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

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

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

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?

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

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

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

Planète à vendre - videos.arte.tv