JetFin Green, Agriculture and Commodities

Union Agriculture Group

2011-11-01T23:45:00.000-07:00

Union Agriculture Group

Based in Montevideo, Uruguay, Union Agriculture Group [proposed symbol (UAGR)] scheduled a $200 million IPO with a market capitalization of $717 million at a price range mid-point of $14 for Wednesday, July 27, 2011. The full IPO calendar for the week of July 25th includes 12 IPOs scheduled to raise $2 billion.

OBSERVATIONS -- UAGR is a private-equity sponsored, money losing roll-up of farm land in Uruguay. Negatives include the following: losing money, operating in a foreign county with an unclear legal structure, UAGR itself is based in the British Virgin Islands.

In addition, “Substantially all of UAGR’s land is held under promesas, pursuant to which UAGR expects to receive title at a later date,” which is obviously a weird way to do business.

UAGR expects to use the IPO proceeds primarily to acquire additional to increase landholdings in Uruguay to 160,000 hectares.

CONCLUSION -- There are better ways to make a less risky food shortage, inflationary hedge, which is what UAGR appears to be.

UAGR Valuation Metrics

BUSINESS -- UAGR is one of the largest corporate agricultural landholders and operators in Uruguay and a leading producer of agricultural products for export to the global market.

UAGR has grown rapidly since formation in 2008 and has fully paid for and acquired approximately 84,670 hectares of agricultural land in Uruguay for operations. Substantially all of UAGR’s land is held under promesas, pursuant to which UAGR expects to receive title at a later date.

Diversified agricultural operations include crops (soybeans and wheat), rice, dairy, cattle, sheep and other products (blueberries and honey).

NOT A US DOMESTIC COMPANY -- Union Agriculture Group Corp. was incorporated pursuant to the laws of the British Virgin Islands. The company’s legal name is “Union Agriculture Group Corp.” Union Agriculture Group Corp. was incorporated on January 2, 2008 and is incorporated for an indefinite period.

COMPETITION -- Although UAGR is one of Uruguay’s leading agricultural producers, due to the highly fragmented nature of the farming sector, UAGR’s overall market share with respect to some of the products produced is insubstantial.

With respect to farmland, UAGR is not aware of a significant number of companies that have been actively competing to acquire farmland in Uruguay on a large scale in the last 10 years. However, UAGR believes that new companies, some of them international, may become active players in the acquisition of farmland and the leasing of sown land, which would add competitors to the market in coming years.

PRE-IPO SHAREHOLDERS % -- Pre-IPO UAGR is 52% owned by private equity funds: . Wellington Management Company, LLP, 18%; Columbia Wanger Asset Management, LP, 12%; Sprott Resource Corp., 9%; Agrivent, 7%; FCPR Ice Opportunity IPO, 6%

USE OF PROCEEDS -- UAGR expects to net $185.5 million from its IPO. IPO proceeds are allocated to the following:

To repay borrowings, if any, outstanding under a subsidiary’s $10.0 million line of credit with Banco Itaú Uruguay S.A.,
To acquire additional farmland, consistent with the business strategy. UAGR expects to use the proceeds primarily to acquire additional land in furtherance of the objective of increasing landholdings in Uruguay to 160,000 hectares.
The remainder, if any, for working capital and general corporate purposes.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Commodity Traders: The trillion dollar club

2011-11-01T23:33:00.000-07:00

Fri, Oct 28 2011
By Joshua Schneyer

NEW YORK (Reuters)- For the small club of companies who trade the food, fuels and metals that keep the world running, the last decade has been sensational. Driven by the rise of Brazil, China, India and other fast-growing economies, the global commodities boom has turbocharged profits at the world's biggest trading houses.

They form an exclusive group, whose loosely regulated members are often based in such tax havens as Switzerland. Together, they are worth over a trillion dollars in annual revenue and control more than half the world's freely traded commodities. The top five piled up $629 billion in revenues last year, just below the global top five financial companies and more than the combined sales of leading players in tech or telecoms. Many amass speculative positions worth billions in raw goods, or hoard commodities in warehouses and super-tankers during periods of tight supply.

U.S. and European regulators are cracking down on big banks and hedge funds that speculate in raw goods, but trading firms remain largely untouched. Many are unlisted or family run, and because they trade physical goods are largely impervious to financial regulators. Outside the commodities business, many of these quiet giants who broker the world's basic goods are little known.

Their reach is expanding. Big trading firms now own a growing number of the mines that produce many of our commodities, the ships and pipelines that carry them, and the warehouses, silos and ports where they are stored. With their connections and inside knowledge -- commodities markets are mostly free of insider-trading restrictions -- trading houses have become power brokers, especially in fast-developing Asia, Latin America and Africa. They are part of the food chain, yet help shape it, and the personal rewards can be huge. "The payout percentage of profits at the commodities houses can be double what Wall Street banks pay," says George Stein of New York headhunting firm Commodity Talent.

Switzerland-based Glencore, whose initial public offering (IPO) in May put trading houses in the spotlight, pays some traders yearly bonuses in the tens of millions. On paper, the partial float made boss Ivan Glasenberg $10 billion richer overnight.

SIZE MATTERS

How big are the biggest trading houses? Put it this way: two of them, Vitol and Trafigura, sold a combined 8.1 million barrels a day of oil last year. That's equal to the combined oil exports of Saudi Arabia and Venezuela.

Or this: Glencore in 2010 controlled 55 percent of the world's traded zinc market, and 36 percent of that for copper.

Or this: publicity-shy Vitol's sales of $195 billion in 2010 were twice those at Apple Inc. As well as the 200 tankers it has at sea, Vitol owns storage tanks on five continents.

U.S. regulations are now pending to limit banks' proprietary trading -- speculating with their own cash. The new rules don't apply to trading firms. "Trading houses have huge volumes of proprietary trading. In some cases it makes up 60-80 percent of what they do," said Carl Holland, a former price risk manager at oil major Chevron Texaco, who now runs energy consultancy Trading Solutions LLC in Connecticut. "They have the most talent, the deepest pockets, and the best risk management."

In addition to proprietary trading curbs, the U.S. regulator voted on October 19 to impose position limits in oil and metals markets. That gives banks who trade futures cause for concern, but since physical players usually receive exemptions to limits -- because they are categorized as bona fide hedgers -- trading firms should go unscathed.

The trading houses' talent and deep pockets translate into incredible power. "Most commodity buyers in the world are price takers. The top trading firms are price makers," said Chris Hinde, editor of London-based Mining Journal. "It puts them in a tremendous position."

The sort of position that has allowed Vitol to do a brisk oil business with the U.S. government, the besieged Syrian regime, and Libya's newly empowered rebels simultaneously over the past few months. In April the company dodged NATO bombs and a naval blockade and sent an oil tanker into the battered Mediterranean port of Tobruk to extract the first cargo of premium crude sold by rebels at the helm of a breakaway Libyan oil company defying Muammar Gaddafi.

Vitol also discreetly supplied Libya's rebels with $1 billion in fuel, Reuters has learned -- supplies they desperately needed to advance on Tripoli. Vitol's early running gave the firm an edge with the country's new political stewards. As it turns the pumps back on, Libyan oil firm Agoco has allocated Vitol half of its crude production to repay debts.

While its savvy traders were doing deals in eastern Libya, Vitol, along with rival Trafigura, kept refined product supplies flowing to the besieged government of Bashar al-Assad in Syria as his troops attacked civilians. Trading houses were able to do this because international sanctions on Syria do not ban the sale of fuel into the country, but they did not have to fight off much competition for that business.

PAST SCRUTINY

Despite a relative lack of regulatory oversight, such reach does attract scrutiny. "There has always been some concern about the trading firms' influence," said Craig Pirrong, a finance professor and commodities specialist at the University of Houston, who points out that some firms "have been associated with allegations of market manipulation".

Public and regulatory attention usually rises with prices. A spike in world food prices in 2007 stirred an outcry against the largest grain trading firms; when oil prices surged to a record $147 a barrel in 2008, U.S. Congress probed the role of oil trading firms, but found no smoking gun. But in May the U.S. Commodity Futures Trading Commission sued Arcadia and Parnon, both owned by a Norwegian shipping billionaire, for allegedly manipulating U.S. oil prices three years ago, amassing millions of barrels they had no intention of using. The companies dispute the charges.

Some transgressions make headlines. A Trafigura-chartered tanker was intercepted in the Caribbean in 2001 on suspicion of carrying illegal volumes of Iraqi crude. In a settlement, Trafigura agreed to pay a $5 million fine, but wasn't charged with smuggling and denied wrongdoing. In 2006 a tanker it chartered dumped toxic waste in Ivory Coast, allegedly making thousands ill and killing up to 16. Courts did not find any connection between its waste and sick people. Trafigura took legal action to keep a report about the Ivory Coast incident out of newspapers, but details were eventually made public.

And it's not just the Europeans. Executives of Illinois-based ADM, formerly Archer Daniels Midland, were jailed for an early 1990s international price-fixing conspiracy for animal feed additive lysine. After Minnesota-based Cargill built a huge soybean terminal on the banks of the Amazon River in 2003, it was targeted by Greenpeace and subjected to Brazilian government injunctions for allegedly encouraging more farming in fragile rainforest. Cargill has since placed a moratorium on buying soybeans from newly deforested land.

THE SQUEEZE AND THE ARB

For many commodities traders, the most profitable ploy has been the squeeze, which involves driving prices up or down by accumulating a dominant position. In the early 2000s, the Brent crude oil stream -- used as a global price benchmark -- fell to 400,000 barrels per day from more than 1 million in the late 1980s. A few traders seized the chance to buy what amounted to almost all the available supply. Price premiums for immediate supply spiked, sapping margins for refiners worldwide. U.S. refiner Tosco sued Arcadia and Glencore for market manipulation; the case was settled out of court.

In metals, stock in warehouses can be tied up for years as loan collateral, allowing the same traders who dominate the metals market to control a huge chunk of world supply -- an apparent conflict of interest that has drawn criticism from the UK parliament.

"The warehouses seem to have an infinite capacity to absorb metal, but a very small capacity to release it," said Nick Madden of Novelis, the world's top rolled aluminum producer.

Trading houses saw the opportunity to leverage metals warehousing after the 2008 financial crisis. Of the six major metals warehousers only one, Dutch-based C.Steinweg, remains independent. Trading houses competed with banks for the spoils -- Glencore, Trafigura and Noble took one warehousing company each, Goldman and JP Morgan the others.

And unlike commodities producers, such as U.S. oil giant Exxon Mobil, trading firms don't just make money when prices go up. Most rely on arbitrage -- playing the divergence in prices at different locations, between different future delivery dates, or between a commodity's quality in different places.

That's what Koch, Vitol and others did in 2009 when they parked 100 million barrels of oil in seaborne tankers. Thanks to a market condition known as contango -- a period when buyers pay more for future delivery than to receive their cargoes promptly -- they could sell futures and lock in profits of $10 a barrel or more.

RICH HISTORY

Many of the biggest players in oil and metals trading trace their roots back to notorious trader Marc Rich, whose triumph in the 1960s and 70s was to create a spot market for oil, wresting business away from the majors.

Belgium-born Rich joined Philipp Brothers, subsequently Phibro, aged 20, leaving in 1974 with a fellow graduate of the Phibro mailroom, Pincus "Pinky" Green, to set up Marc Rich and Co AG in Switzerland.

Rich, now 76, would later end up on the FBI's most-wanted list for alleged tax evasion and trading oil from Iran after the revolution in 1979. He was later pardoned. His partners seized control of the firm in 1994, renaming it Glencore.

Several big trading houses are still family-held -- firms like agricultural giant Cargill, the top private U.S. company, or Kansas-based Koch Industries, a close No. 2. Koch's chief executive Charles Koch, a libertarian activist with a $22 billion personal fortune according to Forbes, has said his company would go public "over my dead body". "The thinking is, why open the books to the world?" said a former lobbyist for Koch who requested anonymity. "Koch benefits from privacy, and it's astonishingly agile and profitable as is."

The old guard now faces a challenge from a new breed of Asian competitors. Companies like Hong Kong-based Noble and Singapore's Olam and Hin Leong are not new, but they are spreading their wings as China's influence in commodities markets increases. Chinese state funds have flowed into Noble and private Asian traders. As China's clout grows, it's very likely that Chinese firms will build trading dynasties of their own. In a move borrowed from the playbooks of western rivals, state-run oil firm PetroChina has set up a Houston oil trading desk and leased massive oil storage tanks in the Caribbean. "China is becoming more like a Glencore," said Hinde. "The Chinese state is funding nimble trading firms to do its bidding. We don't hear much about them yet, but in time we will."

Here's a look at the 16 companies, with aggregate revenues of $1.1 trillion, that trade energy, metals and agriculture.

SAILING CLOSE TO THE WIND

WHO: Vitol, founded 1966 in Rotterdam by Henk Vietor and Jacques Detiger

WHERE: Geneva and Rotterdam WHAT: Oil, gas, power, coal, industrial metals, sugar

TURNOVER: $195 billion (2010) CEO: Ian Taylor STAFF: 2,700

By Richard Mably

On the world oil markets the name Vitol is as familiar as Exxon is at the petrol pump.

In public, for a company that turned over almost $200 billion last year trading 5.5 million barrels a day, its profile is nigh on subterranean.

But earlier this year the world's wealthiest oil trader raised that profile, and did its reputation no harm, by becoming the first to deal with Libya's rebels, long before the overthrow of Muammar Gaddafi.

That helped balance the reputational damage of being fined -- along with many other companies -- for paying surcharges a decade ago to Saddam Hussein's Iraqi oil ministry during the U.N. oil-for-food program.

Vitol's Saddam connection does not seem to have hurt it in Iraq. It became the first company to supply gasoline to the energy ministry after the war in 2003, and now is both a buyer of Iraqi crude and supplier of refined products.

An array of storage tanks on five continents oils the wheels of its vast trading operation and it has stepped into the gap left by the oil majors as they reduce their downstream presence to focus on upstream exploration and production.

With African investors Helios Investment it recently paid a billion dollars to buy Shell's fuel marketing operation across 14 West African countries, keeping the Shell branding.

It has also dipped a toe in the upstream business. Together with Glencore, it pre-qualified to bid for exploration rights in Iraq in a licensing round next year that that could add the Iraqi upstream to its offshore West Africa operations.

Its early dealings with the Libyan rebels may offer the chance of a foothold in Libya's oil and gas territory.

"Vitol's goal was to supply the refined products and then try to pick up upstream assets in Libya," said a western diplomatic source.

Glencore's flotation has sparked speculation about a possible Vitol initial public offering and what it would be worth. Vitol says it is happy with its private status and has no IPO plans.

By annual revenue Vitol is richer than Glencore but the numbers aren't directly comparable -- Glencore owns more hard assets which, typically, are far more profitable than trade turnover.

Vitol's wealth is spread across only 330 share-holding employees, fewer than Glencore's 500. While Vitol would not comment, industry talk has it that none of its senior employees, including CEO Ian Taylor who joined from Shell in 1985 or long-timer Bob Finch who heads Vitol's coal business, holds more than 5 percent of the company. That would put them well below the 16 percent stake Glencore CEO Ivan Glasenberg owns in his firm.

The company's deal with Libya's rebels was a gamble. Sanctions targeted Gaddafi. The firms now controlled by the western-backed rebels might still legally be linked to Libya's national oil corporation. Was Vitol in violation? Lawyers said doing business with the rebels still required great care. But by the end of April, a U.S. Treasury directive authorized the Vitol transactions.

"They sail as close to the wind as they possibly can legally," said an oil analyst who requested anonymity. "That's the nature of their business."

(additional reporting Barbara Lewis)

PRIVATE TO PUBLIC

WHO: Glencore, founded 1974 as Marc Rich and Co. renamed Glencore in 1994

WHERE: Baar, Switzerland WHAT: Metals, minerals, energy, agricultural products

REVENUE: $145 billion in 2010 CEO: Ivan Glasenberg

STAFF: 2,800 people directly; 55,000 at Glencore's industrial assets

By Clara Ferreira Marques

Switzerland-based Glencore cast aside its famed secrecy earlier this year with a record market debut that turned its executives into paper millionaires and propelled the firm into the headlines.

Founded in 1974 by Marc Rich, who fell foul of U.S. authorities but was later pardoned by President Bill Clinton, Glencore has assets spanning the globe and an oil division with more ships than Britain's Royal Navy. Top officials in many other large trading companies began their careers at Glencore.

The company handles 3 percent of the world's daily oil consumption. It's one of the largest physical suppliers of metals including zinc, lead and nickel, and a leading grain exporter from Europe, the former Soviet Union and Australia.

Though it began as a pure metals and oil trader, Glencore has bought a wealth of industrial assets since the late 1980s which now stretches from South American farmland to copper mines in Zambia.

Belgium-born Rich sold his stake in 1994.

The company's largest shareholder is now former coal trader and Chief Executive Ivan Glasenberg, an intense and charismatic South African who holds a stake of just under 16 percent, worth around 4.5 billion pounds at current prices.

Still not entirely comfortable with his public profile, Glasenberg has described his shift into the glare of publicity as "crossing the Rubicon". He is flanked in the top investor table by the youthful heads of Glencore's major divisions. Together, Glencore employees, including many of its top traders, own just under 80 percent of the company.

Glencore has long made its fortune by working on the fringes and in areas where few others dared. That strategy has often succeeded, though last month it found itself at the center of a dispute in the newly minted nation of South Sudan. A row over oil export control could jeopardize its role in selling the nation's crude.

Glencore's initial public offering was the largest globally this year, attracting huge publicity as well as arguments that it marked the top of the commodities cycle. The shares listed at 530 pence in May but have since traded below that, dropping almost a quarter in three months.

A large part of Glencore's market value comes from its listed stakes in other companies, most notably a 34.5 percent holding in Swiss miner Xstrata. Glencore has said publicly it would see "good value" in a merger with Xstrata, but that has so far been rejected by other, smaller, shareholders.

BACK-HAUL MASTERS

WHO: Cargill, founded 1865 by William Wallace Cargill at the end of the U.S. Civil War

WHERE: Minneapolis, Minnesota WHAT: Grains, oilseeds, salt, fertilizers, metals, energy

TURNOVER: $108 billion (2010) CEO: Greg Page STAFF: 130,000

By Christine Stebbins

Tucked away in a private forest an hour's drive from the downtown high rises of mid-western Minnesota stands a brick mansion that strikes most visitors the same way: isolated, solid, regal, powerful.

Inside the "lake office," as it is known, sits the chairman of Cargill Inc., one of the largest privately held companies in the world.

Over the last 145 years, Cargill has grown from a single grain storage warehouse by an Iowa railroad to a behemoth of world commodities trade, straddling dozens of markets for food and other essential materials -- salt, fertilizer, metals.

With global sales of $108 billion in 2010, Cargill would have ranked No. 13 in the Fortune 500 list of publicly held companies, just behind Wall Street banking giant Citigroup.

But Cargill is anything but public. Despite a concerted campaign in recent years to put forth a friendlier face and personality through advertising and more appearances by its executives in public forums, Cargill is bound together by a culture of confidentiality, aggressiveness -- and winning.

"By and large they move as a team," says one retired wheat trader who did business with Cargill for decades. "They have some superstars but mostly a lot of team players -- what I would describe as well grounded, fundamental traders."

One of their secrets: filling the empty barges headed home.

"You've always had grain going down the river and going through the Gulf and being exported. One of the great things that Cargill did was develop the salt business to transport back up, eliminate the snow during the wintertime, and fill barges back up with back hauls," the wheat trader said.

"It was done a long time ago. People forget about it. But it was absolutely one of the greatest moves in the business."

Cargill hopes to dominate new markets as well. Two examples: it makes biodegradable and recyclable plastics out of corn at its $1 billion complex at Blair, Nebraska, and is creating new low-calorie food ingredients for such multinationals as Kraft, Nestle and Coca Cola.

TROUBLED PAST

At times Cargill's power has got it into trouble. In 1937 the Chicago Board of Trade forced the company to sell its corn contracts and Secretary of Agriculture Henry Wallace accused it of trying to "corner" the U.S. corn market. In 1972 Cargill came under attack as it secretly sold millions of tonnes of wheat to Russia, using a U.S. export subsidy program to boot -- and boosting food inflation.

It helps that the firm usually has the backing of Washington. In early 2007, when world grain prices were surging toward all-time highs, it faced a problem in Ukraine. Citing concerns over potential shortages and rising bread prices, Kiev had placed export quotas on cash crops and temporarily stopped granting export licenses for corn, wheat, barley and other grains.

Cargill, as well as fellow U.S. commodity trading firms Bunge and ADM, "agreed to undertake a public relations effort with the goal of creating a political problem for the Government of Ukraine", according to a 2007 diplomatic cable by the U.S. ambassador to Ukraine that was obtained by WikiLeaks and made available to Reuters by a third party.

To achieve this, "it would be necessary to recruit the (Ukrainian) farmers to take an active role. This would be a challenge, since small farmers were unorganized, and most had already cashed in their crops by selling to the traders early... Grain traders welcomed our offer to lend a diplomatic hand," the ambassador wrote.

Asked to comment, Cargill said the company actively backs free trade to boost agriculture in all countries and "is in dialogue with many important audiences, including governments... Additionally, we don't believe export bans are the solution to either high grain prices or price volatility." ADM declined to comment and a spokesman for Bunge could not be reached.

THE 'KOCHTOPUS'

WHO: Koch Industries, founded 1920s by Fred Koch

WHERE: Wichita, Kansas

WHAT: Oil TURNOVER: $100 billion (2010)

CEO: Charles Koch STAFF: 70,000

By Joshua Schneyer

Founded in the 1920s by patriarch Fred Koch, a U.S. engineer who developed a new method of converting oil into gasoline, Koch helped to build a refining network in the Soviet Union in the 1930s. Fred Koch returned to the United States with a visceral hatred for Joseph Stalin and communism. A fiercely libertarian ideology and ultra-competitive engineering prowess live on at Koch Industries' spartan headquarters in Wichita, Kansas, a former Koch executive told Reuters.

With around $100 billion in sales, Koch Industries is a heavyweight among U.S. oil trading firms, and one of the most secretive U.S. corporations. Investors can forget about buying shares in the wildly profitable, family-run firm any time soon.

In oil markets, Koch is a brutally efficient middleman. A master of physical markets, it owns a 4,000-mile U.S. pipeline network and three of the country's most profitable refineries. Many small producers rely almost entirely on Koch to buy, sell and ship their crude. The company now operates in 60 countries.

The Koch brothers, Chairman and CEO Charles and co-owner David Koch, are high-profile supporters of libertarian and anti-regulation U.S. politics. Among their campaigns is one to end the U.S. Environmental Protection Agency's mandate for regulating greenhouse gas emissions. A profile in the New Yorker magazine last year identified the brothers as behind-the-scenes operators who bankroll the U.S. Tea Party movement. The Kochs have denied funding the Tea Party, but their empire's far-reaching tentacles in the political arena have spawned a nickname: the 'Kochtopus'.

The firm's traders, according to two industry sources, made a fortune for Koch in 2009-10 during a contango in U.S. oil markets -- a period when oil for future delivery was higher priced than immediate cargoes. Koch moved quietly to lead a boom in U.S. offshore crude storage, buying millions of barrels at cheap spot prices, parking them in supertankers near its Gulf Coast pipelines, and simultaneously selling into futures markets.

With Koch's easy access to tankers and pipelines, the strategy locked in profits of up to $10 a barrel with virtually no risk, traders said. When spot and futures prices began to converge, Koch would quietly slip crude from the ships into its onshore pipelines. Koch declined to discuss its trading with Reuters.

Former Koch employees were implicated in improper payments to secure contracts in six foreign countries between 2002 and 2008, and the company's officers admitted in a letter made public by a French court last year that "those activities constitute violations of criminal law", according to a report in Bloomberg Markets Magazine this month. The report also details sales by a foreign Koch subsidiary of petrochemical equipment to Iran, which is subject to U.S. sanctions, and a history of criminal or civil penalties for oil spills, a deadly 1996 U.S. pipeline blast, and under-reporting of emissions of benzene, a carcinogen, from a Texas refinery in 1995.

On its website Koch said it dismissed several employees of a French subsidiary upon learning of the improper and unauthorized payments. It also said its foreign units had ended sales to Iran "years ago", and did not violate U.S. law by conducting business with Iran earlier. Koch said its 90s-era pipeline blast was "the only event of its kind" in the company's history, and that a report to Texas regulators was voluntarily submitted by the company in 1995 to reflect higher emissions than it had originally reported. Koch eventually pleaded guilty in 2001 to a felony charge related to its reporting of the benzene emissions.

The firm's far-ranging industrial interests also include chemicals, forestry, ethanol, carbon trading and ranching. Its huge lobbying budget in Washington -- estimated at $10.3 million a year in a recent investigation by the Center for Public Integrity -- stands in contrast to Charles Koch's frugal demeanor within the firm.

The CEO sometimes flies to speaking engagements with no entourage. When in Wichita, he often dines in the Koch cafeteria. When out-of-town employees visit, he has taken them to dinner at seafood chain Red Lobster, a former Koch employee said. "But make no mistake, if you perform well at Koch, you are richly rewarded in salary terms," the person added. "And if you don't, you're out of there fast."

CORN BELT KINGS

WHO: ADM, formerly Archer Daniels Midland, founded 1902 by John Daniels and George Archer

BASED: Decatur, Illinois

TADES: Grains, oilseeds, cocoa

TURNOVER: $81 billion (2010)

CEO: Patricia Woertz STAFF: 30,000

By Karl Plume

"Corn goes in one end and profit comes out the other."

That comment, by Matt Damon's character Marc Whitacre in the 2009 corporate scandal film "The Informant", described how U.S. agricultural firm Archer Daniels Midland Co. turned grain into gold. The line may be simplistic but it's not too far from the truth.

Decatur, Illinois-based ADM is one of the world's biggest commodities traders. It buys and sells multiple crops, mills and grinds and processes them into scores of products, both edible and not, and ships them to markets around the world.

A small Minnesota linseed crushing business more than a century ago, the firm is now is so big its financial performance is often viewed as a barometer of agribusiness as a whole. It owns processing plants, railcars, trucks, river barges and ships. It has trading offices in China, palm plantations and chemical plants across Asia, and silos in Brazil.

"We have a system that monitors the supply and demand needs, because often times they are working independently. For us in the middle, we have the ability then to manage the commodity risk that can be created by the timing differences between those buys and sells," said Steve Mills, ADM's senior executive vice president for performance and growth.

"You'll hear things through the marketplace or the wire services that it's raining someplace or not raining someplace and we'll have people on the ground saying 'I don't know what you're talking about' ... The futures market may take some of that information and run with it. One of the things that gives us an advantage is that we're working in the physical markets as well so (we can) absorb all that information and make the calls."

But ADM's reputation has endured a black eye or two over the years.

A lysine price-fixing scandal in 1993 tarred its name after three top executives were indicted and imprisoned. ADM was fined $100 million by the U.S. government for antitrust violations. The incident was the subject of "The Informant", filmed on site in Decatur.

ADM's environmental record has also been questioned by the Environmental Protection Agency, resulting in fines and forced installation of pollution control measures.

PUTIN, JUDO, CONSPIRACIES

WHO: Gunvor, founded 1997 by Swedish oil trader Torbjorn Tornqvist and Russian/Finnish businessman Gennady Timchenko

WHERE: Geneva

WHAT: Oil, coal, LNG, emissions

TURNOVER: $80 billion 2011, company estimate ($65 billion 2010)

CHAIRMAN: Torbjorn Tornqvist

STAFF: Fewer than 500

By Dmitry Zhdannikov

When it comes to his critics, Vladimir Putin is a heavyweight puncher. Yet it took Russia's most influential politician almost a decade to publicly address one of the most serious allegations against him.

Critics, including the Russian opposition, put it simply -- Russia's paramount leader helped businessman Gennady Timchenko create the Gunvor oil trading empire, which saw a spectacular rise in the past decade when Putin was president and then prime minister.

Putin finally broke his silence last month: "I assure you, I know that a lot is being written about it, without any participation on my part.

"I have known the citizen Timchenko for a very long time, since my work in St Petersburg," Putin told a group of Russian writers. Putin worked in the mayor's office in the early 1990s when Timchenko and his friends, Putin said, spun off an oil trading unit of the Kirishi oil refinery.

"I never interfered with anything related to his business interests, I hope he will not stick his nose into my business either," Putin said.

Timchenko doesn't need to be told to keep a low profile. He is one of Russia's most private tycoons. And his silence helped feed rumors about Gunvor's remarkable growth.

In 2011 the company will turn over $80 billion, up from just $5 billion in 2004. In his first public interview to Reuters in 2007, Gunvor's Swedish co-founder Tornbjorn Tornqvist was keen to stress that the firm's success was built on its traders' experience and excellent contacts.

"But ... to involve Mr Putin and any of his staff in this dialogue is speculation," he added. That comment didn't help calm rumors and then Timchenko spoke too.

After a newspaper interview he wrote an open letter in 2008 headlined "Gunvor, Putin and me: the truth about a Russian oil trader".

"It is true that I, together with three other businessmen, sponsored a judo club where Mr Putin became honorary president," he wrote. "That is as far as it goes -- yet time and again, the media wrongly jump to the conclusion that the judo club connection means that Mr Putin and I are 'close', then leap into conspiracy-theory mode."

Tornqvist, a former BP trader and keen yachtsman, says he doesn't share the vision of Mark Rich, the father of contemporary trading, that political links are the most prized asset in trading.

"If you don't offer competitive terms, no one will work with you," he told a Russian daily this month. For Gunvor's rivals, too, favoritism is also an overly simple explanation of the company's success. They point to very competitive pricing offered by Gunvor when it comes to Russian oil tenders.

Gunvor's oil dominance has waned in the past two years -- it is handling around a fifth of Russian seaborne oil exports, down from a third three years ago. Perhaps to make up for that, it has moved into new sectors such as natural gas, coal and emissions.

Tornqvist says Gunvor's goal is to become a truly global company. "We know how to close the gap (with Vitol and Glencore) and we are actively catching up," Tornqvist said. Like Vitol, he says, Gunvor has no plans to follow Glencore into an IPO.

THE RICH LINK

WHO: Trafigura, founded 1993 by former Marc Rich traders Claude Dauphin, Eric de Turkheim and Graham Sharp

WHERE: Geneva, Switzerland

WHAT: Oil, metals

TURNOVER: $79 billion (2010)

CHAIRMAN: Claude Dauphin

STAFF: 6,000

By Dmitry Zhdannikov and Ikuko Kurahone

The godfather of oil trading, Marc Rich, taught one of his most talented apprentices Claude Dauphin almost every trick in the business. Like Rich, Dauphin created a leading commodities trading house by applying a knife-edge approach to business. He has made a fortune.

But there was one lesson that Rich must have cut short: how to avoid jail. While Rich himself fled to Europe in the 1980s to escape possible imprisonment for tax evasion in the United States, Dauphin spent almost six months behind bars in Ivory Coast in 2006-7 in pre-trial detention involving a dispute over toxic waste dumping.

Shortly after the material was dumped, thousands of residents of the city of Abidjan complained of illnesses, including breathing problems, skin irritation and related ailments. The government of Ivory Coast said 16 people died. The material was dumped in open-air sites around Abidjan in August 2006 after being unloaded from a Trafigura-chartered tanker.

Trafigura said it entrusted the waste to a state-registered Ivorian company, Tommy, which dumped the material illegally at sites around Abidjan.

"We went to the Ivory Coast on a mission to help the people of Abidjan, and to find ourselves arrested and in jail as a result has been a terrible ordeal for ourselves and our families," said Dauphin.

Trafigura paid a $200 million settlement and the country's prosecutor declared that there was no evidence of any illegality or misconduct by any Trafigura company or staff.

In London, Trafigura reached a pre-trial settlement to put an end to a class-action suit from some 31,000 residents. The judge said there was no evidence the waste had caused anything more than "flu-like symptoms" and said some media had been irresponsible in their reporting.

The scandal has hardly hampered the firm's stellar growth.

It has grown into the world's third-largest independent oil trader and second-largest industrial metals trader in less than 20 years, since it was set up in the early 1990s by Dauphin and fellow traders Eric de Turckheim and Graham Sharp.

Like rival Vitol, Trafigura has seized the opportunity to get into oil storage as oil majors focus on production. It announced in early October that it may float its storage subsidiary Puma Energy within 18 months.

Trafigura was also quick to recognize the potential of storage in the industrial metals markets. It bought UK-based metals warehouser and logistics firm NEMS in March 2010, a month after Goldman Sachs had acquired rival Metro and several months before Glencore and JP Morgan moved into the business.

SEVEN-YEAR-OLD IN BIG LEAGUE

WHO: Mercuria, founded in 2004

WHERE: Geneva

ENERGY TURNOVER: $75 billion 2011 company estimate (2010, $47 billion)

CEO: Marco Dunand

By Christopher Johnson

Mercuria is just seven years old, but is already one of the world's top five energy traders.

Headquartered in Geneva, Switzerland, and named after Mercury, the god of merchants, Mercuria's business straddles global energy markets.

It has coal mines in Kalimantan in Indonesia, oilfields in Argentina and Canada plus oil trading in Singapore, Chicago, Houston and across Europe.

Its meteoric growth has been piloted by a couple of the sharpest minds in commodities.

Marco Dunand and Daniel Jaeggi, both Swiss, have worked together closely for more than 25 years in a string of commodities companies, buying and selling crude and oil products in many of the hottest oil trading outfits: Cargill, Goldman Sachs' J.Aron, Salomon Brothers' Phibro and Sempra.

In two decades of oil trading, Dunand and Jaeggi built fearsome reputations for seeing profit margins where others could only see potential losses. They were early dealers in a range of financial derivatives that are now commonplace and brought a level of sophistication to their trading books that most of their competitors could often only envy.

"You were always a little worried, taking the other side of their trades," said one European oil product trader, who declined to be identified.

NETWORK

Compared with other independent trading houses, Dunand and Jaeggi are high profile, speaking periodically to the press and giving regular interviews.

Their move to run their own empire came in 2004 when they founded Mercuria, raising capital from two Polish businessmen, Grzegorz Jankielewicz and Slawomir Smolokowski.

Jankielewicz and Smolokowski's company, J+S Group, traded Russian crude oil and was a leading supplier of oil to PKN Orlen, Poland's top oil refiner.

In 2006, J+S was raided by the Polish authorities in connection with an investigation into oil trading in Poland. J+S denied any wrong-doing and suggested the investigation was politically motivated. No suggestions of wrong-doing were leveled against Dunand or Jaeggi.

Dunand, chairman and chief executive, and Jaeggi, head of global trading, used Mercuria to expand their trading base from crude and oil products.

The business has grown to 890 employees in 28 countries with a turnover at $75 billion, trading almost 120 million tonnes of oil, coal and gas.

NO IPO, YET

Dunand says he and Jaeggi have no intention of selling the company they have built so swiftly, or launching an initial public share offering (IPO). But they have seen interest from potential investors, and have considered a tie-up with a sovereign wealth fund.

"We are not thinking about an IPO -- but that doesn't mean we don't have an open mind," Dunand told Reuters in June. "We are keen to consolidate our culture before we could think about changing it. Having said that, we have also been approached by potential investors -- sovereign funds and others -- who wish to make a private-equity type of investment in our company."

Dunand and Jaeggi are Mercuria's largest shareholders but an employee share ownership scheme holds around 40 percent of the company. "We don't see the need to raise money from the market," Dunand said.

A BRIT IN HONG KONG

WHO: Noble Group, founded 1986 by UK scrap metal man Richard Elman

WHERE: Hong Kong

WHAT: Sugar, coal, oil

TURNOVER: $57 billion (2010)

EXECUTIVE CHAIRMAN: Richard Elman

STAFF: 11,000

By Luke R. Pachymuthu

Founded 25 years ago by Briton Richard Elman, the Hong Kong-based, Singapore-listed Noble Group buys and sells everything from Brazilian sugar to Australian coal.

Noble's shareholders include China's sovereign wealth fund, China Investment Corp., which bought an $850 million stake in 2009, and Korean Investment Corp., which has a minority stake.

Elman, the company's chairman, holds around 30 percent of the company. After dropping out of school he began his career at 15 in a metals scrap yard in the UK. He spent time trading metal in Hong Kong before moving to New York and a stint at commodities trading giant Phibro. Back in Hong Kong, he traded commodities with China in the 1970s and was the first to sell China's Daqing crude oil to the United States.

Noble has grown by acquiring troubled competitors. In 2001, for instance, it bought storied Swiss company Andre & Cie, once one of the world's top five grains traders. Finding itself with a big client base, but short of the physical supplies it needed to meet demand, Noble built its own processing facilities. It's a model it has replicated across various commodities.

Noble is now seeking to spin off its agriculture business with a listing on the Singapore Exchange. The grains business accounts for a third of its earnings and could have a value of more than $5 billion. Wall Street heavyweight JP Morgan is advising Noble on the planned listing.

The company's early forays into trading gas and oil left it with a black eye. Noble quit its global liquefied petroleum gas (LPG) operations in 2010, a year it was censured in Nigeria for discrepancies in gasoline shipping lists. Nigeria's Petroleum Product Pricing Regulatory Agency (PPPRA) said that in one transaction the amount of fuel submitted for subsidies did not match the actual quantity delivered. The company did not comment publicly on this incident.

And it sounded a rare retreat this week when sources close to the company said it had shut its European coal trading operations to focus on Asia and trading.

The China connection continues. In April Noble appointed Li Rongrong, former chairman of the state-owned assets supervision and administration commission of China, as a non-executive director.

PRIVATE FIRM, PUBLIC SPAT

WHO: Louis Dreyfus, founded 1851 by Leopold Louis-Dreyfus

WHERE: Paris WHAT: Cotton, rice, grains, orange juice

TURNOVER: $46 billion (2010)

CEO: Serge Schoen STAFF: 34,000

By Gus Trompiz

In the two years since Margarita Louis-Dreyfus inherited control of the world's top cotton and rice trader following the death of her husband Robert, the woman the French press call "the tsarina" has been at the center of one of the most intriguing struggles in corporate Europe.

Analysts and commentators focused on differences between the forty-something, Russian-born Margarita Louis-Dreyfus and chief executive Jacques Veyrat over how to develop the 160-year-old family firm and whether to list its shares or seek a merger deal.

The winner? The tsarina, or MLD, as the press sometimes also calls her. In April, she and Veyrat told business daily Les Echos that the CEO would be stepping down to make way for Serge Schoen, head of Louis Dreyfus Commodities.

The very public power struggle was all the more remarkable because the company normally keeps everything, from its precise earnings to the exact age of its main shareholder and chairwoman, a secret.

Louis Dreyfus is a well-honed global operator, marketing agricultural commodities from wheat to orange juice. But most analysts think it needs fresh capital to grow, or to buy out minority family shareholders who will have the option to sell their stakes in 2012.

Unsuccessful talks have taken place with Singaporean commodities group Olam International Ltd, while bankers say they have been sounded out about a stock market listing.

Margarita Louis-Dreyfus told Les Echos that a listing, merger or the entry of a private investor were all options. But there's little room for maneuver: the majority stake she inherited is locked up in a trust her husband set up to last for 99 years.

"There is no ideal solution. What matters is that the group and its name survive," she said.

In the wake of Glencore's listing this year, there is interest in another big trading house going public; investors want exposure to long-term demand for commodities.

"I would love for them to be listed on the stock market," said Gertjan van der Geer, who manages an agriculture fund for Swiss bank Pictet. "Cargill and Louis Dreyfus are the large missing players in the commodity trading space."

It doesn't look likely anytime soon. "There is no rush, the company has been private for 150 years so there is no specific timing for changing the shareholding structure," one source close to the company said.

A management shake-up this year at France's most popular football club, Olympique Marseille, offers more proof of Margarita Louis-Dreyfus' determination to defend her husband's legacy and impose hard financial choices.

While pursuing Robert Louis-Dreyfus' passion for the club, which drained millions from his fortune, she has placed strict conditions on new investment.

"Olympique Marseille is at a crossroads," she told supporters in a statement to announce the changes at the club. It's a message that could apply just as well to the Louis Dreyfus group.

(Additional reporting by Jean-Francois Rosnoblet)

CASHING IN ON CHINESE PIGS

WHO: Bunge, founded 1818 by Johann Peter Gottlieb Bunge in Amsterdam

WHERE: White Plains, New York.

TRADES: Grains, oilseeds, sugar

TURNOVER: $46 billion (2010)

CHAIRMAN and CEO: Alberto Weissner

STAFF: 32,000

By Hugh Bronstein

Two decades ago, Chinese farmers fed their pigs just about anything they could lay their hands on. But since White Plains, New York-based Bunge set up in China in 1998, many have switched to soy pellets. Result: China's pigs are heavier than ever and Bunge has become a key supplier to one of the fastest growing economies in the world.

The company, which went public 10 years ago, realized early that rising incomes in Asia could be fed by Brazil and Argentina, two of the last remaining countries with new farmland left for crop cultivation.

It helps that the company's CEO Alberto Weisser is a Brazilian, and that Bunge has more than 100 years experience in South America.

"Asian demand for South American soybeans has exploded over the last five years and Bunge is arguably the best positioned company in the world as it relates to servicing and profiting from the Asian demand trend," said Jeff Farmer, an analyst who follows the company for Jefferies & Company in Boston.

Founded in 1818 in Amsterdam, the company is the world's No.1 oilseed processor. Along the way it has moved headquarters to Belgium, Argentina, Brazil and then the United States.

"They go where the business is," said an industry insider who asked not to be named. "No sentimental attachments to any country or location. What matters is results, and you can see that in the way they trade."

It doesn't always work. In May, Argentina kicked Bunge off the country's exporters' register after the government alleged it had evaded $300 million in taxes, an accusation the company denies. Argentina's tax office is investigating dozens of other agricultural exporters as well.

Despite not being on the registry, Bunge continues to export grains and agricultural products as usual, but it cannot cash in on certain tax benefits and it faces hurdles transporting goods within Argentina, which analysts say could hurt the company's bottom line.

ASIA'S NEW SUGAR KING

WHO: Wilmar International, founded 1991

WHERE: Singapore

WHAT: Palm oil, grains, sugar

TURNOVER: $30.4 billion (2010)

CHAIRMAN AND CEO: Kuok Khoon Hong

STAFF: 88,000 plus

By Harry Suhartono and Naveen Thakral

Around two decades ago, Kuok Khoon Hong decided to leave the business empire of his billionaire uncle Robert Kuok to set up an edible oil business with a big bet: China.

He competed fiercely with Indonesia's Salim group, the business group commanded by his uncle, and won, to dominate the edible oil market in the world's most populous nation.

Wilmar is now the biggest soy player in China with a 20 percent market share, measured in processing capacity. It is also the largest producer of consumer pack edible oils with about 45 percent market share.

Wilmar's strategy is to have its fingers in every part of the supply chain, from point of origin to destination.

In the palm oil business, for example, it owns plantations, mills, refiners, shippers, bottlers and the distribution network, in both the top producers, Indonesia and Malaysia, and the top consumers, India and China.

That gives its traders the advantage of timely market intelligence.

"We have a daily sales report from every corner where we operate and if we see sales slowing over a few weeks, we get to know the changing trend before others," one employee said, on condition of anonymity.

In 2006 Kuok, now 62, orchestrated a $4.3 billion merger which consolidated his uncle's palm oil assets into Wilmar, making it the world's largest listed palm oil firm.

Last year he surprised the market when he trumped China's Bright Food in a $1.5 billion deal to buy Australia's Sucrogen.

That complements his plan to set up a 200,000 hectares plantation in Indonesia's Papua island, which could make him the new "Asian sugar king", a title once hold by his uncle.

With nearly $10 billion worth of cash and bank deposits on Wilmar's balance sheet, Kuok is unlikely to stop his expansion drive there. Investors say he might already have his sights set on Brazil, to strengthen his position in the global sugar market.

THE CUSHING CUSHION

WHO: Arcadia, founded 1988 by Japan's Mitsui & Co

BASED: London

TRADES: Oil

TURNOVER: $29 billion, Reuters estimate

OWNER: John Fredriksen

STAFF: 100

By Caroline Copley and Joshua Schneyer

Arcadia Petroleum, the London-based oil trading firm owned by billionaire oil tanker magnate John Fredriksen, was thrust into the spotlight in May when U.S. commodities regulators sued it for allegedly manipulating U.S. oil markets in 2008.

In one of its biggest-ever crackdowns, the U.S. Commodity Futures Trading Commission alleges Arcadia traders amassed large physical crude positions in Cushing, Oklahoma, to create the appearance of tight supply at the delivery hub for U.S. oil futures. Fredriksen's traders then hurriedly sold the physical crude at a loss, the CFTC lawsuit claims, ending expectations for tight supplies. Overall Arcadia profited by $50 million in derivatives markets as oil futures spreads collapsed, according to the suit.

In a May interview with Reuters, Fredriksen refuted the charges and shot back that "maybe they (U.S. regulators) are trying to get some revenge" for the 2010 BP oil spill in the Gulf of Mexico. Several of Fredriksen's traders worked for BP in the early 2000s, where aggressive oil trading at Cushing turned huge profits, and also led to BP paying fines for alleged trading violations.

"It is a normal situation for oil traders ... They are buying and selling oil. That's what it is all about," Fredriksen said of the recent CFTC charges.

Risk has often paid off handsomely for Fredriksen. With a personal fortune estimated by Forbes at $10.7 billion, the 67-year-old was Norway's richest man until he abandoned his citizenship in 2006 to become a national of Cyprus, where tax rates are lower.

Beyond Arcadia, Fredriksen's stable of commodities-related firms includes MarineHarvest, a global salmon-farming conglomerate billed as "the world's largest seafood company." He also owns oil tanker operator Frontline, U.S. oil trader Parnon -- also named in the CFTC lawsuit -- energy driller Seadrill and gas distributor Golar LNG.

Fredriksen became a leading oil shipping magnate well before buying Arcadia, in 2006. His 28-year-old twins Kathrine and Cecilie play a growing role in his sprawling business empire, according to press reports.

Arcadia doesn't make its revenues public. With 800,000 barrels a day to market, a volume similar to OPEC country Qatar, Arcadia's annual gross revenue from oil could be around $29 billion based on current prices.

The company lists its trade in paper derivatives as larger still, or about 10 million barrels a day.

Arcadia has faced controversy before. Founded in 1988 by Japanese trading giant Mitsui Inc., it was sued in 2000 by independent US refiner Tosco for allegedly conspiring to jack up prices of European benchmark Brent oil by cornering part of the North Sea physical crude market. The suit was settled out of court for an undisclosed sum.

Arcadia often trades large volumes of oil from Nigeria and Yemen, where it boasts close relationships with state oil firms. In a 2009 State Department cable from Yemen, obtained by WikiLeaks and provided by a third party to Reuters, sources told U.S. diplomats that the company used intimidation tactics including kidnapping threats to buy Yemeni crude at below market prices. Arcadia's chief executive in Singapore, Stephen Gibbons, denied the contents of the cable and told Reuters the kidnapping allegations were "ludicrous".

60 YEARS OUT OF THE LIMELIGHT

WHO: Mabanaft WHERE: Rotterdam

WHAT: Oil

TURNOVER: $15 billion, Reuters estimate

CEO: Jan-Willem van der Velden

STAFF: 1,772

By Jessica Donati

Mabanaft's profile is low even by the secretive standards of other independent oil traders. The company has spent six decades trying to keep it that way. Its website reveals little more than that it is the trading arm of privately owned oil company Marquard & Bahls.

A rare news release announced that Jan-Willem van der Velden, who started as an international trader at the company in 1997, would take over as CEO from January this year.

Van der Velden took the reins of a company on a roll. Mabanaft sold 20 million tonnes of oil in 2010, up from 18 million tonnes in 2009. Pre-tax income for its parent company Marquard & Bahls was $274 million, up from $252 million the previous year.

That's still a lot less than the billions the biggest independent oil traders make and a long way off the revenue of Marquard & Bahls' oil tanking division, the second largest in the world after Vopak. Which may be why Mabanaft wants to expand beyond its northern European heartland.

From the 43rd floor of a Rotterdam skyscraper, staff members can look out over a network of rivers toward some of Europe's biggest refineries. But Mabanaft has also gradually opened offices in Singapore and the United States and, in the summer of 2010, a representative office in India.

As usual, details are scant. "Mabanaft is aiming to further diversify its product portfolio by pursuing a controlled geographic growth strategy," is all communications manager Maren Mertens is able to offer on the subject. Geography isn't the sole focus of expansion -- it has moved into naphtha, LPG and wood pellets.

CASHEWS TO FORBES

WHO: Olam, founded 1989 by the Kewalram Chanrai Group, began trading cashews from Nigeria

WHERE: Singapore

WHAT: Coffee, cocoa, rice, grains, sugar

TURNOVER: $11 billion (2009/10)

CEO: Sunny Verghese

STAFF: 13,000 plus

By Harry Suhartono

A wealthier world needs more food. That's the argument of Sunny Verghese, chief executive of Singapore-based trading firm Olam International.

"We haven't seen this pace of population growth in our living memory," Verghese told a conference in Singapore late last year. "We have to increase food production by 50 percent by 2030, and 80 percent by 2050, with our hands tied behind our back," he said, referring to constraints to boosting output such as the lack of land, water and infrastructure.

Verghese still plans to cash in. In two decades the Bangalore-born trader has built Olam into a $4.5 billion company involved in around 20 different commodities including coffee, cocoa, rice, grains and sugar, from a startup that sold Nigerian cashew nuts.

These days, Olam has upstream operations in everything from a coffee plantation in Laos to a rice business in Thailand, from almonds in Australia to cashews in Africa. The firm is now the world's largest shipper of Robusta coffee and counts Nestle, Hershey, General Mills and Sara Lee as clients. It is also the world's second largest trader of rice after Louis Dreyfus.

The French trading giant approached Olam with a merger proposal in 2010, but talks failed earlier this year.

Verghese, who Forbes says is worth $190 million, believes he can go it alone and aims to quadruple the company's value by 2015. It helps that Olam has backing in high places: Singapore state investor Temasek holds a 14 percent stake in the trading firm.

Some analysts point to risk factors: Olam's exposure to natural disasters, such as recent flooding in Australia, and social or political unrest such as that in Ivory Coast.

IN SEARCH OF A REFINERY

WHO: Hin Leong, founded 1963 supplying diesel to fishing boats

WHERE: Singapore

WHAT: Oil and tankers

TURNOVER: $8 billion (2010)

CHAIRMAN AND CEO: Lim Oon Kuin

STAFF: About 100

By Yaw Yan Chong

Lim Oon Kuin arrived in Singapore from China over 50 years ago, and started to deliver diesel by bicycle to boatmen. Now in his mid-60s, the reclusive trader is busy with his latest empire-building effort: getting government approval to build the city-state's fourth oil refinery.

Known as OK Lim, the founder of Singapore's Hin Leong Group wants to build the company from oil trader into an integrated company. He's well on the way. A fleet of tankers and Asia's largest commercial storage facility are among the company's assets.

The $5-billion refinery would pit Hin Leong against refineries already operated in Singapore by oil majors Shell, ExxonMobil and a joint venture between Chevron and China's PetroChina.

Hin Leong made its name in the hard-fought Asia fuel oil and distillates market over 20 years ago, and is arguably the largest independent distillates trader in Asia, regularly mounting successful trading plays in the Singapore market. It also has a substantial presence in Asia's fuel oil market, the world's largest.

Lim's Chinese connections have played a big part in the company's success. It focused initially on shipping fuel oil cargoes to the mainland, a relationship that has since deepened. Hin Leong is joining hands with several Chinese firms to build the proposed Singapore refinery, even as it seeks to build a larger oil storage facility in the South Chinese province of Fujian.

Lim's biggest bet may have been an unprecedented 1997 spree in which Hin Leong bought 30 million barrels of jet fuel and diesel in the key Singapore market -- worth nearly US$800 million over a three-month span. The jury is still out among rival traders on whether he made or lost a fortune that summer, a debate Lim is unlikely to settle publicly.

In his only media interview, with Reuters in 2006, Lim credited his success to investment in his tanker armada -- the "secret weapon" that helped him set up stealthy and profitable deals in the 1990s -- and his philosophy of perseverance.

"Sometimes you get it wrong, but you have to accept it," he said.

(Jessica Donati, Christopher Johnson, Ikuko Kurahone, Richard Mably, Dmitry Zhdannikov reported from London, Gus Trompiz from Paris, Caroline Copley from Zurich, Emma Farge from Benghazi, Karl Plume and Christine Stebbins from Chicago, Hugh Bronstein from Buenos Aires, Joshua Schneyer from New York, Luke Pachymuthu, Harry Suhartono and Naveen Thukral from Singapore; Editing by Richard Mably, Simon Robinson and Sara Ledwith)

(This story October 21 story was corrrected in the 17th paragraph to reflect that Trafigura paid a U.S. Customs fine on an Iraqi crude cargo in 2001, but denied wrongdoing; clarifies language on Trafigura's 2009 legal action to prevent a report on toxic waste dumping in Ivory Coast from being published)

Top ten global oil and commodities traders

2011-10-31T23:31:00.000-07:00

Key facts and figures about 10 secretive giants that control hundreds of billions of dollars worth of the world's commodities.

VITOL GROUP
2010 revenue: $195bn
President and CEO: Ian Taylor
Founded: 1966 by Ian Taylor
Headquarters: Geneva, Switzerland; Rotterdam, the Netherlands
Staff numbers: 2,700
Focus, operations, events: Top focus is physical oil trading. It scaled down derivatives trading several years ago. Last week, Vitol was first to export oil from rebel-held Libya.
Assets include: storage tanks, exploration and production in the Philippines, Congo, Ghana, Nigeria, Russia, Azerbaijan and Kazakhstan, and the Fujairah refinery in the United Arab Emirates.
Facts: Vitol and Glencore were among dozens of firms accused of paying kickbacks to Iraq in 2005 by a commission that probed the United Nation's Oil for Food programme. Vitol was fined $17.5m after pleading guilty.
GLENCORE INTERNATIONAL
2010 revenue: nearly $145bn.
Net income: $3.8bn
Chief executive: Ivan Glasenberg
Founded: 1974 by Marc Rich as Marc Rich & Co.
Headquarters: Baar, Switzerland.
Staff numbers: 2,700
Focuses on: metals and minerals, energy and agricultural products. It holds large stakes in publicly listed firms such as Xstrata.

CARGILL
2010 global sales: $108bn
Chief executive: Greg Page
Founded: 1865 by William Wallace Cargill at the end of the US Civil War with one grain storage silo in Iowa.
Headquarters: Minneapolis, Minnesota.
Staff numbers: 131,000
Involved in: agribusiness, energy trading, meat and food ingredient applications, biofuels production, animal nutrition products, and industrial products such as steel and salt.
Other: WW Cargill's son-in-law, John MacMillan Sr, took over leadership of the company in 1909. Today, nearly 90pc of the company is still owned by the Cargill and MacMillan families. The remainder is owned by employees.

KOCH INDUSTRIES
2009 revenue: near $100bn, according to sources.
Chairman and CEO: David Koch
Founded: Winkler-Koch Engineering co-founded by Fred Koch in 1925.
Headquarters: Wichita, Kansas
Staff numbers: 50,000 in the United States, 20,000 internationally
Interests include: oil refining and transportation, petrochemicals, forestry and paper, and ranching.
Other: Family firm run by the conservative-activist Koch brothers, David and Charles (executive VP). The duo has spent millions funding advocacy groups and political campaigns of right-wing US politicians and candidates. David Koch has argued against evidence of global warming as a result of industrial activity.

TRAFIGURA
2010 turnover: $79.2bn
Chairman and CEO: Claude Dauphin
Founded: 1993. Claude Dauphin, Eric de Turkheim and Graham Sharp. It split off from a group of companies run by Marc Rich.
Headquarters: Geveva, Switzerland
Staff numbers: 4,000. It is moving staff from London to Geneva.
Focuses on: crude oil, products, non-ferrous, concentrates and refined metals trading and transportation.
Other: In 2009, Trafigura and lawyers representing about 30,000 Ivorians agreed on a pre-trial settlement to end a class action lawsuit, which had accused it of causing illness by dumping toxic waste off Ivory coast in 2006.

GUNVOR INTERNATIONAL
2010 turnover: $65bn.
Chairman: Torbjorn Tornqvist
Founded: 1997 by Swedish oil trader Tornqvist and Russian businessman Gennady Timchenko.
Headquarters: Amsterdam, the Netherlands, Geneva, Switzerland
Staff numbers: Less than 500
Focuses on: oil trading with emphasis on Russia. Has expanded in power and coal trading.
Other: In 2008, Timchenko wrote an open letter to say media speculation that he enjoyed special ties with Russia's former president and current prime minister, Vladimir Putin, were overblown.
ARCHER DANIELS MIDLAND CO.
Net sales: $62bn (fiscal year to June 30, 2010)
Chief executive: Patricia Woertz
Founded: 1902 in Minneapolis, Minnesota, by John Daniels and George Archer
Headquarters: Decatur, Illinois, listed on the NYSE
Staff numbers: 29,000
Focuses on: oilseeds, corn processing, agricultural services, storage and transportation, wheat milling, cocoa processing and food ingredients business.
Other: It is known for converting a beverage alcohol plant into its first ethanol fuel facility in 1978 during the Arab Oil Embargo.

NOBLE GROUP
2010 revenue: $56.7bn.
Net profit: $606m.
Chairman: Richard Elman. CEO: Ricardo Leiman
Founded: 1986 by Elman.
Headquarters: Hong Kong, China. Listed in Singapore.
Staff numbers: 11,000
Interests: from Brazilian sugar to Australian coal.
Other: Shareholders include China Investment Corp, which in 2009 bought a 14.5pc stake for $850m.
MERCURIA ENERGY GROUP
2008 turnover: $46bn
President and Group CEO: Marco Dunand
Founded: 2004. Previously known as J&S, which was founded in 1993 and specialized in Russian oil sales to Poland. Headquarters: Geneva, Switzlerland
Staff numbers: 750
Interests: Mercuria sold 117 million tonnes of physical crude oil and oil products in 2010 including fuel oil, middle distillates, naphtha and gasoline. It also trades power, natural gas, coal and biodiesel and has storage capacity in Estonia and the Netherlands.
Other: Last year, Dunand told Reuters the firm might go public in two to three years.

BUNGE
2010 net sales: $45.7bn
Chairman and CEO: Alberto Weisser
Founded: 1818 by Johann Peter Gottlieb Bunge in Amsterdam
Headquarters: White Plains, New York
Staff numbers: 32,000
Trades: oilseeds and grains, produces sugar and ethanol, mills wheat and corn to make ingredients used by food companies and sells fertilizer in North and South America.
Other: It was the largest producer and supplier of fertilizer in South America before selling off its Brazilian fertilizer nutrients assets to Vale in 2010.
Worth a mention:
PHIBRO (bought by Occidental Petroleum in 2009 from Citigroup, reportedly for $250m)
Revenue: Accounted for 10pc of Citigroup's 2007 net income.
Star trader: Andrew Hall
Founded: 1901 as Philipp Brothers.
Headquarters: Westport, Connecticut
Staff numbers: A couple of dozen staffers, according to press reports.
Focuses on: oil, gas, metals and agricultural trading.
Other: Marc Rich started his commodities trading career here as mailroom attendant and apprentice in 1954. Rich scored major profits for the company by doing business with far-flung governments and helped create a global spot market for oil. Leader and star trader Hall earned a $100m bonus in 2008 after a particularly good year of trading oil.
Source: Reuters

"Stop Demonising Foreign Investors in Agriculture, They're Not Grabbing Land"

2011-06-28T02:39:00.001-07:00

Op-Ed, The Daily Nation – Nairobi - June 13, 2011

Author: Calestous Juma, Professor of the Practice of International Development; Director, Science, Technology, and Globalization Project; Principal Investigator, Agricultural Innovation in Africa

The rising food prices are stimulating interest in investing in African agriculture.
But these investments have been criticised as a new form of colonialism at best and downright land-grabbing at worst.
A new report from the US-based Oakland Institute says that in 2009 alone, foreign investors leased or bought an area nearly the size of France (about 60 million hectares).
It is true that many of the land deals are not structured to benefit local communities. But it is wrong to claim that such investments will only help promote food exports at the expense of local needs.
Such claims ignore Africa's determination to harness emerging technologies to promote agricultural development. The efforts are being promoted as part of larger strategies to stimulate economic transformation.
For example, in early 2011, the Saudi Star Agricultural Development, a food firm owned by billionaire Sheikh Mohammed al-Amoudi, announced plans to invest $2.5 billion in Ethiopia by 2020 to produce rice.
Ethiopia-based firms will lease idle arable land in the lowlands of the country. This is part of Ethiopia's plan to lease three million hectares to private investors over the next four years.
Critics argue that Ethiopia should bank the land so that it can use it to feed itself in future.
Leasing now, they argue, amounts to allowing foreign investors to engage in land-grabbing that will disposes future generations of the ability to feed themselves.
But as I argue in my recent book, The New Harvest: Agricultural Innovation in Africa, the continent can feed itself in a generation.
Nearly 60 per cent of the world's available arable land is in Africa.
What is needed is a vision among African leaders that would help the continent to contribute to global food needs while fostering local prosperity.
Efforts to achieve this have already been started through foreign investments in agriculture. Ethiopia has more than 74 million hectares of cultivable land.
So far, only 15 million is cultivated. Bringing three million hectares of land into cultivation in the coming four years is a modest step in the country's effort to foster economic transformation and does not represent misguided land allocation.
Africa has three major opportunities: advances in science and technology; the creation of regional markets; and the emergence of a new crop of entrepreneurial leaders dedicated to the continent's economic improvement.
To take advantage of the opportunities Africa needs to invest in rural infrastructure (energy, transportation, irrigation and telecommunications).
For example, only seven per cent of African agriculture is irrigated — 3.6 per cent in sub-Saharan Africa — compared to 47 per cent in south Asia.
Ethiopia aims to participate in international as well as regional markets. Its investment in hydropower, for example, will also serve Kenya.
In the past, each African country struggled to feed itself. Today, these countries will find it easier to expand agriculture through regional integration, trade and specialisation.
The country is learning from other African countries that have turned their agriculture around in very few years.
Malawi is a better-known example of rapid agricultural recovery. More African presidents are focusing on agriculture and increasing funding to the sector.
Ethiopia is also learning from farming giants such as China, Brazil and India in designing new agricultural institutions.
For example, this year, the country created the Ethiopia Agricultural Transformation Agency along the lines of the Brazilian Agricultural Research Corporation.
The country is expanding higher education and will create nine new universities next year.
Universities are just one option to build technical competence. Adding vocational education to high schools located in agricultural areas is another tool.
This will make education more practical and relevant to young people. Emerging fields such as genomics could be introduced at this early age to inspire young people to become part of the global knowledge revolution.
Vocational schools can help to build competence in areas such as food processing. Up to 40 per cent of the food produced in Africa is wasted through post-harvest loss.
Improvements are needed in processing, storage and transportation. Critics are right to demand greater transparency, ethical practices and improved performance standards.
But they are wrong to demonise all the deals as "land grabs" without offering better alternatives on how Africa can meet the needs of its growing population.
To call for a blanket moratorium on investment is tantamount to asking Africa to commit economic suicide.
Prof Juma teaches at Harvard Kennedy School and is author of The New Harvest: Agricultural Innovation in Africa (OUP, 2011) Twitter: @calestous

NY cotton ends up sharply, weather threatens new crop

2011-05-25T23:24:00.001-07:00

05/25/2011
* US drought, floods continue to boost December prices
* Dec posts steep gains for second day
* Planting days diminishing with no break in bad weather

NEW YORK, May 25 (Reuters) - Cotton finished Wednesday with steep gains for a second day in a row, as two fronts of bad crop weather jeopardized the new planting season, leading participants to bet on a diminished crop in the United States. Cotton's new-crop, December, ended up 5.59 cents, or 4.44 percent, at $1.3135 per lb on ICE Futures US. Earlier, it reached a high last seen on April 26, a day after the contract posted its biggest gain since March 31, when it rose nearly 6 percent. ICE'S benchmark July cotton futures also settled with strong gains of 2.15 cents at $1.5603 per lb, a 1.40 percent rise. Trading volume in the December contract stood at around 8,418 lots, not far behind July's 9,052 lots. Overall volume on ICE cotton for Tuesday came to 20,112 lots and was above the 30-day average, after falling 70 percent below the norm on Monday, Thomson Reuters' data showed. "On the December cotton, I think it's the same fears about weather, whether it's the West Texas drought, that's now moving into South Georgia or the floods up and down the Mississippi (River)," said "We can afford to have a problem in one region, but not in two and certainly not three, during prime planting season," said Sharon Johnson, senior cotton analyst at Penson Futures. Weather woes in the United States have been wrecking havoc on crops. Farmers along the swollen Mississippi River have had to contend with severe floods lately that have drowned thousands of acres of cotton. The actual number of acres lost in both Texas and the U.S. Delta states will not be known until the middle of June, analysts said. December and the back months in the cotton market are being supported by a severe drought savaging cotton crops in Texas, the biggest cotton growing state in the country.

Hedge Funders take to farming it face of doomsday

2011-05-20T04:17:00.000-07:00

Hedge fund managers (thanks to steep performance fees) tend to be known for zooming around in Ferraris and buying multimillion-dollar paintings. Not for tilling the soil on farms.

But in today’s economy, where the dollar is considered fragile at its best, and worthless at its worst – hedge funders are taking to buying up farmland and doing it the good old fashioned American way. They’re planting crops.

A big time hedge funder told The Observer about his fund’s investments, which he said have made him the fifteenth largest farmer in the country. Hedge fund hotshots are farm-happy, and if they can swing it, they’ll start buying up land and beginning to profit an industry that’s currently hugely dominated by old-fashioned family-run businesses, not high-risk, high-return funds that most people outside of the financial sector don’t really understand.

So why now? Well, according to the Observer, hedge funders “envision a doomsday scenario catalyzed by a weak dollar, higher-than-you-think inflation and an uncertain political climate here and abroad.” And we thought the May 21st believers were the only ones worried about such things.

In the current climate, hedge funders believe money does grow on trees. While the dollar is weak and the population surges, food prices are up globally, which means farmland prices are up. So it’s actually a good investment.

Even off Wall Street (or Greenwich or San Francisco or whatever), the hedge funder interviewed for the article displays that typical confident market neutral hedge fund mentality: “If you farm it like we do, you can generate a yield. We think the farmland will be worth 5 to 10 percent more every year, and on top of that, you get the commodities yield.”

But unlike the financial services industry, you can’t just create what you’re selling out of thin air (oh, just kidding) when you’re growing crops. Farmland, especially good farmland, is, believe it or not, in limited supply.

This, after all, is not Farmville. It’s the real thing.

Agriculture - can it be a cash cow for investors?

2011-05-05T01:39:00.001-07:00

By Ellen Kelleher

Might the era of the yeoman farmer be upon us? A clutch of investment advisers say so, claiming that buying arable land is a sounder idea than taking out futures contracts if you are hoping to profit from rising food prices.

Investing in land remains risky and approaches to its ownership and management vary, as do returns. But John Paul Thwaytes, manager of JPT Capital’s Agrifund, which is seeking £50m ($79m) next month in a Dublin listing to support the development of Australian wheat farms, talks it up as a long-term gamble.

Provided a stake is held for eight years for the purpose of hedging exposure to poor years, he expects the fund to throw up a yearly yield of as much as 9.25 per cent from profits generated by farming activities. Investors also gain from any increase in the value of the land. Another fringe benefit is that commercial land offers a hedge against inflation and is not correlated to equities.

There are just a handful of institutions with agriculture divisions (Macquarie, Prudential, Rabobank and UBS are well-placed in the area) and even fewer funds on offer. But interest in land holdings across Brazil, Canada, Africa, Australia and New Zealand is growing, particularly among pension funds as well as private equity and sovereign wealth funds.

Tim Hornibrook, a director with Macquarie Agricultural Funds Management, which runs dairy, sheep, cattle, horticulture, forestry and wine estates, mainly in Australia, and oversees more than $1bn in investments, says: “We’re coming from a low base, but agriculture is starting to gain attention. Investors are looking for alternatives and buying agricultural equities can be a challenge as there’s not a huge range of listed companies to invest in. And while futures contracts are highly liquid, they are also highly volatile and their outlook is quite short term.”

The investment vehicles available include: AgCapita, a Calgary-based private equity firm with a focus on farmland in Saskatchewan; Agrifirma Brazil , a privately-held Jersey company backed by Lord Rothschild and Jim Slater, which owns more than 50,000 hectares of Brazilian farmland; and Agro-Ecological Investment Management, an Anglo-Kiwi partnership that takes stakes in organic farms in New Zealand on behalf of institutional clients and family offices. Funds with a focus on Africa, which boasts a quarter of the world’s arable land, are scarce. But the Emergent African AgriLand fund, a private-equity style fund based in London that aims to invest in 14 sub-Saharan countries and employs 3,500 farm workers, is said to be the largest.

While its managers aim to pay a coupon of 8-10 per cent and provide a target risk-adjusted return of at least 25 per cent, its fees are high. It charges 2.5 per cent a year and a 20 per cent performance fee, and institutional investors must cough up at least €5m.

The pick-up in desire for land holdings comes as global food prices hit nominal all-time highs, according to the United Nations Food and Agriculture Organisation, after a string of bad harvests and amid robust demand in Asia, surpassing the levels seen during the 2007-08 food crisis.

A recent study from the property group Savills concludes that soaring food prices will push up land values in several countries – though growth may be stunted in mature markets like Ireland, Denmark and the Netherlands where land is expensive. Agricultural investment funds, which own land around the world, are forecasting cash-on-cash returns of 3-8 per cent and internal rates of return of 10-18 per cent after fees, according to Savills’ research.

Jonathan Davis, FTfm columnist and a founding shareholder of Agrifirma Brazil, estimates it requires at least four years for managers to see a return on Brazilian land. By his estimates, it costs as much as $1,500 per hectare to purchase it; $1,500 a hectare to develop; and $6,000 per hectare is gained from its sale. “It’s a very difficult business to make money out of. There are so many things that could go wrong. Weather can be a big problem. Crop failure. Land is also a relatively illiquid asset. Then there’s the farming side of it,” he admits. “But it is possible to see an internal rate of return of 20 to 25 per cent. You can see real returns over a long period and see the benefits of an operating yield and capital appreciation.”

Some fund managers are less than enthusiastic about the sector’s prospects, however. Political risks are one concern. Last year, for example, the Brazilian government placed further restrictions on land ownership by foreigners, sparking fears among investors. More generally, farming can be hard work.

Henry Boucher, manager of Sarasin’s ₤£152m Agrisar fund, which invests mainly in agricultural equities and gained 15.5 per cent in the past year, looked into taking a direct land holding in 2005, but later abandoned all efforts. “I really explored it. I tried very hard and came to the conclusion that it wasn’t an accessible area.” Mr Boucher also points out that to woo investors, some vehicles such as Agrifirma were forced to restructure themselves and scrap their hedge-fund style fees (2 per cent fee a year plus 20 per cent of profits).

George Lee, manager of the Eclectica Agriculture fund, meanwhile, is just as cynical about the possible complications and claims equities are an easier bet. He is focusing on fertiliser stocks as he thinks farmers will spend more on soil nutrients as food prices rise.

“That’s one of the themes I’m playing. Farmers will look for a chance to improve their crop yields after the events of 2008 and 2009,” he concludes. “As for trying to farm land yourself, it’s trickier than just getting out your plough. It turns into a five, 10 or 15-year project. There are big issues with logistics and weather conditions.”

AAA reports worldwide rise in timber prices

2011-04-28T00:36:00.000-07:00

By wendy.chothia
Created 27/04/2011 - 16:58

Alternative Asset Analysis (AAA), an alternative investment advocacy organisation, reports that global demand for timber has increased, resulting in higher prices across Europe, Japan, China and the United States.

AAA collated industry lumber data from a number of sources and cross-referenced it against reports from the North American Wood Fiber Review and from Wood Resource Quarterly.

Log buyers in Japan, South Korea and China are driving up demand for timber from the US and, as a result, prices have risen significantly, according to the new North American Wood Fiber Review.

Worldwide demand for softwood lumber rose 18 per cent in 2010, continuing a trend that had already been occurring in China and Japan since early 2009. Global wood consumption for the first quarter of 2011 is up around 20 per cent on last year.

"The official results of the wood fiber review show all regions of North America saw prices trending upwards over the past two years, with growth particularly notable in the north west regions," says Anthony Johnson, an analyst, fund manager and partner at AAA.

These positive comments follow news that log exports to Asia from the west coast of the US have reached their highest point for 14 years. Other regions have also seen price increases and export growth, but not to the same extent as the north west corner and coastal regions, where prices have really soared.

The news is great for the US forestry industry, which has been through a tough time of late with the domestic housing market slump. China, on the other hand has an insatiable need for raw materials to use in its massive growth and development projects. It is turning to the US for its timber following the introduction of new taxes in Russia where it had previously sourced its timber.

The rise in prices was perhaps most notable on Douglas fir logs in the fourth quarter of 2010, with prices rising by 19 per cent from a year before. In addition, hemlock sawlog prices were up by an impressive 25 per cent on the year before. The prices of southern yellow pine lumber in the US were up 24 per cent in March 2011 over same period last year. Prices were also up substantially for Spruce Pine Fur lumber in Canada.

AAA was also keen to welcome the news that the price rises were also being seen in Canada, and, much like the US, the western provinces saw prices rise much more sharply than the rest of the country.

"News that demand for timber is spreading from Asia to the US and Canada is extremely positive for alternative asset investors who were looking to make some health returns while diversifying their portfolio. This proves why alternative assets are such a good addition to any investment portfolio: while equities remain uncertain, timber prices are soaring," says Johnson.

Timber prices are forecast to continue to rise throughout the rest of 2011 in line with continued demand from China and expected demand from Japan following the devastating earthquake.

AAA is keen to promote investment in emerging markets like Brazil, where firms like Greenwood Management are offering investments in plantations of sustainable non-native species for export and charcoal production.

Cargill unit Black River plans $400 mln Asian food fund

2011-04-20T23:55:00.001-07:00

Reuters | 18 April 2011

Deda Chicken Processing Plant, Dehui City, Julin Province, 2005 (Photo: Edward Burtynsky)
By Kevin Lim

Black River, the private equity arm of U.S. agribusiness and trading giant Cargill , is raising a $400 million fund to invest in firms that will benefit from rising Asian demand for meat and vegetables.

The proposed Black River Capital Partners (Food) Fund, which has already received about $200 million in commitments, expects to invest about half the money in China, where people are eating more protein and fruits and less cereal and tubers.

"GDP growth is driving food consumption in emerging markets (and) the demand for safe and high quality food, against a backdrop of outdated production methods and fragmented industry means high margin revenue opportunity for leading players," Black River said in presentation notes seen by Reuters.

"Recent surveys indicate more than 96 percent of (Chinese) consumers are very concerned about food safety and 75 percent of interviewees expressed a willingness to pay extra for safer food," it added.

Black River's Singapore office could not be reached for comment.

The price of grains and other agricultural commodities have risen in recent months, pushing up inflation in many developing countries and raising concerns about possible food shortages.

Last week, the World Bank warned higher global food and energy prices are affecting a larger swathe of developing countries than at the beginning of the year, threatening to push more people into poverty. [ID:nWALEFE768]

According to the presentation, Black River is targeting 30 percent gross cumulative return per annum for the planned food fund, which has a life of 10 years. It will charge a 17.5 percent performance fee if it achieves a hurdle rate of 8 percent.

Black River's investment pipeline includes a Chinese pork producer and distributor, a duck farming firm in northern China, a fish producer in Costa Rica and a frozen fish processor in Singapore.

Institutions that have committed money to the food fund include Dutch pension fund PGGM and Utimco, which manages money for the University of Texas and Texas A&M University, according to the presentation Black River is now targeting investors in Singapore and Hong Kong.

(Editing by Muralikumar Anantharaman)

Planète à vendre - videos.arte.tv

2011-04-19T23:26:00.000-07:00

Planète à vendre - videos.arte.tv

Investors pump $400m into Ukraine farming groups

2011-04-07T03:39:00.001-07:00

Agrimoney | 1 April 2011

Investors have backed hopes for Ukraine agriculture with a near-$400m cash injection, pouring $140m into an acquisition warchest raised by Kernel Holding, and $250m to support expansion plans at farm operator Mriya Agro.

Kernel, the silos-to-sunflowers group which yesterday announced the issue of about 5m new shares to bankroll ambitious takeover plans, said that it had in fact sold 5.4m shares, raising 399.4m zloty ($140m).

The placement price of 74 zloty per share represented a 1 zloty discount to Wednesday's closing price.

However, it was significantly above levels as low as 68 zloty to which the shares fell after the stock issue was announced.

The shares, which are traded in Warsaw, rebounded 5.3% to 74.75 zloty in morning trade on Friday.

'Aggressive expansion'

The announcement came as Mriya Agro, an unlisted group which farms more than 200,000 hectares in Ukraine, revealed the closure of its first issue of eurobonds, for $250m, which has been in train since last year.

Mykola Huta, the Mriya chief executive, said that the cash "opens new opportunities" for the grains-to- sugar beet grower, enabling it "to expand operating activity, optimise financial costs and strengthen our competitive advantages".

Fitch Rating analysts two weeks ago said that the cash would "fund aggressive expansion... across the value chain in the promising Ukrainian agricultural sector".

Fitch analyst Pablo Mazzini said: "The outlook for Ukrainian agriculture is positive, given the low base of comparative production yields and high prevailing commodity prices.

"This means private companies such as Mriya are favourably placed to take advantage of the environment."

'International reputation'

The bond issue, which was last week raised from $200m, was more than twice covered, and purchased in the main by European investors, Mriya said.

US buyers picked up some $55m of the five-year bonds, which carry a fix coupon of 10.95%, with about $25m going to Asian investors.

"We think our first issue of eurobonds was successful," Mr Huta said.

"High interest for our eurobonds... improves our reputation in international capital markets".

Upside for agribusiness investment is promising

2011-04-07T03:30:00.000-07:00

Moscow Times | 6 April 2011

By Charles Bausman

This comes as no surprise. With the ongoing rise in food prices, increasing demand for agriculture from the world’s largest investors, the barriers to investments appearing in Brazil, and the growing delta between Russian and world agri asset values, it was only a matter of time.

The opportunities appear startling. Extremely fertile black earth farmland sells for about $500 per hectare, which is about 15 percent of what similar yielding land fetches in comparable markets. Efficient farmers can generate earnings of $400 to $500 per hectare, making the profit opportunity more than obvious. An oil-rich government bent on building up the sector dispenses subsidized loans, significantly amplifying already high equity returns, and is investing heavily in infrastructure, which in many respects is superior to South America. North Africa, within easy reach of Russian ports, is one of the largest and fastest-growing grain and oilseeds markets.

Investment is not limited to grains. A government incentive program to achieve 85 percent self-sufficiency in meat and poultry by 2015 is driving rapid construction of enormous pork and poultry “factories,” often with thin environmental regulation. Supersized dairy operations are also being rolled out.

Russia defies prediction, and it remains to be seen whether foreign operators will participate in what appears to be an unfolding bonanza. The sector is undercapitalized, which explains the outsized returns and low asset values. Capital needs far outstrip the significant amounts the government is pouring in. The government is on a drive to increase investment into the economy as a whole, agribusiness included. Put all this together and it would appear that substantial foreign investment in Russian agriculture over the coming years is likely.

The scene is reminiscent of Russian energy assets in the early and mid-2000s. They also traded 10 times below world comparables, and investors fretted about ownership rights and country risk, but were driven on by the relentless rise in energy prices. We know how that one ended. There were some spectacular blow-ups, but by and large, those who correctly analyzed the risk and got in ahead of the crowd were well rewarded.

Charles Bausman is director at Global AgInvesting, an advisory firm for institutional investment in agriculture.

Food Commodities Rise Seen Swamping Consumers With Inflation

2011-04-04T05:55:00.000-07:00

By Nicholas Larkin - Mar 31, 2011 Coffee, sugar and cocoa prices will rise five- to 10-fold by 2014 because of shortages that will mean consumers getting “swamped” by food-price inflation, according to Superfund Financial.

A lack of farmland and rising costs means growers will fail to keep up with demand, said Aaron Smith, managing director of Superfund Financial (Hong Kong) Ltd. and Superfund USA Inc. Commodities account for about 40 percent of Superfund’s $1.25 billion assets under management. Smith correctly predicted record copper prices in November and a month later rightly anticipated that silver would outperform gold.

A United Nations index of world food prices jumped to a record last month, contributing to riots across northern Africa and the Middle East that already toppled leaders in Egypt and Tunisia. Global food security is threatened by “excessive price volatility and speculation,” farm ministers from 48 countries said in a joint statement after meeting in Berlin in January.

“There’s a tremendous shortage of food, there’s a tremendous shortage of arable land,” Smith said in interview in London. “Any kind of food products are going to increase.”

Coffee jumped more than fivefold in the two years through July 1994 and more than tripled from February 2002 to March 2005. Sugar prices rose fourfold from June 2002 to February 2006 and more than tripled from June 2007 to February last year. Cocoa advanced 242 percent from December 2000 to January 2003.

Price Gains
Arabica coffee traded on ICE Futures U.S. in New York almost doubled in the past year and traded at $2.663 a pound at 7:33 a.m. local time. Raw-sugar futures advanced 51 percent to 27.03 cents a pound, while cocoa is little changed at $2,960 a metric ton.

Coffee prices jumped after wet weather damaged crops in Colombia and on forecasts for a smaller harvest in Brazil, the world’s largest exporter. Sugar gained after floods in Pakistan and Australia and cocoa advanced as fighting after elections in November disrupted exports from Ivory Coast, the largest grower.

Superfund, founded in Vienna in 1995, specializes in so- called managed futures, using its own trading system to buy and sell commodities and currency futures, stocks and bonds. It has a 24-hour trading operation in Chicago, Smith said.

The U.S. consumer price index rose 0.5 percent in February, the most since June 2009. Asian countries from China to Indonesia raised interest rates this year to curb inflation. European inflation quickened to 2.6 percent in March, the fastest since October 2008 and above the European Central Bank’s 2 percent limit.

Bull Market

The commodity bull market may last for 15 to 20 years, Smith said in July 2008. The Standard & Poor’s GSCI Index of 24 commodities, which that month dropped as much as 66 percent through February 2009, is still 20 percent below its 2008 peak.

Wheat traded in Chicago is down 8.7 percent this year and sugar has dropped 16 percent. Global sugar production may exceed demand for the first time in four years if “normal weather conditions” return to the biggest growing nations, broker and researcher Jonathan Kingsman said last month.

Access to water, higher labor costs and rising incomes are also issues for food commodities, Smith said.

“There’s about 7 billion people in the world,” he said. “When you have that many people, it only takes tens of millions of people to move up a market that’s so small like sugar.”

Rising Population
World food production will have to increase by 70 percent by 2050 to meet increasing demand from an expanding global population, projected to rise to 9.1 billion by 2050 from 6.9 billion now, Hiroyuki Konuma, the UN Food and Agriculture Organization’s regional representative in Asia, said in an interview in Bangkok on March 9.

Food costs are at “dangerous levels” after pushing 44 million people into poverty since June, World Bank President Robert Zoellick said last month. That adds to the more than 900 million people around the world who go hungry each day, he said.

It’s “an incredibly difficult humanitarian story because the poorest countries will be hit the hardest,” Smith said. “The average person is going to be swamped by food inflation. The new arms race is food and energy.”

An indirect way of betting on food prices is to buy gold, because it tends to do well when inflation accelerates, he said. Gold has gained the past 10 years and reached a record $1,447.82 an ounce last week, while silver is up 22 percent this year at $37.775 an ounce. Gold will climb to $2,000 and silver to $60 in three years, he said.

“I think that gold, and to a lesser extent silver, will dramatically underperform soft commodities, but will at least have a high correlation to them,” Smith said. “When we see short-term rates in the U.S. at double digits then you can start to speculate that gold might be getting close to the end of its run.”

Commodities Investors to Keep Powder Dry on Allocations

2011-04-04T05:44:00.000-07:00

By Reuters

NEW YORK (Reuters)—Commodity traders waiting for a fresh onset of institutional investment with the dawning of the second quarter may be in for disappointment.
Two years of steady allocations into raw material, energy and agricultural markets may stall for the time being, with several weeks of moribund activity extended by deep uncertainties in the Middle East, Japan and euro zone. As if that weren't enough, investors must now squarely confront the ending of the super-easy monetary policy cycle and the tricky act of raising rates without upending an economic recovery that remains fragile at best.

Investors reckon this spells "hold" for commodities, many of which have lost momentum during a first quarter in which many new post-2008 highs were swiftly followed by deep correction.

In the last two weeks, daily volume in energy, metals and grains was off 30 percent or more versus the 30-day average, underscoring traders' indecision. That, some say, could affect the momentum of the long money that had been flowing into commodities — meaning the record high sums tracked since December by the U.S. Commodity Futures Trading Commission may slow from March.

"You can bet most commodity-related investors were fairly near full-invested approaching the quarter-end," said Oliver Pursche, president at Gary Goldberg Financial Services, a firm in Suffern, N.Y., which manages $500 million of assets, including a commodities mutual fund. "Now, everything is pointing to stay the course, don't do anything and if you get new capital coming in, don't rush to commit it."

Net investment into U.S. commodity indices peaked for a third month in a row in February, with long positions that bet on price gains crossing $300 billion the first time, government data showed this week.

The value of holdings by institutional investors and others who buy into baskets of commodity futures that represent such indices surged more than $45 billion over those three months. Rising prices was one reason: U.S. crude oil rose 16.8 percent on the quarter, and the Reuters-Jefferies CRB commodities index 8 percent for a third straight quarterly gain.

Fed Policy

Liquidity in commodities could also dry up quickly if the U.S. Federal Reserve embarks on monetary tightening for any reason, despite all promises in the past that it wouldn't.

Since the financial crisis, the U.S. central bank has approved one stimulus package after another to boost the economy and the latest — a $600 billion bond purchase program known in market lingo as Quantitative Easing II, or QE II — will end in June. While there is no word yet of a QE III, some senior Fed officials have been calling for the current package itself to be cut by $100 billion.

Others have suggested an outright rate hike soon, like Minneapolis Fed President Narayana Kocherlakota, who said rates could rise by three-quarters of a percentage point by the end of 2011 — faster than markets expect.

"Stimulus money has been one of the biggest drivers of commodities and any attempt to choke this lifeblood is likely to be greeted by investor panic," said the managing partner of a New York hedge fund that manages $70 million in commodities.

Trading volumes in oil shrunk after investors began to worry about how long the market will be able to capitalize just on the freeze in Libyan oil exports and unrest in other oil-producing Arab countries. Crude futures in New York defied high U.S. oil stockpiles to rise $15 during the quarter to a 2-1/2 year high above $106 per barrel.

Traders say prices could dive if Libyan rebels locked in fierce fighting with Muammar Gaddafi's troops succeed in taking key oil-producing towns to resume exports. Even so, no one really wants to bet on the direction in oil now.

"Generally speaking, our stance on the energy sector and oil in particular is going short right now doesn't make sense and adding to the long position doesn't make a lot of sense either," Mr. Pursche said. "So, it's a hold, and that obviously impacts trading volumes."

Don Steinbrugge, managing partner of Agecroft Partners in Richmond, Va., concurs with that.

"The average institutional investor thinks there's more downside than upside in the oil market if this whole situation in Libya is resolved in the next couple of weeks," said Mr. Steinbrugge, a hedge fund consultant who also gives advice on portfolio building to big investors like pensions. "That said, I think it's a lot easier to predict long-term trends in commodity prices based on projections of global GDP, and what demand will be for various components of the market, than to forecast supply shocks."

Japan Woes

Copper prices have fallen almost 10 percent since hitting record highs of nearly $10,200 a ton in mid-February. Trading volumes in copper — a key economic bellwether — have dwindled, too, on fear that the post-earthquake nuclear radiation leaks in Japan and the euro zone's debt woes would get worse before getting better.

Japan remains one of the world's largest economies although it is not as big a commodities consumer as China.

The huge sovereign debt of countries such as Greece and Portugal have dragged on market sentiment for more than a year, taking a fresh blow after credit rating downgrades this week.

Despite the run-up in oil, the average energy hedge fund is down nearly 3 percent year-to-date, according to data tracked by Chicago-based Hedge Fund Research.

Unless the market overcomes its trading inertia, returns could remain dismal, putting pressure on fund managers.

"As investors, we want the best risk-adjusted returns," said Mike Hennessy, managing director at Morgan Creek Capital, a $10 billion fund-of-funds in Chapel Hill, N.C., that invests with managers specializing amongst others in energy and commodity portfolios. "We download all capital to managers and expect them to have a view and navigate those markets on a short-term basis."

Matières Premières : Un Secteur agricole trop concentré cause première de l’envolée des prix ?

2011-03-22T04:23:00.000-07:00

Alain Butler l ’expert en matières agricoles de BNP Paribas (Suisse) à Genève met en avant la concentration du marché agricole pour expliquer la récente hausse du prix des matières premières.

Alain Butler ne croit que ce qu’il voit. C’est pour cela qu’il passe la plupart de son temps sur le terrain, à la rencontre des acteurs du secteur agricole. La confrontation entre sa connaissance des marchés globaux et son ancrage dans la réalité des marchés physiques lui confère ainsi une légitimité toute particulière pour évoquer la hausse des prix actuelle. Réfutant la thèse de l’importance de la spéculation sur la direction des prix, il apporte un éclairage pratique aux développements du secteur.

La concentration géographique des zones de production est selon lui l’une des causes majeure de la volatilité des cours car elle les rend vulnérables au moindre incident climatique ou trouble politique. Mais il affirme que la tendance actuelle est à la déconcentration. D’une part, les investisseurs veulent diversifier leurs risques en privilégiant la complémentarité géographique, au travers des petits pays producteurs. D’autre part, les gouvernements des pays émergents ont dépassé le paradigme des cultures d’exportation pour enfin développer les cultures vivrières. Cette double dynamique devrait donc à long-terme permettre une baisse naturelle la volatilité des cours en assurant un approvisionnement plus constant du marché mondial

ENTRETIEN

Les origines structurelles de la flambée des prix

. Les facteurs conjoncturels n’expliquent pas à eux seuls l’envolée des denrées dans le monde .

Olivier Pellegrinelli /Agefi En quoi la hausse du prix des matières premières agricoles actuelle diffère-t-elle de 2007-2008?

Alain Butler. (BNP Parribas Suisse). Il y a quatre ans, c’était la première fois que le monde était confronté à une telle envolée des prix.

L’importance relative des facteurs qui ont pu contribuer au-delà des mauvaises récoltes qui ont précédé à cette augmentation agressive des cours – notamment, intervention des fonds d’investissement, développement des biocarburants et incertitudes macroéconomiques – est toujours débattue aujourd’hui par les experts. Il est probable que certains de ces facteurs jouent toujours un rôle dans la hausse actuelle mais le déclencheur incontestable a été la brusque détérioration de l’offre liée à de mauvaises récoltes causées par des sécheresses en Russie et en Argentine, ou des inondations en Australie et au Pakistan. Cette baisse de disponibilité s’est de plus matérialisée simultanément sur la majorité des matières premières agricoles.

Quel rôle le pétrole joue t-il dans la fixation des prix agricoles?

Il est certainement moins important que pour d’autres matières premières. Les cours du pétrole influencent bien entendu les coûts de production agricoles, mais les marchés agricoles répondent à une demande relativement captive et, une fois produites, elles doivent in fine être vendues peu importe leur coût de production car elles sont périssables. La demande en produits agricoles est relativement prévisible, contrairement à l’offre qui peut fluctuer fortement d’une année à l’autre, ce qui rend les cours vulnérables à de fortes hausses ou à des baisses.

Comment les marchés des contrats à terme influencent-ils les cours physiques?

Aujourd’hui, les marchés agricoles sont mondiaux et les interactions entre chaque région de la planète sont toujours plus importantes. Les prix locaux sont donc fortement influencés par les prix internationaux. Les contrats à terme reflètent principalement l’anticipation des cours futurs. Certains producteurs utilisent également leur connaissance des cours à terme pour décider quelles cultures planter et ainsi maximiser leur profit. L’influence est donc réciproque entre les cours des contrats à termes et ceux des marchés physiques.

La présence des fonds d’investissement sur les contrats à terme constitue-t-elle un facteur de volatilité important?

L’activité des fonds d’investissement peut avoir un effet amplificateur à court terme mais en aucun cas elle ne peut fixer la direction des cours. Ce sont toujours les déséquilibres physiques et leur interprétation par les acteurs de marché qui se trouvent à la base du mécanisme qui fixe l’orientation des prix. Ainsi, les positions dites « spéculatives « ne peuvent à elles seules expliquer l’augmentation du prix des matières premières et n’ont qu’une influence relativement limitée sur le niveau absolu des prix à long terme.

Quels autres facteurs contribuent à augmenter la volatilité des cours?

Incontestablement, la gestion de l’information a un rôle fondamental dans la volatilité quotidienne des cours. Depuis l’émergence d’internet et de la téléphonie mobile, l’information circule beaucoup plus vite, même dans les régions productrices parfois reculées. Les agriculteurs peuvent donc réagir face aux cours mondiaux, en négociant leurs prix, voire en stockant plus longtemps une partie de leur récolte si leur liquidité le permet. De plus, du fait de la diffusion rapide de l’information, des simples effets d’annonce peuvent avoir des implications beaucoup plus importantes sur les cours. Quand le département américain de l’agriculture publie son rapport mensuel, toute la chaîne de valeur y a accès au même moment. Il y a plus d’une dizaine d’années, l’environnement n’était pas propice à une telle vitesse de diffusion de l’information.

Pourquoi les matières agricoles telles que le cacao, le coton ou le sucre ont-elles flambées récemment?

Il s’agit là aussi de l’augmentation de l’incertitude liée à l’offre à court et moyen termes de ces denrées. Toutes ces cultures sont de plus extrêmement concentrées géographiquement, ce qui rend les cours mondiaux sensibles vis-à-vis des évènements climatiques et politiques dans les grands pays producteurs. Cette année, la crise ivoirienne pour le cacao ou le gel en Floride pour le jus d’orange, en sont de parfaits exemples. Dans le cas du coton, il faut savoir que des producteurs avaient fortement réduit leurs surfaces cultivées parce que le soja était relativement plus rentable. Au moment de la reprise économique, l’offre s’est retrouvée largement déficitaire pour répondre à une nouvelle demande globale de textile liée à la reprise économique ce qui a poussé les prix du coton vers le haut.

Comment voyez-vous l’évolution de ces marchés à moyen terme?

Les cultures en général vont selon moi connaître un phénomène de déconcentration dans les années à venir. Suite à la crise alimentaire de 2007/2008, les gouvernements des pays en voie de développement sont en train de favoriser les cultures vivrières destinées à l’autosuffisance alimentaire, au détriment des cultures de rentes destinée à l’exportation et autrefois encouragées par le consensus de Washington. De plus, les investisseurs cherchent à réduire leurs risques en diversifiant l’origine géographique de leurs produits. Cette tendance va donc contribuer à diminuer la volatilité des prix car elle réduira l’importance des événements climatiques et politiques.

La corrélation de prix entre chaque matière première a considérablement augmenté depuis quelques années. Pourquoi?

Les cours sont plus corrélés qu’avant car les opportunités pour substituer les denrées à d’autres sont beaucoup plus nombreuses. Plus les marchés grandissent, plus les acheteurs finaux trouvent les opportunités de remplacer un tourteau de soja par un tourteau de colza par exemple. De même, plus la capacité industrielle de transformation des denrées augmente, plus la flexibilité pour saisir ces opportunités est grande. Le fait que le financement des marchés agricoles soit de mieux en mieux organisé favorise aussi des opportunités de substitution. Ainsi, comme dans les principes fondamentaux de l’économie, plus les produits agricoles deviennent substituables, plus leurs prix seront corrélés.

interview:
Olivier Pellegrinelli /Agefi

EN COMPLEMENT : La crise libyenne fait plonger le prix du coton

La livre de fibre blanche, qui valait encore 75 cents début 2010, avait bondi à plus de deux dollars la semaine précédente les opérateurs s’inquiétant de la faiblesse de l’offre sur la planète

Les prix du coton se sont fortement repliés cette semaine à New York, entraînés par les angoisses des marchés financiers alors que la crise libyenne tournait à la répression sanglante et entraînait une envolée des cours du pétrole.

«Les spéculateurs ont semblé soudain pressés de retirer de l’argent de la table», ont commenté les analystes de la maison de courtage Plexus Cotton. «Ce qui devait être une relativement faible correction a pris une forte ampleur, surtout en raison de l’incertitude sur le front géopolitique», ont-ils ajouté.

Le marché du coton est particulièrement sensible à la conjoncture économique et connaît régulièrement de fortes variations en fonction de la confiance des investisseurs en la reprise économique.

La perspective d’une crise majeure au Moyen-Orient a donc concentré toutes les inquiétudes, de même que l’envolée des cours du pétrole, qui si elle se prolongeait pourrait constituer un choc important pour l’économie mondiale.

L’indice Cotlook A, moyenne quotidienne des cinq prix du coton les plus faibles sur le marché physique dans les ports d’Orient, retombait vendredi à 209,30 dollars (pour 100 livres), contre 233,50 dollars en fin de semaine précédente soit une baisse de 10%…Le Prix de la spéculation ?

Commodity Fund Inflows Surge to $4 Billion in February: Lipper

2011-03-22T01:44:00.001-07:00

By Reuters
Monday, March 21, 2011 3:50:05 PM ET

NEW YORK (Reuters)—Investors plowed more than $4 billion into commodity-based products and mutual funds in February, the most in nine months, favoring agricultural markets, silver and broad index funds, Lipper data showed.

Inflows to U.S.-regulated "commodity products" rebounded to $4.05 billion last month, from just $38 million in January, according to data tracking funds that invest directly in physical commodities or derivatives, not corporate securities. It was the highest since $6.3 billion in May 2010 and the third-largest one-month inflow on record.

The surge helped elevate total net assets in the funds to $151.4 billion, from $142.4 billion at the end of January. That makes up about half the total net length of index funds tracking commodity markets, including swaps and other unregulated vehicles, according to data from the U.S. Commodity Futures Trading Commission.

To view a graphic on the data, click here: http://r.reuters.com/sux58r.
To see the CFTC data click here: http://r.reuters.com/hym38r.

Inflows climbed as markets recovered from an early January slump to post a 3.3 percent return for the Reuters-Jefferies CRB index, with oil prices igniting on turmoil in North Africa and the Middle East, corn scaling new post-2008 peaks on concerns over low stocks and sugar touching a 30-year high. But as markets faltered in March amid escalating uncertainty and instability, the flow may not last. The CRB is down 0.8 percent so far, its first decline in seven months.

"We expect outflows in March given the heightened volatility," said Edward Meir, senior commodities analyst at global futures brokerage MF Global.

The rising flow of investor capital into commodities—aided by the advent of mutual and exchange-traded funds that allow institutions to avoid the complex futures markets and invest as they would into stocks or bonds—has fueled intense debate about whether speculators artificially inflate prices. While numerous studies have sought to disprove any causal link, most analysts agree that multi-billion-dollar allocation shifts into the relatively smaller, less-liquid commodity markets can have a short-term impact on prices.

Markets Bounced

The PowerShares DB Agriculture Fund, which invests in grains, softs and livestock markets tracking the DJ-UBS Agriculture Index, attracted the greatest inflows of $522 million, taking net assets to $3.7 billion. The underlying index rose 0.9 percent in February.

Investors continued to shift their gold holdings into the iShares Gold Trust, which saw a net inflow of nearly $350 million, and out of the SPDR Gold Shares, which remains the biggest fund with nearly $55 billion. Experts have said the iShares vehicle's lower fees are attracting interest.

The iShares silver trust attracted $315 million as prices outpaced gold.

While Brent crude oil posted its best monthly gain since May 2009 as Libyan oil exports were halted by violence, U.S. crude prices lagged due to a glut of landlocked oil. The U.S. Oil Fund witnessed a net outflow in February, mostly reversing inflows in January.

The biggest commodity mutual fund operator, PIMCO, continued to attract sizable investment, with the CommoditiesPLUS Strategy Fund for institutional investors drawing in $326 million. The biggest RealReturn fund attracted $276 million to rise to $18.3 billion. The PLUS fund is benchmarked against the Credit Suisse Commodity Benchmark, while the RealReturn fund uses the Dow Jones-UBS Commodity Index Total Return index.

The data does not include fund holdings of over-the-counter indices or direct investment in futures or physical commodities, or hedge funds. Lipper's historical data includes only funds that are currently in operation.

Dell fund raises $780 mln for energy investment

2011-03-09T02:42:00.000-08:00

Tue, Mar 8 2011
NEW YORK, March 8 (Reuters) - MSD Capital, a private investment firm for Dell Inc (DELL.O: Quote, Profile, Research, Stock Buzz) founder and chief executive Michael Dell and his family, raised about $780 million for an energy hedge fund, according to a regulatory filing.

The filing with the U.S. Securities and Exchange Commission showed MSD Energy Partners raised a total of $779.86 million. (Writing by Ritsuko Ando; Editing by Gary Hill)

Mellon Capital Management Launches commodities strategy

2011-03-09T01:17:00.000-08:00

By wendy.chothia
Created 08/03/2011 - 10:00

Mellon Capital Management, part of BNY Mellon Asset Management, has launched its Commodity Alpha Long-Bias Strategy, a commodities strategy designed to provide institutional investors with diversification beyond equities and fixed income and to provide a hedge against inflation.

The strategy is designed to add value by taking long and short positions in futures contracts for a range of liquid commodities including energy, precious metals, industrial metals, grains, livestock and other agricultural products. The strategy's managers seek positions in the commodities markets that appear attractive by evaluating various factors that can influence commodity futures prices.

"The commodities markets offer distinct investment opportunities as many of its participants are in these markets for reasons other than maximising investment profits," says Eric Goodbar, managing director and alternatives strategist for Mellon Capital. "For example, producers, processors and consumers of commodities trade to lock in physical delivery or hedge their profit margins."

While maintaining a net long position, the strategy generally uses longer-dated futures contracts and takes long or short positions in contracts with positive roll returns with the goal of mitigating the costs associated with rolling futures.

Zambia: Rich African farms draw international investors

2011-03-02T23:12:00.001-08:00

TradeInvest Africa | 2 March 2011

Nelly Nyagah

"We have worked with the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, to obtain political risk insurance on our investments," says Neil Crowder, a founding partner at British firm Chayton Africa, which recently acquired a 20,000 ha farm in Zambia.
Private investment in Africa's agriculture is rising. Neil Crowder, a founding partner at British firm Chayton Africa, which recently acquired a farm in Zambia tells TradeInvestAfrica that he intends to focus on the continent's markets where opportunities abound.

International investors who previously avoided Africa's agriculture are now looking at the sector. What has changed?

There is a growing interest in African agriculture, not only from private equity investors with a traditional focus on Africa, but also from investors who have not historically considered Africa. We think there are several reasons for this growing trend. First and foremost, agriculture as a broad investment theme has increasingly gained momentum in the past several years. While agriculture previously displayed cyclical, commodity-type returns, there are now signs that we are entering a period of sustainable growth. This is being driven by a variety of global factors including rising population, rising income levels in emerging markets, and a growing scarcity of arable land and water.

Africa itself is showing demographic factors that suggest a rapidly rising demand for food in the coming decades: economic growth across the continent compares favourably with growth in traditional markets and the foundation for investing has been steadily improving across many of the countries in Africa, with better transparency and a more stable legal framework.

Finally, valuations remain attractive in Africa. With land available at prices that are attractive in an international context, much of sub-Saharan Africa benefits from rich soil and a climate that allows for double-cropping, or two crops per year. This leads to the potential, in well structured investments, for high productivity and strong cash returns relative to other agricultural markets.

Investors are treading carefully, as it is a new asset class for many. As a result, investments that have been well structured with proper governance and control will likely be sought after. Investors are fortunate to have available a wide range of tools to mitigate risk. As an example, we have worked with the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group, to obtain political risk insurance on our investments. In our view, such coverage is a beneficial protection mechanism for our investors and provides comfort to those concerned about the types of risk typically present in the region.

How do you see your investment in Zambia contributing to food security, affordability and technology transfer in southern African?

Chayton Capital has a very specific investment strategy. We believe that the domestic markets within Africa will experience the same kind of secular growth we are seeing globally, perhaps to an even greater extent. Most countries in sub-Saharan Africa are relatively large net importers of food. As a result, we believe that properly managed commercial farming operations in the region will benefit from the secular trends in the region.

Zambia is an attractive market and we selected it as the country in which to make our first investments. With good availability of land and abundant water, the location is also attractive as several neighbouring markets are importing food. Additionally, the country has a very good investment climate and is a relatively easy place to do business.

We are in the process of aggregating 20,000 hectares of production in one specific region of the country. We intend to focus on primary food crops such as maize, soya and wheat. By achieving scale in production we will be able to upstream the business into storage, milling and transportation. The total investment required for this investment is roughly $85-million. Once established, our project will have numerous competitive advantages. The scale of the operations will allow us to overcome some of the infrastructure issues that mid-sized commercial farmers are challenged with, often due to lack of capital and expertise.

Our production model is technologically advanced. Cropping is done under full irrigation and we employ conservation tillage practices, an environmentally friendly style of farming that lowers the cost of operations, reduces erosion, and enhances soil fertility. By concentrating our assets in one geographic location, we are able to better utilise the capital we are putting into the project.

Additionally, by establishing a meaningful presence in one specific region, we are able to work closely with the community on an out-grower basis. This means we can provide training on soil management, inputs and the use of our capital investments. As a result, the overall productivity in the region rises.

Which areas of the agribusiness sector are the most profitable?

We believe that a successful agribusiness investment that incorporates primary production must include other elements in the value chain such as processing, storage and transportation. We are interested in expanding in all of these sectors. Geographically, we are looking to markets that meet our requirements for investment, including secure availability of water and access to markets. Additionally, we look for political stability and a good legal framework for land investments. We have identified Botswana, Malawi, Mozambique and Tanzania as target markets for our investments.

Where is the potential for linking small-scale farmers to larger agribusiness supply chains?

Traditional small-scale farmers in Africa face many challenges, including limited access to markets, availability of inputs and often a lack of education on effective farming techniques and soil management. Our strategy of building large scale 'production hubs' allows us to overcome many of the challenges within Africa. Our scale will allow us to build related businesses that not only support our operations but support the small-scale farmers in the region. We can provide the community with access to inputs and access to markets. At the same time, by working with the local farming community, we can help enhance their ability to increase productivity on their farms. There is a clear benefit to the community, but our business benefits by greater use of our operating businesses.

Why isn't Africa attracting enough international investors despite the potential benefits of investing in agriculture?

Investment activity into agriculture is increasing within Africa, but there is still a need for greater commitment of capital from investors outside Africa. While there have been well publicised investments made by Middle Eastern and Far Eastern investors looking for food security, we have also seen growing interest from more traditional international private equity investors. Although it has been slow to develop, there has been a noticeable increase in activity over the past year. Further, we would put the pace of investing in context: according to a recently released MIGA report, following the onset of the global financial crisis, in 2009 FDI inflows to developing countries dropped by 40%. The good news is that as the global recovery continues to strengthen, these inflows are projected to increase and it is our view that the agriculture sector in Africa should benefit.

We believe that over the past year investors have largely been educating themselves on the potential returns and risks associated with an investment in Africa; in a global context, it remains a frontier market. It will take time for the continent to be considered more mainstream amongst traditional investors. However, we have seen an dramatic increase in our activities in the past year and I am sure this is reflected at other firms as well.

How would you advise international investors interested in farming in Africa?

I think there is an extremely compelling case for investing in agriculture in Africa. A properly structured investment, we believe, will generate superior returns to any we have looked at in other emerging markets around the globe. However, Africa has its own challenges and nuances across the continent and each country is different in terms of the investment framework. Investors need to take the time to understand the issues specific to Africa to judge if any investment is well-researched, structured and that it will be well managed over time.

Neil joined Chayton Capital from Goldman Sachs where he was a partner managing director. Most recently, Neil was co-heead of European Research and co-chief operating officer of the Global Investment Research Division. Prior to Goldman Sachs, Neil worked for American Express and St. Paul Companies gaining both direct and indirect real estate investment and workout experience.

Chayton Africa seeks to make pioneering investments in African agriculture, agribusiness and related infrastructure and intends to unlock the potential of agricultural land and assets by optimising production and operational efficiency across the agricultural value chain.

Les investisseurs étrangers bienvenus

2011-02-24T00:01:00.000-08:00

Le Courrier Interational | 17.02.2011

Disposant de terres arables non exploitées, la Zambie les loue à des entreprises occidentales qui y cultivent des céréales. De quoi assurer l’approvisionnement du marché national.

Scott Baldauf | The Christian Science Monitor

Les collines de cette région de Zambie ont longtemps été connues pour le cuivre que se disputaient les compagnies minières américaines, britanniques et chinoises. Mais cette industrie soumise à des cycles imprévisibles d’expansion et de repli semble maintenant vouée à mettre prochainement la clé sous la porte. La crise alimentaire de 2007, engendrée par la demande croissante de biocarburants qui a fait s’envoler les prix des denrées, a attiré un type d’investisseurs d’un genre totalement nouveau. Pendant que les patrons des compagnies minières consultaient les cartes et évaluaient les richesses qu’ils pouvaient encore extraire des profondeurs du sol, les nouveaux investisseurs étrangers ont estimé les revenus qu’ils pouvaient tirer des champs de maïs et de blé. C’est ainsi qu’ils ont projeté de créer des dizaines de milliers d’emplois stables qui vont relancer l’économie rurale du pays.

“L’Afrique est un importateur de denrées alimentaires, alors qu’elle dispose de vastes étendues de terres fertiles”, remarque Neil Crowder, cofondateur de Chayton Capital, une société d’investissement londonienne, soutenue par la Banque mondiale, qui a investi 10 millions de dollars dans la firme locale Chobe Agrivision pour louer 10 000 hectares dans la région de Mkushi et qui projette de doubler prochainement cette superficie. “Malheureusement, certains des pays les plus pauvres du monde ont les prix alimentaires les plus élevés. Comme on peut réduire les frais de transport en ayant des exploitations en Zambie, on a décidé d’y mettre en place un modèle d’approvisionnement du pays et de ses voisins en denrées de subsistance – principalement en maïs, soja et blé.”

Repère

Chobe Agrivision a commencé à mettre son projet en oeuvre après avoir obtenu un bail de quatorze ans du gouvernement. La société a planté du maïs et du soja à la fin de l’an dernier et elle prévoit d’engager 3 000 habitants de la région pour assurer les récoltes en 2011. En vertu de l’accord signé avec le gouvernement zambien, 80 % de la production sera exportée dans des pays voisins et les 20 % restants seront vendus en Zambie. La Zambie (capitale Lusaka), ex-Rhodésie du Nord, est un pays d’Afrique australe sans accès à la mer, traversé par le fleuve Zambèze. Le pays fut colonisé par les Britanniques à la fin du XIXe siècle et devint un protectorat de l’Empire colonial britannique jusqu’en 1964.
Accueil favorable

Le gouvernement du président Rupiah Banda a accueilli favorablement ce projet qui bénéficie du soutien des agriculteurs. Ceux-ci ne voient pas les investissements étrangers comme une menace. “Selon le recensement en cours, notre population est comprise entre 12 et 15 millions d’habitants, ce qui n’est pas énorme, et nous avons entre 30 et 45 millions d’hectares de terres arables, dont la grande majorité ne sont pas exploitées”, souligne Bradford Machile, le ministre du Développement de l’élevage et de la pêche. A la différence de pays comme Madagascar et le Mozambique, poursuit le ministre, la Zambie n’a pas de grand mouvement de défense des agriculteurs?et?des?consommateurs contre les “vols” de terrains, car les terres ne manquent pas. “Les terres sont ici. Vous ne pouvez pas les prendre et partir avec”, dit-il.

Chobe Agrivision a commencé à mettre son projet en œuvre : après avoir obtenu un bail de quatorze ans du gouvernement, la société a planté du maïs et du soja à la fin de l’an dernier et elle prévoit d’engager 3 000 habitants de la région pour assurer les récoltes en 2011. En vertu de l’accord signé avec le gouvernement zambien, 80 % de la production seront exportés dans des pays voisins et les 20 % restants seront vendus en Zambie.

La société projette également d’entrer en contact avec les petits agriculteurs locaux (dont beaucoup travailleront sur ses terres) et de leur enseigner des techniques de pointe pour qu’ils puissent accroître leur propre production. Quand elle construira ses moulins à grains, elle les dotera d’une capacité accrue pour qu’ils puissent les utiliser aussi pour leur propre compte et améliorer leurs revenus.

Grenier à céréales

“Dans quatre ou cinq ans, la Zambie sera un grenier à céréales non seulement pour l’Afrique australe, mais pour tout le continent”, prédit Stuart Kearns, un ancien fermier zimbabwéen qui dirige les opérations de Chobe dans la ville de Mkushi. Selon lui, les petits agriculteurs ne peuvent pas se payer les grands systèmes d’irrigation à pivot central, dans lesquels des buses gigantesques tournent autour d’un pivot pour distribuer juste la quantité d’eau requise, mais ils peuvent apprendre la technique du zéro labour, qui réduit l’érosion et accroît la production en retenant les substances nutritives dans le sol.

“Dans certains pays, l’agriculture est regardée de haut. Tout le monde aspire à un emploi de col blanc, mais nous voulons faire en sorte que l’agriculture soit enseignée à l’école avant que le mépris ne s’installe, poursuit M. Kearns. C’est un programme dans lequel vous enseignez à vos employés, puis à vos voisins, et chacun propage à son tour ses connaissances.”

Son partenaire, Fred Wallis, qui avait lui aussi une ferme au Zimbabwe, roule jusqu’à la clôture à travers des hectares de plantations bien entretenues et pointe du doigt les champs d’une petite ferme située au-delà. Des femmes courbées en deux désherbent à la main. Des chèvres mordillent des plants avant d’être chassées par une pluie de gravillons lancés par de jeunes garçons. La plupart de ces villageois seront sans doute embauchés et formés par Chobe. “Quand les Chinois sont venus dans la région pour extraire le manganèse, ils sont venus avec leurs propres employés, ils ont pris le manganèse et ils ont fermé la mine. Les gens disent que ce n’est pas bien, explique Fred Wallis. Mais, quand des investisseurs comme Chobe arrivent, ils vivent comme les gens du coin, embauchent ceux-ci et leur enseignent comment mieux cultiver la terre, et, quand ces villageois rentrent chez eux, ils utilisent ces techniques sur leurs propres terres. Voilà le genre d’investissement dont le pays a besoin.”

Africa farmland has potential of Brazil: Quifel

2011-02-23T23:56:00.001-08:00

Pedro Marques dos Santos of Quifel (photo courtesy of Oje)
Reuters | Tue Feb 22, 2011

LONDON (Reuters) - African farmland investment has the potential to match the exponential growth of Brazil's agricultural industry, the head of business development at privately owned agricultural operator Quifel said.

"The best benchmark is really Brazil. What took the Brazilians around 30 years, one should try to do it in 10-15 years," Pedro Marques dos Santos, head of business development at Quifel said, referring to how Africa could emulate Brazil's dominance in global agricultural investments.

Quifel operates in Africa, Latin America and Southern Europe and began operations with a palm project in Brazil.

"In 2007, Quifel also embraced the Sub-Saharan Africa land development opportunity," Marques dos Santos said, noting higher land prices in Brazil as one driver.

Investors poured $26 billion in foreign direct investment into Brazil in 2010 and around one-third of all funds and companies investing in farmland globally have committed funds to Brazil, the OECD said in a report.

But anyone interested in buying up Brazilian land may find it tough as last year the attorney general issued a ruling that limited the area of land foreigners were able to purchase.

The effect has been to cap at 12,350 acres the amount of land that can be bought by a foreign investor or a company that's more than 50 percent foreign-owned, prompting some investors to look to alternative regions.

This, combined with rising food prices, has spurred global interest in African farmland.

Global food prices are at record levels and are likely to remain so in the months to come, according to the U.N.'s Food and Agriculture Organization.

Africa has lower production costs than Latin America due to cheaper land and labour yet could offer similar yields, Marques dos Santos said.

There's a bigger need to invest in infrastructure and logistics in Africa but, "The end result is to expect high returns if farm talent is able to overcome everyday operational difficulties."

Brazil, Latin America's largest country, is one of the world's leading exporters of agricultural commodities including coffee, sugar and soybeans.

SUB-SAHARAN AFRICA

Quifel, which runs African farms in Mozambique, Sierra Leone and Angola, chose these countries based on their coastal locations and expectations of high economic growth, Marques dos Santos said.

Coastal West African countries were attractive for fruits and vegetables, while Mozambique appealed "for oilseeds, thus avoiding transhipment within the continent and by being closer to Asian markets for potential exports," he said.

Many African countries are net food importers, raising questions about food security and whether production should go to feeding the local community.

"Quifel's projects are Greenfield and for the foreseeable future our production will be bought by local players - mainly processors or crushers - as the countries need that production for domestic consumption," Marques dos Santos said.

Beyond the food security issue, investing in Africa has other challenges, which helps explain why its agricultural potential has not yet been fulfilled.

"Companies which can't cope with the long-term horizon are slowly leaving the region," he said.

Quifel has a long-term expansion plan within Sub Saharan Africa, he said, adding that its immediate focus will be on the development of the areas it already has under management.

Food: The big fright

2011-02-23T23:54:00.000-08:00

Qatar Today | 23 February 2011

"The era of low-food price is over, worldwide" says Dr Mahendra Shah, Director of Programme International Affairs, QNFSP.
When the whole country is baking in the Ephoria of the 2022 Bid win and the Fine show of Qatari footballers at the Asian Football Cup 2011, Food security seems like an implausible topic to ponder over.

But not if you look at recent reports from around the world on escalating food prices and the mounting tension and disrupting occurrences in some parts of the world. Though we have not seen the wave of riots that rocked countries such as Haiti and Bangladesh three years ago, when prices of agricultural commodities jumped, it is still a possibility, caution experts UN.

The increase in food costs will also hit developed economies, with companies from McDonald's to Kraft raising retail prices. Finan cial Times in a recent report emphasised that higher food prices boosts overall inflation, which is above the preferred targets of central banks in Europe.

UN's Food and Agriculture Organisation has given the global food market 'critical' status and says that immediate measures have to be put in place to stave off a repeat of the 2007/2008 crisis, when food prices doubled in just a week.

Earlier, addressing the UN Summit on Food Security at the Food and Agriculture Organisation (FAO) headquarters in Rome in 2009, HH the Emir, Sheikh Hamad bin Khalifa Al-Thani pledged Qatar's commitment to contribute in eradicating hun ger and malnutrition. The urgency of the situation was reflected in HH the Emir's words and subsequent actions.

The Qatar National Food Security Programme (QNFSP) was established in 2008.

"Qatar believes that national food security is part of the regional and international food security," said HH the Emir.

But what does Qatar have to do with riots and hunger in other parts of the world? A country which has never had a food crisis so far?

"Here is a country, one of the wealthiest in the world that could buy food at any price, no matter what the price, from the world market. There has been concern in Qatar as there has been concern in the rest of the world. From 2007, we entered a new era in world food. Until then price of food commodities was go ing down. The era of low-food price is over, worldwide" says Dr Mahendra Shah, Director of Programme International Affairs, QNFSP.

And this is so, "because of increasing world demand," says Dr Shah. "Only 5% of the world's food is traded. And international food trade will increase rapidly due to a number of factors including population growth, urbanisation and rise in incomes. At the same time biofuel requirement mandated in a number of coun tries will also affect land availability for food cultivation resulting in high food prices. The food demand cannot be met in some countries and hence there is higher dependence on exports."

But the export market is very sensitive. Countries can stop the export of food based on local reasoning. India banned the export of rice and Russia banned the export of wheat in recent times. "On the one hand, the world needs free trade and on the other countries can refuse to export food commodities due to many reasons - a drought in the country being just one. All this puts pressure on commodities, a fact that countries are painfully aware as food is a essential need."

Understanding this need, Qatar has set up a comprehensive national programme that takes into account the challenges that are the country's alone.

And thus under the direction of HH the Heir Apparent Sheikh Tamim Bin Hamad Al-Thani, the QNFSP was established with the objective of creating a sustainable Food Security road map, by introducing structural reforms to address the problems that affect the sustainability of energy, water, agriculture and food supplies.

Heading the QNFSP taskforce is Fahad Al-Attiya, Chairman of QNSFP, who says that this nationwide initiative will make Qatar food secure in 10 years.

"The global risk is high and food is a critical component for the existence of any civilisation, which then makes QNFSP one of the highest of national priorities," says Al-Attiya.

The Arab challenges

While food security is a worldwide issue, the challenges that the Gulf countries face are much higher.

"GCC with a total population of approximately 40 million, of whom 40% are foreign workers, are endowed with oil and gas reserves estimated at some QR130 trillion ($35 trillion). This puts the region's nationals among the world's richest peoples in terms of per capita wealth. However, although the region's eco nomic and energy security are assured, the GCC countries are the world's most water insecure and food deficient, importing 60-95% of their food requirements," says Dr Shah.

The limited land and water resources in the GCC pose a sub stantial technological challenge to increasing domestic food pro duction.

"Of the region's total land area of approximately 259 million hectares, only 1.7% is currently under cultivation, mainly with groundwater irrigation. Although about one-fifth of the total land area is potentially cultivable, the region's arid climate and constraints caused by heat, salinity, limit the levels of food suffi ciency that can be achieved."

Some of the GCC states have established fossil fuel-driven water-desalinisation plants, contributing approximately 15% of the total available water resources in the region.

"However, current concerns about climate change, and the fact that the GCC has one of the highest carbon footprints in per capita terms, limit this option. Investment in research into the use of renewable energy, particularly solar power, in future desalination plants offers a means to increase domestic food pro duction," he reveals.

And this is one of the options that is being explored by QNFSP and once that comes into process will provide the much needed impetus for the whole region to follow this prototype of success.

"From my point of view, every country in the world should produce the maximum amount of food it can, in a manner that is environmentally, economically and socially sustainable."

GCC should give the highest priority to establishing a regional centre of excellence for solar-energy research for water desalination, greenhouse solar cooling and greenhouse hydroponic-technology development, says Dr Shah.

Furthermore, a dedicated GCC agricultural research centre for dry-land crops, livestock and aquaculture development, and adaptation to future climate change should also be established.

Regionally relevant research into protected agriculture, solar energy for desalinisation and greenhouse hydroponics has the potential to enhance domestic food self-sufficiency in the GCC countries.

All these are steps taken into due consideration by the QNFSP.

"However, some crops, such as wheat, require as much as 1,400 kg of water to produce 1 kg of yield. This calls for strategic decisions about which crops to produce locally and which to secure through international GCC investments," says Dr Shah.

A proposed partnership model

Over the past few years, GCC states have begun to consider investing in farmland overseas. However, there is growing worldwide concern that such international agricultural investments must be environmentally, economically and socially responsible and sustainable. "They must also be well-structured and legally executed. Otherwise, there is a risk that the burden of food insecurity in the investing GCC countries might end up being transferred to the host coun tries," says Dr Shah.

Dr Shah has identified a solution that would give the oil-rich Arab countries an edge while improving the living conditions and economies of those countries that they lease contract land to use for food produce.

"A shared-benefits model that would best meet the needs of the investor and the local community in currently cultivated land areas where the yield gaps are large could provide the basis for responsible and sustainable agricultural development partnerships," he says.

Dr Shah illustrates his point.

"Consider a situation in which 100 units of land area farmed with poor management and low agricultural tech nology produces 100 tonnes of a food commodity. With foreign investment bringing in sophisticated technologies and management, the production on this piece of land is boosted to 500 tonnes. The local community receives 200 tonnes, while the investor receives a similar share. The remaining 100 tonnes is then sold by the investor into the local market. The market sale would be important in terms of host-country food security, and the sales income would be reinvested for the benefit of the local community through infrastructure and social-services development. The investor's share would need to be acceptable in terms of return on investment.

"Such an innovative partnership arrangement could be further structured as an official development aid (ODA)," says Dr Shah.

Sub-Saharan Africa (SSA), with its fertile land, ample water resources and the world's lowest agricultural productivity, is the biggest hot spot for agricultural land acquisition by public and private investors from the GCC, China, India and Europe. The agricultural sector in SSA countries is in urgent need of invest ment capital.

However, decades of poor government commitments to agriculture and low investments have resulted in stagnating productivity and food-production levels.

In his research papers, Dr Shah has shown how the GCC countries have a real opportunity to invest in Sudan as a development aid partner, not only to assure their own food security but also to contribute to sustainable agricultural development.

"The potential through a shared partnership model, as described above, is substantial. For example, current maize yields of approx 1.2 tonnes/hectare can be increased to more than 7 tonnes/hectare with high agricultural technology and management."

Responsible agricultural investments can contribute to sustainable agriculture development towards achieving food security and an end to the hunger that today affects one-third of the population in SSA.

The GCC's challenge is to adopt a scientific, knowledge-based and policy-relevant integrated agro-ecological and socio-eco nomic approach to enhancing its domestic food production. This can be done only by forming sustainable and responsible development partnerships that can put the SSA countries on a path of progressive and sustainable development.

The Water Challenge

Dr Patrick Linke, Chief Engineer at QNFSP and the Associate Professor of Chemical Engineering at Texas A&M University Qa tar is of the opinion that water issues in the region are critical.

Ground water resources cannot be touched as it cannot be re plenished given the climatic conditions of the region and hence alternative resources have to be worked out for the food security programme.

"Basically the idea is to desalinate the sea water. The other alternative is to recycle waste water and reuse. But there are health and hygiene issues to deal with while using recycled water for irrigation, not to mention the large quantity needed for this."

QNFSP is considering using non-fossil energy for producing renewable resources, and as a concept, wind and solar energy is to be put to use. Reusing energy is another option and all this is being explored too. "All the issues will be explored, the energy infrastructure, the location of the station, how to transmit the energy from it, to final feasibility of the desalination project, the economies of subsidies, all this will have to be looked into and by 2013, and the picture will be in place."

"For this whole value chain to be economical, at some point of the chain subsidies will have to be put in place. It could be energy, water, or both or just the crop," says Dr Linke.

Agriterra to build port facility in Guinea

2011-02-23T23:51:00.000-08:00

World Grain Staff | 23 February 2011

One of Agriterra's cattle ranches in Mozambique, operated by its subsidiary, Mozbife

PORT OF CONAKRY, GUINEA — Agriterra recently announced that it is going to build a 30-hectare industrial and commercial terminal in the Port of Conakry in Guinea. The company said it expects the new terminal to open up new opportunities in the agricultural logistics sector.

Agriterra said the facility will benefit its existing African agriculture business interests by opening up opportunities in the agricultural logistics sector.

Andrew Groves, Agriterra executive director, believes that adding the new port business will help the company to build a “vertically integrated” agricultural and associated logistics group in sub-Saharan Africa.

"This is a fantastic complementary opportunity for Agriterra to expand its activities and utilize its African-focused agricultural, logistics and project management experience to capitalize on the soft and hard commodity resource boom in West Africa,” Groves said. “There remain huge global concerns regarding food security which are prompting significant investment in West African agriculture, particularly in palm oil, cocoa, rice, maize and livestock. This, in tandem with the dramatic increase in the development of mineral resources, particularly iron ore and bauxite, means there is a crucial need to expand the export capacity of the Port of Conakry.”

The company has now signed a concession agreement, with a 20-year initial term, for the new port terminal. The new terminal will include a 300-meter dock and a 30-hectare platform. It will contain grain storage silos, a processing unit, a preparation unit, a logistics depot, a fuel depot, freight hangars and food storage silos.

The company said a construction partner and project financing will now be sought.

"We will continue to develop our Mozambican grain processing and cattle ranching businesses which are growing rapidly and gaining market share in the region,” Groves said. At the moment the Agriterra business consists of two separate grain processing businesses — both in Mozambique — and a cattle ranching business. But the company said it is actively trying to expand through acquisition and investment into new complementary areas.

Qatar plans to make barren land arable to increase food security

2011-02-23T23:50:00.001-08:00

Qatar will secure 70% food security in the country by exploiting the latest technology to make its barren land arable.
The Green Prophet | February 21st, 2011

Tafline Laylin

Roughly as large as Connecticut, Qatar relies almost exclusively on imports for food with only 10% of the country’s edibles produced within its own borders. Unlike other Gulf countries that are usurping African land to expand their agricultural capacity, Qatar intends to transform its own barren land into an agricultural powerhouse. According to Gulf in the Media, the National Food Security Program (NFSP) committee has established a five-stage plan to first identify and then overcome challenges to achieving food independence.

Food prices rise in tandem with oil prices, since the cost of shipping food necessarily increases. As a result, Qatar’s imported food doesn’t come cheap. To counter this problem, the country established their NFSP in 2008.

The 17-member committee will identify challenges, conduct surveys, and analyze data related to exploiting the most modern agricultural methods to render land between Doha and Al Khor arable.

Although the team expects to receive some resistance from middlemen in the current food supply chain, NFSP and its Chairman, Mohamed bin Fahad Al Attiyah, welcome input and investments from the private sector.

Widespread agricultural production in a country with few freshwater resources and an unforgiving desert climate is no easy task. Nonetheless, Qatar will invest huge sums of money on research and developing a progressive information technology hub in order to secure lower food prices.

Their four major foci will be:

Agricultural production
Managing and desalinating sea water
Sustainable energy resources
Food processing industries
“We are well on our way to making reliance on food imports a thing of the past,” Al Attiyah told the paper.

Hedge Funds Boost Bullish Silver Bets as Mideast Tensions Mount

2011-02-23T05:05:00.001-08:00

By Pham-Duy Nguyen - Feb 22, 2011 Hedge funds boosted bullish bets on silver to the highest in almost four months as tensions in the Middle East sent the metal to a 30-year high.

Managed-money funds held net-long positions, or wagers on rising prices, totaling 35,159 contracts on the Comex as of Feb. 15, U.S. Commodity Futures Trading Commission data showed last week. That’s the most since October. Holdings have gained for three straight weeks, the longest streak since September.

Silver futures rallied 7.7 percent last week, the most since early December, as Egypt’s pro-democracy demonstrations spread to Bahrain, Yemen, Libya and Iran. Prices have doubled in the past year and touched $32.87 an ounce in New York on Feb. 18, the highest since March 1980.

“With the Middle East deteriorating, and the threat of inflation, you’ve got the big money flowing back into silver and precious metals,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “Silver provides better upside exposure than gold. Gold hasn’t moved as much, and people are chasing yields.”

Gold in New York gained 2.1 percent last week and is up 24 percent in the past 12 months, trailing silver’s rally. Bullish gold holdings by managed-money funds totaled 159,814 contracts, up 10 percent from the previous week and the highest total since December, CFTC data show.

‘Silver Over Gold’
“If I had to, I’d pick silver over gold,” said James Dailey, who manages about $200 million at TEAM Financial Asset Management LLC in Harrisburg, Pennsylvania. “Gold and silver are picking up market share in the currency world as a store of value. Silver’s also got the tailwind of the global industrial expansion.”

Silver futures for March delivery gained 2.3 percent to settle at $32.296 on Feb. 18 on the Comex. Gold futures for April delivery gained 0.3 percent to $1,388.60 an ounce. The metal touched a record $1,432.50 on Dec. 7.

Managed-money positions include hedge funds, commodity- trading advisers and commodity pools. Analysts and investors follow changes in speculator positions because such transactions may reflect an expectation of a shift in prices.

Louis Dreyfus Said to Close Commodity Fund to New Investors

2011-02-23T05:03:00.001-08:00

By Chanyaporn Chanjaroen - Feb 22, 2011 The $2 billion commodity hedge fund of Louis Dreyfus Group, the world’s largest rice and cotton trader, stopped accepting new money from investors, according to two people, after assets advanced 20-fold in about two years.

The Louis Dreyfus Commodities Alpha Fund, managed by Geneva-based Ian McIntosh, started with $100 million in November 2008 and focuses mainly on farm products including grains, oilseeds, sugar, coffee and cocoa. The fund returned 17.3 percent in 2010, according to the people who have direct knowledge of the matter. They declined to be identified because the information isn’t public.

Investors increased their allocation to commodities as cotton and rubber soared to records, and coffee more than doubled in the past year, after drought and floods ruined crops. Commodities-related funds attracted $5 billion in the fourth quarter, the biggest such inflow since the period ended June 30, 2009, said Farhan Mumtaz, an analyst at Eurekahedge Pte.

“Physical commodity market knowledge assists in more accurate supply and demand analysis” for hedge funds trading raw materials, said Adam Taylor, assistant portfolio manager at London-based Liongate Capital Management LP, which invests more than $500 million in such funds.

The Louis Dreyfus Group, founded about 160 years ago, trades grains, oilseeds, sugar, ethanol, coffee and cotton, and has offices in more than 55 countries, its website said. The company has expanded into energy, real estate and electricity distribution in France. McIntosh, 49, has been with Louis Dreyfus since 1984. The fund also trades metals and freight.

Fund Returns
Commodity hedge funds returned on average 10.65 percent in 2010, the Newedge Commodity Trading Index shows. Investors in the Standard & Poor’s GSCI Commodity Index received 9.02 percent.

Assets managed by commodity-related funds were $195.8 billion as of Dec. 31, Eurekahedge’s Mumtaz said in Singapore.

Cotton jumped to a record $2.0893 a pound on ICE Futures U.S. on Feb. 18 and more than doubled in the past 12 months on demand from China and as floods destroyed crops in Australia and Pakistan. Rubber surged to an all-time high of 535.7 yen per kilogram the same day after floods in Thailand disrupted output.

Hedge funds are largely unregulated investment vehicles whose managers can trade any asset, aim to make money regardless of whether markets rise or fall and participate substantially in profits from money invested.

Abu Dhabi Royal to Invest in Chechnya as Putin Pushes Rebuild

2011-02-22T02:36:00.001-08:00

By Henry Meyer, Zainab Fattah and Ilya Arkhipov - Feb 22, 2011 Royal Group, run by the brother of Abu Dhabi’s ruler, may invest several hundred million dollars in housing and agriculture projects in Chechnya, said Ramzan Kadyrov, the Russian region’s leader.

Royal Group, which invested in Al-Reem, a $60 billion island project in Abu Dhabi, recently sent a delegation to the region, Kadyrov said in an interview with Bloomberg News in Moscow on Feb. 19.

“We proposed some projects to them and they really liked them,” said Kadyrov, who has spearheaded Russian Prime Minister Vladimir Putin’s campaign to rebuild infrastructure devastated by two wars since 1994. “They said they are ready to participate in building homes and in the agricultural sector.”

Russia is trying to lure investment to the North Caucasus region, which has seen almost daily attacks on government officials and police. With the Winter Olympics taking place in the nearby resort of Sochi in 2014, Putin has tried to drum up investment in the mostly Muslim region.

“The federal government is trying to attract investments although Chechnya isn’t normally the kind of place where businesses would like to put their money,” said Nikolai Petrov, an analyst from the Moscow Carnegie Center.

Then-President Putin groomed Kadyrov to lead Chechnya after his father Akhmad was killed in a bomb attack on the regional capital Grozny’s main soccer stadium in 2004. Human Rights Watch, which tracks government abuse, has accused Kadyrov of ordering abductions and torture, which he has denied.

‘$100 Million’
Royal Group will spend as much as $100 million in the first phase of a housing project, said Samia Bou Azza, a spokeswoman. The total value “may go up in different phases” and the company is considering investment in livestock, the dairy and power industries, she said by phone yesterday.

The plan is part of growing interest in Russian investment in the Gulf region. United Arab Emirates investors, including Gulftainer Company Ltd., a port operator in Sharjah, and Dubai- based Damac Properties last year agreed to spend $800 million in Russia. The deals were sealed during Putin’s investment forum in Sochi.

Verno Capital, a Moscow-based hedge fund, in November won a mandate to manage $100 million for Abu Dhabi sovereign wealth fund Mubadala Development. Roland Nash in December quit after 14 years as chief strategist of Renaissance Capital to join Verno in the same capacity.

June Meeting
The Chechen leader, 34, said he first discussed investment opportunities at a meeting in June last year with the crown prince of Abu Dhabi, Sheikh Mohammed bin Zayed Al Nahyan. He then met Sheikh Tahnoon bin Zayed al Nahyan, who is chairman of Royal Group and another son of Abu Dhabi ruler Sheikh Khalifa Bin Zayed Al Nahyan, last year.

Royal Group is active in media, trade, financing, real estate, manufacturing, construction and technology.

One of Kadyrov’s aides, Adam Delimkhanov, is wanted by Interpol for allegedly masterminding the March 2009 murder of a leading rival of the Chechen president in Dubai. Sulim Yamadayev was gunned down in an elite seafront housing complex, in a high- profile case for the main business and tourist hub in the Gulf, a popular destination for wealthy Russians and other foreigners.

Dubai Trial
Dubai authorities tried two men for the murder, including an Iranian who worked as a groom for Kadyrov’s horses in the city state. After they were convicted of the crime and sentenced to life imprisonment, a Dubai court in December reduced the prison term to 27 months; with time served, they are due for release in mid-2011.

The cases of other suspects in the murder are being reviewed by the court and decisions on whether to pursue suspects through Interpol depend on the judgments, Major-General Khamis al Mazinah, deputy commander of Dubai police, said by phone yesterday.

Kadyrov said accusations against Delimkhanov, whom he described as a “friend and a brother,” are “untrue” and “unfounded.” According to Dubai police, the Kadyrov aide arranged the delivery of the murder weapon, a gold-plated Makarov pistol.

The potential business ties between Abu Dhabi and Chechnya show the controversy surrounding the murder is being forgotten, said Petrov at the Carnegie Center.

Abu Dhabi and Dubai are the two biggest members of the United Arab Emirates, the second-largest Arab economy. In 2004, another Gulf state, Qatar, allowed two Russian agents to return home after sentencing them to life for the murder of a former president of breakaway Chechnya, Zelimkhan Yandarbiyev.

Hedge Funds Increase Bullish Cocoa Bets on Ivory Coast Unrest

2011-02-21T02:53:00.001-08:00

By Debarati Roy - Feb 21, 2011 Hedge funds are the most bullish on cocoa futures in almost seven months as political turmoil threatens supplies from Ivory Coast, the world’s biggest producer, and prices jumped to the highest since 1979.

In the week ended Feb. 15, hedge funds and money managers increased their net-long positions, or bets on rising prices, by 11 percent to 20,936 futures and options contracts, the highest since July, U.S. Commodity Futures Trading Commission data show. The holdings have more than doubled in the past month.

Alassane Ouattara, the internationally recognized winner of Ivory Coast’s Nov. 28 elections, told exporters to halt cocoa shipments until Feb. 23 in a bid to cut off funds to his rival. Prices surged to a 32-year high last week. The political stalemate entered its third month as Laurent Gbagbo, the incumbent president who has ruled for a decade, refused to cede power.

“The supply situation because of Ivory Coast problems is worrisome,” said Luis Rangel, a vice president at ICAP Futures LLC in Jersey City, New Jersey. “Speculators are very active in this counter.”

Cocoa futures for May delivery jumped $61, or 1.8 percent, to settle at $3,499 a metric ton on Feb. 18 on ICE Futures U.S. in New York, after touching $3,511, the highest since February 1979.

The export ban may send prices as high as $3,720, according to a Bloomberg survey of six analysts on Jan. 25. That would be the highest since January 1979.

Managed-money positions include hedge funds, commodity pools and commodity-trading advisers. Analysts and investors follow changes in speculator positions because such transactions may reflect an expectation of a change in prices.

Arab farm investment push

2011-02-16T23:31:00.000-08:00

Stock & Land | 10 February 2011

FORMER Prime Minister, Bob Hawke, is leading a push to get Arabs to invest in Australian farmland as part of a long term food security strategy for oil-rich Gulf States
Mr Hawke, a founding member of the Australian Gulf Council (AGC), believes the combination of Saudi money and Australian farmland and farming know-how will make a good mix, and the oil rich States are keen to buy in.

With fast-growing populations, shrinking water reserves and land areas that are mostly desert, Arabian Gulf nations such as Saudi Arabia, Kuwait, Qatar and the United Arab Emirates are keen to reduce their reliance on their own limited irrigated farmland or volatile import markets.

While increasing foreign ownership of Australian land and agribusiness assets has stirred concerns about a long term lock-up of production for overseas profit, and implications for neighbouring landholders, overseas investment activity isn't slowing.

Last year Qatar-based sovereign agricultural investment company, Hassad Food, made its mark as a high stakes buyer of rural property in Victoria, NSW and Queensland, while other Gulf companies have footprints here, too.

Hassad, an arm of the government-owned Qatar Investment Authority, is believed to have paid almost $30 million in November for five neighbouring Central West NSW properties totalling 3660 hectares around Canowindra, soon after buying prominent NSW Merino stud property, Raby Station, at Warren.

Raby Station at Warren, bought by Qatar Investment Authority’s Hassad Food last year after earlier buying Clover Downs at Cunnamulla from Clyde for $18.5 million and “Kaladbro Estate” in western Victoria for about $25m in late 2009. Hassad also bought 6800 hectares around Canowindra in November last year.
Saudi investors have a budget of almost $3 billion to invest in food production outside their home base, an Australian business group led by Mr Hawke was reportedly told in December.

Saudi Arabia has been canvassing farmland purchases elsewhere around the globe, too, including prospects in Sudan, while government and business leaders have also been negotiating possible projects in Senegal and the Philippines.

African nations such as Mozambique have also invited the Saudis to expand farming projects they have already started on that continent.

Mr Hawke and former Howard Government treasurer, Peter Costello, jointly led a AGF trade mission to the region to promote investment in a variety of Australian industries - from education to minerals - but farmland and food security were the topics that most interested their hosts.

"The whole food security issue is central to almost every discussion you have with government leaders in the gulf today," said AGC chief executive officer Michael Yabsley.

"No matter what wealth oil generates, you cannot compensate for a scarcity of arable land."

Among the companies represented on the week-long tour of gulf States was R.M. Williams Agriculture Holdings (RMWAH) - a joint venture initiated 18 months ago, between bush clothing specialist R.M.Williams and Sydney-based investment company, Primary Holdings International.

RMWAH, which was exploring options for "significant investment" to expand its farming interests, has a heavy focus on organically grown livestock on two Northern Territory properties and two in Queensland, including a big poultry farm.

Executive chairman, David Pearse, said the trade mission provided an opportunity to meet ruling families in the region and promote Australian agriculture as well as his own business plans.

Mr Yabsley acknowledged, however, that overseas investment, particularly by sovereign governments securing direct food supply lines for themselves was an increasingly contentious issue.

"The issue of Sovereign wealth buying land is a big topic - probably mostly among rural Australians - and there's also a lot of sensibility about the issue from Gulf State investors and ruling families," he said.

"They want to be sure that best practice management of any farming investment is the order of the day.

"The extent of overseas investment in Australian agriculture is a policy issue for governments to oversee, and the Foreign Investment Review Board (FIRB) plays an active role in keeping a close eye on what's approved for sale to off-shore investors."

But Liberal Senator, Bill Heffernan, said the FIRB was not active enough and sovereign investment ambitions were enticing some vested interests to flog off Australian farmland in lucrative, short-sighted deals with overseas buyers.

He said vendors, bankers and business interests who were keen to sell to rich government-backed corporations from China, the Middle East or elsewhere, were not thinking about the long term impact on the viability of family farms and small businesses in Australia in two or three decades.

"I've no objection to foreign capital or people wanting to make a quid by selling to the highest bidder, but we've got to wake up fast while we still own our own destiny," Senator Heffernan said.

"Family farms are the mainstay of our sovereign production. Their land should be feeding Australia and our export markets as global populations grow and we face the prospect of millions of our near neighbours being displaced by food shortages.

"Once we sell big slabs of our sovereign assets to another government it won't care too much about what we think that land or water should be used for."

UAE looking to Turkey for investing in food security

2011-02-16T23:27:00.001-08:00

The National | 11 February 2011

Turkish Foreign Minister Ahmet Davutoglu and UEA's Foreign Minister Abdallah bin Zayid Al Nuhayyan at a joint press conference in Istanbul, December 2010.

by Tom Arnold

The UAE will look to invest in farmland in Turkey as rising prices raise the urgency of food security, says Sultan al Mansouri, the Minister of Economy.

Recent natural catastrophes from Australia to Argentina had taken officials by surprise and pushed up prices of some commodities, he said.

Mr al Mansouri yesterday welcomed a high-level Turkish delegation headed by the country's finance minister Mohammad Shamsheik.

Both countries want to raise bilateral trade to US$10 billion (Dh36.73bn) by 2015. Bilateral trade reached $3.1bn during the first 10 months of last year, said Mr al Mansouri.

"The issue of the food crisis we see all over the world puts much more focus in areas of co-operation," he said during the UAE-Turkey Joint Economic Committee meeting.

"Turkey has great potential in the agricultural sector and we would like the Turkish side to provide us with opportunities to invest in the sector as this is one of our priorities."

Agriculture is still one of the most valuable sectors of the Turkish economy, with about half of the country's land area devoted to farming. Turkey is an important exporter of fruit, wheat and cotton. The prices of the last two commodities have surged in recent months as bad harvests in key exporting nations put pressures on supply.

As a country that imports about 85 per cent of its food requirements, the UAE is taking action to safeguard its future needs by building strategic food reserves.

Turkey was "very open" to agricultural investment from the UAE, said Mr Shamsheik.

Opportunities were especially plentiful in the south-east of the country, where there were 1.8 million hectares of land, he said.

The two sides also discussed the possibility of linking Turkey to the planned GCC railway project. Running from Kuwait City to Muscat, the estimated 2,117km-long project will carry passengers and freight across the six GCC states.

"This railway project will cover the whole of the GCC and will eventually reach Turkey due to the lines that are connected to Turkey and further to Europe," said Mr al Mansouri.

Nasser Ahmed Khalifa al Suwaidi, the chairman of Union Railway, was among the officials at the meeting. The developer and operator of the proposed national railway will begin tendering civil engineering contracts next month.

Mr Shamsheik said he was delighted at the prospect of connecting Turkey with the GCC through the project and said Turkish companies had expressed an interest in bidding for construction contracts.

Turkey was in talks with the GCC over a free-trade agreement between the two sides, said Mr Shamsheik.

South African farmers ready to venture into the Congo

2011-02-16T23:25:00.000-08:00

How We Made It in Africa | 13 February 2011

A group of South African farmers is getting ready to go up to the Republic of the Congo and start with commercial agriculture in the central African state.

The process started in 2009 when the Congo extended a formal invitation to South African farmers to investigate the possibility of farming in the Congo. The country’s agriculture sector has been described as very underdeveloped.

An organisation called Congo Agriculture has been established. Congo Agriculture, which is affiliated to South African farmers union Agri SA, will facilitate and drive the process of setting up farmers in the Congo.

Pioneers in commercial agriculture

Gert Rall, CEO of Congo Agriculture, said the first farmers are set to travel to the Congo in March to pick their farms and register local companies. The group has been asked to start operations on a farm of around 80,000 hectares, although according to Rall, the area of land available is so vast that one cannot put an exact size on it. “Practically half of the country is available for the development of agriculture,” he said.

The farmers will initially focus on maize, all of which will be produced for local consumption as it is expected that no crops will be exported within the first five years.

One of the largest challenges the farmers will face is the Congo’s lack of infrastructure. “One big problem is there is hardly any infrastructure, so . . . whatever we want, we need to put it there,” Rall said.

The Congo’s favourable climate and incentives offered by the government should, however, make up for some of the difficulties. The region has a rainfall of between 1,500mm and 2,000mm a year. In addition the farmers will receive a five-year tax holiday and can bring in their equipment duty-free.

Rall said they will also receive much better prices for their maize than currently in South Africa. “There is a formula to calculate the price, but I can tell you the price we are negotiating at this stage is much, much higher than the South African maize price,” he said. Production costs in the Congo are also expected to be much lower than in South Africa.

Congo Agriculture is ideally looking for farmers to run their operations in the Congo as an extension of their businesses in South Africa. “It would be very difficult for a guy to go up on his own there, without capital or without the necessary back-up support from home,” Rall noted.

Steering clear of past mistakes

Africa’s agriculture sector is currently receiving a lot of interest from all over the world, but setting up operations on the continent does involve a degree of risk. Some of the Zimbabwean farmers who in 2004 were invited to start with commercial agriculture in Kwara State, Nigeria had to wait many years for promises of electricity and irrigation. They are also facing challenges to get financing from the banks.

“Irrigation is key to our project but there have been many delays in this area. The promise of a constant electricity supply has not yet materialised, although there are many electrical poles and wires on our farm. Finance is also still a problem. We battle to get the financial institutions to understand the concept of short-, medium- and long-term loans and the real need to have finance before the rainy season starts,” one of the farmers told How we made it in Africa in an interview last year.

Rall is, however, determined to take a cautious approach and not make the same mistakes as other South African farmers that ventured into the rest of the continent. “There are too many disasters that happened in the past in Africa where farmers lost everything, they had to come back home with nothing,” he said.

“It is very important . . . that whatever we do, we take small steps. We cannot afford to repeat the mistakes in the past that happened all over Africa,” Rall added.

A number of trade and investment protection agreements signed between the two countries’ respective governments, Agri SA and the farmers should offer some security. “We have five agreements, which have been ratified by both countries’ parliaments. If something goes wrong there, you can come and open a case in Pretoria to protect your property up there,” Rall explained.

African farmland to Indian firms no cause for worry: UN official

2011-02-16T23:24:00.001-08:00

IANS | 13 February 2011

Youba Sokona, Coordinator at the United Nations Economic Commission for Africa.

New Delhi, Feb 13 (IANS) A top official at UN agencies has sought to allay apprehensions among people of some African countries that propose to lease farmland to investors from countries like India to mutually secure food supplies under South-South cooperation.

UN officials also say the rich countries must play a more meaningful role in addressing concerns over climate change in the African continent, assessed to need $25 billion in funding, with support also coming in from emerging economies like India and China.

'Concerns over land are just an apprehension. Land is allocated to serious investors and they are helping in the development of the respective regions. There is no free lunch,' said Youba Sokona, coordinator at the United Nations Economic Commission.

'People are investing money to get good returns. This engagement is important to ensure food security and also boost economic growth in Africa,' Sokona, who is from Ethiopia and oversees climate change policy in Africa, told IANS in an interview.

'Africa is importing a lot of food despite availability of fertile land and water. What we need is know-how and investment. This is coming largely from India and China and we are also comfortable working with the two countries,' he said during an official visit here.

Ethiopia, for example, has offered to Indian investors 1.8 million hectares of farmland, equalling 40 percent of the total area of the principal grain-growing state of Punjab, in what could give a big push to the country's food security.

The senior UN official said African countries were also looking for technology transfer from developing nations like India and China to deal with issues of poverty and climate challenge that can be mutually beneficial.

'South-South cooperation is very important. Our challenges are similar. We will be more comfortable tackling it together. We're looking for technology transfer, not technology dumping,' Sokona said.

'Most technologies offered from North American and European countries are not suitable in our countries. But Indian and Chinese technologies and know-how can be comfortably implemented in the African countries.'

According to Anthony Nyong, who oversees the compliance and safeguards division of the African Development Bank, said developed countries, which have been the main polluters in the past, must pay the most to tackle the challenges of environment degradation.

'We (the least developed countries - LDCs) add only three percent to the total global green house gas emission while we bear the maximum brunt of it. Yet, there is a huge financing gap,' Nyong told IANS.

'Just to fund current programmes we need some $25 billion. But only $700-million funding is available,' Nyong said, adding: 'We have the commitment and the expertise to address these issues related to environment. But there is a big problem of financing.'

(Gyanendra Kumar Keshri can be reached at gyanendra.k@ians.in)

Rising world food prices may soon hit Africa hard, but could be a future boon

2011-02-16T23:20:00.000-08:00

Christian Science Monitor | 16 February 2011 By Scott Baldauf

Johannesburg, South Africa
Global food prices reached a historic high last month, a fact that may cause even the most comfortable of Americans to cinch in their belts and cut back on spending.

"Global food prices are rising to dangerous levels and threaten tens of millions of poor people around the world," World Bank Group President Robert Zoellick said Tuesday as he announced the bank's findings that about 44 million people in developing countries have been pushed into poverty since last June because of rising food prices.

Here in Africa, where many people spend as much as 60 to 80 percent of their income on food, higher food prices don’t mean cutting costs. They mean spending the same amount for less food. In a word: hunger. But that's the short term.

In the longer term, a sustained global trend of rising food prices – caused in part by growing demand from China and in part by crop failures in Russia, Pakistan, Australia, and Sri Lanka – may have generated more investment in the poor but agriculturally rich nations of Africa, spurring on better food production and better food security for both Africa and the West.

“Over the long term, it’s going to be a period of high prices,” says Yvonne Mhango, an economist for the Renaissance Capital economic forecasting firm in Johannesburg, South Africa. “With the growth of the middle class in China, and growing consumption, that trend is going to encourage investment in food production, especially in Africa, which is more sparsely populated and with access to water sources.”

In theory, more investment in African agriculture is a good thing, because it creates jobs and increases the amount of food available in the global market, thereby lowering prices. But there are good land deals that ensure a portion of the food grown in a country remains in that country, and there are bad deals that don’t, says Ms. Mhango.

“Whether or not [new agribusiness investment] benefits Africa depends on leadership and the deals that are struck between countries and the investors,” says Mhango.

Short-term challenges

For the short term, however, higher food prices are likely to mean suffering for the world’s poor.

According to the United Nation’s Food and Agriculture Organization (FAO), food prices in December reached their highest level, topping even the 30-year highs of 2008. The FAO’s Food Price Index showed increases in all areas, including food grains, although the greatest increases were in sugars, oils, and fats. The benchmark price of US wheat rose 50 percent compared with the same time last year, while the price for corn (a common food staple in Africa) was 45 percent higher than last year.

Given how little margin many rural and urban poor African citizens have for survival, rising food prices can often have political ramifications, a fact that the former president of Madagascar, Marc Ravalomanana learned in March 2009. Mr. Ravalomanana was overthrown in a bloodless coup d’etat, after an agricultural land deal with Korean conglomerate Daewoo came to light. The deal would have given Daewoo a 99 year lease on nearly 50 percent of Madagascar’s arable lands, with all of the produce being exported to South Korea.

Rising food prices may have also exacerbated the political tensions in the North African countries of Tunisia and Egypt, where citizen revolts ultimately toppled their long-ruling authoritarian governments.

Here in South Africa, bread prices have risen 24 percent over the past year and 61 percent over the past three years, according to the Sunday Times newspaper in Johannesburg. Bread is a staple food for many working-poor South Africans, often the only source of food for the midday meal.

The problem of high food prices is worse, of course, in those areas where the transportation of food is restricted by conflict. In the East African nation of Somalia, maize prices were 79 percent higher than last year and sorghum prices were 81 percent higher, a staggering fact when one considers that Somalia is flooded with foreign-donated food aid, and that more than half of the Somali population relies almost entirely on (free) food donations.

Urban poor to be hit hardest

“Those who are hit the hardest are going to be the urban poor,” says Mhango. “The rural people will be able to eat whatever excess they have produced, and they'll manage to scrape by. But ... in the slums ... where you can’t grow food because of the intense congestion, people are likely to have a much harder time.”

“That is going to be increasingly difficult in an election year like this one,” she adds, referring to the fact that some 30 African countries are scheduled to hold elections over the next 12 months. “Higher food prices can become a political issue.”

Ex-Goldman executives launch active commodity fund

2011-01-31T05:13:00.000-08:00

(Reuters) - UK-based Fulcrum Asset Management has launched a fund designed to tap the growing demand for active commodities strategies from investors unhappy with the returns from commodity index trackers.

Institutional investors have been switching to active strategies in greater numbers as passive plays have disappointed in volatile markets.

Fulcrum, which was founded in 2004 by two ex-Goldman Sachs executives and now manages over $1 billion (626 million pounds), has made the commodity part of its macro fund, Fulcrum Alpha, separately available in response to demand for strategies that will preserve capital during major sell offs.

"Investors want commodities as a core allocation for the long term with sensible risk management so they don't do poorly from the inevitable air pockets that can occur," Andrew Stevens, chief executive of Fulcrum, and a former investment manager at Goldman Sachs, said in an interview.

As well as a maximum drawdown constraint of 25 percent, which kicks in when markets become more volatile, there are limits on the amount of each commodity that can be owned. The aim is to control risk and outperform in down markets by getting out of positions quickly when prices plummet.

Returns are generated from systematic trading strategies based on prices, volatility, backwardation and contango, inventory data and mean reversion, investing across some 24 commodities.

Established in November as a UCITS III fund -- a European structure which also imposes certain concentration limits on managers -- the fund is being rolled out this quarter.

It is targeting an annual return of 15-20 percent with investors able to withdraw their money at a day's notice.

Stevens said the fund could reach several billion under management as it should appeal to a range of investors including asset allocators, private banks, pension funds, endowments, foundations and funds of funds.

Gavyn Davies, chairman of Fulcrum and a former chief economist of Goldman Sachs, said a similar strategy had run with real money since 2006 and was up the equivalent of 96 percent on a cumulative basis since inception.

Davies said the fund was currently market neutral, as the price and volatility signals are mildly positive but signals related to inventory levels are negative. "The other models are giving us long positions in some of the industrial metals and short positions in energy," he said.

Fulcrum has also just opened a New York office headed by Tom Dempsey, who spent time at Goldman Sachs Asset Management as head of product strategy for the U.S. quantitative equity group.

"He will add to the investment process, and build the business in North America," said Stevens, adding that he hoped to have two or three people in the office by summer.

Taurus Quits Silver After Metal Rallies `Too Much,' Maintains Bet on Gold

2011-01-21T07:12:00.001-08:00

By Chanyaporn Chanjaroen - Jan 21, 2011 Taurus Funds Management Pty sold all of the silver holdings in its $200 million precious-metals fund this month, saying the metal’s rally has been excessive, while sticking with a larger bet on gold, according to an executive.

“We’ve cut all silver exposure, in physical and equity, simply because it went up too much in too short a period,” Co- Manager Brenton Saunders said in an interview today. Taurus Precious Metals Strategy sold the 5.7 percent holding, and cut a further 1.9 percent in silver-mining shares, he said. Cash holdings surged to 8 percent from 1.4 percent last month.

Silver gained 83 percent last year as investors bought precious metals for protection against a weaker dollar and Europe’s financial crisis. This year, spot silver has lost about 11.5 percent as holdings in exchange-traded products have fallen amid speculation the gains were overdone. Silver is this year’s worst performer in the Thomson Reuters/Jefferies CRB Index.

“The correction is pretty healthy, we don’t think it’s a major inflection point,” said Saunders, who co-manages the Sydney-based fund with Mohendra Moodley. Taurus Precious Metals Strategy returned almost 32 percent last year from February, when it started. Silver is “digesting the big moves,” he said.

Immediate-delivery silver traded at $27.3625 an ounce at 2:55 p.m. in Singapore after peaking at $31.2375 on Jan. 3, the highest level in 30 years. Holdings in four exchange-traded funds tracked by Bloomberg News have dropped 2.6 percent to 14,772 metric tons from a record high set last month.

‘Crowded’ Trade

Silver may retreat as much as 20 percent this year as soaring demand for physical metal signals a “crowded” trade, Barry James, chief executive officer of James Investment Research Inc., has said. James oversees $2.4 billion.

Spot silver’s slump this year has eclipsed a decline in immediate-delivery gold, which traded today at $1,347.30 an ounce, down about 5.2 percent in 2011. Platinum and palladium have gained this year.

Taurus has maintained its physical gold holdings at 77 percent of the fund, Saunders said, citing low borrowing costs and continued investment interest. “We expect it to do well,” Saunders said. “Any reduction that we or other investors made in gold should be short-lived.”

Saunders and Moodley also manage the Taurus Global Resources Hedge Fund, which returned about 2 percent last year since it was started in February. In all, Taurus Funds Management oversees $650 million.

Hedge Funds Raise Bets on Commodity Rally to Highest Level in Four Years

2010-12-13T01:45:00.001-08:00

By Chanyaporn Chanjaroen - Dec 13, 2010 Hedge funds and large speculators increased their bets on a commodity rally to the highest level since at least 2006 as copper and gold gained to records.

An index tracking speculative positions in 20 commodity futures in the U.S. advanced 8.4 percent from the week before to 1.54 million contracts as of Dec. 7, the highest level since at least February 2006, Commodity Futures Trading Commission data show. The gauge, compiled by Bloomberg, is derived by taking short positions, or bets on lower prices, from long positions.

Commodities tracked by the Thomson Reuters/Jefferies CRB Index advanced 11 percent this year, extending a 23 percent gain in 2009, on demand led by China and as investors bought raw materials as a store of value. Cotton soared 85 percent, silver 73 percent and arabica coffee 54 percent. Hedge funds and institutional investors will put more money in commodities next year as the world economy recovers, Barclays Capital said.

“The current economic environment is clearly positive for risk assets like commodities,” Yingxi Yu, an analyst at Barclays Capital in Singapore, said today by phone. “Talk of a double-dip or a recession seems to be fading away.”

About 76 percent of respondents surveyed at a Barclays’s conference last week in New York predicted a bigger inflow into direct commodity investments next year. New investments this year were $50 billion, the London-based bank said.

“We see most commodity prices moving higher in 2011 as global economic growth, at an above-trend 4.2 percent, bolsters demand,” Morgan Stanley analysts led by New York-based Hussein Allidina said in a report dated Dec. 10. The bank is “most constructive” on crude oil, copper, gold, corn and soy, it said.

Near-zero interest rates in the U.S. and increasing money supply in leading world economies have attracted investors to commodities, said Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd., by phone today from Melbourne. U.S. Treasuries returned 5.6 percent this year, according to Merrill Lynch & Co., and the MSCI World Index of equities gained 7.6 percent.

“The key driver is cheap money that’s parked in high- returning assets like commodities,” he said. “A tipping point would be when the Fed starts raising the rates. That’s when we will start to see big correction.”

Speculative long positions in New York-traded copper outnumbered shorts by 26,432 contracts in the week ended Dec. 7, a 25 percent increase from the week before, CFTC data show. Wheat speculators repositioned for a price increase, holding 8,488 net long positions, a reversal from 19,372 lots of net shorts a week before, the data show.

Commodities to Get Boost From New Regulation Effort, Arrowhawk's Fan Says

2010-12-03T04:17:00.000-08:00

By Asjylyn Loder - Dec 2, 2010 The most sweeping rewrite of Wall Street rules since the 1930s will encourage traders to invest in physical commodities, potentially keeping supply off the market and affecting prices, said Jennifer Fan, a partner and senior portfolio manager with Arrowhawk Commodity Strategies, a hedge fund in Darien, Connecticut.

The Commodity Futures Trading Commission is trying to limit the impact traders have on the prices for raw materials, Fan said. Reining in futures trading won’t be effective because it will drive traders to the physical markets, she said.

“It’s driving people to invest in physical commodities and actually taking commodities that we produce and holding them off the market, not using them and just keeping them for investment purposes, and I think that’s pretty clear that that affects the price of commodities,” Fan said today at the Bloomberg Link Hedge Fund and Investor Briefing in New York during a panel titled Timing the Peak of the Global Commodities Rush.

The Dodd-Frank financial overhaul, which became law in July, gave the CFTC a year to establish rules governing the $615 trillion over-the-counter derivatives market. The commission has until January to impose limits on the number of contracts a single trader can hold for commodities including oil, natural gas and gasoline. It has until April to impose limits on agricultural products.

Chilton Reaction

“Folks are always going to try and find a way around the law, rules or regulations,” said CFTC Commissioner Bart Chilton in an e-mail. “Sometimes that is sort of like pushing on a balloon. You may make a difference in one place, but it comes out another.”

The law also includes the so-called Volcker rule barring banks from trading on their own accounts, as well as rules designed to push the over-the-counter market onto regulated clearinghouses and exchanges -- two issues that have garnered much attention from Goldman Sachs Group Inc., JPMorgan Chase & Co. and Bank of America Corp., according to meetings posted on the Web sites of the federal regulators.

The CFTC, along with the Securities and Exchange Commission, must also determine which companies will be categorized as swap dealers or major swap participants. Those are designations that entail higher capital requirements and increased scrutiny.

Dodd-Frank

The law is named for its primary authors, Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, and House Financial Services Chairman Barney Frank, a Massachusetts Democrat. It aims to stem systemic risk by requiring most interest-rate, credit-default and other swaps be processed by clearinghouses after being traded on exchanges or swap-execution facilities.

Congress took aim at the industry after soured trades on mortgage and credit derivatives tipped the U.S. economy into the deepest recession since the 1930s.

The panel included Richard Robb, an economics professor at Columbia University and chief executive officer of Christofferson, Robb and Co., a New York- and London-based investment management firm; Mari Kooi, chief executive officer of Santa Fe, New Mexico-based Wolf Asset Management International LLC; and Tim Flannery, founder and chief investment officer of Copia Capital LLC, a Chicago-based hedge fund.

Saudi investors facing obstacles in Argentina

2010-12-02T00:14:00.001-08:00

The Saudi Gazette | 30 Nov 2010

By HAZEM AL-MUTTARI

RIYADH: Dr. Fahad Balghunaim, Saudi Minister of Agriculture, said the exponentially high price of fodder is chiefly responsible for the rise in prices of imported and locally produced chickens.

He said the feed price increase is estimated at 40 percent, and noted that Saudi poultry producers have flooded the Ministry with appeals to subsidize the fodder.

“We are considering these applications,” he said.

Dr. Balghunaim commented on the matter during the visit Monday by Argentina’s Agriculture Minister Julian Dominguez and his accompanying delegation to King Abdul Aziz Center for Genuine Arab Horses in Riyadh.

He said one of the major efforts in the field of economic exchange is to translate the initiative of King Abdullah, Custodian of the Two Holy Mosques, of investing in agriculture in foreign countries into practical measures.

The King is determined to secure a stable, reasonably priced food supply for the Kingdom and the Ministry of Health has tasked the private sector with implementing this initiative, Dr. Balghunaim said.

The private sector has responded positively by entering into partnerships with multinational companies investing in agriculture and investing in countries that are rich in agricultural resources, he said.

He said a Saudi business delegation visited Argentina to explore areas of economic exchange and discovered three obstacles to investment there.

There are concerns about tax exemptions, an investment protection pact and a tax on foreign investors, but an official said efforts are underway to address them.

Argentina’s agricultural minister said “we are making intensive contacts with the Foreign Ministry in Argentina to resolve these three issues.”

There are no restrictions for Saudi investors to possess lands in his country, he said.

There are some restrictions on the purchase and lease of some projects, but they have not been implemented, he added.

In a related matter, Saad Al-Meqbl, director general of Agricultural Affairs in the Eastern Province, has announced that 12 poultry projects have been shut down because their owners failed to follow regulations.

The projects, which he described as outdated, were in the urban zone.

He said his administration gave the owners a grace period so they could rectify the shortcomings, but they took no substantive action.

Al-Meqbl said a committee of officials from the ministries of Agriculture and Municipal and Rural Affairs have been effective in conducting surprise inspection tours of unlicensed shops selling live chicken.

The inspectors have confiscated more than 15,000 live chicken and the instruments used to slaughter them, he said.

Al-Meqbl further said owners of the poultry farms who violated the regulations were fined more than SR393,000 and that one of them was fined SR184,000 for unlicensed slaughtering of chicken.

Fines will be increased to SR1 million to further deter people, he added.

--------------------------------------------------------------------------------

African Agriculture Fund first closing at USD135m

2010-12-02T00:06:00.001-08:00

AAF | 29 November 2010

The African Agriculture Fund (AAF), a private equity fund designed to respond to the food crisis that severely impacted the continent in 2008 in the wake of escalating food prices, reached its first closing at USD135m in November 2010.

AAF investment thesis primarily lies in food production, processing and distribution in cereals, livestock farming, dairy, fruit and vegetables, crop protection, logistics, fertilizers, seeds, edible oils, smallholders and agri services. To achieve optimal diversification within the sector, the fund will invest across the value chain from primary production to processing and tertiary services and across the continent. The Fund will make investments of up to USD20m per portfolio company, targeting entities with robust management and growth prospects. The fund aims to support private sector companies that implement strategies to enhance and diversify food production and distribution in Africa by providing equity funding including strengthening the management and modernisation of the agricultural sector on the continent.

To enhance its impact on development, the fund has deployed two powerful instruments: a dedicated SME sub fund of a target size of USD60m (initially USD30m) and a Technical Assistance Facility (TAF) of EUR10m, to support outgrower schemes in large companies and business development services in SMEs.

The support to AAF, whose total target size is USD300m, is part of a coordinated response of a pool of European DFIs, with the Agence Française de Développement (AFD), the Spanish Agency for International Development Cooperation (AECID), Promotion et Participation pour la Coopération économique (Proparco) and International Fund for Agricultural Development (IFAD), and a number of African DFIs, including the African Development Bank (AfDB), the Development Bank of Southern Africa (DBSA), the West African Development Bank (BOAD) and the ECOWAS Bank of Investment and Development (EBID), as limited liability partner investors. The International Fund for Agricultural Development (IFAD) will manage the Technical Assistance Facility for which core funding has been committed by the European Commission with the contribution of the Alliance for a Green Revolution in Africa (AGRA) and the Italian Cooperation.

To fight African agribusiness and agriculture’s chronic undercapitalisation, the fund is equipped with an innovative mechanism designed to attract private sector capital. Lead investors such as AFD and AECID together with BOAD and EBID have pooled their shares into a first loss risk taking mechanism that will provide private investors into AAF with an accelerated return.

Fund managers Phatisa have a team of seasoned professionals with a depth of experience in private equity, fund management and the agricultural sector across Africa. Phatisa is led by Duncan Owen and Stuart Bradley, with Valentine Chitalu as its Chairman. The group has offices in Mauritius, Zambia, Kenya, South Africa and is in the process of establishing a presence in West Africa.

The fund will operate according to a Socially Responsible Investment (SRI) Manual that features an environmental and social risk management system, guidelines for an optimal use of the technical assistance facility and, for the first time in agribusiness private equity, a Code of Conduct for Land Acquisition and Land Use in agricultural and agribusiness projects to prevent unsustainable practices.

“With food security such a crucial issue across Africa, the AAF will make equity finance available for African agricultural companies,” says Valentine Chitalu, Chairman of Phatisa Group. “We welcome all the investors’ significant contributions to Africa’s economic development and long-term prosperity.”

During the first closing procedures, Duncan stressed that “the commercial success of this new African food fund is critical for both the fund’s international investors and for the future of agriculture as a whole in Africa.”

AAF Promoters were advised by a legal team led by Gide Loyrette Nouel, Stéphane Puel, partner, and Julien Vandenbussche, comprising Africa Legal, Lance Roderick, partner and Louise Campion, and Muhammad Uteem Chambers

Saudi's Agroinvest to raise $533m for farm investments

2010-11-24T02:21:00.001-08:00

By Souhail Karam Monday, 12 April 2010

FARM INVESTMENTS: Saudi based Agroinvest has said that it is close to obtaining approval from the regulator to raise $533m for foreign and local farm investments. (Getty Images)
Saudi based agricultural investment firm Agroinvest is close to obtaining approval from the regulator to raise about $533 million for foreign and local farm investments, its chairman said. Agroinvest, or the International Agriculture and Food Investment Co, is the biggest of many private firms involved in foreign farm investment that were set up in the kingdom since import reliant Gulf Arab countries started buying or leasing land in developing nations to ensure food supplies.

But farmland acquisitions by foreign investors have sparked some opposition in developing nations and the United Nations last year voiced concern that farmers' rights in developing nations could be compromised.

Usamah al Kurdi, who chairs Agroinvest's founding committee, said his firm would not want to tarnish Saudi Arabia's image by buying farmlands abroad.

In a telephone interview with Reuters, he said: "Everybody is getting philosophical about this issue, but Agroinvest is not a real estate firm. We are in agriculture and we want to do this with firms and farmers unions in these countries."

He added: "The ideal scenario for Agroinvest, Kurdi said, would be to "forge partnerships with local firms or farmers unions who have a project ready. If leasing the land is an option, then we will do it with our partners."

Seeking approval from the Capital Market Authority (CMA) for the private placement "was not a legal requirement," he said.

Kurdi said: "We have taken the initiative to seek the CMA's approval to show how serious we are."

He added: "We hope to raise about $533.3 million from private and institutional investors to add to the capital raised by the founders."

He declined to say how much capital had so far been raised from Agroinvest's founders. Kurdi said in April that 25 percent of the capital will come from founding shareholders and the remainder from institutional investors and a public offering.

Several Saudi firms have already started farm investments in countries stretching from Indonesia to Ethiopia after a sharp rise in global food prices in 2008 and after authorities prioritised safeguarding water over self sufficiency in some crops such as wheat.

In addition to investments abroad that would include rice, grains, oilseeds and soybeans, Agroinvest plans to invest in grain silos and in funds with exposure to farm investments.

Kurdi declined to go into detail and said only that several propositions were being examined for investments in Australia, Romania, Senegal, Turkmenistan and Vietnam.

He said: "Foreign investments will take 60 percent of our total investments and 40 percent will be invested locally."

Kurdi added: "We plan investment in logistics through funds and Djibouti is being considered as a potential location."

The company will start announcing its foreign investments after it obtains regulatory approvals to start operations "within eight to 10 weeks," he added.

Agroinvest's most advanced plans are in Saudi Arabia where it plans to invest in shrimp farms, poultry and greenhouses, he said. (Reuters)

CalPERS invests $500 million in new environmentally-conscious strategy

2010-11-24T02:18:00.000-08:00

November 22nd, 2010
The California Public Employees’ Retirement System (CalPERS), the largest public pension fund in the United States, recently put $500 million into a strategy that invests in environmentally-focused global public companies. The new internally-managed strategy will be modeled after HSBC’s Global Climate Change Benchmark Index (HSBC CCI). According to CalPERS, “companies must derive a material portion of their revenues from low-carbon energy production,” including alternative energies, water conservation and control, energy efficiency, and carbon trading, in order to be included in the portfolio.

“Until now, we’ve invested in external managers whose funds screen out the worst offending public companies,” commented CalPERS Board President Rob Feckner. “But this more robust, quantitative strategy will allow us on a large scale to support and become more directly involved in positive change by top performers that have improved share value and also done good for the environment.”

So although CalPERS has focused on restricting its investments in companies with negative environmental impacts in the past, their new environmental investment strategy takes a different approach. “Research shows that a positive inclusionary methodology for investing in common stock companies is more successful than a negative exclusionary approach that uses subjective rather than quantitative selection criteria,” stated George Diehr, Chair of the CalPERS Investment Committee.

CalPERS manages the retirement benefits for over 1.6 million California public employees and their families. The pension fund oversees $219 billion in assets under management.

UAE, Saudi eye more farmland leasing overseas

2010-11-24T02:01:00.000-08:00

Foreign land acquisitions have provoked opposition from farmers in developing nations

By Reuters Tuesday, 23 November 2010 11:24 PM

FOOD PRICES: Gulf states suffered when international food prices spiked to record levels in 2008, forcing up their import bills (Getty Images)
The UAE and Saudi Arabia will continue to invest in acquiring farmland abroad as part of their strategy to secure food supplies, officials from the two Gulf states said on Tuesday.

Gulf states suffered when international food prices spiked to record levels in 2008, forcing up their import bills. They have since sought to lease and buy farmland in developing nations to improve security of food supplies.

"In Saudi we have given a priority to water security and therefore are phasing out the production of water-intensive crops and as part our security strategy we are encouraging the private sector to invest in agriculture abroad," Fahad Balghunaim, the kingdom's agriculture minister, told reporters on the sidelines of an industry event in Abu Dhabi.

He added: "We don't have one place or region we are targeting for these land leases, I can promise you that we will be everywhere in the world

L’équation de la sécurité alimentaire

2010-11-21T23:29:00.000-08:00

Pierre-Alexandre Sallier
L’équilibre agricole mondial en onze chiffres

■ Dans dix ans, les besoins alimentaires annuels supplémentaires de la Chine équivaudront à ceux affichés par l’Europe des 27.

■ Les importations chinoises de soja représentent 60% de la demande mondiale.

■ Si les rendements restent les mêmes, 10 millions d’hectares supplémentaires – trois fois la Suisse – devront être plantés dans le monde pour ne pas puiser dans les stocks de grains.

■ Les biocarburants brûlent 30% de l’huile de colza, 15% de celle de soja et 15% du maïs.

■ L’alimentation du bétail et les besoins «industriels» (biocarburants) dévorent 35% des céréales et 60% des oléagineux.

■ L’impact des changements de régime alimentaire sur la demande d’huiles végétales est aussi important que celui de l’accroissement de la population.

■ Les besoins en grains sont passés de 155 à 250 kg par habitant depuis 1964, les biocarburants leur faisant toucher de nouveaux sommets cette année.

■ Depuis 1964, les surfaces cultivées par habitant ont fondu, passant de 1500 à 900 m2. La hausse des rendements de 1,40 à 3 tonnes par hectare (céréales et oléagineux) a cependant permis aux récoltes d’augmenter de 210 à 280 kg par être humain.

■ 70% des champs de soja, 25% de ceux de maïs et 20% du colza sont plantés en OGM.

■ Les exportations américaines représentent 44% du commerce mondial du blé, du maïs et des oléagineux, une importance similaire à celle observée en 1966.

■ Les exportations russes de blé sont passées cette année de 18 millions à moins de 4 millions de tonnes.

Ex-RBS Sempra heads to launch physical commodity fund

2010-11-18T23:52:00.001-08:00

5:28pm EST
NEW YORK (Reuters) - The former heads of RBS Sempra Commodities will launch a physical energy and metals trading fund backed by Stone Point Capital early next year, the CEO of Stone Point told Reuters on Thursday.

David Messer and Frank Gallipoli, who started the Sempra Commodities trading unit that later established a joint venture with RBS (RBS.L: Quote, Profile, Research, Stock Buzz), will launch the fund in the first quarter of 2011 in Stamford, Connecticut.

The move is the latest evidence of private equity funds stepping in to finance proprietary trading as banks face tougher restrictions on trading for their own book.

Charles Davis, CEO of the $10 billion private equity fund, said the commodities trading fund would be seeded with "hundreds of millions of dollars" and would focus initially on energy and metals trading.

Jason Schenker, president and CEO of Prestige Economics in Austin Texas, said the move showed private equity firms are looking to diversify their investments following two years of relatively lackluster returns.

"If you invest in good people and good trading strategies you can make a lot of money trading commodities. There's still a lot of interest in this space," Schenker said.

"It has been a difficult two years for private equity firms and they're increasingly looking to invest directly into hedge funds and commodity traders to help generate better returns."

Messer and Gallipoli will be joined at the fund by former RBS-Sempra chief operating officer (COO) Rob Feilbogen, Davis said.

All three parted from RBS Sempra last spring. Sparkspread.com, which initially reported the story, said the three would be part funding the new venture.

Davis at Stone Point said the fund would trade physical oil, gas, power and base metals, adding the firm may trade other commodities depending on the eventual make-up of the team they are putting together.

David Messer was not immediately available for comment.

PRIVATE EQUITY

Banks have been changing their trading businesses to comply with the Volcker rule, part of a broader financial reform law that limits the extent to which banks can bet with their own capital.

The change in strategy has seen many physical commodity traders leave banks to join traditional energy and metal trading houses or set up their own funds.

In September, a senior Credit Suisse (CSGN.VX: Quote, Profile, Research, Stock Buzz) commodity executive and a team of traders left the bank to set up a hedge fund backed by the private-equity Blackstone Group.

RBS established the joint venture with Sempra Commodities in 2008 but was forced to slim down to appease European Union antitrust concerns just over one year later after it received billions of dollars in state aid during the financial crisis.

Most of the joint venture was sold to JPMorgan (JPM.N: Quote, Profile, Research, Stock Buzz) this year for around $1.8 billion. The exception was the retail commodity marketing operations that were sold to Noble Group Ltd (NOBG.SI: Quote, Profile, Research, Stock Buzz) in September for $317 million.

JPMorgan cut up to 50 people from its enlarged commodities trading business in July following the takeover.

The head of RBS Sempra's proprietary metals trading business left the firm with his team in September.

Olam invests US$1.5b in Gabon

2010-11-17T22:26:00.001-08:00

Channel News Asia | 15 November 2010

Olam's CEO Sunny Verghese says his company uses political risk assurance, such as that provided by the World Bank's Multilateral Investment Guranatee Agency (MIGA), for its projects in Africa.
By Travis Teo
SINGAPORE: Commodities company Olam recently announced plans to invest US$1.5 billion in the African country of Gabon.

And it said at full production, its new fertiliser plant and palm oil unit will generate a combined revenue of US$675 million annually.

This means that by 2015, one-fifth of Olam’s revenue will come from Africa, up from the current 14 to 15 per cent.

Olam is betting on Africa to double its net profit margin to 5.2 per cent in five years and analysts have said that it is an achievable target.

Demand for agricultural commodities has outstripped supply for the last 9 out of 10 years and agri-commodities companies are increasingly turning to unexplored regions like Africa for their resource needs.

But Africa is still a risky bet.

“How we manage the political and sovereign risk is to take a risk insurance cover, a political risk insurance cover call PRI, in the London Lloyd’s Market. And in addition to that for specific projects, we try to secure MIGA guarantees, the multi lateral investment guarantee agency, MIGA, which is a world bank body for project risk insurance, and by diversifying…we are able to mitigate and manage these risks,” said Sunny Verghese, Group Managing Director and CEO of Olam.

Large tracts of land and cheap manpower in the second-fastest-growing continent in the world make Africa an attractive investment for commodities companies that are increasingly seeking to attain scale.

Analysts added that the recent merger talks between Olam and Louis Dreyfus, which dominates rice imports by Africa, can potentially give the combined entities the advantage of pricing power.

James Koh, an Analyst with Kim Eng, feels that there will be a long term increase in prices of commodities.

“The long term supply demand trends points to a long term increase in prices, but I don’t think that its necessary means that every commodity related company will benefit from this boom. For one thing, I think you need to be well capitalised, you need to be a substantial player, we are already seeing a wave of consolidation in this sector. I think with the recession you are finding that people are preferring to deal with the bigger players like Olam, like Noble, because there’s less counter party risk.”

It also helps to have on-the-ground experience of doing business in Africa. And in that regard, analysts said, Olam, which started exporting cashews out of Nigeria in 1989, has a huge advantage.

Overall analysts have a positive view of commodities companies like Olam and Nobel.

“This is one sector where we see that we can still achieve growth, especially now that the risk of a double dip recession is subsiding. These are well capitalised players where they have the financial muscles to do M&A deal, identify good investment and take advantage of the low interest rate environment. That will help generate value for shareholders,” said Mr Koh.

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Abu Dhabi moves to secure food supply

2010-11-17T22:24:00.001-08:00

Financial Times | 16 November 2010

Abu Dhabi has been working on a food security strategy and is building silos in Fujairah. "If you really want food security, either you buy a piece of farmland overseas or you build your own trading house," a London-based commodities banker told FT.
FT [1] via Zawya.com

By Javier Blas and Jack Farchy in London and Andrew England and Roula Khalaf in Abu Dhabi

Abu Dhabi is to make a bold foray into commodities with the establishment of a government-owned trading house aimed at securing food supplies for the import-dependent nation and capturing profit margins in metals and agriculture trading.

People familiar with the plans say the company, which is called Abu Dhabi Sources or ADS, is likely to be started with a capital base of several hundred millions of dollars.

ADS will be going up against well established trading houses, including Glencore, the world’s largest commodities trader, Minneapolis-based Cargill and Louis Dreyfus of France.

Bankers and traders in London and Geneva, Europe’s trading hubs, say headhunters have approached metals and agriculture traders in the past three months seeking senior staff to build up ADS. It is not clear if ADS will trade in oil.

Abu Dhabi, home of 95 per cent of the hydrocarbon reserves of the United Arab Emirates, has embarked on ambitious plans to transform itself into a global city, with infrastructure projects that could cost more than $300bn and require huge imports of raw materials.

Food security has risen to the top of the agenda in the Middle East and North Africa – the world’s biggest importer of cereals – following the food crisis of 2007-2008.

Policymakers are worried about surging prices, but more importantly about exporting countries’ trade restrictions – such as Russia’s halt on wheat shipments – which make importers vulnerable to an interruption in supplies.

Commodities prices have rocketed in the past six years on the back of strong demand from China and other emerging markets.

Copper prices hit record highs last week, becoming the first industrial commodity to break above levels set in 2008.

Abu Dhabi has been working on a food security strategy and is building silos in Fujairah, a smaller member of the UAE.

The move is designed to secure the flow of imports even in the event of a disruption in the Strait of Hormuz, the Gulf’s key waterway, which could be affected by any military confrontation with Iran.

“If you really want food security, either you buy a piece of farmland overseas or you build your own trading house,” a London-based commodities banker said.

Abu Dhabi is not the first country to build a domestic trading house, although its plans appear more ambitious than other, more limited, state-owned trading enterprises, such as Badan Urusan Logistik, or Bulog, of Indonesia.

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Gold, Agriculture Are `Safest Long Positions,' Deutsche Bank's Lewis Says

2010-11-12T03:42:00.000-08:00

By Jae Hur and Ichiro Suzuki - Nov 11, 2010 Precious metals including gold and agricultural commodities may extend gains in the coming months as a declining dollar and tight supplies boost demand, according to Deutsche Bank AG.

A lot of agricultural commodities including corn, soybeans and wheat are “still cheap” even after recent rallies, Michael Lewis, global head of commodities research, said in an interview. The surge in gold, which touched a record this week, is not yet extreme, Lewis said yesterday in Tokyo.

Commodities have jumped this year on increased demand as the U.S. emerged from recession and China, the world’s largest metals user, led expansions in Asia. Copper, used in pipes and wires, reached an all-time high today. Grains and soybeans have rallied on higher demand, trade curbs and poor harvests.

“The safest long positions to have are in precious metals and agriculture,” Lewis said in the interview, referring to bets that prices will advance. For gold “the magnitude of this rally to us is not extreme,” Lewis said.

Immediate-delivery gold has gained 28 percent in 2010 and is set for a 10th annual gain as the dollar has dropped. The precious metal touched a record $1,424.60 an ounce on Nov. 9. Corn has gained 42 percent this year on speculation hot, dry weather in August hurt crops in the U.S., the world’s biggest exporter. Cotton reached a record $1.5195 a pound yesterday.

Gold Bulls

Lewis’s call for higher gold prices echoes forecasts from other investors and analysts including Jim Rogers, who has said it may jump to $2,000 an ounce over the long term. Myles Zyblock, chief institutional strategist at RBC Capital Markets, said last month gold may soar to $3,800 within three years as it follows the pattern of previous “investment manias.”

Gold would need to rise to more than $1,455 an ounce to surpass its all-time high in real terms as measured by producer prices, Lewis said, according to a copy of remarks to clients in Tokyo today. Adjusted for changes in consumer prices, the metal would need to advance to $1,880 an ounce to reach the level seen at the beginning of the 1980s, he wrote in the remarks.

“The gold price would need to hit $2,100 to represent the most powerful rally in percentage terms, and surpass the 1976- 1980 gold-price rally, when prices surged by just over 720 percent,” Lewis wrote in the speech.

Bond Buying

Gold has surged as the U.S. currency has dropped, investors have boosted holdings through exchange-traded products and central banks including India’s have added the metal to their reserves. The dollar has fallen as the Federal Reserve expanded a program to buy bonds to bolster growth in the largest economy.

The Dollar Index, which tracks the currency against six major counterparts including the euro and the yen, traded today at 77.625 compared with this year’s high of 88.708, which was set in June.

“We expect investors’ flows into gold exchange-traded funds will accelerate, as well as efforts by the Fed to devalue the dollar,” Lewis wrote in the speech to clients. Exchange traded funds, of ETFs, trade like stocks, enabling investors to buy precious metals and other products without taking delivery.

Central-bank gold holdings rose by about 500 metric tons last year and may rise again in 2010, the first time they have been net buyers since 1988, Lewis said in the speech. On current trends, central-bank buying in 2010 will surpass private-sector inflows into physically backed ETFs, Lewis said in the speech.

Central banks in India, Bangladesh, Sri Lanka and Mauritius have bought gold this year and in 2009 from the International Monetary Fund, which said last year it was putting 403.3 tons of bullion up for sale.

From corn to nuts, Optima plans listed farmland REIT

2010-11-11T01:45:00.000-08:00

Reuters | 9 November 2010

Optima's Thomas Gimbel said they are exploring international agricultural investment opportunities, but currently are focusing on U.S. farmland, what he calls the "breadbasket of the globe."
By Carey Gillam

BOSTON, Nov 9 (Reuters) – U.S. investment adviser Optima Fund Management is picking up new U.S. farm properties at a brisk pace as it prepares to take public its farmland real estate investment trust, a top Optima executive said Tuesday.

“There are a lot of institutional investors who are recognizing the opportunity here,” Optima Fund Management Executive Managing Director Tom Gimbel said in a presentation Tuesday to a gathering of agricultural investors. “I think we are at an inflection point.”

Optima, a $4.5 billion private investment firm specializing in hedge funds, started investing in U.S. farmland about two years ago, but it still comprises a small percentage of its portfolio.

Optima intends to list its American Farmland Co REIT in the next three to four years, Gimbel told the Agriculture Outlook Americas conference in Boston. He said Optima has been talking with investment banks and underwriters about the prospects, which appear to be “extremely good.”

Optima is not the first to push for a public farmland REIT. Gladstone Land Corp, a REIT focused on agricultural properties, in August filed plans with U.S. regulators for an initial public offering on Nasdaq under the symbol “LAND.” [ID:nSGE6750KF]

As it prepares for its own offering, Optima’s farmland REIT is diversifying its farmland holdings across the United States, with ownership of 12 different crop varieties, including corn and soybean farms in Illinois, and a vineyard in Monterrey, California.

Optima currently is close to completing the acquisitions of a vegetable farm in Florida, a rice farm in the Mississippi Delta and a walnut grove in California, according to Gimbel.

But the fundamentals for U.S. farmland are strong and growing, Gimbel said.

In a July report, Optima said it saw a long-term, “super cycle” for agriculture continuing for many reasons, including China’s strong demand for U.S. grain, a growing world population that will continue to drive food demand, and a global scarcity for land and water for food production.

Gimbel said Optima is exploring international agricultural investment opportunities, but currently is focusing on U.S. farmland, what he called the “breadbasket of the globe.”

U.S. farmland investments are seen generating lower returns than deals many other investors are pursuing in international markets, but are seen as far less risky, he said.

“We’re starting with the U.S.,” he said. (Reporting by Carey Gillam; Editing by Lisa Shumaker and Maureen Bavdek)

Private equity sees “buckets of money” in water buys

2010-11-11T01:44:00.001-08:00

Reuters | 9 November 2010
By Laura MacInnis

GENEVA, Nov 9 (Reuters) – Water scarcity will generate big returns for the irrigation sector once climate change and population growth take their toll on farming, private equity managers said on Tuesday.

Asked at an agriculture investing conference whether it is possible to make money from water, typically a public good rather than a bankable commodity, Judson Hill of NGP Global Adaptation Partners was unequivocal.

“Buckets, buckets of money,” he told the meeting of bankers and investors in Geneva, a leading European hub for commodity trading. “There are many ways to make a very attractive return in the water sector if you know where to go.”

Smart irrigation technology will be at a premium in arid regions and places where higher crop yields are needed to meet rising food demand, Hill said, also citing opportunities from water rights in Australia and parts of the United States.

“Irrigation is a big industry and it is growing. I think it’s going to grow dramatically,” he said, estimating the sector at $3.5 billion today. “In parts of the U.S. we still grow rice in the desert, as crazy as that is. I think that will change.”

Gary Taylor, a partner with AgriCura, a fund focused on U.S. corn, soybean, cotton, rice and wheat farming, said water was fundamental to smart agricultural land investments.

“We have done extensive work to understand the aquifer system along the Mississippi river and do believe over the term of our fund that water will become increasingly important,” Taylor, a former executive at Cargill, said.

For agricultural equipment manufacturers such as John Deere (DE.N), there are also opportunities in tailoring irrigation systems to drought-resistant seeds developed by companies such as Monsanto (MON.N), Dupont (DD.N) and Syngenta (SYNN.VX).

“There are very efficient ways to approach irrigation,” said Cory Reed, John Deere’s director of strategic marketing, describing a need to water certain commodity crops with careful volumes on a fixed schedule.

Hill also named links with communities as critical to gaining traction in the “very, very local” water sector, where investments can involve negotiations with governments amid growing awareness about scarcity risks.

“The water business is very much like the energy business was 20 or 25 years ago,” he said. “As the price of water increases we are all going to become better stewards, not because we all become environmentalists but because it will affect our pocketbooks.” (Editing by Janet Lawrence)

Bankers, funds try to cope with demand for farms

2010-11-11T01:43:00.001-08:00

Reuters | 9 November 2010

"There aren't many Goldman Sachs bankers walking around rural China looking for dairy farms," says Rich Gammill, managing director of the Cargill unit Black River Asset Management (Photo: Xinhua).
By Laura MacInnis

GENEVA, Nov 9 (Reuters) – Bankers and fund managers are scrambling to build up rural expertise in response to rocketing investor demand to buy entire farms as an inflation hedge.

Investment funds worldwide have put an estimated $15 billion to $20 billion in agriculture globally, and interest is also growing from ultra-rich investors and pension funds, which see farmland as tangible, strategic assets.

But Rich Gammill, managing director of the Cargill unit Black River Asset Management, which manages $6 billion including in food and agriculture, said farmland investments can be tricky.

“It seems simple, but agriculture is anything but. There is a global supply chain and lots of regulation, a lot of risks and factors that I think the traditional finance people on Wall Street do not have their heads wrapped around,” he said.

Many investors also want international holdings, requiring their advisers to navigate different tax and regulatory systems, as well as rules on foreign land ownership.

“There aren’t many Goldman Sachs bankers walking around rural China looking for dairy farms,” Gammill said.

In the United States, the $1.2 trillion farming sector remains less than 1 percent institutionally owned, mainly because many investors don’t know how to get started, said Mary McNairy, a partner at International Farming Corp, an alternative investment firm.

“It is huge. The question is, how do you get into it, how do you access the market,” she said.

NEED FOR LOCAL CONTACTS

Gary Taylor, a partner with AgriCura, a fund focused on U.S. corn, soybean, cotton, rice and wheat farming, estimated that over the next decade 50 percent of U.S. farmland will change hands, mainly because of the advanced age of most farmers.

Buying agricultural lands requires local links, said Tim Hornibrook, division director of Macquarie Agricultural Funds Management.

“It is essentially a private market. That makes it hard to get access but it also presents great opportunity,” he said.

Several investment managers also described the struggle to bridge the gap “between Wall Street and the farm track”, with a search for farm managers who can deal well with investors and bankers who understand the basics of agricultural operations.

They may also need to learn to cope with farmland issues including jobs and security of food supplies.

Several dozen farmers, union members and activists protested outside the luxury Geneva hotel where the agriculture investing conference was held on Tuesday, saying foreign purchases of farmland risked choking off local food supplies.

“This is the consequence we fear from the liberalisation of agriculture,” said Rudi Berli, a Geneva-based vegetable farmer, who described risks for developing countries in particular. “The small producers are going to suffer from this.”

But Hornibrook of Macquarie said agriculture investors would tread lightly on the terrain they purchased.

“Sustainability is just part of what you do as part of good business practice,” he said. “If you manage your land in the right way, it is going to increase the viability of that land longer term.”

(Editing by Jane Baird)

South America tops farmland investors’ wish-list

2010-11-11T01:42:00.001-08:00

Reuters | 10 November 2010

Black River Asset Management, part of the U.S. agri-business giant Cargill, controls 50,000 hectares of productive land in South America and is looking for more chances to strike big farmland and food production deals.
By Laura MacInnis

GENEVA, Nov 9 (Reuters) – Farmers’ fields in Brazil and Argentina are among the most prized assets in a new global market for agricultural land that has sprung up alongside soaring commodity prices.

Private equity and fund managers at a farm investing conference in Geneva named South America a top place to buy, lease and manage agricultural lands for profit.

“The South American marketplace is really booming along right now,” said Mark Zenuk, managing director of the $3 billion NGP Global Adaptation Partners fund.

Black River Asset Management, part of the U.S. agri-business giant Cargill, controls 50,000 hectares of productive land in the region and is looking for more chances to strike big farmland and food production deals.

“It’s a scale approach, for sure,” said Rich Hammill, managing director of Black River, which manages some $6 billion in assets worldwide.

Carlos Aguiar, chief executive of the Macquarie Crop Fund, told the Geneva conference there was an active market in buying and selling Brazilian land.

“There is a scarcity of food and scarcity of land and Brazil is one of the only places that you can expand drastically and have the market that has the technology and the infrastructure in place for that,” he said.

EXPORT TAXES

South America accounts for 59 percent of global exports of oilseeds, 11 percent of grains and 37 percent of meat, said Gonzalo Fernandez Castro of Lumix Capital, who invests in farming in Brazil, Paraguay, Argentina and Paraguay.

With agricultural commodity prices at multi-year highs, buying farmland is seen as a more direct way to cash in on valuable crops and to take advantage of long-term appreciation of farm property.

“For most investors, agriculture is a very, very new asset class,” said Tim Hornibrook of Macquarie Agricultural Funds Management, who said it was typical for people to invest first in domestic farming markets to avoid more complex risks.

For NGP Global Adaptation Partners, Brazil, Paraguay and Uruguay are all attractive destinations and Argentina is under review following the death of former President Nestor Kirchner, a leftist political force who was due to run again in 2011.

“Argentina is extremely interesting,” Zenuk said. “It’s a great breadbasket to the world and it has a good infrastructure system. The problem is they have an export tax regime that they mess around with all the time.”

“You don’t want to be in an asset class where you are not able to market the material on a global basis,” Zenuk continued. “It does provide some difficulty in putting our money there, in a private equity sense.”

But Mark McLornan, the chief executive of Agro Terra, an Argentine farm investment firm which has logged 53 percent net returns in the last four years, said government controls were already factored into his business plans.

“A reduction in export taxes is money straight to my bottom line,” he said. McLornan said Argentina was also appealing as a farm investment destination because of its demographics.

While the average age of farmers in the U.S., European Union and Australia is around 60, in Argentina it is 40, meaning its farm labour force is robust and knowledgeable. “In Argentina it is a sector where people want to work,” he said.

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Le mythe agraire de Isis & Osiris

2010-11-07T23:46:00.001-08:00

Le mythe égyptien de Osis et Osiris a une dimension agraire. En effet on peut facilement retracer l'origine agricole de cette fable, dont les principaux personnages prennent place dans le monde naturel. Prenons d'abord le cas d'Osiris. Ce dieu est reconnu par les Egyptiens comme le Grand Constructeur, le Grand Civilisateur, celui qui permet à l'Egypte de passer du monde de la chasse à celui de l'agriculture. En fait, pour l'Egypte antique, l'épi de blé mûri au soleil représente le dieu même, un dieu gorgé de soleil et de pouvoir nourricier.
On présente également Osiris comme un grand conquérant car il a su fléchir par le pouvoir de la douceur tout le monde connu d'alors. Ici encore, il s'agit sans doute d'une métaphore évoquant le succès de la culture du blé auprès des peuples ainsi affranchis des aléas de la chasse. C'est sans doute pourquoi il est dit qu'avec Osiris "le maitre de toutes choses arrivait à la lumière". Le blé que l'on peut engranger, le blé que l'on peut moudre, le blé dont on peut faire du pain dégusté en toute saison, ce blé d'est rapidement imposé aux humains; il a joui des égards qu'on accorde à un roi.
Osiris représente également les crues du Nil, responsables de la croissance du blé. Isis, sa tendre épouse, représente la terre humide, la terre fertile, la terre créatrice, fécondée par le pouvoir générateur des crues d'Osiris. Et Seth repsérente la terre aride du désert avec son vent chaud et desséchant qui dispute sans cesse à Osiris la terre fertile.
Car Seth, le maitre des tempètes et de tous les désordres, ne représente pas uniquement le pouvoir de la sécheresse. Par extension, il devient responsable du sort que le blé va subir au cours de maintes transformations. En effet, on coupe l'épi de blé mûr et, ensuite, on sépare la partie alimentaire de l'écorce en le faisant piétiner par des taureaux. Métaphoriquement, Seth devient donc le bourreau, celui qui abat Osiris, qui le démembre, qui l'enferme et en disperse les morceaux lors des semis.
Esis entre alors en scène, elle accueille les morceaux de son mari port dans le sein de la terre. Grâce au pouvoir de féminin créateur, elle le remembre et lui redonne vie, si bien qu'il reâît pour la prochaine moisson.

Le Japon, à l’origine d’une course mondiale aux ressources ?

2010-10-27T23:30:00.000-07:00

Reuters 12-10-2010

par Natsuko Waki

LONDRES (Reuters) – L’idée qui germe au Japon de consacrer une partie des énormes réserves de change du pays à l’achat de matières premières industrielles est susceptible, si elle est appliquée, de provoquer des bouleversements économiques et financiers.

Le Parti démocrate japonais, actuellement au pouvoir, a proposé la semaine dernière de tirer parti de la vigueur du yen pour investir dans le développement de ressources naturelles à l’étranger, et en particulier dans celui des terres rares, vitales pour l’industrie électronique.

Il a également avancé l’idée de créer un fonds souverain sur le modèle de ceux existant en Chine et à Singapour.

Auquel cas, le Japon deviendrait la première grande puissance économique mondiale à investir une partie de ses réserves de change dans des coentreprises stratégiques, une pratique instaurée par des pays émergents à forte croissance comme le Qatar et la Chine.

Les pays en développement investissent massivement dans les ressources naturelles et agricoles et les pays occidentaux craignent que ces grandes manoeuvres économiques n’aient également des fins politiques.

“L’idée d’un capitalisme d’Etat se répand. C’est parti de la Chine et du Proche-Orient et ça gagne le Japon”, observe Sven Behrendt, du consultant genevois Geoeconomica. “Les réserves de change sont devenues un instrument de pouvoir”.

“Les gouvernements sont plus attentifs et innovants quant aux ressources à leur disposition à des fins d’intérêt national. L’Etat adopte une nouvelle attitude vis-à-vis des marchés internationaux en tant qu’acteur économique lui-même”.

HORS DU DOMAINE PUBLIC

La Chine assure 97% de la production mondiale de terres rares et le Japon achète la moitié environ de cette production mais un différend tenant à des îles contestées en mer de Chine méridionale ont envenimé les relations entre les deux pays.

La tension était montée d’un cran en septembre au moment de l’arrestation par Tokyo d’un capitaine d’un navire de pêche chinois qui était entré en collision avec deux patrouilleurs des garde-côtes japonaise.

Pékin avait suspendu les contacts de haut niveau avec le Japon et des sources proches du secteurs de l’industrie avaient fait état de l’arrêt d’exportations chinoises de métaux rares. Cette information a été démentie par la Chine.

Le contentieux ne s’arrête pas à ces deux pays. Brunei, la Malaisie, les Philippines, Taïwan et le Vietnam revendiquent des parties de la mer de Chine méridionale, potentiellement riche en gaz et en pétrole. La Chine revendique pour sa part la quasi-totalité de la surface maritime par laquelle transite la moitié du tonnage de pétrole mondial.

Le Japon, par ailleurs, n’a jamais possédé autant de dollars, ne serait-ce que par les efforts déployés pour contenir la hausse du yen.

Les fonds souverains gèrent pour les futures générations des revenus annuels de l’ordre de 3.000 milliards de dollars, soit le dixième environ de la capitalisation boursière mondiale.

Suivant les données du consultant spécialisé Monitor, les transactions touchant au charbon, au pétrole et au gaz naturel ont représenté 11,2 milliards de dollars en 2009, soit plus de 16% de la valeur totale des investissements répertoriés des fonds souverains. En 2008, ces transactions avaient totalisé 1,3 milliard de dollars.

Une bonne partie des transactions portant sur les ressources naturelles ou les terres arables se font en dehors du domaine public, ce qui implique que le montant réel est encore supérieur.

SUSPICION CANADIENNE

Pour beaucoup, il n’y a aucun mal à acheter des actifs dans un marché libre et de manière claire. Toutefois, l’élément “souverain” présidant à ces transactions fait craindre à certains une mainmise de certains gouvernements sur des actifs importants d’un point de vue stratégique en général et pour la sécurité nationale en particulier.

Le Canada, ainsi, ne voit pas d’un bon oeil l’intérêt manifesté par les Chinois pour le groupe minier local Potash. Il juge que les entreprises publiques doivent investir pour des motifs uniquement économiques et non pas en tant qu’agent des intérêts de leur gouvernement.

Le fonds souverain chinois CIC et son équivalent singapourien Temasek passent ainsi pour avoir Potash en ligne de mire. Le secteur de la potasse est en effet particulièrement convoité par la Chine, qui cherche à augmenter sa production alimentaire pour subvenir aux besoins de sa population.

CIC ne fait pas mystère de ses cibles: l’énergie, l’agriculture et l’électricité. Il compte investir en particulier en Russie et en Indonésie.

Suivant certains médias, le Venezuela et l’Inde avaient également envisagé de créer un fonds souverain pour se porter acquéreur en commun d’actifs énergétiques dans le monde entier.

Les pays du Golfe étendent pour leur part leurs achats de terres arables, pour s’assurer une sécurité alimentaire, à l’Europe de l’Est et l’Australie.

“Les pays à la source des fonds souverains éprouvent la nécessité de sécuriser le flux des importations alimentaires à des prix raisonnables”, expliquait le sultan bin Nasser al-Suwaidi, gouverneur de la banque centrale des Emirats arabes unis.

Les Nations unies craignent toutefois pour les droits des agriculteurs des pays en développement si les pays riches achètent massivement des surfaces cultivables pour assurer leur sécurité alimentaire.

Michael Power, stratège d’Investec Asset Management, remarque que le Japon était à la pointe des acquisitions de ressources naturelles et énergétiques pilotées par l’Etat au travers de ses conglomérats industriels et financiers d’avant-guerre.

“La bataille pour les ressources naturelle est un problème géo-économique au niveau national. Le Japon se préoccupe à nouveau de la sécurité de ses approvisionnements”, dit-il.

Wilfrid Exbrayat pour le service français, édité par Benoît Van Overstraeten

Saudi Arabian company to invest $100m in agriculture in Katsina

2010-10-27T23:29:00.001-07:00

Nigerian Compass | 22 June 2010
A SAUDI Arabian company, Foras International Investment Company, plans to invest $100 million in the agricultural sector in Katsina State.

A representative of the company, Mr Salim Lalani, made the announcement yesterday in Katsina while briefing newsmen shortly after signing a Memorandum of Understanding (MoU) with the state government.

He said that the company might go beyond the investment capital in the agricultural sector, depending on the potential on the ground.

Lalani said the company would develop large hectares of land to be provided by government to grow specific crops, which would be of interest to both the company, government and people of the state.

He said he and other officials of the company were in the state at the instance of the government, and that the company would use its experts from Australia and Asia to grow crops that would be of benefit to the people.

The Special Adviser to the Governor on Resource Development, Alhaji Musa Na-Shuni, said that under the MoU, the state would provide 1,000 hectares of land to the company.

He said the state governments would also provide other logistic support to boost the company’s investment in the agricultural sector.

The MoU also covers housing and development of infrastructure, in which the company may invest 160 million dollars and 100 million dollars respectively.

Na-Shuni signed the MoU on behalf of the government, while Lalani signed for Foras International Investment Company.

Prime farmland in Argentina costs almost as much as in United States

2010-10-27T23:27:00.000-07:00

MercoPress | 21 October 2010
Prices for the best farmland in Argentina’s breadbasket, the humid Pampa have risen on average 10% this year according to registered operations reports. This means the hectare of prime agriculture land in Argentina now costs almost the same as the average price of farmland in the state of Illinois, 14.000 US dollars.

“Prices are very strong, it’s a bull market. Farmland for agriculture which is the most demanded average 14.000 US dollars the hectare in the corn hard core region, while land in the periphery of that core are in the range of 8.000 to 10.000 US dollars the hectare”, said Luis Clucellas from Bullrich Campos, one of the main companies in the business.

“Currently a hectare of some of the best farmland ranges 13.000 to 14.000 US dollars but can also reach 15.000 US dollars, which is the average price for farmland in the state of Illinois at the heart of the corn belt”, added Clucellas.

Overall the companies involved in selling Argentine farmland agree that demand remains higher than supply, but also point out to the fact that there has been a slight increase in land for sale.

Furthermore the market has yet to recover the enthusiasm and sales peak previous to the 2008 drought and the farmers’ conflict with the Argentine government over export taxes on grains and oilseeds.

Nevertheless there is a growing interest from buyers, a greater number of requests to visit potential acquisitions and the best farmland is specifically targeted.

“This has had an influence on the price of farmland, together with the recovery of grain and oilseed prices plus prospects that land remains a good investment option, given the anticipated increasing demand for food world-wide in coming years. In this context the market is more active than at the beginning of the year”, said Mariano Maurete from Alzaga Unzué and Co.

“We see a more active atmosphere, although I wouldn’t say prices have risen, but rather that they are as high as they were back in 2008; if any increase it was not above 10%”, he added.

Eduardo FitzGerald from Compañía Argentina de Tierras said the market is more active and if buyers find good quality farmland they are ready to pay, “although maybe not as much as the owner would like”.

Good farmland prices have risen 10% to 15% compared to 2009, but other lesser quality camps, half agriculture, half livestock, “owners are more prepared to talk and negotiate”. Demand is not desperate, however when it’s good farmland, “there is an interest” said Fitz Gerald.

For Marcos Lanusse an advisor in camp transactions “overall the market remains strong and stable regarding prices, with a slight increase in very specific cases such as land not further than 100 kilometres from Buenos Aires City or marginal farmland with good development potential”.

Lanusse said that when there have been price increases “they have not gone further than 10% to 15% compared to last year. Market seems to have grown in volume and number of deals, but the fact is there is not much prime farmland for sale, and there are investors on the lookout considering options”.

But, who is buying land in Argentina? According to Lanusse most are locals, and when foreigners, in very specific cases.

On the other hand farm policies implemented by the Argentina government have meant that many investment funds which originally considered Argentina as an option, “have finally decided to move to Uruguay and Brazil and in second place to Bolivia and Paraguay”.

Fonds d’investissement agricole: de la terre dans le portefeuille

2010-10-27T23:25:00.001-07:00

Fonds d’investissement agricole: de la terre dans le portefeuillePublié le 25 octobre 2010 à 06h15 | Mis à jour le 25 octobre 2010 à 06h15* Taille du texte* Imprimer* Envoyer*À lire aussi* Nouvelles règles: les banques canadiennes en bonne posture* Fin d’année anxieuse pour les détaillants en Bourse* Les profits seront au rendez-vous au troisième trimestre* Les Québécois n’épargnent pas trop pour la retraite, dit la RRQ* L’univers des fonds beaux, bons, pas chersSur le même thème* Bourse de Toronto* Cadillac* Twitter* Courtage d’actions* InvestissementsDu même auteur* Fonds d’investissement agricole: de la terre dans le portefeuille* La porcherie dont personne ne voulait* Relations publiques: l’industrie minière fourbit ses armes* Projet de loi 79: les mines échapperont encore aux municipalités* Les Canadiens perdent confiance«On pense que les terres agricoles représentent de… (Photothèque Le Soleil)AgrandirPhotothèque Le Soleil«On pense que les terres agricoles représentent de très bons actifs pour les investissements à long terme et qu’elles génèrent des rendements intéressants avec peu de volatilité», soutient Guillaume Poulin, banquier d’affaires et avocat.*Hugo FontaineLa Presse(Montréal) Des actions échangées à Toronto et des obligations américaines, certes. Et pourquoi pas quelques parcelles de terres agricoles de Saint-Narcisse pour compléter votre portefeuille? C’est ce que propose Agriterra, nouvelle société de Trois-Rivières, avec un premier fonds d’investissement québécois consacré aux terres agricoles.> Suivez Hugo Fontaine sur TwitterL’idée d’Agriterra est née quand Guillaume Poulin, banquier d’affaires et avocat, discutait Bourse avec son beau-père Roger Gauthier, qui dirige une entreprise de distribution de fertilisants. «Roger me disait que ses terres agricoles avaient toujours représenté son meilleur rendement», raconte Guillaume Poulin.Depuis 1996, la valeur des terres agricoles au Québec a doublé. La valeur a augmenté chaque année, sauf de 2003 à 2005. Dans la période de 10 ans terminée le 31 décembre 2009, les terres agricoles ont rapporté un rendement annuel composé de 6%, contre 3,4% pour le S&P/TSX.«On pense que les terres agricoles représentent de très bons actifs pour les investissements à long terme et qu’elles génèrent des rendements intéressants avec peu de volatilité, soutient Guillaume Poulin. On veut offrir cette possibilité d’investissement à des gens qui ne sont pas du milieu agricole.»Agriterra a déjà acheté une première terre, à Saint-Narcisse, en Mauricie. Et il ne devrait pas être trop difficile d’en dénicher d’autres, affirme Roger Gauthier. Avant même qu’il soit question du fonds, on lui offrait d’acheter une terre par mois, raconte-t-il.«Mais je ne vais pas acheter de bazou, je veux un Cadillac. J’ai des critères de sélection sévères. Je veux des terres rentables, pour que les gens soient intéressés à louer.»Agriterra louera les terres qu’elle possède et redistribuera les revenus de location aux porteurs de parts. Selon Guillaume Poulin, les loyers annuels sont de 2,5% à 4,5% de la valeur de la terre.Le fonds sera liquidé après cinq, sept ou neuf ans, selon la volonté des investisseurs, pour profiter de la hausse des valeurs.Réticence de l’UPAL’Union des producteurs agricoles (UPA) affiche une certaine réticence par rapport à l’arrivée de cette première société d’investissement. Le syndicat craint la spéculation et s’inquiète de la hausse des prix des terres. «Il y a donc lieu d’être extrêmement vigilant, la souveraineté alimentaire s’appuyant notamment sur l’accès à des terres agricoles fertiles et exploitées par des producteurs-propriétaires qui les cultivent pour leurs concitoyens», souligne l’UPA.Mais les dirigeants d’Agriterra se défendent de faire de la spéculation, étant donné qu’ils garderont les terres pour un minimum de cinq ans. Ils croient aussi que le fonds pourra aider certains producteurs.«J’ai sur mon bureau le dossier d’un producteur qui a acheté une terre, mais qui n’a plus les moyens de payer, raconte Roger Gauthier. On va acheter la terre et la lui louer, on va lui donner de l’oxygène en diminuant sa dette et augmenter ses liquidités.» Il perdra l’augmentation éventuelle de la valeur de sa terre, «mais au moins il ne terminera pas en faillite pour ensuite rendre sa terre à la banque».Agriterra estime aussi que les jeunes agriculteurs, incapables d’acheter des terres déjà trop chères, pourraient également être intéressés à la location d’une terre, avec une option d’achat au bout du bail.Agriterra tente actuellement d’intéresser les courtiers en valeurs mobilières au projet.L’objectif est de rassembler 3 à 5 millions de dollars dans les trois premières années, puis, si tout va bien, 10 millions au bout de cinq ans. «On ne veut pas aller trop vite, on veut pouvoir bien investir les fonds qu’on va recueillir», dit Guillaume Poulin.Il y a de moins en moins de terres agricoles pour une demande mondiale toujours plus forte, ce qui fait grimper la valeur des terres. Chaque investissement a toutefois sa part de risques. Si de nouvelles technologies provoquaient un bond substantiel de la productivité dans les 10 ou 15 prochaines années, note M. Poulin, chaque lot deviendrait un peu moins essentiel et sa valeur diminuerait.Partager «On pense que les terres agricoles représentent de très bons actifs pour les investissements à long terme et qu'elles génèrent des rendements intéressants avec peu de volatilité», soutient Guillaume Poulin, banquier d'affaires et avocat. (Photothèque Le Soleil)
La Presse Affaires | le 25 octobre 2010

Hugo Fontaine

La Presse

(Montréal) Des actions échangées à Toronto et des obligations américaines, certes. Et pourquoi pas quelques parcelles de terres agricoles de Saint-Narcisse pour compléter votre portefeuille? C’est ce que propose Agriterra, nouvelle société de Trois-Rivières, avec un premier fonds d’investissement québécois consacré aux terres agricoles.

L’idée d’Agriterra est née quand Guillaume Poulin, banquier d’affaires et avocat, discutait Bourse avec son beau-père Roger Gauthier, qui dirige une entreprise de distribution de fertilisants. «Roger me disait que ses terres agricoles avaient toujours représenté son meilleur rendement», raconte Guillaume Poulin.

Depuis 1996, la valeur des terres agricoles au Québec a doublé. La valeur a augmenté chaque année, sauf de 2003 à 2005. Dans la période de 10 ans terminée le 31 décembre 2009, les terres agricoles ont rapporté un rendement annuel composé de 6%, contre 3,4% pour le S&P/TSX.

«On pense que les terres agricoles représentent de très bons actifs pour les investissements à long terme et qu’elles génèrent des rendements intéressants avec peu de volatilité, soutient Guillaume Poulin. On veut offrir cette possibilité d’investissement à des gens qui ne sont pas du milieu agricole.»

Agriterra a déjà acheté une première terre, à Saint-Narcisse, en Mauricie. Et il ne devrait pas être trop difficile d’en dénicher d’autres, affirme Roger Gauthier. Avant même qu’il soit question du fonds, on lui offrait d’acheter une terre par mois, raconte-t-il.

«Mais je ne vais pas acheter de bazou, je veux un Cadillac. J’ai des critères de sélection sévères. Je veux des terres rentables, pour que les gens soient intéressés à louer.»

Agriterra louera les terres qu’elle possède et redistribuera les revenus de location aux porteurs de parts. Selon Guillaume Poulin, les loyers annuels sont de 2,5% à 4,5% de la valeur de la terre.

Le fonds sera liquidé après cinq, sept ou neuf ans, selon la volonté des investisseurs, pour profiter de la hausse des valeurs.

Réticence de l’UPA

L’Union des producteurs agricoles (UPA) affiche une certaine réticence par rapport à l’arrivée de cette première société d’investissement. Le syndicat craint la spéculation et s’inquiète de la hausse des prix des terres. «Il y a donc lieu d’être extrêmement vigilant, la souveraineté alimentaire s’appuyant notamment sur l’accès à des terres agricoles fertiles et exploitées par des producteurs-propriétaires qui les cultivent pour leurs concitoyens», souligne l’UPA.

Mais les dirigeants d’Agriterra se défendent de faire de la spéculation, étant donné qu’ils garderont les terres pour un minimum de cinq ans. Ils croient aussi que le fonds pourra aider certains producteurs.

«J’ai sur mon bureau le dossier d’un producteur qui a acheté une terre, mais qui n’a plus les moyens de payer, raconte Roger Gauthier. On va acheter la terre et la lui louer, on va lui donner de l’oxygène en diminuant sa dette et augmenter ses liquidités.» Il perdra l’augmentation éventuelle de la valeur de sa terre, «mais au moins il ne terminera pas en faillite pour ensuite rendre sa terre à la banque».

Agriterra estime aussi que les jeunes agriculteurs, incapables d’acheter des terres déjà trop chères, pourraient également être intéressés à la location d’une terre, avec une option d’achat au bout du bail.

Agriterra tente actuellement d’intéresser les courtiers en valeurs mobilières au projet.

L’objectif est de rassembler 3 à 5 millions de dollars dans les trois premières années, puis, si tout va bien, 10 millions au bout de cinq ans. «On ne veut pas aller trop vite, on veut pouvoir bien investir les fonds qu’on va recueillir», dit Guillaume Poulin.

Il y a de moins en moins de terres agricoles pour une demande mondiale toujours plus forte, ce qui fait grimper la valeur des terres. Chaque investissement a toutefois sa part de risques. Si de nouvelles technologies provoquaient un bond substantiel de la productivité dans les 10 ou 15 prochaines années, note M. Poulin, chaque lot deviendrait un peu moins essentiel et sa valeur diminuerait.

India Billionaires Go On Buying Spree in `Last Frontier’ Africa

2010-10-27T23:24:00.001-07:00

Bloomberg | 24 October 2010

Sai Ramakrishna Karuturi, founder and managing director of Karuturi Global Ltd. Photographer: John Sommers II/Bloomberg

By Mehul Srivastava and Subramaniam Sharma

Indian billionaire Ravi Ruia flew to Africa every month for the past 18 months, buying coal mines in Mozambique, half an oil refinery in Kenya and a call center in South Africa for his Essar Group.

This month, executives of his Essar Energy Plc. attended a conference hosted by Nigerian President Goodluck Jonathan to attract investors in the power grid. The officials, backed by $2 billion the company raised in an April listing on the London Stock Exchange, also mulled other “business opportunities” around Africa, the company said.

Ruia, who controls the $15 billion Essar Group with his older brother, Shashi, is not alone. Billionaire countrymen Sunil Mittal, chairman of India’s largest mobile phone provider, Bharti Airtel Ltd.; Adi Godrej, chairman of Godrej Consumer Products Ltd.; and Harsh Mariwala, founder of Marico Ltd., have fueled a $15.8 billion buying spree in Africa since January 2005.

“Africa looks remarkably similar to what India was 15 years ago,” said Firdhose Coovadia, director of Essar’s African operations. “We can’t lose this opportunity to replicate the low-cost, high-volume model we’ve perfected in India.”

‘Last Frontier’

Indian companies acquired or invested in at least 79 companies in Africa, chasing business in less crowded markets after growing in a home economy that expanded by an average 8.5 percent since April 2005.

Africa’s gross domestic product expanded 4.9 percent a year from 2000 to 2008, McKinsey & Co. said in a June report. The continent’s GDP will rise to $2.6 trillion by 2020 from $1.6 trillion in 2008.

Consumer spending may double to as much as $1.8 trillion by 2020 as infrastructure is built and farm output increases, the report said. That is the equivalent of adding a consumer market the size of Brazil.

“Africa is seen by the investing community as the last frontier,” said Walter Rossini, who manages $330 million in an India fund at Aletti Gestielle Sgr Spa in Milan. “There is a higher risk, but then there is greater reward if the political situation remains stable over the next 10 years.”

Africa is new territory for Bharti, which paid $9 billion in June for mobile phone operations in 15 countries and will rebrand them by year’s end.

500 Million Roses

This month, Bharti executives sought advice at the Kenya offices of Bangalore-based Karuturi Global Ltd., the world’s largest rose-grower. Sai Ramakrishna Karuturi, the managing director, said Africa is driving his company’s success.

Six years ago, as he struggled to compete against flower growers in Africa and Europe with lower freight costs and larger tracts of land, he bought a small plot in Ethiopia. Sales since have grown 11-fold to $112.7 million in the fiscal year that ended March 31.

He leases 311,000 hectares of land — larger than the U.S. state of Rhode Island — in Ethiopia and Kenya, and his company sells more than half-a-billion roses a year.

“I got in on the ground floor, others got in on the second floor, but there’s a lot of floors left to go in Africa’s economic cycle,” Karuturi said. “Africa offered us a scale we could never reach in India.”

26 Deals

Indian acquisitions in Africa peaked in 2008, when companies closed 26 deals worth $3.1 billion. Those include the state-run Indian Farmers Fertiliser Cooperative Ltd.’s $721 million purchase of Industries Chimiques du Senegal, an idle phosphates producer that once was the country’s largest industrial plant. New York-based Ernst & Young LLP handled 11 deals since 2005.

“We are seeing Indian companies look at Africa in a major way,” said Anuj Chande, the London-based head of the South Asia Group at advisory and accounting firm Grant Thornton U.K. LLP. “Compared to India, valuations are quite attractive. We’re expecting to see a lot of midsize deals across a variety of sectors.”

Apollo Tyres Ltd., India’s second-biggest tiremaker by market value, bought Durban, South Africa-based Dunlop Tyres International Pty for $62 million in April 2006. That gave Gurgaon-based Apollo two manufacturing plants and a retreading unit in South Africa and Zimbabwe, and brand rights to 32 African countries.

‘Tata, Ambani’

“If tomorrow the Indian economy was to take a U-turn, then at least you have other markets which are growing,” said Neeraj Kanwar, Apollo’s vice-chairman and managing director. “I can’t survive on the Indian market alone.”

The company aims to triple sales to $6 billion in five years, with 60 percent of revenue coming from outside India. In the fiscal year that ended March 31, 62 percent of its $1.7 billion in sales came from India.

Adi Godrej bought a hair-color company in South Africa and a soap and body-lotion maker in Nigeria. His Mumbai-based Godrej Consumer Products gets 23 percent of its total sales outside India, including Africa.

Marico paid 520 million India rupees ($12 million) to buy the consumer division of Durban-based Enaleni Pharmaceuticals Consumer Division (Pty) Ltd. in October 2007. Two months ago, it bought South African health-care brand Ingwe for an undisclosed price.

Dabur India Ltd. started shopping on the continent in 2004, when it bought a hair-care brand in Egypt and then a Nigerian cosmetics company.

“We need to now seek avenues of growth outside of India because India’s becoming saturated and hugely competitive,” Dabur Chief Executive Officer Sunil Duggal said.

One reason why smaller Indian companies ventured into Africa is that their budgets still attract attention in countries trying to woo foreign investors, Karuturi said.

“I am not even a fly on the wall in India, but in Ethiopia I am the largest investor, the second-largest employer after the government,” said Karuturi, whose company owns professional soccer and volleyball teams. “To do that in India, you have to be a Tata or an Ambani.”

To contact the reporters on this story: Mehul Srivastava in Mumbai at msrivastava6@bloomberg.net; Subramaniam Sharma in New Delhi at ssharma@bloomberg.net.

To contact the editor responsible for this story: Bret Okeson at bokeson@bloomberg.net.

U.S. Forestry Firm Launches European Hedge Fund

2010-10-19T22:29:00.001-07:00

Oct 19 2010 | 1:44am ET

Forestry investment firm Timberland Investment Resources has launched a European timber hedge fund.

Timberland Investment Resources Europe will offer British and other European investors access to the increasingly popular timber asset class. The new London-based subsidiary is still awaiting Financial Services Authority approval.

The fund will invest in timber resources in Europe, the U.S. and Latin America.

"The forestry asset class is gaining prominence globally because of its history of outstanding performance and its demonstrated ability to serve as a portfolio diversifier and inflation hedge," TIR founder Tom Johnson said. "We intend to make these unique attributes more accessible to European investors by offering them investments designed to meet their long-term objectives."

The new European unit is headed by managing partners Hugh Humfrey and Gian Paolo Potsios, bother formerly of Arch Financial Products

Les mystères de la ruée vers l’or vert africain

2010-10-14T01:48:00.000-07:00

Jeune Afrique | 08/10/2010

Par Michael Pauron

La ruée des pays et des groupes étrangers vers l’or vert africain inquiète experts et ONG. Reste que le phénomène est difficilement quantifiable, nombre d’annonces d’accords n’étant pas suivies d’effet.

Alem a trouvé du travail depuis peu. Ce paysan éthiopien qui avait du mal à joindre les deux bouts avec son lopin de terre gagne désormais 1 euro par jour pour travailler sur les 300 000 ha du groupe indien agroalimentaire Karuturi. Maïs, riz, palmier à huile… L’arrivée des investisseurs indiens dans les plaines verdoyantes de la rivière Tekezé, dans le nord du pays, n’est pas le fruit du hasard.

L’Éthiopie est un promoteur actif : elle aurait déjà cédé 1,2 million d’hectares, selon la Banque mondiale. « Nous sommes les moins chers et les plus compétitifs », se vantent même les autorités, espérant convaincre les investisseurs de ne pas dépenser leurs dollars ailleurs. Tout comme le Soudan voisin, concurrent sérieux qui affiche presque 4 millions d’hectares de terres déjà vendues ou louées.

Les porteurs de projets n’ont pas fini d’affluer sur le continent. Ils sont asiatiques, saoudiens, maghrébins, européens, américains, privés ou étatiques, et lorgnent plus de 200 millions d’hectares cultivables et disponibles en Afrique, sur 445,6 millions dans le monde.

Mozambique, Bénin, Nigeria, Mali… Combien de terres ont déjà été acquises sur le continent ? Ce qui fait la une des journaux et qui, au nom du droit au sol des populations, anime les passions, locales et internationales, est invérifiable. Selon l’International Food Policy Research Institute (Ifpri), il s’agirait de 9 millions d’hectares depuis 2006. « On ne connaît pas la réalité », assure pour sa part Bernard Bachelier, directeur de la Fondation pour l’agriculture et la ruralité dans le monde (Farm). « Il y a beaucoup d’effets d’annonce », poursuit-il. La Banque mondiale, dans son rapport publié le 7 septembre (« Rising Global Interest in Farmland »), estime qu’à la fin de 2009 ces annonces ont concerné plus de 30 millions d’hectares. Mais « dans de nombreux cas, les accords annoncés n’ont jamais vu le jour », explique l’institution.

Manque de transparence

« Il y a d’abord la volonté des opérateurs et des gouvernements de triompher et de faire vite une annonce sur un accord, précise Bernard Bachelier. Mais après, les discussions techniques commencent avec les administrations et, bien souvent, elles s’enlisent autour de la question du droit au sol, du foncier et du cadastre. Aussi, les investissements pour la mise en culture et l’acheminement des récoltes s’annoncent fréquemment bien plus élevés que prévu. Au final, nombre d’investisseurs se retrouvent dans l’incapacité de financer le projet et abandonnent. »

Selon Bernard Bachelier, le Mali est un bon exemple. « Sur 1 million de terres irrigables, gérées par l’Office du Niger, il y a eu pour 650 000 ha de lettres d’intention. Au final, il ne reste plus que 45 000 ha de projets. » Et de citer le projet libyen : « Tripoli et Bamako ont communiqué, en grande pompe, sur un accord portant sur 100 000 ha. Le document ne donne aucune précision sur le type de contrat : bail à durée déterminée ? Propriété ? Au final, seuls 25 000 ha sont évoqués. Et jusque-là, un canal de 40 km a été construit par des Chinois, sans aucun canal secondaire pour irriguer. »

Madagascar a elle aussi vu son accord sur 1 million d’hectares tué dans l’œuf : la pression populaire a eu raison du groupe sud-coréen Daewoo, qui avait négocié un bail de… quatre-vingt-dix-neuf ans.

Le phénomène d’achat de terre sur le continent n’est pas nouveau, mais la Banque mondiale relève que la quantité de terres négociées dans chaque contrat, qui dépassait rarement quelques milliers d’hectares il y a encore cinq ans, en concerne aujourd’hui allègrement plusieurs centaines de milliers. Comme au Bénin, où Green Waves, un groupe à capitaux italiens, a obtenu l’appui du gouvernement béninois pour l’exploitation annuelle de 250 000 ha de tournesol en août 2007, essentiellement pour cultiver des agrocarburants.

Le pays de Boni Yayi entend offrir plus de 3 millions d’hectares de terres d’ici à 2011 aux groupes étrangers pour la culture et le développement des agrocarburants. Avec un prix compris entre 76 et 456 euros l’hectare (suivant le sol, la proximité d’un point d’eau…), l’opération peut être juteuse. Mais pour quelle rentabilité ? Personne ne s’avance sur cette question délicate. Beaucoup de facteurs entrent en compte : prix des produits sur le marché, fertilité des sols, coûts d’acheminement des récoltes, prix des intrants (engrais, semences…).

La Banque mondiale prévient d’emblée qu’une rentabilité de court terme est inenvisageable pour des terres à irriguer et loin des axes routiers. Mais les perspectives de retour sur investissement sont impressionnantes. Ainsi, pour la culture du sucre, une fois les obstacles dépassés et la culture lancée, 1 hectare de terre pourrait rapporter 18 500 dollars en Zambie (environ 13 850 euros), 8 000 dollars au Kenya, contre 3 750 dollars au Brésil…

Un secteur porteur

L’engouement pour les terres fertiles de l’Afrique est bien réel et, tout le monde en convient, le secteur a de l’avenir. La société Investisseur et Partenaire pour le développement (I&P) en est convaincue. Avec 14 millions d’euros engagés sur le continent, dont un bon tiers (hors microfinance) dans l’agroalimentaire, I&P considère que « le domaine agricole est un secteur clé », selon Sébastien Boyé. L’entreprise, qui investit spécifiquement dans les PME africaines, accompagne entre autres la société Sagex, qui cultive du maïs et du soja sur quelque 3 000 ha au Cameroun.

À Madagascar, I&P est actionnaire de Phileol, producteur d’huile de ricin. Ce n’est pas de tout repos : « Les risques juridiques sont importants, bien souvent le droit coutumier se superpose au droit national, les parties prenantes locales sont fortes. Il faut être souple sur le schéma de sécurisation du foncier. D’ailleurs, nous sommes rarement propriétaires des surfaces. »

Sébastien Boyé pointe en outre le manque d’initiatives africaines. « L’accaparement des terres par des étrangers est au cœur du débat. Or il faut reconnaître que nous ne sommes pas submergés par les demandes émanant d’Africains. Mais la situation va évoluer. » « Le problème de l’Afrique est l’accès au financement, privé et public », soutient ainsi Bernard Bachelier. Les compétences sont un autre obstacle. Ainsi que le résume un agriculteur éthiopien, qui appelle de ses vœux une politique d’accès aux terres de son pays : « Nous avons de l’or entre les mains, mais nous ne savons pas comment l’utiliser pour lutter contre la pauvreté. »

___________________________

Qui investit et pourquoi

Par Michael Pauron

La Banque mondiale classe les investisseurs en trois groupes. Les gouvernements d’abord : alertés par la crise alimentaire de 2008, ils sont venus trouver de l’espace pour sécuriser leurs approvisionnements alimentaires, et donc privilégier les cultures d’exportation.

Les fonds d’investissements ensuite, attirés par la rentabilité potentielle d’un secteur en pleine croissance, par des prix sur les marchés mondiaux en hausse et par un marché régional en expansion. Enfin, les agro-industriels et les traders se distinguent par la dimension des acquisitions, sans toujours proposer un projet fiable.

Les sociétés spécialisées dans les agrocarburants sont également nombreuses, et représenteraient quasiment 5 millions d’hectares. Dans une étude parue en septembre, Les Amis de la Terre Europe identifient ainsi un certain nombre de sociétés européennes : le suisse Addax Bioenergy en Sierra Leone, les britanniques Sun Biofuels en Éthiopie ou D1 Oils au Swaziland, l’italien Agroils ou encore le norvégien ScanFuel au Ghana.

_____________________________

Olivier de Schutter : “Je dénonce l’iniquité des règles”

Par Michael Pauron

Olivier de Schutter est le rapporteur des Nations unies pour le droit à l’alimentation.

Spécialiste belge du droit à l’alimentation, il regrette les discours de bonnes intentions et appelle à la réforme des règles du commerce mondial, qui, par leur iniquité, écartent d’office le continent africain.

JEUNE AFRIQUE : En Afrique, plus de 200 millions d’hectares de terres cultivables sont disponibles et très convoités. Est-ce inquiétant ?

OLIVIER DE SCHUTTER : Après l’absence d’investissements depuis les années 1980, c’est vrai qu’il y a un regain d’intérêt pour les pays du Sud, là où la terre est disponible et la main-d’œuvre peu chère. Les pays de l’Organisation de coopération et de développement économiques (OCDE) craignent de ne plus avoir assez de place pour cultiver et investissent massivement dans les grandes exploitations. Mais la plupart des projets servent à développer les exportations. Les retombées pour les pays hôtes sont insignifiantes.

Comment améliorer le système ?

Les concessions faites aux investisseurs sont considérables et sans contrepartie. Regardez le Mozambique, qui, d’un côté, importe 305 000 tonnes de blé pour sa consommation – ce qui le rend vulnérable aux cours mondiaux –, et, de l’autre, offre des conditions très avantageuses aux exploitants étrangers, comme l’exonération de taxes et de droits d’entrée. Les bénéfices retirés pour le pays sont minimes. Les investisseurs pourraient s’engager, auprès des petits exploitants, à organiser des coopératives, développer les moyens de stockage. L’État pourrait de son côté acheter les récoltes et faciliter l’accès au crédit.

Pourquoi les États africains ne sont-ils pas plus fermes ?

Ils ont besoin de cet argent, et les investisseurs font de la surenchère d’un pays à l’autre. Il est très difficile pour les pays de la région de faire front commun, car le degré d’intégration régionale est insuffisant.

Le rapport de la Banque mondiale [BM] publié le 7 septembre* alerte sur les risques liés à la ruée vers l’or vert. L’institution est-elle méfiante à l’égard des fonds d’investissement ?

D’abord, le discours de la BM est contradictoire avec les actions de son bras armé pour le secteur privé, la Société financière internationale [SFI], qui encourage les États africains à limiter au maximum les contraintes qui pèsent sur les investisseurs et à leur donner des garanties juridiques fortes.

Ensuite, à la question « les investissements seront-ils bénéfiques à long terme ? », la réponse de la Banque mondiale est d’énumérer les conditions pour qu’ils le soient. Or la vraie question est de savoir si les terres disponibles doivent prioritairement bénéficier aux investisseurs étrangers ou aux paysans locaux. L’accès doit être équitable. Car l’important ce n’est pas l’investissement mais la manière de faire reculer la pauvreté dans les campagnes.

Les pays ne profiteront-ils pas de cette manne pour acquérir technique et savoir-faire, devenir plus compétitifs et faire reculer la pauvreté ?

Il ne faut pas confondre productivité et compétitivité. Dans la révolution verte opérée en Asie, la capacité de production a augmenté de 8 %, et la population malnutrie a augmenté de 9 %. En Amérique latine, la proportion est de 8 % et 17 % ! Si on laisse se développer les grandes exploitations, les petites vont disparaître, et les paysans vont rejoindre les villes. La petite agriculture préserve l’emploi, la nature limite l’exode, c’est la meilleure façon de faire baisser la pauvreté.

La petite agriculture peut-elle subsister dans la mondialisation ?

Pas dans l’économie low cost, ni avec l’iniquité des règles du commerce mondial, que je dénonce. Les pays de l’OCDE s’étaient engagés lors du sommet de l’Organisation mondiale du commerce [OMC] en 2005 à supprimer leurs subventions. En 2008, l’Union européenne les a restaurées sur le lait. Les soutiens aux producteurs et les normes faussent la concurrence. Le discours est : « Ouvrez vos marchés, vendez vos produits, on les transformera. » L’Afrique dépend des importations et est vulnérable aux prix mondiaux. Elle doit se diversifier, se protéger, ne pas se laisser enfermer dans la production de matières premières et développer son marché intérieur pour écouler sa production.

* « L’intérêt croissant pour les terres agricoles dans le monde peut-il apporter des bénéfices équitables à long terme ? »

Expert: Investors no longer believe fairytales about Ukrainian agriculture

2010-10-14T01:35:00.000-07:00

Published: 11 October 2010

by John Marone

Following the global financial crisis of 2008, the once golden eggs of the emerging Ukrainian market – real estate, retail and banking – remain cracked, soiled and reeking with debt.

At the same time, in a world of increasingly inclement weather and billions of mouths to feed, the country’s agriculture sector has come to command center stage among foreign investors eager to get in on growth.

Yet, despite a few well-publicized share offerings on European exchanges, and some high-profile mergers and acquisitions, this year’s expected boom has still not boomed.

Alex Lissitsa, president of the Kyiv-based agricultural lobby Ukrainian Agribusiness Club, grew up in a Ukrainian village before studying agriculture in the West.

Lissitsa told the Kyiv Post in a recent interview that foreign investors are already knee deep in Ukrainian agriculture, with full or partial stakes in around half of the country’s top 60 agricultural holdings.

But the road ahead toward greater consolidation and increased export presents several challenges, such as still-cautious equity markets and more questions than answers about Ukraine’s expected cancellation of the country’s ban on the sale of agricultural land.

KP: The Ukrainian parliament has repeatedly renewed the country’s moratorium on the sale of agricultural land on a yearly basis, although many expect the moratorium to finally be lifted in 2011, when it comes up for renewal again. Large international agribusiness companies have said they welcome the end to the moratorium, but you have said you are concerned. Why? What are these concerns? And what needs to be done to allay them?

AL: It’s not so important that Ukraine will have a land market, but what kind of land market it will be. Right now, it’s a black box, and no one knows what’s inside. For example, will it be possible for legal entities or only physical entities to buy land? What will be the limit on the maximum size of land use? Who will have legal advantage in a purchase? Will it be obligatory to sell land via a state bank, or will this be possible on the free market? How will it be possible to combat parcelization of land plots? Will a minimum price on land be set? There are a lot of such questions, but the seven draft laws on the land market that have been written up over the last three years offer different answers to these questions.

From the point of view of business interests, it’s important that the decisions taken are not only sufficient but also predictable for the mid-term. Otherwise, it will be difficult for a real business to operate. Only land speculators will win, which is also a big problem. For now, the whole process of introducing a land market looks more like a slogans’ competition than a well thought out economic strategy. The inevitability, however, of introducing a land market is becoming clearer every year.

KP: What about market consolidation in the sector? Are foreign companies also getting involved in the consolidation or can we expect them to wait until the sector is already consolidated before investing? Are smaller farms being gobbled up because they lack, for instance, storage facilities, or will some survive consolidation?

AL: Consolidation in the agricultural sector is an established fact. Holdings are increasing their presence, with 60 companies cultivating more than four million hectares of land. Half of these are fully or partially owned by foreign capital. For example, these are companies that have done IPOs (initial public offerings of company shares). Foreign capital is quite interested in Ukrainian assets, so it would be senseless to wait for the consolidation process to end when no opportunities for creating new agro companies will remain on the market and when an entry ticket in the form of the purchase of an already existing business could become more expensive.

Regarding small farms, their prospects are clear. Of course, we have examples of farming companies turning into large holdings over the years, but such precedents are few. It’s not just a matter of the presence of storage facilities, processing potential, sales or access to finance. Simple calculations show that it’s not profitable to grow grain in areas of less than 3,000 to 4,000 hectares, because you cannot cover the costs of modern equipment and technology in a reasonable amount of time. And without these things, you cannot be competitive. Therefore, small companies will fall into niche production of things like vegetables.

KP: Some large Ukrainian agribusiness players, such as Avangard and Nibulon, are placing their bets on export. What are Ukraine’s chances of becoming a serious global food exporter? I know it’s already a big grain and seed-oil exporter, but is there tension between those who want Ukraine to export finished food products and those who want to export more grain, seed oil and other raw food? Is government hampering the latter, for example, by bans on exports? Is export of food Ukraine’s future?

AL: It’s clear to everyone in the world and Ukraine that Ukraine’s potential allows it not only to cover its domestic needs but to export significant volumes of agricultural products. Consolidation of the export business with production continues afoot. But this is just one of the ways toward vertical integration. Some companies are getting the most added value from the domestic market. As regards the structure of export, buyers on the world market prefer to buy raw [agricultural] materials rather than finished [food] products. This is a fact. For example, the global market for wheat is a lot higher than the global market for flour.

Of course, we need to think about how to export products with a high added value, but it’s more important not to lose the markets of food production that we already have. For example, in free-trade talks with the European Union, the Europeans insist on the cancellation of export tariffs on [Ukrainian] sunflower seeds. This would make us into a supplier of raw materials for European sunflower seed oil makers. So, Ukrainian negotiators have to expend maximum effort toward maintaining these tariffs. As regards limits on export: First of all, they are restricted by our obligations as members of the World Trade Organization. But on the other hand, the depth of our country’s economic policy doesn’t allow one to hope that the government will somehow modernize the structure of export.

KP: Lastly, we have seen some IPO activity this year, but we were promised a lot more. What is holding up more IPOs by Ukrainian companies in Europe – bad market conditions?

AL: Over the past two or three years, there have been significant country risks and a crisis. When there were serious discussions about whether the hryvnia would collapse, or when one of branch of executive authority blocked the other, it was difficult to explain to investors that Ukraine was a country to invest in. As a results Ukrainian assets were undervalued. I cannot say now that everything is ideal, but at least the edge has been taken off these and other problems. In addition, food prices have risen. Therefore, we expect the investment attractiveness of Ukrainian agro companies on world capital markets to rise in the next couple of years. Without a doubt, a lot depends on the companies themselves. The days when one could tell investors fairytales about Ukrainian agriculture are long gone.

Kyiv Post staff writer John Marone can be reached at marone@kyivpost.com

Algeria seeks investment in key economic sectors

2010-10-14T01:31:00.000-07:00

Khaleej Times | 13 October 2010 Adel Arafa

ABU DHABI — The Government of Algeria is offering huge investment opportunities in tourism, real estate, agriculture, services and banking sector to attract foreign investors especially from the UAE, Algerian Ambassador to the UAE Humaid Shibaira said.

“The government guarantees these offers and provide blanket protection to foreign investors who enjoy all rights of ownership in equal footing the native citizens,’’ the ambassador said in a statement to Khaleej Times on the occasion of visit of Speaker of the UAE Federal National Council (FNC) Abdul Aziz Al Ghurair to the Algeria.

“The trip to Algeria will have significant parliamentary, political and economic dimensions. While in Algiers, Al Ghurair will hold talks with Prime Minister of Algeria Ahmed Ouyahia and a number of ministers and top officials over prospects of joint investment and partnership,’’ the diplomat said.

He indicated that the UAE-Algeria ties have experienced unprecedented headway and qualitative leaps over the last five years through the activation of investment and partnership with the UAE investors and major firms. UAE investors are pumping huge funds into the agricultural sector given the availability of vast arable lands and water and production inputs along with a large market which can serve as a gateway to European and African markets.

He termed prospects of joint cooperation as ‘promising’ under the support of the Emarati and Algerian leadership. He added that the UAE-Algeria joint ministerial committee will meet in May 2011 in Abu Dhabi to evaluate progress of the current joint cooperation and draw a one-year action plan to clear all obstacles ahead.

“Parliamentary cooperation can be very instrumental towards achievement of these ends through bilateral consultations and exchange of know-how and successful democratic experiences,” he said. The ambassador said that the Algeria Investment Council which is headed by the Prime Minister have the nod to the Emirates International Investment Company to build $6 billion integrated city in Algeria.

The civil aviation authorities in both countries, he said, had concluded air traffic agreements granting the UAE national carriers Emirates and Etihad Airways to operate new commercial flights between the two countries. Algerian Airways is running three flights per week to passengers and freights from the UAE.

Dubai is also linked by sea with many Algerian seaports. The ambassador told the paper that Algiers and Abu Dhabi had activated two important treaties on avoidance of double taxation and encouragement and protection of investment. — adel@khalejtimes.com

UAE has over 2,800 sq km in Sudan farms

2010-10-14T00:36:00.000-07:00

Emirates 24/7 | Wed, 13 Oct 2010

The UAE controls more than 2,800 square kilometers in farms in Sudan as a result of its decision to invest in agricultural projects in fertile Arab nations to slash its soaring food import bill, according to a Sudanese official.

The farms, scattered over Khartoum, Jazeera, Nile and other arable provinces in the East African Arab country, are more than triple the area of Bahrain and account for nearly 3.5 per cent of the UAE’s total area.

Figures by the Khartoum-based Arab Organization for Agricultural Development showed those farms exceed the UAE’s total cultivated areas, estimated at around 3.1 per cent of the country’s area of 81,000 square kilometers.

Quoted by the semi official UAE daily Alittihad, a Sudanese embassy official in Abu Dhabi said the UAE is the largest Gulf investor in farm projects in Sudan, controlling around 700,000 acres (4,832 square kilometers). The farms account for nearly 58 per cent of the 1.2 million acre farming ventures owned by the Gulf Cooperation Council (GCC), which groups the UAE with five other Gulf nations.

“The UAE’s farm investments in Sudan are the largest among the GCC investments in agricultural projects,” said Muneera Abdul Halim, an economic adviser at the Sudanese Embassy in the UAE.

She said the Zayed farm project is among the first and largest agricultural venture launched by the UAE in Sudan, with investment of around $60 million.

The UAE, Saudi Arabia and other Gulf nations decided in 2008 to invest abroad in farming projects given their arid desert nature following a surge in global food prices that were among the main drivers of soaring inflation in the region.

The six members are among the largest food importers in the world, with their combined farm import bill exceeding $20 billion in 2009.

AOAD data showed the GCC’s cumulative farm imports exceeded $75 billion during 2005-2009, accounting for around 41 per cent of the total Arab food import value of $180 billion although the population of the six members of around 36 million formed only about10 per cent of the total Arab population.

GCC and other Arab officials have repeatedly voiced concern about the farm gap and growing reliance on food imports, mainly from the US and other Western countries. Some officials considered such reliance as a risk to their security.

According to AOAD, a key Arab League establishment, most regional nations are suffering from slackening farm exports and rapid growth in the population, leading to a steady increase in their imports of food products.

It said the surge in exports had created a massive food gap of more than $180 billion over the past 10 years to turn the region into the biggest single food buyer.

In a recent study, a key Saudi investment firm said the GCC’s decision to invest in farming projects in Sudan and other countries constitutes a turnaround in their policies to achieve food self sufficiency, describing it as unrealistic goal.

NCB Capital said the policy shift means the GCC nations, which control nearly 45 per cent of the world’s proven oil wealth, will rely more on food imports but such projects will allow them to overcome natural constraints at home.

“The GCC nations are shifting their agricultural policies away from the nationalistic goal of food self-sufficiency towards more flexible and broad-based efforts to ensure food security. The previous policies were ultimately undermined by acute constraints posed by the natural environment and resources on domestic agriculture,” NCB Capital said.

“This shift is translating into greater reliance on imports, outsourced agriculture and a greater focus on dry agriculture. Farming does not represent a significant component of the GCC economies as an exceptionally arid climate and low capital investments have limited its contribution to GDP and employment.”

Muneera said Sudan, long dubbed the “Arab and African food basket”, had massive arable land, estimated at nearly 100 million hectares, accounting for around 48 per cent of the total Arab cultivated areas. It also has around 130 million hectares of pasture areas and over 135 million heads of livestock.

Hedge Fund Oil Bets Climb to Five-Month High: Energy Markets

2010-10-11T04:19:00.000-07:00

October 11, 2010, 1:53 AM From Businessweek

Oct. 11 (Bloomberg) -- Hedge funds raised bullish bets on oil to the highest level in more than five months amid speculation that the Federal Reserve will enact further stimulus measures to keep the economic recovery on track.

Hedge funds and other large speculators increased wagers on rising crude prices by 44 percent in the seven days ended Oct. 5, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. It was the highest level since April 23.

“The writing has been on the wall for the rally in crude oil for the last few weeks,” said Hamza Khan, an analyst with Schork Group Inc., a consulting company in Villanova, Pennsylvania.

Crude has rallied more than 13 percent since Sept. 17 amid growing evidence that the Fed will need to start debt purchases to prevent the world’s biggest economy from sliding back into a recession, weakening the U.S. currency and boosting dollar- denominated commodities. The dollar depreciated 1.1 percent last week, while crude advanced 1.3 percent.

Oil for November delivery rallied 81 cents to $83.47 a barrel in electronic trading on the New York Mercantile Exchange today, extending a 99-cent gain on Oct. 11 after the Labor Department said U.S. employers cut hiring more than forecast in September, trimming 95,000 workers. The median estimate of 87 economists surveyed by Bloomberg News was for a decline of 5,000 jobs.

‘Additional Accommodation’

The employment report increased the prospect of the Fed debt purchases, according to Andy Lipow, president of Lipow Oil Associates LLC, a Houston-based energy consultant. The Dollar Index, which tracks the U.S. currency against those of six major trading partners, has slipped more than 12 percent since this year’s peak on June 7.

The central bank bought $300 billion of Treasuries in 2009.

Deutsche Bank AG raised its fourth-quarter and first- quarter 2011 forecasts for both Nymex and Brent oil to $80 a barrel, Adam Sieminski, the bank’s Washington-based chief energy economist, said in a report last week. As recently as mid- September, the bank’s forecasts were $70 for the fourth quarter and $75 for the first.

“You look around the world and see good economic news out of China and some parts of the European Union, most notably Germany,” Lipow said. “Even here in the U.S., as bad as the perception of the economy is, total petroleum demand is up.”

The four-week average of total petroleum products supplied rose 2.2 percent from a year ago, the Energy Department reported last week.

Net Longs

Net-long positions in oil held by what the CFTC categorizes as managed money, including hedge funds, commodity pools and commodity-trading advisers, rose by 51,634 futures and options combined to 168,540, according to the CFTC report.

Bullish bets on gasoline prices more than doubled to 50,354, the fifth straight weekly increase, the data showed. Net-long positions on heating oil rose for a sixth week, advancing 21,433, or 69 percent, to 52,699.

Net-long positions in futures and options combined in four natural-gas contracts decreased by 19,828 futures equivalents to 31,479 in the week ended Oct. 5, the lowest level this year, the CFTC data showed.

The measure of natural-gas net longs includes an index of four contracts adjusted to futures equivalents: Nymex natural gas futures, Nymex Henry Hub Swaps, Nymex Henry Hub Penultimate Swaps, and ICE Henry Hub Swaps. Henry Hub in Erath, Louisiana, is the delivery point for Nymex futures, a benchmark price for the fuel.

--With assistance Margot Habiby in Houston, Christian Vits in Frankfurt and Mark Shenk in New York. Editors: Dan Stets, Bill Banker

U.S. Hedge Fund Third Point Accumulating Position in Potash Corp

2010-10-11T04:16:00.000-07:00

Third Point, Dan Loeb's US$3.3-billion hedge fund, has accumulated a position in Potash Corp. of Saskatchewan Inc. (POT.TO) in recent weeks, according to a story in the Globe and Mail newspaper that in turn cites reports of a new listing of the fund's top five holdings.

Potash clocks in at No. 4 on Third Point's top positions list, according to the fund's latest disclosure of holdings, which was reported on the Market Folly blog, the Globe and Mail says. The new position is an attempt to profit should BHP Billiton Ltd. raise its hostile US$130-a-share offer for Potash, or should a bidding war erupt, it adds.

Clive Hedge Fund Gains 6.6% in September on Agriculture, Gold Investments

2010-10-11T03:09:00.000-07:00

By Chanyaporn Chanjaroen Bloomberg - Oct 8, 2010

Clive Capital LLP’s $4 billion commodity hedge fund returned 6.6 percent in September, the best monthly return since May 2009, according to a report to investors obtained by Bloomberg.

Clive Fund Ltd. increased 1.7 percent in the first nine months, the London-based company said in the report. The figures refer to Class B shares introduced in May 2008.

“The agriculture sector was the best performer with strong profits in corn, cotton, soybeans and the oilseeds and vegetable oil complex,” according to a commentary in the report of the fund, which is managed by Chris Levett. “The fund was profitable in precious metals on the back of our length in gold, platinum and palladium.”

Cotton futures jumped 18 percent in September and reached the highest price in 15 years on concern demand from textile mills would outstrip supply as floods destroyed crops in Pakistan, and low temperatures and rain hurt production in China, the biggest grower. Corn and soybeans advanced 13 percent and 9.6 percent, while gold climbed 4.9 percent, touching a record.

Clive beat average hedge fund returns globally of 3.4 percent last month, based on data from Chicago-based Hedge Fund Research Inc., which tracks more than 2,200 such capital pools.

Hedge funds are largely unregulated investment vehicles whose managers can trade any asset, aim to make money regardless of whether markets rise or fall and participate substantially in profits from money invested.

Is Zambia Africa’s next breadbasket?

2010-10-06T23:41:00.000-07:00

Mail & Guardian | Oct 01 2010

JODY CLARK

The evening sun is setting on Francis Grogan’s Zambian farm and the combine harvesters are finishing their work for the day. Francolins scuttle in their wake and herons pick at the ground where wheat has been growing.

But instead of letting the farmland lie fallow until next season, Grogan will soon be planting again.

“The land is so good here that there’s no need for it,” says the Irishman and managing director of Zambeef, one of sub-Saharan Africa’s largest food producers.

“The sun shines all day and there is plenty of water for irrigation, which means we can double-crop. Once the wheat is harvested, we’ll plant the maize and sorghum.”

Long regarded as the poorer cousin of its Zimbabwean neighbour, Zambia is fast gaining attention as a desirable destination for agricultural investors.

International investors from Britain to South Africa have begun putting money into infrastructure development and transport, and about 200 exiled Zimbabwean farmers have taken leases from the Zambian government to develop farmland in the country.

Meanwhile, companies such as Zambeef have risen on the back of a growing Zambian middle class, whose incomes and expectations are rising.

From humble beginnings in 1991 in Lusaka, where the business started as an abattoir and two butcher shops, Zambeef is now a $200-million-a-year company. It is the largest meat producer in Zambia, slaughtering more than 60 000 head of cattle and 3,5-million chickens a year.

“We have a lot more water than Brazil, there is plenty of rainfall and solid support from the government. This is an excellent country to invest in,” Grogan said.

The question now on many people’s lips is: Could Zambia become the next breadbasket of Africa? It certainly has the potential.

Of a total land area of 752 000km2, 420 000km2 is classed as having medium to high agricultural potential. But, only 15% of arable land is cultivated, according to the World Bank.

Despite this, last season’s maize harvest satisfied domestic consumption more than twice over, according to the International Trade Centre in Geneva.

Of a total harvest of 2,7-million tonnes, only one million tonnes of maize was absorbed by the home market. The surplus will be exported, and the country is looking for buyers.

Although economic growth has averaged 5% over the past decade thanks to a roaring demand for the country’s copper, the agricultural industry has floundered. Agricultural growth has averaged less than 1% annually.

Only 1% of small farmers have access to electricity and just 28% have access to a public water supply, making irrigation all but a dream for many.

Despite the country’s potential, between 80% and 90% of its farmers still work on small-scale or subsistence operations.

Access to finance and capital is also a problem. The Zambian National Farmers’ Union has said that “Zambia’s market for agricultural finance is fundamentally dysfunctional”.

Credit is scarce and expensive for the majority of farmers and heavily skewed towards the larger corporate sector.

In addition, the union says, loan terms are often too short to accommodate the long-term nature of agriculture, and the processing of loan applications by banks frequently takes too long.

These problems make an already risky sector even more hazardous, with non-performing loans in the 0agricultural sector now exceeding 37%, against 13% across all other sectors of the economy.

Large sums of money are needed to kick-start agricultural businesses. According to Grogan, it costs $10 000 a hectare to turn bush into farmland, but even for large-scale businesses such as Zambeef, bank lending rates are about 20%.

For that reason the company has turned to international organisations, such as the European Investment Bank, which offers loans for farming operations at about 5% interest. This is not an option for most farmers in Zambia.

Despite this, the tremendous possibilities have continued to attract investors, with a delegation of Indian commercial farmers expected in December.

That could benefit both them and Zambia.

The United Nations Food and Agriculture Organisation says that if Zambia could equal agricultural activity in Kenya, a country where two-thirds of the land is semi-arid, output would amount to $1,5-billion a year –10% of Zambia’s GDP.

The sector’s current contribution is about 1%.

“The Zambian government is very supportive — and they aren’t looking for backhanders,” said Grogan. “Of course there’s a lot of red tape and bureaucracy, but that’s the same everywhere in the world.

“We came up from very humble beginnings, delivering beef to the shops in the morning in Land Rovers. Now we have a turnover of £200-million a year and we’re listed on the local exchange.”

SLC Agricola may sell stake in Brazil farmland unit this year, CEO says

2010-10-06T23:40:00.001-07:00

Bloomberg | Oct 2, 2010

By Lucia Kassai

SLC Agricola SA, a Brazilian farm group, plans to create an agricultural-property company and sell a stake to an investor this year, Chief Executive Officer Arlindo de Azevedo Moura said.

SLC, whose crops cover an area almost as big as Jacksonville, Florida, will seek to sell a 49 percent slice of the new company, Land Co., to local or foreign investors that may included sovereign and pension funds, he said today in an interview in Sao Paulo. Porto Alegre, Brazil-based SLC would retain control of the unit and contribute farmland.

“Agricultural land prices in Brazil have a tremendous potential to increase,” said Moura, who declined to give a possible value for the stake.

SLC Agricola produces cotton, soybeans, coffee, corn and rice on about 223,000 hectares (552,000 acres) in Brazil. The company raised 308 million reais ($183 million) in an initial public offering in June 2007.

Shares fell 2 centavos, or 0.1 percent, to 18.64 reais at 2:11 p.m. New York time in Sao Paulo trading.

GM ‘lesser of two evils’: Olam

2010-10-06T23:37:00.000-07:00

The Land | 04 Oct, 2010

ANDREW MARSHALL

THE Singaporean boss of fast-growing global agricultural commodities trader, Olam International, says his company won’t buy genetically modified (GM) crops, but he thinks they are an inevitable “must” to feed a hungry planet.

“Our board of directors will not be involved in GMs, but I believe one way we can meet the food challenge is to adopt GMs as one of the solutions,” says Olam’s group managing director, Sunny Verghese.

Addressing the who’s who of Australian agribusiness at this year’s Rabobank Agribusiness Leadership dinner, Mr Verghese said China alone was increasing its food consumption demand by 20 per cent every year, yet for the past 15 years Chinese food crop production had been almost flat.

“In time we will see that GMs are the lesser of two evils and the world will embrace this technology to lift agricultural production rather than opt to go hungry,” he said.

With world population numbers growing at 75 to 80 million people every year, he said the reality of food supply and demand couldn’t be ignored, nor could the need for research investment into better food production efficiency.

Mr Verghese’s 20-year-old company is the name behind a ballooning portfolio of Australian and overseas agricultural trading, farming and processing businesses, including Queensland Cotton, Western Wool in NSW, Mt Tyson Seeds in Queensland and 12,000 hectares of southern Australian almond orchards.

Olam began as a cashew trader, then moved into cocoa, coffee and spices, and now has suppliers, farms, factories and customers in 60 countries.

Mr Verghese said China was increasingly fulfilling its agricultural needs by importing more food – and saving its precious agricultural water resources.

About 20 per cent of Chinese agriculture’s water requirements were now satisfied by imports of crop and livestock products grown using another nation’s water reserves.

“China has 20pc of the world’s population, but only six per cent of its fresh water,” he said.

This year it imported soybeans for the first time – a scenario few could have imagined China doing 25 years ago.

China and India were extracting so much ground water to feed their thirsty industrial and agricultural sectors that ground water tables were dropping at the rate of three to six metres every year.

Increasingly water was also diverted to cities to supply industry and urban growth – today agriculture only accounted for 40pc of water use in China, Vietnam and India but enjoyed 80pc of water resources 30 years ago.

The emerging economies of Asia were not only eating more protein in the form of cereals, but also demanding more fat content in their diets.

Mr Verghese said Olam saw “sustainable value” in investing in agriculture.

Despite opportunities to diversify into other industries, the company maintained a strict focus on understanding and following agricultural commodities, which in turn gave it a close relationship with suppliers and the opportunity to find and support niche market opportunities paying premium prices.

He believed increasing opportunities for food and agriculture would foster a revival in research and development for the industry – including much more private capital.

TIAA acquires controlling interest in Westchester Group, Inc.

2010-10-06T23:33:00.000-07:00

TIAA-CREF | October 04, 2010

Acquisition of Premier Agricultural Asset Manager Enhances Offering for Institutional Investors and Extends TIAA’s Leadership in Agricultural Investing

NEW YORK–(BUSINESS WIRE)– Teachers Insurance and Annuity Association of America (TIAA) has acquired a controlling interest in Westchester Group, Inc. (Westchester), one of the nation’s premier, independent agricultural asset managers. The transaction enhances TIAA’s agricultural investment platform for institutional investors and extends its leadership in agricultural investing. Financial terms of the transaction were not disclosed.

“TIAA and Westchester offer a fully integrated agricultural asset management platform that combines a broad global presence with world-class agricultural asset management,” said Scott C. Evans, head of asset management for TIAA-CREF. “Institutional investors will be able to tap TIAA’s expertise and prudent approach to investing and Westchester’s nearly 25 years of experience, on-the-ground presence, local knowledge and attention to quality properties in the U.S. and Australia. We invest in farmland with a long-term view that emphasizes growth through sustainable practices.”

By joining TIAA as a standalone subsidiary, Westchester remains independent and able to exercise its unique expertise and entrepreneurial approach. Randall Pope, Westchester’s president and chief operating officer, will become chief executive officer of the company. Murray Wise, Westchester’s founder and chief executive, will remain a board member and adviser. Westchester’s other investment professionals will continue with the company as well.

“TIAA and Westchester have complementary capabilities and a shared strategic focus on the future of agricultural investing,” said Mr. Pope. “Together, our experience and expertise will enable us to achieve the ownership and investment objectives of institutional clients, as well as attracting new institutional investment capital to the agricultural marketplace.”

TIAA is among the largest institutional investors in agriculture, with investments in more than 400 farms in North America, South America, Australia, and Eastern Europe as part of its General Account. Westchester, which has managed agricultural investments on behalf of TIAA since the inception of TIAA’s agricultural portfolio, manages more than $1 billion in agricultural assets and nearly 320,000 acres throughout the United States and Australia.

“We think the long-term outlook for the agricultural asset class is favorable,” said Jose Minaya, head of TIAA’s Natural Resources Group. “The scale and diversification of our holdings, and now the combined expertise of our company and Westchester will enable us to continue to identify the highest-quality investment opportunities. We also share a long-term view of agricultural investing that emphasizes responsible stewardship of farmland and a risk-managed approach.”

Farmland, with its historically stable returns, differs from other asset types in its market cycles and can potentially reduce volatility relative to a well-diversified portfolio of stocks, bonds and real estate as well as provide a hedge against inflation. TIAA employs a variety of structures in making its farmland investments, with a focus on acquiring equity ownership in the underlying land. The company employs or partners with premier agricultural asset managers to source farmland investment opportunities and then develop and manage the portfolio.

“This transaction shows that companies like Westchester can join TIAA and obtain the benefits of our integrated asset management platform while retaining their independence,” said Sheila Hooda, senior managing director of mergers & acquisitions for TIAA-CREF, who handled the transaction for the company.

Agricultural investments occur within TIAA’s General Account, an insurance company general operating account. The performance of the investments held in the TIAA General Account support the TIAA Traditional Annuity’s guarantees of principal, minimum guaranteed returns, additional amounts and payout obligations. The General Account primarily invests in corporate and government bonds, structured finance instruments, and real estate.

The TIAA General Account is an insurance company account and does not present an investment return, and is not available to investors.

About TIAA-CREF

TIAA-CREF (www.tiaa-cref.org) is a national financial services organization with $410 billion in combined assets under management (as of 6/30/10) and provides retirement services to the nonprofit and government fields.

About Westchester Group, Inc.

Westchester Group, Inc., (www.westchester-group.com), headquartered in Champaign, Illinois, is a leading agricultural asset management firm, providing a complete range of agricultural real estate and management services. The company specializes in portfolio management and acquisition of farmland for institutional and corporate clients, and individual farmers, as well as individual investors. Westchester manages a diverse range of crops for its clients, including corn, soybeans, almonds, wine grapes, apples and citrus.

Saudis to invest $500 million in Brazil agriculture

2010-10-06T23:28:00.000-07:00

Qatar News Agency | Tuesday, 05 October 2010

Sao Paulo: Representatives of Saudi group Agro invest, a public-private agricultural investment company, are now in Brazil seeking partnerships for producing and exporting grain and poultry.

The group’s capital for investing abroad is US$ 500 million. “Brazil has lots of potential. It has good climate and good soil for grain and poultry farming. It is a good country to invest in,” said businessman Mohamed Abdullah Al-Rasheed, the president of Saudi Greenhouses, one of the companies in the Agro invest group.

Agro invest, also known as the International Agriculture and Food Investment Company, was established last year as part of a Saudi government project to ensure food security and help stabilize prices on the local market, according to Brazil-Arab News Agency.

According to Rasheed, activities should begin in 2011, and for such, we must get to know the agricultural opportunities that Brazil has to offer. “We want long-term partnerships,” he added.

Aside from Brazil, the group’s companies are eyeing African, Asian and European countries.

Agro invest’s main fields of interest are poultry, wheat, maize and soy. The group intends to establish several production-oriented partnerships both in Brazil and the Arab country.

As negotiations move forward, Rasheed claimed that the second step is sending a technical team to Brazil to assess the conditions for production and exporting.

Saudi Greenhouses is the leading greenhouse vegetable-growing enterprise in the Arab country.

“I am looking for a partner in melon production for distribution in Saudi Arabia,” said the entrepreneur, who has 74 hectares of greenhouses for growing cucumber, tomato, sweet pepper and eggplant.

The Saudi businessman met on Monday with Brazilian companies in a meeting organized by the Ministry of Agriculture, Livestock and Supply.

On the Brazilian side, the meeting was attended by the Association of Soy Growers of the State of Mato Grosso (Aprosoja), Ricardo Tomoczyk, who met with Saudis and claimed that they will do business for certain.

To the export manager of honey company Novo Mel, Carlos Rehder, and the director of trading company DGA, Gaspar Candioli, who maintain a partnership for selling soy and maize, the meetings were very good.

Both of them spoke with the president of Alsanie Trading, Abdullah Al-Sanie, who is looking for partners in the grain industry, especially soy and maize for animal feed.

The Alsanie group has four companies in Saudi Arabia. In the agricultural field, the group produces poultry and egg, and represents pharmaceutical products for animals, agricultural machinery and auto parts.

The group’s poultry company, Al-Wadi Poultry Farms, has five farms in the country and capacity for slaughtering over 35 million birds per year. Nevertheless, Sanie wants to establish a joint venture with a Brazilian company to produce more chicken and supply the Saudi market.

“The coming of the Saudi delegation was very important. High quality companies and important people have come to negotiate with Brazilian businessmen,” said the director of International Agribusiness Promotion at the Ministry of Agriculture, Eduardo Sampaio.

According to him, the soil, the climate and the abundance of water, coupled with the Brazilian technology and entrepreneurship, have led the country to become the leading producer and exporter of food, attracting investment opportunities.

Aside from purchasing land, Sampaio claimed that it is possible to invest in Brazil in different ways, such as contract farming, financial market mechanisms, stock market or partnerships.

Merchant Commodity Fund Swings Into Black In Sept.

2010-10-06T11:51:00.001-07:00

Oct 6 2010 | 12:24pm ET

A commodity hedge fund managed by a pair of former Cargill traders is making a bid for a seventh-straight positive year.

The Merchant Commodity Fund erased its year-to-date loss in September, rising 12.7% on the month. The fund is now up 7.5% in 2010, Bloomberg News reports. The $1.1 billion agriculture and energy fund is headed by Michael Coleman, based out of Singapore, and Doug King, who works in Zug, Switzerland.

Merchant Commodity returned 5.2% last year and 24% in 2008.

The average hedge fund returned between 3% and 3.5% last month, according to industry indices. The Standard & Poor's 500 Index rose 8.9% in September

Les terres rares deviennent une ressource indispensable

2010-10-04T01:45:00.001-07:00

Par Nathanael Gabay*

Encore relativement méconnus, ces métaux non ferreux sont bien partis pour être le thème d’investissement des prochaines années.
Les terres rares regroupent, sous ce terme que d’aucuns jugeront inapproprié, 17 métaux non ferreux (dont le scandium, l’yttrium, le lanthane, par exemple) aux propriétés chimiques uniques et non substituables, parmi lesquelles l’amplification des couleurs, la réfrigération magnétique ou l’amélioration de la transmission des lasers. Dans les faits, ces molécules sont devenues indispensables à l’industrie de pointe et aux technologies du futur. On en trouve ainsi dans les écrans LCD et les téléphones portables, mais également dans les ampoules à basse consommation, les voitures électriques et les éoliennes. Les terres rares sont considérées comme une ressource clé dans le développement de l’industrie verte. A titre d’exemple, un véhicule hybride contient entre 15 et 16 kilos de terres rares et une éolienne offshore en nécessite plus de 600 kilos! La technologie militaire se développe également à partir des performances des terres rares. La haute précision des missiles dits «intelligents» a ainsi été possible grâce à la superpuissance des aimants composés de l’alliage samarium-cobalt. Cette dépendance des technologies civiles et militaires à l’égard des terres rares en a fait une ressource stratégique pour toutes les grandes nations industrialisées.

Le contexte économique actuel est particulièrement favorable à une envolée du prix des terres rares. En effet, l’offre actuelle (125 000 tonnes) peine à satisfaire une demande mondiale qui explose (134 000 tonnes, selon les chiffres 2009 de Lynas) et alimente la hausse des prix de la plupart des métaux rares. Ainsi le néodyme, qui est utilisé dans les moteurs hybrides et les éoliennes, a vu son prix multiplié par quatre en deux ans. Mais le principal facteur d’une explosion des prix des terres rares tient à la structure de production extrêmement concentrée. En effet, grâce à une ambitieuse politique d’investissements entamée au milieu des années 80, la Chine s’est constitué un quasi-monopole sur ce marché et fournit actuellement 95% des besoins mondiaux. Cette position dominante permet à la Chine de pousser les prix à la hausse grâce à une politique de restriction des exportations et de taxes à l’export. Et on a vu ces dernières semaines la dimension stratégique des métaux rares. En effet, lors des tensions diplomatiques entre la Chine et le Japon mi-septembre, les terres rares se sont révélé un outil de pression pour Pékin. Menace sérieuse pour l’industrie japonaise lorsqu’on sait que la Toyota Prius et les écrans LCD de Sony ne pourraient exister sans europium et thulium.

Doit-on alors craindre une bulle? Cela semble peu probable car les réserves mondiales de terres rares, estimées à près de 100 millions de tonnes (selon le US Geological Survey) et réparties sur l’ensemble du globe, sont largement suffisantes pour accompagner la progression de la demande. Malgré son leadership actuel, la Chine possède à peine 35% des terres rares extractibles et de nombreux gisements occidentaux ne sont pas exploités. Européens et Américains, principaux transformateurs de métaux rares, semblent donc attendre la montée des prix ou la nécessité de sécuriser leur approvisionnement pour lancer de vastes plans d’investissements miniers sur leur propre territoire.

Dans une situation de frictions entre l’offre et la demande et d’un producteur décidé à faire monter les prix, comment l’investisseur peut-il profiter du potentiel fortement haussier de ce marché? Contrairement à la majorité des métaux précieux tels que l’or ou l’argent, il n’existe pas pour les terres rares de marché à terme organisé tel que le Nymex. De plus, les sociétés spécialisées dans l’extraction de terres rares sont très majoritairement étrangères et non cotées sur les places boursières européennes, ce qui les rend difficiles d’accès pour les investisseurs suisses. Pour y remédier, la société Solactive® a créé un indice thématique sur les entreprises extractrices de terres rares, le Solactive® Rare Earths Performance-Index. Il suit la performance de sept à neuf valeurs parmi une liste d’une quinzaine d’entreprises dont l’activité principale est liée aux terres rares. L’indice est pondéré selon la capitalisation boursière des constituants et rebalancé tous les trimestres afin d’éviter une perte de liquidité due à un rachat ou une fusion. En Suisse, l’indice Solactive® Rare Earths Performance-Index est investissable à travers le Certificat Tracker (ISIN: CH0112278558) émis par EFG Financial Products. Il permet de suivre l’indice tant à la hausse qu’à la baisse et s’adresse donc à des investisseurs avisés en raison du risque de perte en capital. Lancé en juillet 2010, ce certificat a déjà tenu toutes ses promesses avec une progression de 83% en seulement deux mois (au 17 septembre)!

* Conseiller en investissements, EFG Financial Products AG.

Pension fund Calstrs eyes $2.5 billion in commods

2010-09-26T02:57:00.001-07:00

NEW YORK (Reuters) - Investment strategists at Calstrs are recommending the No. 2 U.S. pension fund invest up to $2.5 billion in commodities in the next three years, one of the largest institutional allocations planned for the sector.

They also suggest the $132 billion California State Teachers Retirement System not just invest passively in commodity indexes -- as institutional investors have typically done in the past -- but also in actively-managed hedge funds and physical production of raw materials, according to a paper used earlier this month to brief its pensions board.

"Rather than passively investing in commodities, staff advocates a range of active strategies to potentially hedge inflation, profit from commodity price moves up or down and reduce volatility," Calstrs' investment committee staff said in the paper, a copy of which was obtained by Reuters on Thursday.

In a more detailed recommendation to the Calstrs board three months after it voted in favor of a commodities investment, the committee recommended allocating up to 1.5 percent of its assets to commodities over three to five years, rising from below $150 million in the first year to nearly $2.5 billion by the third year.

An investment staff at Calstrs said the board was to be briefed again on the commodities investment plan in October.

"At this point, no decision has been made as yet," the staff said, stressing the plan was still in discussion stage.

The paper presented to Calstrs' board is among the best evidence yet that major institutional investors are still interested in expanding the estimated $300 billion that has been invested in commodity markets over the past decade.

But the approach toward the sector may be changing, as new strategies are sought to maximize returns at a time of highly correlated performance and negative roll returns on futures.

While the first wave of investment years ago had bet commodity markets would offer diversification from equities and bonds, that argument broke down as many markets moved in sync.

The staff recommended that Calstrs adopt a three-pronged strategy comprised of investments in commodity index futures and swaps; hedge funds and trend-following funds; and physical commodity-producing partnerships.

"For example, in the first year of implementation, it is expected that commodities investments would only amount to less than $150 million, but grow to nearly $2.5 billion by the end of Year 3," the said the paper, presented by Calstrs investment staff Carrie Lo and Steven Tong and endorsed by Chief Investment Officer Christopher Ailman.

Calstrs's investment team recommended using the Dow Jones UBS index .DJUBS for the pensions' index futures portfolio, saying it had a more balanced exposure to the different commodity sectors than the energy-dominant SPGSCI .SPGSCI.

Calstrs' foray into commodities is expected to come under its Absolute Return asset class, which targets about 5 percent of the fund's assets, or just under $7 billion.

The investment staff at Calstrs also gave their board the option of having a smaller trial investment of $300 million to $500 million for commodities in a different asset class, although they said they preferred a bigger allocation.

(Reporting by Barani Krishnan; Editing by Alden Bentley)

Credit Suisse commods team leaves to form own fund

2010-09-26T02:54:00.000-07:00

NEW YORK (Reuters) - A top Credit Suisse (CSGN.VX) commodity trader is leaving the bank, along with a team of proprietary traders, to set up a hedge fund backed by $150 million from private investment firm Blackstone Group (BX.N), two people familiar with the matter said.

The move by George 'Beau' Taylor, a rainmaker renowned for making big bets on energy markets at a series of Wall Street firms, is the latest response to U.S. lawmakers in July passing new rules cracking down on speculative trading.

Eight people will be leaving the bank, including Taylor, the global head of commodities arbitrage trading, and Trevor Woods, head of energy arbitrage trading.

Credit Suisse and Blackstone declined to comment on the moves, which were first reported by the Wall Street Journal on its website on Thursday.

Investment banks like Credit Suisse with proprietary trading desks are looking a hard look at their trading businesses and whether they comply with the so-called Volcker rule, part of broader financial reforms designed to rein in banks from making risky bets with their own capital.

Credit Suisse's proprietary-trader ranks have thinned from as many as 250 to just 100, a person familiar with the firm told Reuters.

The Volcker rule is widely expected to shake loose a number of trading teams from banks, creating opportunities for investment firms like Blackstone to help launch and take stakes in new hedge funds.

Last month, JPMorgan Chase & Co (JPM.N) told its proprietary commodities traders that their desk will be shut down, as it looks to comply with new U.S. banking laws. Other proprietary desks will also be shut down over time, one source said at the time.

Commodities Outlook Is ‘Constructive,’ Barclays Says

2010-09-26T02:51:00.000-07:00

Sept. 23 (Bloomberg) -- Commodities have a “constructive” outlook, with supply constraints set to become a more dominant theme in the fourth quarter, Barclays Capital said.

Demand for coal, aluminum, coffee, copper, crude oil, corn, sugar and soybeans probably will climb to a record this year, analyst Kevin Norrish said today at a presentation in London. The Reuters/Jefferies CRB Index of 19 raw materials is headed for its best performance in the current quarter since last year’s final three months.

“We are pretty positive on commodities for the rest of this year,” Norrish said. “Copper is looking very strong.”

The CRB Index fell in this year’s first six months on concern that the world economic recovery rebound might falter because of slower Chinese growth and budget deficits in Europe. The gauge has added 8.2 percent in the third quarter as gold climbed to a record, cotton rose to the highest price since 1995 and wheat surged.

“The current quarter has proved the strongest for commodity investments so far this year, and we expect further upside price risk in a number of markets heading into the fourth quarter, especially in oil and base metals, but in some agriculture markets as well,” Barclays Capital said in a global outlook report e-mailed today.

Chinese Economy

Raw materials slid in the second quarter as China, the world’s largest consumer of copper, energy and iron ore, took steps to curb its real-estate market. An index of the six main industrial metals traded on the London Metal Exchange dropped 16 percent in the period, the most since the fourth quarter of 2008.

“China’s policy-induced slowdown is showing signs of stabilizing,” Barclays Capital said in the report.

Supply limits will help industrial metals perform well for the rest of 2010, particularly copper and tin, as well as agricultural commodities, Norrish said. He also pointed to demand from emerging markets.

Copper for delivery in three months reached a five-month high on the LME today as inventories monitored by the exchange headed for a 31st weekly decline in a row. The ratio of stocks to consumption probably will fall to an all-time low in 2011’s second quarter, due mainly to Chinese demand, Norrish said.

Copper, Tin

Immediate-delivery copper’s discount to the three-month price, the so-called contango, shrank to $1 a metric ton today, according to LME figures. The spread was at $7.50 in the prior session. A near-term price higher than longer-dated contracts, known as a backwardation, may signal concern about scarcity.

“We are seeing these markets starting to really look quite tight,” Norrish said. “Contangos are starting to tighten up now and are moving into backwardation, which is a classic signal that physical supply and demand is starting to really make an impact.”

The market for tin is “probably as tight as copper,” Norrish said. He predicted an average price for immediate- delivery metal of almost $27,000 a ton in next year’s second quarter. Cash tin traded at $23,645 at 12:55 p.m. in London today. The CRB Index was last up 0.3 percent at 279.77 points.

--With assistance from Claudia Carpenter in London. Editors: Dan Weeks, Claudia Carpenter.

To contact the reporter on this story: Anna Stablum in London at astablum@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

The One Commodity Hedge Fund That's Killing It Right Now

2010-09-14T01:58:00.000-07:00

David Coolidge of Velite Capital, a Houston-based commodity fund with about $1 billion under management, is outperforming almost the entire hedge fund industry right now.

In August, Velite was up 20%, according to an e-mail sent to investors that was obtained by Bloomberg.

That means he outperformed other commodity funds, which are down on average of -1.5% this year and the entire hedge fund industry, which returned on average .4% on average in August, by a mile.

The fund wouldn't answer any questions when Bloomberg called, and this fund has been under the radar until now, so we know barely anything about Coolidge or his strategy, other than the fund specializes in oil and energy trading and the guess out there is that he was pretty short 2011 natural gas.

But this might be a lead. The one Houston-based David Coolidge on Facebook looks like he fits the bill.

He "likes" PETCO and Dr. Paul Dyer, a new-agey self help guru who helps people become more passionate about their life in 12 weeks.

And here's what we found out about Velite.

Coolidge founded it in 2005.
The "Velites" were a class of infantry in the Polybian legions of the early Roman republic.
Some of the other people working there include Kelly Hill, a former energy trader and the director of operations, Clifton White, a former trader and Velite's "fundamental analyst," Brad King, the vice president, Stephen Naehr, the director of analytics, and Kyle Cooper, the managing director.
Coolidge's August performance seems unique and impressive for now, but he might just be the first energy success story we're hearing about.

Alarm bells at sovereign funds' farmlands foray

2010-09-13T01:35:00.000-07:00

16 Aug, 2010 11:28 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".

Indian firms foray into Latin America’s agri business

2010-09-08T23:39:00.001-07:00

Published: 7 September 2010

NEW DELHI: Indian companies are increasingly getting a foothold into South America, acquiring assets and land not just to get entry into its lucrative agricultural market but also to export commodities such as sugar, pulses and edible oils back to India.

According to Latin American diplomats serving in New Delhi, Indian company Shree Renuka Sugars recently made it to the club of top five sugar producers in Brazil, South America’s largest country and world’s biggest sugarcane producer.

India’s largest sugar refiner, Shree Renuka Sugars had first bought a sugar and ethanol producer Vale Do Ivai S.A. Acucar E Alcool in November 2009 for $240 million, including its 18,000 hectares of land and cane crushing capacity of 3.1 million tonnes annually.

A few months later, in February, it invested another $329 million for a 51-percent stake in Equipav SA Acucar e Alcool, that owns two sugar mills with 10.5 million tonnes annual capacity, as well as, 115,000 hectares of cane growing land in south-eastern Brazil.

The diplomats said other Indian companies are also vying to get into the lucrative sugar industry, such as the consortium led by state-run Bharat Petroleum Corp, as also private sugar companies like Rajashree and Godavari, looking at cane estates and ethanol plants.

Mumbai-based Bajaj Hindusthan already has a subsidiary in Brazil, Bajaj Internacional Participators Ltd, to scout for investment opportunities in the country. But, it’s not just sugar and Brazil, which are attracting Indian corporate groups.

“It is a natural synergy for Indian companies to look at South America for agriculture. Cultivable land is at a premium in India and growing food overseas to import it back to the country is win-win for both sides,” said a senior diplomat, requesting anonymity.

“Frankly, there is also not much sensitivity about the issue of land in South America due to the low population, unlike, say, in Africa where it is often a political hot potato,” the diplomat added.

Interests in sugar and ethanol aside, Sterling Group has a 2,000 hectare olive farm in Argentina, while Solvent Extractors Associations of India — made up of 16 member companies — plans to invest $50 million to grow oilseeds in Uruguay.

Olam, a company owned by a non-resident Indian with headquarters in Brazil, cultivates 30,000 hectares of peanut production in Argentina.

In a similar development, Indian companies are also increasingly looking for farm assets abroad in Latin America for import of pulses, edible oils and sugar in recent years. In 2009, India imported over $1 billion worth of edible oils from Brazil.

South America, of course, has the advantage of large surplus of land and no restrictions on foreigners acquiring this asset. It has 25 percent of world’s freshwater reserves and there is little need to bring farm technology, thanks to a sophisticated research system.

Further, the cost of land in South America is also often much less than its equivalent in India, said the diplomat.

“The cost of land generally in South America is half the cost of land, say in Punjab. The most fertile land is costing around $12000 a hectare , while fallow land can be bought for as little as a few hundred dollars a hectare.”

Burry, predictor of mortgage collapse, bets on farmland, gold

2010-09-08T23:37:00.000-07:00

Michael Burry, former head of Scion Capital Group, works at his office at his home in Cupertino, California. Photographer: Tony Avelar/Bloomberg

Bloomberg | Sep 7, 2010

By Jon Erlichman and Dakin Campbell

Sept. 7 (Bloomberg) — Michael Burry, the former head of Scion Capital LLC who predicted the housing market’s plunge, talks with Bloomberg’s Jon Erlichman about his investments in agricultural land, real estate and gold. (This is an excerpt. Source: Bloomberg) - Play Video

Michael Burry, the former hedge-fund manager who predicted the housing market’s plunge, said he is investing in farmable land, small technology companies and gold as he hunts original ideas and braces for a weaker dollar.

“I believe that agriculture land — productive agricultural land with water on site — will be very valuable in the future,” Burry, 39, said in a Bloomberg Television interview scheduled for broadcast this morning in New York. “I’ve put a good amount of money into that.”

Burry, as head of Scion Capital LLC, prodded Wall Street banks in early 2005 to create credit-default swaps to bet against bonds backed by the riskiest home loans. The strategy paid off as borrowers defaulted, letting his investors more than quintuple their money from 2000 to 2008, according to Michael Lewis’s book “The Big Short” (Norton/Allen Lane).

Burry, who now manages his own money after shuttering the fund in 2008, said finding original investments is difficult because many trades are crowded and asset classes often move together.

“I’m interested in finding investments that aren’t just simply going to float up and down with the market,” he said. “The incredible correlation that we’re experiencing — we’ve been experiencing for a number of years — is problematic.”

Still, it’s possible to find opportunities among small companies because large investors and government officials focus on bigger ones, he said. He is particularly interested in small technology firms.

“Smaller companies in Asia, I think, are neglected,” he said. “There are some very cheap companies there.”

Investing in Gold

Gold is also a favored investment as central banks issue debt and devalue their currencies, he said. Governments haven’t adequately addressed the causes of the financial crisis and may be sowing the seeds for future problems by borrowing, he said. In the U.S., lawmakers showed they didn’t understand how to prevent another crisis when they gave the Federal Reserve and Chairman Ben S. Bernanke additional authority, he said.

“The Federal Reserve, in my view, hadn’t seen this coming and in some ways, possibly contributed to the crisis,” he said. “Now, Bernanke is the most powerful Fed chairman in history. I’m not sure that’s the right response. The result tends to tell me they’re not getting it right.”

The Dodd-Frank Act, signed by President Barack Obama on July 21, creates a consumer bureau at the Fed to monitor banks for credit-card and mortgage lending abuses. The bill also gives the Fed chairman a seat on a newly created Financial Stability Oversight Council, which is supposed to spot and respond to emerging systemic risks.

Background in Medicine

Originally, investing was a hobby for Burry, who as a resident neurosurgeon at Stanford Hospital in the 1990s typed his ideas onto message boards late at night.

He went to high school in San Jose, California, graduated from the University of California, Los Angeles and then earned a medical degree from the Vanderbilt University School of Medicine, according to “The Big Short.” The book portrays him as a loner from a young age who excelled in areas that required intense concentration. While searching for undervalued companies, he discovered his own house was overpriced, prompting a broader investigation of the housing market.

It’s possible Burry is part of “an extremely small group” of economists and investors who are “really exceptionally adroit” at forecasting, former fed Chairman Alan Greenspan said in April. Burry has been critical of the role Greenspan played in fueling the crisis with low interest rates.

Goldman Sachs

Burry said Wall Street investment banks such as Goldman Sachs Group Inc. shouldn’t trade on their own account and don’t always act in the best interests of clients. The firm is disbanding its principal-strategies business, one of the groups that make bets with the company’s own money, two people with knowledge of the decision said last week.

“I don’t believe that any Wall Street bank always acts in the best interests of its clients,” said Burry, adding that he often fought with firms while betting against housing. “It’s an incredibly vicious, incredibly competitive world when you’re going to go take a position opposite one of those banks.”

He asked seven Wall Street banks to help him bet against the housing market, and only Deutsche Bank AG and Goldman Sachs expressed any interest, Lewis wrote in his book. At the end of June 2008, original investors in Burry’s hedge fund received a return on their money, after fees and expenses, of 489.34 percent, according to the book.