 on signs that the economic recovery in developed countries was slowing.
“The whole second quarter was difficult for energy” stocks, said Kurt Wulff, an independent oil and gas analyst at McDep LLC in Needham, Massachusetts. “I’d say they got oversold.”
To contact the reporter on this story: Miles Weiss in Washington at mweiss@bloomberg.net
Icahn plowed about $929 million into energy stocks in the period, bringing the total to 18 percent of the hedge-fund group’s stock investments, according to a regulatory filing last week. The energy bet helped the funds record an 8 percent gain July, when oil stocks rebounded, Icahn’s holding company said in an Aug. 4 statement.
Icahn, who has a 30-year history of investing in energy companies when they trade at a discount to the value of their oil and gas reserves, bought the stakes as the April 20 explosion of BP Plc’s Macondo well pushed prices lower. The Standard & Poor’s index of major oil and gas exploration companies declined 12 percent during the second quarter. It has since rebounded 10 percent.
“Carl has often said he could buy oil cheaper on Wall Street than at the wellhead,” said Russell Glass, who served as president of Icahn Associates during the 1990s, when the billionaire was acquiring stakes in small exploration and production companies. “He has a very keen sense for intrinsic value in the energy space,” said Glass, who now runs RDG Capital LLC, a New York-based hedge-fund group.
Genzyme
Icahn declined to identify the energy investments when reached at his New York office, and none of the stocks were named in the quarterly report that his holding company, Icahn Enterprises LP, filed with the U.S. Securities and Exchange Commission. The companies may be listed in the quarterly Form 13F that money managers such as Icahn must file with the SEC by Aug. 15 if they oversee $100 million or more of equities traded on U.S. exchanges.
Icahn also benefited from his investment in Genzyme Corp., whose shares have gained 36 percent since the end of the second quarter because of speculation the world’s largest maker of medicines for genetic diseases may be acquired by Sanofi-Aventis SA. Sanofi, based in Paris, has outlined an offer of $67 to $70 a share in a letter to Genzyme’s board, according to a person with knowledge of the matter who declined to be identified because the discussions are private.
The gains in July offset a 3.1 percent loss in the second quarter as “core” equity positions declined in value, according to the SEC filing. On average, hedge funds fell 2.5 percent in the three months ended June 30, according to Hedge Fund Research Inc. in Chicago.
Energy Investments
The filing also showed that Icahn fund group entered into option contracts tied to the performance of the S&P 500 earlier this year as part of its “market hedging strategy.” Under these contracts, Icahn would have received as much as $1.6 billion if the S&P 500 fell to zero and $188 million if the benchmark rose above 1,220.
As of June 30, Icahn’s hedge funds had a $110 million paper gain on the contracts tied to the S&P 500, which fell 12 percent during the quarter. The benchmark has gained 8.8 percent since then.
Icahn’s energy portfolio, valued at $923 million as of June 30, may include securities other than publicly traded stocks. Only $608 million of the securities had price quotes available in “active markets,” according to the SEC filing, with the other $315 million valued through techniques used for convertible bonds, illiquid stocks, and custom derivatives sold by investment banks.
BP
Icahn previously has fought battles for control of energy companies such as Texaco Inc. and Phillips Petroleum Co. during the 1980s. In 2005, he pushed for board seats at Kerr-McGee Corp., an Oklahoma City energy producer that was acquired by Anadarko Petroleum Corp. the following year.
Two years ago, Icahn’s hedge fund group quadrupled its stake in Williams Cos. to 17.5 million shares during the second half of 2008, when the Tulsa, Oklahoma, natural gas company lost more than 64 percent of its stock market value, and bought a 3.3 percent stake in The Woodlands, Texas-based Anadarko during 2007 and 2008. He sold most of these oil and gas holdings in early 2009.
BP, which is based in London, had lost more than half its market value after the oil spill occurred, falling as low as $26.75 a share by June 28. During the second quarter, 6 of the 12 companies included in the Standard & Poor’s 500 Integrated Oil & Gas Index hit their 52-week lows and crude oil prices suffered their first quarterly decline since 2008 on signs that the economic recovery in developed countries was slowing.
“The whole second quarter was difficult for energy” stocks, said Kurt Wulff, an independent oil and gas analyst at McDep LLC in Needham, Massachusetts. “I’d say they got oversold.”
To contact the reporter on this story: Miles Weiss in Washington at mweiss@bloomberg.net
8/06/2010
10 Reasons Why Sustainable Aquaculture Is the Future of Seafood
by Guest Analysts: Michael Whelchel and Aaron Enz | August 4th 2010
Fish farming (or aquaculture) is the fastest growing segment within the global agribusiness growing at a compound annual growth rate of 9%. In the 1970’s, aquaculture represented only 6% of total seafood consumption. Today, it represents 40% and is expected to rise to 50% by 2024 representing a market size of $100 billion.
Part of the reason for aquaculture’s growth is the increase in global demand for seafood coupled with a flat or declining supply from wild harvesting. While aquaculture is expected to fill the growing demand, conventional aquaculture methods have problems, including the wide use of antibiotics and pesticides to fight disease; the necessity of using of wild caught fish for fishmeal to feed farmed species; contaminants from fishmeal; and limited coastal waters available for aquaculture. If not addressed, the problems facing conventional aquaculture will limit its ability to meet rising demand.
The following are key drivers making sustainable agriculture an interesting sector to watch:
1. Output from Wild Fisheries in Peril – “We are fighting a war against fish, and we are winning,” says Dr. Daniel Pauly, a noted fishery expert who recently appeared in the documentary “The End of the Line”. Over 75% of the world’s commercial species are now fully exploited, overexploited, depleted, or recovering from depletion, reports the Food and Agriculture Organization of the United Nations. Other forms of animal-protein, such as beef, poultry and pork were domesticated over four thousand years ago and this has just begun in the seafood industry, at scale, over the past few decades.
2. Expanding Global Seafood Demand – World per capita consumption of fish and fishery products has risen by 50% in the last decades from an average of 11.5 kg during the 1970s to over 17 kg today.
3. Food Security – In 2008, imports made up 83% of the seafood consumed in the U.S. mostly from countries with practices that are under-regulated and far from sustainable. It is nearly impossible to trace the origins of imported seafood. In contrast, sustainable aquaculture enables local production (which also means fresher produce), year-round availability, and a higher degree of traceability.
4. Fish Consumption is an Efficient & Sustainable Protein Source – In animal husbandry, one of the key efficiency measures is the feed conversion ratio (FCR). The FCR measures feed fed/weight gained for various animals. This ratio is determined by the biological ability for animals to convert food into tissue. The FCR for sheep and cattle is 8:1, pigs 4:1, poultry 2:1, and fish (Atlantic salmon or tilapia) ~1.5 :1.
5. Safety & Health Concerns – Many people are unaware of the full range of potential containments in seafood. Fish species that are high on the food chain, such as tuna or swordfish, accumulate greater concentrations of toxins and pollutants. This problem also applies to aquaculture since the main source of protein for farmed fish is fishmeal produced from smaller, wild caught fish, which can contain mercury, PCBs or other containments. Within sustainable agriculture, there are companies creating fishmeal that derives its protein source from plant-based materials instead of fish.
6. Scale – The seafood industry is seeking sustainable aquaculture technologies that can scale at cost parity with the existing incumbent technologies. Technologies such as land-based recirculation aquaculture systems (RAS) are either cost competitive with incumbent methods or are poised to become so. RAS grows fish in large quantities “indoors” under controlled conditions.
7. Opportunity to Innovate – The following are promising next generation solutions for sustainable aquaculture: advanced, closed-loop land-based RAS systems, plant-based protein for replacement of fishmeal, nutrition formulations that replace nutrients found in fishmeal, technologies for conversion of fish waste to biomass and fertilizer, biofiltration for closed-loop systems, and deep-water farming. These innovations have the potential to ripple through the industry and reshape the seafood industry and the industry’s suppliers.
8. More Customers Are Demanding Sustainable Products – An increasing number of restaurants, retailers and food processing companies are looking to source seafood from sustainable providers. The Wall Street Journal recently reported that McDonald’s, Long John Silver and Red Lobster have embraced the growing movement toward more eco-friendly seafood-buying practices.
9. Local is the New Organic – The concept of ‘food miles’ is a measure of the distance that a food product travels from harvesting to where it is sold. For fish, food miles is often 2x to 3x greater than typical produce (1,500 miles) because fish are often caught and processed in very different locations. Land-based aquaculture can be located closer to where products are consumed, and can significantly reduce food miles, transportation costs and simultaneously improve freshness.
10. Global Warming Effect on Wild Fisheries – Scientists believe extra carbon in the atmosphere is causing a decrease in the ocean’s pH (known as “acidifcation”) which can negatively impact sea life. While computer models can provide clues as to what the rising ocean temperature and carbon absorption may mean to fish, the interactions of those variables is uncertain and therefore the ultimate outcome is unknown.
Conclusion
The confluence of declining wild fish stocks, increasing world seafood demand, problems with conventional aquaculture and the emergence of new technologies are propelling sustainable aquaculture forward. Sustainable aquaculture offers many economic and product benefits such as consistent harvest, scalable operations, lower transportation costs for locally produced seafood, and containment free products. For the right innovators and investors, there are enormous commercial opportunities.
About the authors:
Michael Whelchel and Aaron Enz are partners at Watershed Capital (watershedcapital.com), a financial advisory and investment banking firm focused exclusively on serving companies and investors in the sustainable business and clean technology sectors. Watershed Capital has an active practice in advising and financing innovative, sustainable seafood companies. They can be reached at michael@watershedcapital.com and aaron@watershedcapital.com.
Fish farming (or aquaculture) is the fastest growing segment within the global agribusiness growing at a compound annual growth rate of 9%. In the 1970’s, aquaculture represented only 6% of total seafood consumption. Today, it represents 40% and is expected to rise to 50% by 2024 representing a market size of $100 billion.
Part of the reason for aquaculture’s growth is the increase in global demand for seafood coupled with a flat or declining supply from wild harvesting. While aquaculture is expected to fill the growing demand, conventional aquaculture methods have problems, including the wide use of antibiotics and pesticides to fight disease; the necessity of using of wild caught fish for fishmeal to feed farmed species; contaminants from fishmeal; and limited coastal waters available for aquaculture. If not addressed, the problems facing conventional aquaculture will limit its ability to meet rising demand.
The following are key drivers making sustainable agriculture an interesting sector to watch:
1. Output from Wild Fisheries in Peril – “We are fighting a war against fish, and we are winning,” says Dr. Daniel Pauly, a noted fishery expert who recently appeared in the documentary “The End of the Line”. Over 75% of the world’s commercial species are now fully exploited, overexploited, depleted, or recovering from depletion, reports the Food and Agriculture Organization of the United Nations. Other forms of animal-protein, such as beef, poultry and pork were domesticated over four thousand years ago and this has just begun in the seafood industry, at scale, over the past few decades.
2. Expanding Global Seafood Demand – World per capita consumption of fish and fishery products has risen by 50% in the last decades from an average of 11.5 kg during the 1970s to over 17 kg today.
3. Food Security – In 2008, imports made up 83% of the seafood consumed in the U.S. mostly from countries with practices that are under-regulated and far from sustainable. It is nearly impossible to trace the origins of imported seafood. In contrast, sustainable aquaculture enables local production (which also means fresher produce), year-round availability, and a higher degree of traceability.
4. Fish Consumption is an Efficient & Sustainable Protein Source – In animal husbandry, one of the key efficiency measures is the feed conversion ratio (FCR). The FCR measures feed fed/weight gained for various animals. This ratio is determined by the biological ability for animals to convert food into tissue. The FCR for sheep and cattle is 8:1, pigs 4:1, poultry 2:1, and fish (Atlantic salmon or tilapia) ~1.5 :1.
5. Safety & Health Concerns – Many people are unaware of the full range of potential containments in seafood. Fish species that are high on the food chain, such as tuna or swordfish, accumulate greater concentrations of toxins and pollutants. This problem also applies to aquaculture since the main source of protein for farmed fish is fishmeal produced from smaller, wild caught fish, which can contain mercury, PCBs or other containments. Within sustainable agriculture, there are companies creating fishmeal that derives its protein source from plant-based materials instead of fish.
6. Scale – The seafood industry is seeking sustainable aquaculture technologies that can scale at cost parity with the existing incumbent technologies. Technologies such as land-based recirculation aquaculture systems (RAS) are either cost competitive with incumbent methods or are poised to become so. RAS grows fish in large quantities “indoors” under controlled conditions.
7. Opportunity to Innovate – The following are promising next generation solutions for sustainable aquaculture: advanced, closed-loop land-based RAS systems, plant-based protein for replacement of fishmeal, nutrition formulations that replace nutrients found in fishmeal, technologies for conversion of fish waste to biomass and fertilizer, biofiltration for closed-loop systems, and deep-water farming. These innovations have the potential to ripple through the industry and reshape the seafood industry and the industry’s suppliers.
8. More Customers Are Demanding Sustainable Products – An increasing number of restaurants, retailers and food processing companies are looking to source seafood from sustainable providers. The Wall Street Journal recently reported that McDonald’s, Long John Silver and Red Lobster have embraced the growing movement toward more eco-friendly seafood-buying practices.
9. Local is the New Organic – The concept of ‘food miles’ is a measure of the distance that a food product travels from harvesting to where it is sold. For fish, food miles is often 2x to 3x greater than typical produce (1,500 miles) because fish are often caught and processed in very different locations. Land-based aquaculture can be located closer to where products are consumed, and can significantly reduce food miles, transportation costs and simultaneously improve freshness.
10. Global Warming Effect on Wild Fisheries – Scientists believe extra carbon in the atmosphere is causing a decrease in the ocean’s pH (known as “acidifcation”) which can negatively impact sea life. While computer models can provide clues as to what the rising ocean temperature and carbon absorption may mean to fish, the interactions of those variables is uncertain and therefore the ultimate outcome is unknown.
Conclusion
The confluence of declining wild fish stocks, increasing world seafood demand, problems with conventional aquaculture and the emergence of new technologies are propelling sustainable aquaculture forward. Sustainable aquaculture offers many economic and product benefits such as consistent harvest, scalable operations, lower transportation costs for locally produced seafood, and containment free products. For the right innovators and investors, there are enormous commercial opportunities.
About the authors:
Michael Whelchel and Aaron Enz are partners at Watershed Capital (watershedcapital.com), a financial advisory and investment banking firm focused exclusively on serving companies and investors in the sustainable business and clean technology sectors. Watershed Capital has an active practice in advising and financing innovative, sustainable seafood companies. They can be reached at michael@watershedcapital.com and aaron@watershedcapital.com.
8/05/2010
Investing in Canada's Bifurcated Economy
In this hostile financial climate, long-term investors must now give more thought than ever to capital preservation and sustainable growth. It is not a profound observation that growth is not sustainable if it is driven by debt-fueled consumption. Sound fundamentals for growth include:
• Favorable demographics;
• Low national debt levels;
• High savings rates; and
• Persistent trade surpluses.
Many emerging economies have all of these characteristics, while the so-called 'developed' economies have virtually none of them. Take Canada as an example. It can be argued that Canada suffers from many of the problems of the typical developed nation, though to a lesser degree than its G8 brethren. Canada is the best of the worst, so to speak. Still, it has familiar developed-economy problems, including:
• Aging population, with unfunded liabilities for social benefits;
• High debt-to-GDP levels;
• Low savings rates;
• Increasing government regulation and intervention in the economy;
• Large fiscal deficits; and
• An overly accommodative monetary authority.
This raises the question: why should investors emphasize investments in developed economies such as Canada over emerging economies? The fact is that direct investments in emerging economies often come with higher levels of political risk - see Russia's expropriation of oil assets, or Argentina's punitive export tariffs on agricultural commodities during its 2008 food crisis. The challenge becomes how to obtain emerging economy growth with developed economy risk.
That is the investment draw of Canada. Even though it faces many of the issues of the rest of the developed world, there is an opportunity to capture emerging market returns in Canada due to its uniquely bifurcated economy.
Eastern Canada, represented by Ontario and Quebec, is heavily exposed to deteriorating US demand through its automotive and aerospace industries. To put it simply, Eastern Canada imports what the emerging economies need and exports what they make, putting it under pressure on both the cost and revenue side of the equation.
Meanwhile Western Canada, represented by British Columbia, Alberta, Saskatchewan and Manitoba, is in the enviable position of exporting what the emerging economies need and importing what they make. What do I mean by this? It's a well-understood process that energy and food consumption undergo rapid growth as a developing economy makes the transition to a middle class standard of living. Energy and agriculture are Western Canada's dominant industries - and this region, with only 10 million inhabitants, is one of the world's largest net exporters of both energy and agricultural commodities. Here's an approximate breakdown:
Energy -
• Oil (13% of world reserves; 4% of world production)
• Uranium (8% of world reserves; 20% of world production)
Agriculture -
• Potash (60% of world reserves; 30% of world production)
• Wheat, coarse grains, oilseeds (21% of the world export market for wheat; 10% for oilseeds)
• Farmland (80% of Canadian total)
Therefore, investing in Western Canada provides exposure to emerging market growth in energy and agriculture within one of the world's most politically stable markets. In addition, investors who have a 'value' orientation have been provided what I believe are attractive entry points into the Western Canadian market by some recent events.
In the energy sector, the credit crisis has caused financing to become scarce for junior oil & gas companies while low natural gas prices are reducing their profitability. They are being forced to sell assets to stay in business. This has created a buyers' market for the acquisition of smaller oil production assets - assets that are highly cash-flow positive at current oil prices.
In the agriculture sector, the regulatory barriers that made it difficult to invest in Saskatchewan farmland have recently been liberalized, allowing capital to move in and acquire the cheapest farmland (on a productivity basis) in Canada and perhaps the world.
Its reasonable to expect China to overtake the US as the world's leading economy, and, as part of this process, I think Canada's fortunes will surprise many. Indeed, Canada's uniquely bifurcated economy may serve as a bridge from the developed to the developing world.
Stephen Johnston - Partner - Agcapita Partners LP
• Favorable demographics;
• Low national debt levels;
• High savings rates; and
• Persistent trade surpluses.
Many emerging economies have all of these characteristics, while the so-called 'developed' economies have virtually none of them. Take Canada as an example. It can be argued that Canada suffers from many of the problems of the typical developed nation, though to a lesser degree than its G8 brethren. Canada is the best of the worst, so to speak. Still, it has familiar developed-economy problems, including:
• Aging population, with unfunded liabilities for social benefits;
• High debt-to-GDP levels;
• Low savings rates;
• Increasing government regulation and intervention in the economy;
• Large fiscal deficits; and
• An overly accommodative monetary authority.
This raises the question: why should investors emphasize investments in developed economies such as Canada over emerging economies? The fact is that direct investments in emerging economies often come with higher levels of political risk - see Russia's expropriation of oil assets, or Argentina's punitive export tariffs on agricultural commodities during its 2008 food crisis. The challenge becomes how to obtain emerging economy growth with developed economy risk.
That is the investment draw of Canada. Even though it faces many of the issues of the rest of the developed world, there is an opportunity to capture emerging market returns in Canada due to its uniquely bifurcated economy.
Eastern Canada, represented by Ontario and Quebec, is heavily exposed to deteriorating US demand through its automotive and aerospace industries. To put it simply, Eastern Canada imports what the emerging economies need and exports what they make, putting it under pressure on both the cost and revenue side of the equation.
Meanwhile Western Canada, represented by British Columbia, Alberta, Saskatchewan and Manitoba, is in the enviable position of exporting what the emerging economies need and importing what they make. What do I mean by this? It's a well-understood process that energy and food consumption undergo rapid growth as a developing economy makes the transition to a middle class standard of living. Energy and agriculture are Western Canada's dominant industries - and this region, with only 10 million inhabitants, is one of the world's largest net exporters of both energy and agricultural commodities. Here's an approximate breakdown:
Energy -
• Oil (13% of world reserves; 4% of world production)
• Uranium (8% of world reserves; 20% of world production)
Agriculture -
• Potash (60% of world reserves; 30% of world production)
• Wheat, coarse grains, oilseeds (21% of the world export market for wheat; 10% for oilseeds)
• Farmland (80% of Canadian total)
Therefore, investing in Western Canada provides exposure to emerging market growth in energy and agriculture within one of the world's most politically stable markets. In addition, investors who have a 'value' orientation have been provided what I believe are attractive entry points into the Western Canadian market by some recent events.
In the energy sector, the credit crisis has caused financing to become scarce for junior oil & gas companies while low natural gas prices are reducing their profitability. They are being forced to sell assets to stay in business. This has created a buyers' market for the acquisition of smaller oil production assets - assets that are highly cash-flow positive at current oil prices.
In the agriculture sector, the regulatory barriers that made it difficult to invest in Saskatchewan farmland have recently been liberalized, allowing capital to move in and acquire the cheapest farmland (on a productivity basis) in Canada and perhaps the world.
Its reasonable to expect China to overtake the US as the world's leading economy, and, as part of this process, I think Canada's fortunes will surprise many. Indeed, Canada's uniquely bifurcated economy may serve as a bridge from the developed to the developing world.
Stephen Johnston - Partner - Agcapita Partners LP
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