Tag Archives: investing in food

Global food crisis will worsen as heatwaves damage crops,


Harvests will fall dramatically during severe heatwaves, predicted to become many times more likely in coming decades

The world’s food crisis, where 1 billion people are already going hungry and a further 2 billion people will be affected by 2050, is set to worsen as increasing heatwaves reverse the rising crop yields seen over the last 50 years, according to new research.

Severe heatwaves, such as those currently seen in Australia, are expected to become many times more likely in coming decades due to climate change. Extreme heat led to 2012 becoming the hottest year in the US on record and the worst corn crop in two decades.

New research, which used corn growing in France as an example, predicts losses of up to 12% for maize yields in the next 20 years. A second, longer-term study published on Sunday indicates that, without action against climate change, wheat and soybean harvests will fall by up to 30% by 2050 as the world warms.

“Our research rings alarm bells for future food security,” said Ed Hawkins, at the University of Reading, who worked on the corn study. “Over the last 50 years, developments in agriculture, such as fertilisers and irrigation, have increased yields of the world’s staple foods, but we’re starting to see a slowdown in yield increases.”

He said increasing frequency of hot days across the world could explain some of this slowdown. “Current advances in agriculture are too slow to offset the expected damage to crops from heat stress in the future,” said Prof Andy Challinor, at the University of Leeds. “Feeding a growing population as climate changes is a major challenge, especially since the land available for agricultural expansion is limited. Supplies of the major food crops could be at risk unless we plan for future climates.”

Hawkins, Challinor and colleagues examined how the number of days when the temperature rose above 32C affected the maize crop in France, which is the UK’s biggest source of imported corn. Yields had quadrupled between 1960 and 2000 but barely improved in the last decade, while the number of hot days more than doubled.

By the 2020s, hot days are expected to occur over large areas of France where previously they were uncommon and, unless farmers find ways to combat the heat stress that damages seed formation, yields of French maize could fall by 12% compared to today. Hawkins said there will be some differences with other crops in different locations, but added: “Extreme heat is not good for crops.”

The second study is the first global assessment of a range of climate change impacts, from increased flooding to rising demand for air conditioning, of how cutting carbon emissions could reduce these impacts, published in Nature Climate Change. “Our research clearly identifies the benefits of reducing greenhouse gas emissions – less severe impacts on crops and flooding are two areas of particular benefit,” said Prof Nigel Arnell of the University of Reading, who led the study, published in Nature Climate Change.

One example showed global productivity of spring wheat could drop by 20% by the 2050s, but such a drop in yields is delayed until 2100 if firm action is taken to cut greenhouse gas emissions.

River flooding was the impact which was most reduced if climate action is taken, the study found. Without action, even optimistic forecasts suggest the world will warm by 4C, which would expose about 330m people globally to greater flooding. But that number could be cut in half if emissions start to fall in the next few years. Flooding is the biggest climate threat to the UK, with over 8,000 homes submerged in 2012.

Another dramatic impact was on the need for air conditioning as temperatures rise. The energy needed for cooling is set to soar but could be cut by 30% if the world acts to curb emissions, with the benefit being particularly high in Europe. However, climate action has relatively little effect on water shortages, set to hit a billion people. Just 5% of those would avoid water problems if emissions fall.

“But cutting emissions buys you time for adaptation [to climate change’s impacts],” said Arnell. “You can buyfive to 10 years [delay in impacts] in the 2030s, and several decade from 2050s. It is quite an optimistic study as it shows that climate policies can have a big effect in reducing the impacts on people.”

Ed Davey, the UK’s secretary of state for energy and climate change, said: “We can avoid many of the worst impacts of climate change if we work hard together to keep global emissions down. This research helps us quantify the benefits of limiting temperature rise to 2C and underlines why it’s vital we stick with the UN climate change negotiations and secure a global legally binding deal by 2015.”

by Anric


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Macro update

Macro update

The following quote from Scott Minerd, CIO of Guggenheim is an encouraging one: “The resilience of the data following Hurricane Sandy shows how much momentum there is in the U.S. economy. As we head into Christmas, we will probably have a strong selling season, helping to bolster the economy even further. The news out of China has also been exceptionally good, with the economy expanding faster than expected, indicating things have bottomed out there.”

Interestingly, the latest data seems to indicate that Asia and the United States have disconnected from Europe. We saw a hard sell-off in Europe, while U.S. markets remained unchanged. At the same time, gold prices moved higher. The trend over the last few months has been that when risk assets go up, gold goes up, and when risk assets go down, gold follows. Seeing Europe sell-off while gold and the dollar moved higher shows that the rest of the world is decoupling from what is happening in the eurozone. As a result, Europe is unlikely to be a major drag on the U.S. markets at this point. It is amazing how problems, such as those in the eurozone, dominate the headlines, but ultimately become non-events. The pending change of government in Italy is almost certainly another example of this.”

Macro and Political Uncertainty Keeps a Lid on Commodities

The negotiations related to the fiscal cliff in the US and fears that a deal will not be reached by the end of 2012 kept investors nervous during November and December. Although US presidential elections are behind us and new Chinese leadership is in place, investors remained defensively positioned regardless of continued monetary easing. The stronger dollar also did not help the commodity sector and neither has a lack of progress on the EU banking union negotiations. Oil prices remained mainly resilient, but commodity-related equities were down because of increased market uncertainty.

The media’s attention has focused recently on grandiose claims that the US will overtake Saudi Arabia as the world’s top oil producer by 2017. We think that is very optimistic, although we do expect US shale oil growth to continue and to be a leading contributor to non-OPEC supply. If US oil production growth continues at the same pace as in 2012 (10% p.a.) that would imply that OPEC would have to cut output to balance the market, which would certainly be in their interest given their budgetary requirements. With a more realistic growth rate of 6% p.a. an OPEC cut would not be required (See Graph below)

Update from Mike Rothman at Cornerstone Analytics

Mike estimates that global oil demand for the Oct and Nov period averaged 91.8 million barrels/day, an ALL-TIME HIGH and a year-over-year growth of 1.8 million barrels per day.  This data point proves to be a huge problem for the consensus that continues to push a bearish oil story.


* For the year as a whole, Mike argues that global oil demand growth is more than 3 times the consensus growth estimate.  Mike DOES NOT buy into the “missing oil” story and asserts that the consensus will simply have to revise their demand numbers upwards because historically missing oil NEVER shows up.

* Oil demand in China was up roughly 7.9% year-over-year during November, including an inventory draw of 200,000 barrels/day during the month.

* Global oil demand has been led by an incredible shift in developed versus emerging market oil demand, a factor that many market analysts are simply missing.

We find Mike Rothman’s research tremendously valuable: Here is a link to his site

China November Electricity Output Up 7.9% on Year

China’s electricity output in November totaled 401.1 billion kilowatt hours, up 7.9% compared with the same period a year earlier, data from the National Bureau of Statistics showed Sunday. In the 11 months ended Nov. 30, China’s electricity output totaled 4.384 trillion kWh, up 4.4%

Based on preliminary data from China Customs and the NEA, we estimate China’s apparent oil demand rising slightly less than 3% during November. We generate our figure by summing net crude imports, net refined product imports and adding in domestic oil production. In assessing crude stockpiling behavior, though, we estimate that China pulled down crude stocks during the month on the order of 200,000 b/d – as compared with a stockbuild of 300,000 b/d in the corresponding month last year. When we net out this stockpiling, oil demand was up about 7.9% . This rate is notably aligned with a coincident reading for the country’s electricity production – which was up about 8% year/year.


Outstanding new Vital Assets Video from Global Fund Exchange Chief Information Officer, Nicholas Yeager. Click here to view



by Anric


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Jeremy Grantham's Advice – I suggest we all listen


The world is using up its natural resources at an alarming rate, and this has caused a permanent shift in their value. We all need to adjust our behavior to this new environment. It would help if we did it quickly.


    Until about 1800, our species had no safety margin and lived, like other animals, up to the limit of the food supply, ebbing and flowing in population.

    From about 1800 on the use of hydrocarbons allowed for an explosion in energy use, in food supply, and, through the creation of surpluses, a dramatic increase in wealth and scientific progress.

 Since 1800, the population has surged from 800 million to 7 billion, on its way to an estimated 8 billion, at minimum.

    The rise in population, the ten-fold increase in wealth in developed countries, and the current explosive growth in developing countries have eaten rapidly into our finite resources of hydrocarbons and metals, fertilizer, available land, and water.

 Now, despite a massive increase in fertilizer use, the growth in crop yields per acre has declined from 3.5% in the 1960s to 1.2% today. There is little productive new land to bring on and, as people get richer, they eat more grain-intensive meat. Because the population continues to grow at over 1%, there is little safety margin.

 The problems of compounding growth in the face of finite resources are not easily understood by optimistic, short-term-oriented, and relatively innumerate humans (especially the political variety).

 The fact is that no compound growth is sustainable. If we maintain our desperate focus on growth, we will run out of everything and crash. We must substitute qualitative growth for quantitative growth.

 But Mrs. Market is helping, and right now she is sending us the Mother of all price signals. The prices of all important commodities except oil declined for 100 years until 2002, by an average of 70%. From 2002 until now, this entire decline was erased by a bigger price surge than occurred during World War II.

 Statistically, most commodities are now so far away from their former downward trend that it makes it very probable that the old trend has changed – that there is in fact a Paradigm Shift – perhaps the most important economic event since the Industrial Revolution.

 Climate change is associated with weather instability, but the last year was exceptionally bad. Near term it will surely get less bad.

 Excellent long-term investment opportunities in resources and resource efficiency are compromised by the high chance of an improvement in weather next year and by the possibility that China may stumble.

 From now on, price pressure and shortages of resources will be a permanent feature of our lives. This will increasingly slow down the growth rate of the developed and developing world and put a severe burden on poor countries.

 We all need to develop serious resource plans, particularly energy policies. There is little time to waste.

Click here to read the most recent macro synopsis from Global Fund Exchange


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Jeremy Grantham's November Letter: On the Road to Zero Growth

Jeremy Grantham’s latest quarterly letter, entitled “On the Road to Zero Growth” is out.

The U.S. Department of Agriculture (USDA)  issued a report warning every American that U.S. food prices in 2013 will rise 3%-4% — but that jump is just the start of a frightening long-term trend.

The warm weather in the winter months gave farmers hope for a great crop production this year, but a crippling U.S. drought in the summer months covered around 60% of the continental United States. The water shortage has killed crops, pushed corn prices higher, and is now starting to make its way to your local store shelves.

But according to famed analyst Jeremy Grantham, the looming U.S. food price increase in 2013 is just the beginning, and the reasons go far beyond the current drought.

Grantham, the founder of Boston-based institutional money manager GMO LLC, in his July 2012 quarterly letter to investors wrote a report entitled, Welcome to Dystopia! Entering a long-term and politically dangerous food crisis.”

Grantham explained that rising U.S. food prices have more to do with soaring population growth than this summer’s water shortage.

“We are five years into a severe global food crisis,” Grantham wrote, “that is very unlikely to go away.”

Editor’s Note: Food isn’t alone — shortages of energy and natural resources are inevitable, and the latest data we uncovered is startling. Click here to download our latest macro synopsis

U.S. Food Prices Rise with Population

Grantham explained that as the world’s population rises, global demand for resources will rise exponentially; it’s a mathematical certainty.

“The general assumption is that we need to increase food production by 60% to 100% by 2050 to feed at least a modest sufficiency of calories to all 9 billion+ people, plus to deliver much more meat to the rapidly increasing middle classes of the developing world,” wrote Grantham.

Even today, the average American is responsible for 32 metric tons worth of food, water, minerals, and energy from the environment every single year – and that’s just one person.

Given the interconnectedness between food, oil, and water there is no question prices in all three will rise as the population continues to grow. Grantham points out that you can’t grow food or develop water sources without energy which is why higher food prices and rapidly rising oil are tightly linked.

“Even if we could produce enough food globally to feed everyone satisfactorily the continued steady rise in the cost of inputs will mean increasing numbers will not be able to afford the food we produce.This is a key point that is often missed,” Grantham said.

Over time, Grantham said food shortages “will threaten poor countries with increased malnutrition and starvation and even collapse.”

So the long summer drought which consumed almost 65% of the contiguous U.S. states is just a preview of what can happen as wheat and corn crop shortages escalate in severity.

Grantham warned, “Any price increase from here may cause social collapse and a wave of immigration on a scale never before experienced in peacetime. Another doubling in grain prices would be catastrophic.”

Grantham’s predictions have been discussed for years. Through our research we continue to look into the effects of global population growth on our resources.

Turns out, Grantham is dead on.

“We’ve uncovered a catastrophic pattern in our nation’s food system,” said Chris Martenson,  “One we believe could soon hasten a world food crisis -a chain of events that could lead to massive food inflation, even riots.”

The pattern Martenson identified affects the entire global economic system. It’s eerily similar, he explains, to the kind of pattern you see in a pyramid scheme, one that escalates exponentially before it collapses – with little notice.

Related Articles and News:

Jeremy Grantham’s July 2012 Letter:  Welcome to Distopia

Jeremy Gratham’s Nov 2012 Letter:  On the Road to Zero Growth

Crisis vs Opportunity: The latest research by Global Fund Exchange


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Investing in agriculture to feed the world

As food prices soar in response to growing demand and crop failures in the US after the worst drought since the 1930s, investing in agriculture, or agribusinesses if you want to diversify along the value chain, is becoming more and more popular. There is plenty of scope for the money to be usefully invested. According to the UN’s Food and Agriculture Organisation, “it is estimated that net investments of $83bn a year must be made in the agriculture sector of developing countries if there is to be enough food to feed the world population of 9.1bn in 2050”.

Although investing in farming may be necessary to help feed the world, there are many critics of the practice, concerned the industrialization of farming will lead to environmental and social damage as intensive, fertilizer-dependent practices will degrade soil and push small farmers into poverty.

Farmland prices all around the world have soared in recent years. Here are just a  few of the recent headlines

From 2001 to 2011, the price of farmland in the UK has tripled due to the demand for agricultural commodities. In Canada, since 2006, farmland prices have risen by an average of eight percent per year.

Is it a bubble ?  Maybe, but when you hear a well respected scientist say that “in the next 50 years we will need to produce as much food as has been consumed over our entire human history.” Where else can the demand / supply imbalance lead ?

It is hard for me to comprehend that in the next 50 years we will need toproduce as much food as has been consumed over our entire human history. Dr Megan Clark, Chief Executive CSIRO

The UN Food and Agriculture Organisation says there is an urgent need for significant and long-term investment in farming technology and the infrastructure to support reliable food supplies. Sustainable agriculture funds are there to supply that need.

Anric Blatt, co-portfolio manager of the AquaTerra Fund, a multi manager fund, focused on imperative must-outcomes likes food, water and scarce resources feels that combining water and food investment themes allows for diversification, reduction in volatility and provides a deeper scope for his portfolios.

The currently approved and already earmarked spending by government and private sector institutions into food and water sectors alone will make these investments one of the most attractive sectors going forward. Anric Blatt, Chairman, Global Fund Exchange


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A day in the life of Global Fund Exchange


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Update on the US drought – this WILL affect global commodity prices for quite some time

Corn futures surged 58 percent since mid-June, soybeans were up 31 percent and wheat 41 percent. The US drought may push food inflation as high as 4 percent in 2012, the USDA said last week.

The department has declared natural disasters in more than 1,800 counties in 35 states, more than half of the country’s total, mostly because of the dry, hot weather.

The following extract from Jeremy Granthams Quarterly Investor Letter “Welcome to Dystopia” certainly makes a valid point.

“Globally, 2010 looked to me like a 1-in-150-year event with heroic heat in Russia and elsewhere and biblical floods in Pakistan and Australia. It really hurt global grain output. I suggested then that surely the following season had to be at least less bad, and what did we get? Thailand, the largest rice exporter was knee-deep in floods overhalf the country, 80-year floods occurred in the Mississippi, Texas sweltered in way-above record heat, and quite severe droughts gripped many other places. Perhaps in total a 1-in-50-year event globally. So, after all, perhaps Iwas right; it was “less bad” but hardly what I meant. And now, quite suddenly, even while I was thinking about this letter, 1-in-50-year drought and heat have hit our major growing areas. So let’s call this a 1-in-20-year globally, for Brazil, Argentina, Russia, and several other areas are also having unusually bad weather. Any statistician starts to getjumpy when looking at 1-in-150, 1-in-50, and 1-in-20 back to back. Long-term weather records are poor and a lot ofthis is judgmental, but this three-year stretch is, shall we say, very unusual. (The National Oceanic and Atmospheric Administration has said that the chance that this year’s heat in the Midwest was not affected by a warming climate was over 1 in 1 million. Other sources have used much punier odds, such as 1 in 100,000. I will settle for “very unusual.”) We really have to start factoring into the investment equation increased odds of difficult and volatile growing weather.”


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