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Food Inflation hits Saudi Arabia

Food Inflation hits Saudi Arabia

http://www.globalfundexchange.com/blog/2013/02/17/food-inflation-hits-saudi-arabia/

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Inflation in Saudi Arabia has accelerated to 4.2 percent year-on-year in January this year, the highest level since July 2012, compared with 3.9 percent the previous month, according to the latest report by the Central Department for Statistics and Information (CDSI).

Riyadh-based Jadwa Investment said this rise is mostly due to higher food and other expenses and services prices which both contributed 2.3 percentage point to the overall inflation figure, while the contribution of rent and housing related services inflation fell to 1.2 percentage point in January compared with 1.5 percentage point in the previous month.

Food prices maintained their upward trend since September last year. In January, food prices increased by 6 percent year-on-year, the highest level since April 2011. Most of this increase is due to risings prices of meat and poultry, fish and crustaceans and fresh fruits. Prices of cereal and cereal products, however, maintained their deflationary trend, contracting by 0.3 percent year-on-year despite some reports of grain and flour shortage in some areas of the Kingdom. In fact, the General Organization for Grain Silos and Flour Mills has announced that it raised the flour allocation to licensed distributors by 10 percent earlier this month. International food prices also point to a minimal external pressure. According to the Food and Agriculture Organization (FAO), international food prices contracted by 1.4 percent year-on-year in January compared with -0.4 in December, the report said.

by Anric

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Posted by on February 17, 2013 in Agriculture, Investments

 

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Coming agri boom garners investor attention

Coming agri boom garners investor attention

http://www.globalfundexchange.com/blog/2013/01/31/coming-agri-boom-garners-investor-attention/

Calculating the amount of land planted with agri produce, 2012 should have seen the biggest harvests ever in the US, the world’s largest grain exporter. But it did not exactly happen like that. The country’s corn-belt was hit by the worst droughts since the 1930s and the impact on global food markets was exacerbated by dry weather in Russia and Brazil.

This is set to lead to a period of “agflation”, with food prices due to hit new record highs in 2013, according to Rabobank’s Food and Agribusiness Research unit.

The current bout of price rises is mainly affecting commodities that are largely used in animal feed such as corn and soybeans, as opposed to the last bout of food inflation in 2008, when the price of staple foods such as wheat, maize and rice doubled, hitting the world’s poor hardest.

Agricultural companies however are priced significantly below their long term averages as equity investors have not yet adjusted to this new normal.

“Demand for agricultural commodities is expected to outweigh supply as these key macro trends continue,” says a report from the UN’s Principles for Responsible Investment*.

As well as pension funds, the sector is attracting insurance companies and sovereign wealth funds, no doubt aided by the increasing press coverage, educational efforts by funds like the Food and Water funds from Global Fund Exchange and a number of investor conferences on the subject.

On February 26th and 27th, Anric Blatt, portfolio manager of the Food and Water focused AquaTerra fund will be speaking at the Global Ag Conference in Abu Dhabi. Click here to read more about the conference, download the program and register.

Global AgInvesting Middle East (February 25-27, 2013) offers a comprehensive overview of agriculture investment opportunities, risks, and return profiles across all major global production regions, as well as strategies for diversified ag portfolios including regional variation, private equity, liquid investments, water, and protein plays. Produced by HighQuest Partners, GAI Middle East will highlight strategies for ensuring food security, including outsourcing and technological advances. Panel discussions will provide attendees with a picture of the agriculture investing landscape and a clear idea of where the real money is moving in the space.

GAI Middle East is produced in conjunction with the Food Security Center of Abu Dhabi

by Anric

 

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Impact of climate change on food prices is grossly underestimated

Maize: food prices have risen Climate change’s impact on future food prices is being underestimated, Oxfam warned in a report on Wednesday.

The development charity predicts that massive price spikes will be a devastating blow to the world’s poorest people who today spend up to 75% of their income on food, and will also adversely affect global consumers.

Its report, Extreme Weather, Extreme Price, suggests extreme weather events such as droughts and floods – made more likely by global warming – could drive up future food prices.

Previous research has tended to consider gradual impacts of rising global temperatures, such as changing rainfall patterns. Oxfam’s research, comissioned by the charity and undertaken by the Institute of Development Studies, examines the impact of extreme weather scenarios on food prices in 2030. It warns that by that date the world could be even more vulnerable to the kind of drought happening today in the US – the worst in 60 years – with dependence on US exports of wheat and maize predicted to rise and climate change increasing the likelihood of extreme droughts in North America.

The research claimed that:

  • Even under a conservative scenario another US drought in 2030 could raise the price of maize by as much as 140% over and above the average price of food in 2030, which is already likely to be double today’s prices.
  • Drought and flooding in southern Africa could increase the consumer price of maize and other coarse grains by as much as 120%. Price spikes of this magnitude today would mean the cost of a 25kg bag of corn meal – a staple which feeds poor families across Africa for about two weeks – would rocket from around $18 to $40.
  • A nationwide drought in India and extensive flooding across south-east Asia could see the world market price of rice increase by 22%. This could lead to domestic spikes of up to 43% on top of longer term price rises in rice importing countries of such as Nigeria, Africa’s most populous country.
  • Climate shocks in sub-Saharan Africa are likely to have an increasingly dramatic impact in 2030 as 95% of grains such as maize, millet and sorghum that are consumed in sub-Saharan Africa are expected to come from the region itself.

As well as affecting the world’s poorest, such rises will also hit those on the lowest incomes in the UK, who already spend up to half their household budget on food, the report notes.

Oxfam’s climate change policy adviser, Tim Gore, said: “Rising temperatures and changing rainfall patterns hold back crop production and cause steady price rises. But extreme weather events – like the current US drought – can wipe out entire harvests and trigger dramatic food price spikes. We will all feel the impact as prices spike but the poorest people will be hit hardest.”

He said the world needed to wake up to the drastic consequences facing our food system of climate inaction: “As [greenhouse gas] emissions continue to soar, extreme weather in the US and elsewhere provides a glimpse of our future food system in a warming world. Our planet is heading for average global warming of 2.5–5C this century. It is time to face up to what this means for hunger and malnutrition for millions of people on our planet.”

The report comes as UN talks aimed at tackling climate change are due to close in Bangkok on Wednesday with little sign of progress, while tomorrow the Food and Agriculture Organisation is due to publish further information on how the worst US drought in 60 years is impacting on global food prices.

View or Download the entire report

 

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Major new film out – Last Call at the Oasis

If you thought only Third World countries have water crises, a new documentary asks you to think again. Increasingly, problems are rising to the surface in the United States.

Filmmaker Jessica Yu harnesses the celebrity power of actor Jack Black and environmental activist Erin Brockovich – immortalized by Julia Roberts in the 2000 movie about Brockovich’s work – to give the looming U.S. water crisis a thorough wringing out in “Last Call at the Oasis”.

“A third of U.S. counties face water shortage by the year 2050,” Yu told Reuters. “It’s not really a solvable problem but we can manage it so much better.”

“Last Call at the Oasis” follows environmental activists as they try to hold accountable those who contaminate the Earth’s most precious natural resource – clean water.

In Las Vegas, they find a desert city is straining limited resources as it grows exponentially. Rural mid-western states are home to industrial cattle farms where tons of manure is improperly disposed, contaminating streams and drinking water. In farming communities, local towns see a spike in cancercases after chemicals are used in pesticides.

According to Yu’s research, in just 60 years the aquifer in California’s Central Valley could be depleted, leaving barren an area that provides one fifth of the nation’s produce.

Brockovich, who won a 1996 multi-million dollar settlement against energy giant Pacific Gas and Electric for polluting the water supply of a California town, said that water pollution is causing health issues throughout the United States.

“Tropic Thunder” comic actor Black appears in a spoof commercial for bottled water, dubbed Porcelain Springs, that has been reclaimed from sewage – a concept that has been a hard sell in the United States despite being practiced elsewhere.

Singapore, for instance, satisfies 30 percent of its requirements through reclaimed water, the documentary notes.

“We’re taught that in a survival situation if you don’t have any water, you can drink your own urine,” laughed Brockovich. “I just think none of us want to be in a position where we find ourselves drinking our urine if we can just make other options and choices now.”

The sources of pollution include household products, pesticide manufacturers and the natural gas industry, to name a few. While the movie refrains from pointing the finger at any one company or group, industry representatives nevertheless declined to be interviewed for the film.

The film is not about a bad guy,” said Yu. “These industries are representative of a system that lets these things happen. We give the benefit of the doubt to industry. The burden of testing being on the producers of the chemicals – that seems like something that is fundamentally flawed.”

Solutions discussed in the film also include better oversight by the Environmental Protection Agency and tighter regulations particularly on the natural gas industry and chemicals used for hydraulic fracturing, or fracking, in drilling for gas.

“Nobody wants industry and those companies to go away because these people need jobs, but they don’t want you to poison them,” said Brockovich.

“There’s a moment here where industry does not have to be the villain. You could create jobs to better dispose of waste – how we’re going to reclaim and recycle that water, so that it’s usable,” she added.

In a 2008 report, the UN Intergovernmental Panel on Climate Change estimated that by 2080 nearly half the world’s population will be without clean water.

“We see third world countries that have these problems,” noted Brockovich. “If you think it can’t be us, then think again.”

Read our previous posts on water

Watch our previous water video

 

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State of the World's Land and Water Resources for Food and Agriculture

By 2050, food production is projected to increase by about 70 percent globally and nearly 100 percent in developing countries. This incremental demand for food, together with demand from other competing uses, will place unprecedented pressure on many agricultural production systems across the world. These ‘systems at risk’ are facing growing competition for land and water resources and they are often constrained by unsustainable agricultural practices. They therefore require particular attention and specific remedial action.

The State of the World’s Land and Water Resources for Food and Agriculture (SOLAW) analyses a variety of options for overcoming constraints and improving resource management in these areas of heightened risk. In each location, a mix of changes in institutional and policy measures will have to be combined with greater access to technologies for better management of land and water resources. Increased investments; access to novel financing mechanisms; and international cooperation and development assistance will also help overcome these constraints.

Click here to download the executive summary (PDF)

Read our other posts on investing in agriculture, water

or click here to learn more about the AquaTerra Fund

 

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Agriculture – The Investment Needs of the Hour (and the next decades)

As investors continue their search for alternative investment assets that offer capital preservation, income and inflation hedging characteristics, and that are supported by sound long-term fundamentals such as population growth and economic expansion, many institutional investors such as Pension Funds, Hedge Funds, Sovereign Wealth Funds, Family Offices and UHNW Individuals are turning to farmland investments to generate long-term gains without dramatically altering the overall risk profile of a balanced investment portfolio.

Currently, around 1% of institutional investments assets sit in agriculture investment, and most think tanks and analysts predict that this will rise to over 5% in the next five years, creating a spike in short-term demand and adding further upward pressure to demand and therefore prices. This might be described as the beginnings of a bubble, much like many real-estate bubbles before, but the bigger picture looks different this time.

On one side of the equation we have an increasing demand for commodities such as food and biofuels as the population continues to expand at the fastest pace in history.

To put this into context; up until around 1800, the global population had risen and fallen in line with our ability to produce food using the basic of agricultural techniques, yet since the introduction of hydrocarbons for energy and agriculture, the population has increased from only 800 million to over 7 billion in just over 200 years.

At the time our grandparents were born there were around 1.5 billion people to feed, and by the time we were born, that number had increased to around 5 billion. It is now estimated by the UN that world population will reach 9 Billion by 2050.

Economic expansion in developing economies also contributes as wealthier populations shift toward a more protein based diet consuming more meat. In China alone, 50,000 people move from rural areas to urbanizations, and their diets gradually shift towards meat.

According to a report by the Centre for World Food Studies in Amsterdam, meat consumption in China was around 20kg per person in 1985, reaching over 50kg per person by 2000, and projected to reach 85kg per person by 2030.

As 1kg of meat requires the input of around 7kg of grain, the growing pressure on global cereal supplies is immense. If everyone in the world consumed as many calories as the average American, we would need to find farmland equal to 2.2 Earth sized planets simply to keep up with demand.

One the flip side of this equation we have supply of food, and ultimately the farmland that produces our food. At every point in the 38 year commodity price cycle where real assets have undergone sharp re-pricing due to shock increases in demand at a time of limited supply, there has been opportunity to increase supply, either through the development of new farmland, or through the developments and application of new technology such as the use of fertilisers during the Green Revolution which led to a significant on-going annual increase in agricultural yields.

Currently, population growth outstrips output growth at a time where little or no new farmland is available to bring to cultivation, and yield increases from the use of fertilisers are diminishing towards zero. This unique set of circumstances dictate that there is no obvious remedy to the supply demand problem, supporting the theory that higher food prices are here to stay as little can be done to increase supply yet demand continue to grow.

 
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Posted by on July 28, 2011 in Agriculture

 

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Video: Lauralouise Duffy and Anric Blatt on Investing in Water

 
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Posted by on July 12, 2011 in Videos, Water

 

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