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India Finally Restores Power to 360 Million People After Grid Collapse

A man works on a power transmission cable in Tezpur, India. Photographer: Adeel Halim/Bloomberg

India resumed power supplies to most of the 360 million people plunged into darkness by the worst grid failure in a decade, an outage that shut transport networks, triggered commuter chaos and halted water supplies

“Power supply has been restored to all states and the situation is near normal now,” Power Grid Corp. of India Ltd.’s projects director I.S. Jha said by phone. “We will have complete normalcy once thermal plants resume complete generation.” Jha said Power Grid had bought power from the eastern and western regions to reconnect services.

Businesses and households across much of Delhi, Haryana, Punjab, Himachal Pradesh, Uttar Pradesh, Jammu and Kashmir and Rajasthan states had to turn to generators, while services on New Delhi’s metro and Indian railways were suspended for several hours. Traffic signals failed, jamming roads.

Prime Minister Manmohan Singh is seeking to secure $400 billion of investment in the power industry in the next five years as he targets an additional 76,000 megawatts in generation by 2017. India has missed every annual target to add electricity production capacity since 1951.

Power cuts are common across swathes of India as the country battles an average 9 percent shortfall in meeting peak power demand that the government says shaves about 1.2 percentage points off annual economic growth. The affected states are responsible for about 37 percent of electricity consumption, according to the Central Electricity Authority.

“This again highlights how poor infrastructure remains the biggest drag on the Indian economy,” said D.H. Pai Panandiker, president of RPG Foundation, an economic policy group based in New Delhi. “The power sector remains too over-regulated. Unless private companies are allowed greater involvement, the problems are going to remain.”

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'Boom Times' for U.S. Farming

According to U.S. Agriculture Secretary Tom Vilsack, “agriculture continues to be a bright spot” in the otherwise dull U.S. economy.  Farming, along with natural resources production – read: oil – is one of the few bright spots, writes Financial Times Commodities Editor Javier Blas in a recent article.

2011 marks the fourth consecutive “boom” year experienced by the U.S. agri sector.  As U.S. production of staple food commodities, particularly corn, has grown, net farm income has nearly doubled over the past decade.  With prices reaching record highs, the nation’s farmers are poised to bring in over $100 billion, up from $50 billion in 2001.

Surging income levels for farmers has been a boon to the agribusiness sector.  As we have reported previously, agricultural equipment maker Deere & Co. has announced record positive figures, as have companies in its peer group.  Seed and pesticide producer Monsanto as well as Cargill, the world’s top agricultural commodities trading company, have also benefited from the farming boom.

Perhaps the most dramatic gains can be seen in the soaring price of farmland in the Midwestern U.S. The value of land acreage has risen skyward, with year-on-year gains reaching above 25%.  The U.S. Department of Agriculture (USDA) foresees another strong year ahead in 2012.

Rising demand from growing powerhouses China and India, combined with weather anomalies that destroyed crop harvests in key producing regions around the world, has resulted in rising agricultural commodity prices across the board.

Over the past thirty years, commodities have spiked at times, but typically the effect was usually limited to a single commodity.  In contrast, this current commodity boom is affecting nearly every commodity, including wheat, corn, soybeans, coffee, sugar, etc.  Such a phenomenon has not been seen since 1973-1974.

We believe investing in agriculture is one of the most significant opportunities of our time, and monitor developments in this sector closely.

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Strong Demand Lifts Agribusiness Sales

Deere & Co., the world’s largest farm machinery maker, expressed a strong outlook for the global agribusiness sector in 2012. Positive global farming conditions, combined with the collective rising incomes of farmers, has lifted agribusiness sales “in spite of an unsettled global economy,” the company stated in a press release.

Deere reported record results in 2011, surpassing many Wall Street expectations.  Fellow agricultural giants, including Agco Corp and CNH Global, have also reported positive results for the year.

Deere expects farmers’ incomes to remain stable in the year ahead, given the sizable (and still growing) global demand for agricultural commodities.  The rising value of farmland in the United States is further contributing to the positive outlook.  U.S. farmland rose to 30 year highs in the July-to-September period.  This increase in land value came even as crop prices fell from their peaks earlier in the year.

Deere says expanded crop production and  increased financing opportunities in China along with high agricultural commodity prices in India contributed to strong performance in the Asian market.

Access to secure food supplies is crucial for growing nations in Asia and the Middle East.  Because demand is rising so dramatically, nations must increase domestic crop production where possible, or else be forced to satisfy new demand with expensive food imports.

As we have previously reported, this trend is accelerating in the Middle East, which is set to see food import levels double over the next decade.

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Posted by on November 29, 2011 in Agriculture, Commodities

 

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Water Stress- Global Concern for Businesses

Did you know that the average pair of blue jeans uses up 919 gallons of water during its lifetime?

Levi Strauss & Company is all too aware. Water is an increasingly scarce commodity in the world, and Levi’s and other major companies are worried about the potential impact on their bottom line.

Clothing manufacturers are not the only industry concerned with the effects of global water shortages.  Food & beverages, clothing, tobacco and metals & mining conglomerates are all heavy water consumers who have long been accustomed to cheap, easy and reliable water access.  As water demand increases and climate change effects take hold, that may all change.

Water is a crucial for nearly every part of the manufacturing cycle, no matter if the end product is a bottle of soda or a pair of jeans.  Water shortages present significant risks to these businesses and may even jeopardize their business model in the coming decades.  Water savings and conservation efforts are becoming a top priority.  This is particularly true in the developing world, where many manufacturing plants and cotton fields are located.

In the clothing world, growing cotton requires access to lots of water for irrigation purposes.  Water is also needed for the processing, dying and stitching of the garment.  However, much of the irrigation practices utilized by small scale farmers in India, Pakistan, Brazil and West and Central Africa (where much of the world’s cotton is grown) are outdated and inefficient.

Last year, flooding in Pakistan and droughts in China destroyed much of the cotton crop, resulting in skyrocketing prices.  Levis, for example, felt this impact directly, because nearly 2 pounds of cotton are needed for every pair of jeans the company produces.  Over the coming years, climate change may accelerate such extreme weather events and thereby increase risks for cotton-dependent industries and companies.

The clothing industry is taking action to reduce these threats.  In 2005, the international nonprofit Better Cotton Initiative was established to promote water conservation, reduce the use of pesticides and strengthen child-labor restrictions in the garment industry.  Large companies and industry groups have signed on, including Levis, IKEA, the Gap and Adidas.

Use of drip irrigation, rather than conventional field flooding, is highly encouraged.  Drip irrigation saves time, money, energy and reduces the amount of water farmers need to properly water their fields.  The Better Cotton Initiative has passed this and other knowledge on to many cotton farmers in India, resulting in a 32% reduction in water and pesticide usage on farms over a three year period.

Global businesses must adapt to a new water reality – what was once cheap and consistent may no longer be true.  As business models change and new practices and innovations take hold, we expect to see a new range of opportunities for profitable investment in the water sector.

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Posted by on November 3, 2011 in Water

 

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China Accelerates Iron Ore Initiatives in Africa

China leads the world in the consumption of iron ore, a key element of the steel-making process.  Demand is increasing as industrialization expands and new domestic infrastructure construction projects get underway.

Last year, China imported 618 million tons of iron ore, largely from only four countries – Australia, Brazil, India and South Africa. In order to break its dependence on the world’s “Big Three” global miners (BHP Billiton, Rio Tinto and Vale), China is accelerating investment into new mining projects in West Africa.  In total, estimates say nearly 250 million tons of iron ore could be produced every year over the medium to long term.

Chinese iron ore imports in 2011 are predicted to rise 8% from last year’s total.  Prices for iron ore with 62% iron content have risen by one-third over the past year, and doubled over the past two.  Acquiring new supplies is crucial for large ore importers like China.

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Posted by on August 25, 2011 in Natural Resources

 

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Rapidly Growing India Sets Ambitious Renewable Energy Targets

The use of energy in non-OECD countries in Asia is posed to double between 1990 and 2035, according to data from the U.S. Energy Information Administration (EIA).

India in particular is experiencing significant population growth and resultant increased demand for energy.  By 2017, the country’s electricity demand is expected to double, requiring the addition of nearly 100GW of power generating capacity.

Coal and oil currently supply 40% and 24% of India’s power needs, respectively, with natural gas also playing a role.  J.P. Morgan estimates that over the next few years, Indian imports of natural gas will increase by 139% while domestic production increases by 90%, leaving the nation with a natural gas shortage and in all likelihood a higher import bill.

To make matters worse, poor infrastructure  has made electricity very expensive.  On average, the cost of electricity in India is five times higher than in the United Kingdom.

In light of these varied energy challenges, India has begun to focus seriously on developing domestic renewable energy resources.

At present, renewables account for 11% of all installed power capacity in India, with about 20GW installed. Earlier this year, India quadrupled its solar energy target, now aiming to develop 20GW of solar by 2022.   Ten percent of this targeted capacity will be off-grid distributed capacity to serve rural communities which currently lack access to the electricity grid.

Tata, the largest power utility in India, is reportedly seeking an additional 150MW of wind power for its portfolio.  It aims to increase production of solar energy tenfold from current levels, based on a report by the Wall Street Journal earlier this year.

According to the Renewable Energy Secretary Uma Shankar, the Indian government will set an ambitious short-term target of 17GW in new capacity over the next six years; a plan that would nearly double the amount of renewable energy in the country. To achieve this target, up to $33.8 billion in new capital will be required.  Read more…

 

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China, India & Brazil Lead as Global Auto Sales Trend Higher

High demand keeps global auto sales on the rise even as gasoline prices trend higher.

According to the April 2011 Short-Term Energy and Summer Fuels Outlook released by the U.S. Energy Information Administration (EIA), American drivers can expect to pay an average $3.86 per gallon during the 2011 driving season with a peak of $3.91 per gallon by mid-summer.

As a result, there has been renewed consumer enthusiasm for electric and high-mileage vehicles in the United States, with President Obama reporting that the U.S. is on track to achieve its goal of 1 million electric vehicles on the road by 2015.

Although increasing gasoline costs are having an effect on the average American consumer, the effect has not been translated as severely to other parts of the world, where vehicle ownership is still on the rise.  Sales of cars and light trucks is increasing rapidly in the world’s fast growing nations like China, India and Brazil.

During the month of March, Chinese vehicle sales rose 5.4% from March 2010 levels, to 1.82 million.  From March 2009 to March 2010, vehicle sales rose by 25%.  In India, vehicle sales as of March 2011 rose 30% on the year to 1.98 million.  Brazil’s Q1 sales of cars and light vehicles rose 4.7% to 852,000.  Auto sales in Turkey rose 76% to 181,631 vehicles during Q1, and Indonesia reported a 25.2% increase from the year before.

In many instances, these numbers represent first time auto purchases, as opposed to vehicles bought to replace older models.  If purchasing trends continue as expected, the total number of active vehicles on the world’s roads will increase sharply, and will undoubtedly affect global patterns of petroleum demand.  Read more…

 

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