Download your FREE Renewable Energy Investments Report here
Barclays Plc (BARC), the U.K.’s second- largest lender by assets, created a 100 million-pound ($163 million) fund to support renewable energy farm projects.
The fund was developed with the National Farmers Union after a Barclays survey found that 37 percent of the U.K.’s 200,000 farmers are seeking to cut their energy bills and generate income using renewable energy, the London-based bank said today in a statement.
The U.K. reduced the incentives it pays to developers of large solar projects this year and is shifting its focus to funding smaller residential and commercial projects. The government aims to generate 15 percent of the country’s energy from renewable sources by 2020.
Download your FREE Renewable Energy Investments Report here
Farmers “are looking forward to many further years of lower energy costs and a potentially new income as they sell energy back to the grid,” Travers Clarke-Walker, a product and marketing director for Barclays, said in the statement.
The average size of solar, wind and hydroelectric projects likely to receive financing through the fund will be 44 kilowatts, Barclays spokesman Michael O’Toole said in a telephone interview. The bank expects the costs of wind and solar projects to fall by half in the next three to five years and may increase its investments in renewable power. It bought Aug. 11 an 85 percent stake in a 26-megawatt wind farm in eastern England.
Barclays surveyed 300 dairy farmers in England, Scotland and Wales this month and 60 percent said they expect renewable energy to generate revenue for their businesses, according to the statement.
Download your FREE Renewable Energy Investments Report here
Some are already doing so. Renewable energy “looked like a good investment because of government feed-in tariffs and we wanted to offset some of our business costs,” Andrew Hawkey, 58, a third-generation farmer from Cornwall, said in an interview.
Barclays financed a 250-kilowatt ground-mounted solar farm that’s in operation now on Hawkey’s land near Wadebridge, and he wants to borrow 120,000 pounds to add another 50 kilowatts of capacity. He said the solar panels may cut his power bills by about 30 percent.
Download your FREE Renewable Energy Investments Report here
Source: Bloomberg
DGC Asset Management Limited provide Investors with the opportunity to engage in strategic mid term and long term asset-backed investments within the Agricultural, Timber and Renewable Energy sectors.
Tuesday 30 August 2011
Thursday 11 August 2011
Jim Rogers Shuns Gold for Farmland Investment
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
by Jason Jenkins, Investment U Research
Wednesday, August 10, 2011
Jim Rogers is no stranger to Investment U. In May, our Executive Editor, Garrett Baldwin, interviewed the investing legend and got his ideas on everything from a tertiary education bubble to a long-term commodity bull market.
When the world’s major markets find themselves in peril, everyone seeks out a trusted voice of reason – someone who has achieved success over the long haul.
So it shouldn’t be peculiar that the co-founder of the Quantum Fund made some news over the weekend.
Jim Rogers is even more down on the U.S. government than most…
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Jim Rogers’ Three Crucial Observations
Rogers doesn’t believe the market is in shambles due to the downgrade of our rating by Standard & Poor’s or the possibility of a double-dip recession, but because we are the greatest debtor in the history of the world.
What should be taken from Rogers’ statements this weekend are three of his crucial observations:
Jim Rogers Loves Buying Undervalued Assets
What Jim Rogers saw in gold and silver over a decade ago, he now sees in agriculture. Agriculture prices are still, on a historic basis, extremely depressed, and this is where he sees his next opportunity. Rogers thinks that the current commodities supercycle will last for 20 to 25 years. So if this commodity bull started in 1999 or 2000, this bull will run until about 2020 to 2025.
Another overlooked option is direct investment in farmland. Farmland investments will pay a regular yearly dividend from the sale of crops, and can provide long-term capital gains during a bull market in food. Some direct farmland investment vehicles include Agrifirma in Brazil, Agcapita in Canada, and Chess partners and Hancock in the United States.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Source: Investment U
by Jason Jenkins, Investment U Research
Wednesday, August 10, 2011
Jim Rogers is no stranger to Investment U. In May, our Executive Editor, Garrett Baldwin, interviewed the investing legend and got his ideas on everything from a tertiary education bubble to a long-term commodity bull market.
When the world’s major markets find themselves in peril, everyone seeks out a trusted voice of reason – someone who has achieved success over the long haul.
So it shouldn’t be peculiar that the co-founder of the Quantum Fund made some news over the weekend.
Jim Rogers is even more down on the U.S. government than most…
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Jim Rogers’ Three Crucial Observations
Rogers doesn’t believe the market is in shambles due to the downgrade of our rating by Standard & Poor’s or the possibility of a double-dip recession, but because we are the greatest debtor in the history of the world.
What should be taken from Rogers’ statements this weekend are three of his crucial observations:
- He will not be buying stocks. Stocks are going to be, at best, in a trading range for years to come. He compared the current environment to that of the 1970s when equities were problematic.
- Rogers is a value buyer. He stated in 2000 that a “supercycle” commodity bull market had begun. Commodity prices would advance longer than in any previous uptrend. The raw materials surge would be led by gold and silver. Eleven years ago, gold was trading near its low at $252 – the lowest real price in nearly a century. Silver was selling at $4. Eleven years later, it’s up 650 percent.
- Rogers has currently stopped buying gold and silver. He’s not selling because he still believes that gold will hit and surpass $2,000 an ounce sooner rather than later. Rogers went on to elaborate “that gold prices are not in a bubble because not everyone is buying yet.” The question is, if he’s holding gold and silver long but not buying more of it, what is he buying?
Jim Rogers Loves Buying Undervalued Assets
What Jim Rogers saw in gold and silver over a decade ago, he now sees in agriculture. Agriculture prices are still, on a historic basis, extremely depressed, and this is where he sees his next opportunity. Rogers thinks that the current commodities supercycle will last for 20 to 25 years. So if this commodity bull started in 1999 or 2000, this bull will run until about 2020 to 2025.
- You can invest directly in agricultural stocks, such as John Deere (NYSE: DE) or Monsanto (NYSE: MON).
- Another method is to invest in agricultural futures through exchange-traded funds (ETFs), such as Agriculture ETF (LSE: AIGA) on the London Stock Exchange or PowerShares DB Commodity Index (NYSE: DBC) in the United States.
Another overlooked option is direct investment in farmland. Farmland investments will pay a regular yearly dividend from the sale of crops, and can provide long-term capital gains during a bull market in food. Some direct farmland investment vehicles include Agrifirma in Brazil, Agcapita in Canada, and Chess partners and Hancock in the United States.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Source: Investment U
What Investors Should Buy: Jeremy Grantham - GMO
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
I only really follow closely one company that fits the bill as a farmland investment and that is Canadian company Sprott Resource Corp (SCPZF.PK). Sprott owns 2.1 million acres of cropland stretching across Alberta, Saskatchewan and Manitoba. Sprott has exposure to gold, silver, oil and fertilizer, but its One Earth Farms has big plans:
“The goal of One Earth Farms Corp. (“One Earth Farms”) is to become Canada’s largest fully integrated corporate farm. A true partnership between the private sector and First Nations, One Earth Farms represents a new model for North American farms. One Earth Farms is committed to becoming an industry leader by delivering superior results and a reduced risk profile through economies of scale, professional management and progressive farming practices.”
Avoid Everything Else
The rest of the letter is classic Grantham, a grumpy old bear. He views global equities not covered above as ranging from unattractive (as of August 2) to very unattractive. He thinks that 950 is fair value on the S&P.
Like many investors, I follow the investment actions of a short list of well respected professional value investors. Near the top of that list is Jeremy Grantham.
Grantham’s letters to investors are usually pretty depressing. He has a knack for spotting bumps in the road and rarely thinks stocks are cheap. So when he provides some advice on what to buy rather than what to avoid I sit up and pay attention.
In his most recent quarterly discussion he did exactly that (link).
Grantham Suggestion #1 – Farmland/Forestry
Grantham comes as close to pounding the table on an investment idea with farmland and forestry. His exact words are “ for those with a long horizon, I am sure well-managed forestry and farmland will outperform the average of all global assets."
I’m not sure I’ve ever seen him use the word “sure” before.
I only really follow closely one company that fits the bill as a farmland investment and that is Canadian company Sprott Resource Corp (SCPZF.PK). Sprott owns 2.1 million acres of cropland stretching across Alberta, Saskatchewan and Manitoba. Sprott has exposure to gold, silver, oil and fertilizer, but its One Earth Farms has big plans:
“The goal of One Earth Farms Corp. (“One Earth Farms”) is to become Canada’s largest fully integrated corporate farm. A true partnership between the private sector and First Nations, One Earth Farms represents a new model for North American farms. One Earth Farms is committed to becoming an industry leader by delivering superior results and a reduced risk profile through economies of scale, professional management and progressive farming practices.”
At the current stock price of $4.79 I think Sprott Resource is a good long-term bet given the value of its net assets comfortably exceeds that and because management will undoubtedly grow those net assets at a healthy clip.
Grantham isn’t the only smart guy who thinks farmland is a sure bet. Investment biker Jim Rogers and housing meltdown star Michael Burry have both indicated a focus on the sector.
Grantham Suggestion #2 – Resources in the Ground
Grantham hedges a little on suggestion number two simply because so many of them have increased so much over the past five years. Grantham’s words on resources in the ground were:
“I think it is likely that resources in the ground, hydrocarbons, metals and fertilizer, will also win on a 10-year horizon. I am not certain, though, because of the remarkable gains in so many of these in the last five years. I would put the odds at 2 to 1. As mentioned last quarter, many commodities have the potential for very sharp declines in the short term. If that occurs, then the odds would, of course, rise.”
Strangely there is one company that offers exposure to hydrocarbons, metals and fertilizer. It is again Sprott Resource Corp which I mentioned earlier. But as an investor you could also consider a company affiliated to Sprott Resource Corp and that is Sprott Inc. (SPOXF.PK). I recently provided some detail on Sprott Inc.
The idea is pretty simple. Sprott Inc. is an investment manager focused on all of those resources in the ground that Grantham mentions. If these commodities do well then Sprott’s funds will do well which will in turn attract more investor dollars. I consider it a leveraged play on commodities.
If you are interested in exposure to oil and like to sleep at night I would strongly encourage you to check out Penn West Energy (PWE) which has massive amounts of land in Western Canada that is going to have a lot of oil unlocked by horizontal drilling techniques. Penn West currently yields over 5.5% on existing production and that production is going to ramp up for years as Penn West takes new technology to its land base.
Grantham Suggestion #3 – Quality Stocks
Grantham has been suggesting a focus on blue chip quality for a while. Here is his most recent advice:
“On a regular time horizon, I would continue to overweight quality stocks, which may well be on a roll. They are not priced to make a fortune, but they are priced to give approximately 4.5% to 5% real return, which I think is acceptable for low-risk assets. They have also delivered dependable downside – risk off – relative performance for several years, which is a characteristic generally in short supply.”
Here are the top holdings from the GMO U.S. Core Fund at the end of June 2011, loaded with blue chip quality ideas:
Microsoft (MSFT) 4.8%
Pfizer (PFE) 4.6%
Wal-Mart (WMT) 4.1%
Oracle (ORCL) 3.8%
Google (GOOG) 3.2%
IBM (IBM) 3.2%
Johnson and Johnson (JNJ) 2.8%
Merck (MRK) 2.7%
Procter and Gamble (PG) 2.7%
Coca-Cola (KO) 2.5%
Exxon Mobil (XOM) 2.4%
Qualcomm (QCOM) 2.3%
Philip Morris (PM) 2.1%
Verizon 1.8% (VZ)
Pepsico 1.8%
Total of top holdings: 44.8%
Grantham Suggestion #4 – Emerging Markets
Grantham said emerging markets will outperform other non-high quality equities for the next seven years. Grantham points out that in a global financial crisis the foreign reserves held by these emerging economies are twice what is held by developed countries and can help the rebound more quickly or help investors weather through.
Grantham carefully suggests that these developing countries are moving toward the profitability of the developed world:
“Emerging markets are hard to evaluate because they are clearly going through many phases of development in a real hurry. So what is normal profitability? Probably not the old levels. They are moving toward developed status and probably toward our developed world’s level of profitability. (Yes, James Montier, that would be a change and, therefore, I admit, far from certain.)”
Grantham Suggestion #5 – Japan
At the bottom of his recommendation list but still a recommendation nonetheless is Japan, of all places. Grantham’s thesis here is interesting as he thinks Japanese companies may be able to finally move profitability levels toward those of other developed countries.
Here is what Grantham had to say:
“We at GMO also believe that Japan is likely to “regress,” in the mathematical sense, toward levels of profitability that would be considered normal in other developed countries. We expect the progress to be very slow and uneven.
If it does not happen at all, then Japanese stocks are priced like the average of all other developed equities, or a bit cheaper. If, however, by some chance margins improve quite fast, then Japanese stocks will likely be the best performing stocks around and could hit double-digit real returns for seven years. Japan’s remarkable resilience in the face of electricity shortages gives some inkling of what they are capable of. How quickly we have forgotten the nation's obvious talents of 20 years ago. Can all of those talents really be lost forever?”
Avoid Everything Else
The rest of the letter is classic Grantham, a grumpy old bear. He views global equities not covered above as ranging from unattractive (as of August 2) to very unattractive. He thinks that 950 is fair value on the S&P.
Generally Grantham thinks rise avoidance is a good idea. He suggests cash is a good idea not just because it is a safe haven, but also for its optionality as dry powder to take advantage of opportunities.
Source: Seeking Alpha
Farmland Investments Raise 16% Annual Returns
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Perry Vieth baled hay on a neighbor’s farm in Wisconsin for two summers during high school in 1972 and 1973. The grueling labor left him with no doubt about getting a college degree so that he’d never have to work as hard again for a paycheck. Thirty-eight years later, and after a career as a securities lawyer and fixed-income trader, Vieth is back on the farm.
Except, now, he owns it. As co-founder of Ceres Partners LLC, a Granger, Indiana-based investment firm, Vieth oversees 61 farms valued at $63.3 million in Illinois, Indiana, Michigan and Tennessee. He’s so enthusiastic about the investments that he quit a job in 2008 overseeing $7 billion in fixed-income assets at PanAgora Asset Management Inc., a Boston-based quantitative money management firm, to focus full time on farming, Bloomberg Markets magazine reports in its September issue.
On a spring afternoon, Vieth, 54, barrels along backcountry roads in a Jeep Cherokee in Indiana and Michigan to scout a fruit orchard and corn and soybean farms to buy. Rural towns with names such as Three Rivers pass by in a blur, separated by a wide horizon of fields with young crops popping up.
“When I told people I was leaving to start an investment fund in farmland, they said, ‘You’re doing what?’” says Vieth, in a red polo golf shirt and khakis. “It will always be difficult for Wall Street firms to understand. It’s not like buying stocks on a computer.”
It’s much better: Returns from farmland have trounced those of equities. Ceres Partners produced an average annual gain of 16.4 percent after fees from January 2008, just after the firm started, through June of this year, Vieth says.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
George Soros
The bulk of the returns are in rent payments from tenant farmers who grow and sell the crops and from land appreciation. The Standard & Poor’s GSCI Agriculture Index of eight raw materials gained 5.3 percent annually over the same period, and the S&P 500 Index (SPX) dropped almost 1 percent.
Investors are pouring into farmland in the U.S. and parts of Europe, Latin America and Africa as global food prices soar. A fund controlled by George Soros, the billionaire hedge-fund manager, owns 23.4 percent of South American farmland venture Adecoagro SA.
Hedge funds Ospraie Management LLC and Passport Capital LLC as well as Harvard University’s endowment are also betting on farming. TIAA-CREF, the $466 billion financial services giant, has $2 billion invested in some 600,000 acres (240,000 hectares) of farmland in Australia, Brazil and North America and wants to double the size of its investment.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Jim Rogers
“I have frequently told people that one of the best investments in the world will be farmland,” says Jim Rogers, 68, chairman of Singapore-based Rogers Holdings, who predicted the start of the global commodities rally in 1996. “You’ve got to buy in a place where it rains, and you have to have a farmer who knows what he’s doing. If you can do that, you will make a double whammy because the crops are becoming more valuable.”
The growth in demand for food, spurred by the rising middle classes in China, India and other emerging markets, shows no signs of abating. Food prices in June, as measured by a United Nations index of 55 food commodities, were just slightly below their peak in February. The UN’s Food and Agriculture Organization said in a June report that it expects food costs to remain high through 2012.
So many investors have rushed to capitalize on food prices in the past three years that they may be creating a farmland bubble. The Federal Reserve Bank of Kansas City, which covers Colorado, Kansas, Nebraska and other agricultural states, said in May that farmland prices had surged 20 percent in the first quarter compared with a year earlier.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Safe Haven
“Yes, farmland will be a bubble again; all agricultural products will be in a bubble again,” says Rogers, who is an investor in Agrifirma Brazil Ltd., a South American farmland owner.
Hedge-fund manager Stephen Diggle calls farming the ultimate safe haven. Diggle began buying farms with his own money in 2008 after Lehman Brothers Holdings Inc. (LEHMQ) filed for bankruptcy in September of that year and the S&P 500 plunged 43 percent in the next six months. He purchased 8,000 acres in Uruguay, three smaller plots in southern Illinois and an 80-acre New Zealand kiwi-and-avocado orchard.
“We really thought all the investment banks would go under,” says Diggle, who as a hedge-fund manager uses options and warrants to bet on price swings in the market. “Everyone said, ‘Buy gold.’ But at the end of the day, you can’t eat it. If everything else goes and I just have these farms, it makes me moderately wealthy.”
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
‘Prosperous China’
The hedge fund Diggle co-founded, Artradis Fund Management Pte in Singapore, suffered about $700 million in losses. He closed it in March and opened another Singapore-based hedge fund, Vulpes Investment Management Pte. Diggle plans to incorporate his five farms into an investment management group run by Vulpes.
From his vantage point in Asia, where the British expatriate has worked for the past two decades, Diggle says he’s witnessed aspiring locals eating their way up the food chain.
“You can see what a more prosperous China will consume,” Diggle, 47, says. “It means more dairy, more meat -- not just pork and chicken.”
Investors find in farmland a respite from the cyclical price swings of the commodities market. Since 1970, there have been at least four price jumps of at least 100 percent that were followed by steep declines in the S&P agriculture commodities index. By contrast, the average value of an acre of farmland tracked by the U.S. Department of Agriculture has been on a mostly steady climb from $737 in 1980 to $2,350 in 2011.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Leaving BlackRock
“Farmland is the lowest-risk part of the value chain, but it’s also a key part of production,” says Jose Minaya, TIAA- CREF’s head of natural resources and infrastructure investments.
In the U.K., where farm prices are also rising, one money manager traded his career at BlackRock Inc. (BLK) for one in farming. Graham Birch, 51, left in 2009 as the London-based head of the natural resources team at BlackRock, the world’s biggest asset manager, to run his two dairy, wheat and barley farms in southwest England full time.
Birch, who says farming has suffered from a lack of investment and management talent, has spent $1 million on improvements. He now captures all of the effluent from his 600- cow herd, stores it in a 4 million-liter (1-million-gallon) steel tank and uses it as fertilizer for his crops. “At heart, I am basically a businessman, and I want to try to apply the things I learned over the years to see what I could do,” Birch says.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Wall Street Roots
Ceres Partners’ Wall Street roots are evident in the firm’s makeshift office in an old clapboard farmhouse that sits in the middle of cropland. Lucite tombstones resting on a shelf in a small room mark deals done by Brandon Zick, a former vice president of strategic acquisitions at Morgan Stanley (MS)’s investment management unit. Vieth hired Zick in January to help analyze and manage farm purchases.
Vieth, a 1982 graduate of the University of Notre Dame Law School, began his career as a securities and corporate lawyer before moving to the pits of the Chicago Mercantile Exchange, where he traded S&P 500 options. After a series of stints running an arbitrage team for Fuji Securities Inc. and other firms, he was hired as chief investment officer of fixed income at PanAgora, the quant firm, in 1999.
By about 2006, Vieth’s concerns about the economy were mounting: Inflation was at a low, and the dollar had peaked as U.S. debt and deficits soared. So he searched for an asset class that would benefit from a currency decline and rising prices. His research led him to farms, since a falling dollar boosts U.S. crop exports.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Falling Dollar
Vieth then connected with Paul Blum, a fellow Notre Dame alumnus who spent some of his youth on a farm in upstate New York and today acts as Ceres’s point person with tenant farmers.
As the dollar fell 24 percent against the euro from January 2006 through May 2008, the pair started buying land as personal investments until the business grew too big for Vieth to manage during evenings and weekends. So, in late 2007, he founded Ceres, just as tightening credit markets began to push the global economy into a recession.
He named the firm Ceres for both the Roman goddess of agriculture and a bar he frequented during his trading days in Chicago. “I was more convinced hard assets were where you wanted to be, and farmland was the best investment I could identify,” Vieth says. By May 2011, he had collected 17,238 acres, mostly in the Midwest.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Shade and Rocks
When Vieth wants land, he goes shopping, as he does with Zick and Blum under a partly cloudy southern Michigan sky in May. Armed with aerial and soil maps, they look for farms with predictable rainfall, mineral-rich land and good drainage. They avoid land that slopes too much, which could lead to soil erosion.
The trio drive by a 337-acre farm for sale by a bank, and Vieth frowns at the slant of the land and the trees that line the perimeter. “Those trees will shade the corn and stunt growth,” he says. Blum doesn’t like the many rocks scattered on the unplanted dirt. Zick is skeptical that the bank will get its asking price of $7,000 an acre in a foreclosure sale.
The investors next visit a farmer they hired, Ed Kerlikowske Jr., who grows watermelon, peas and corn on their 782-acre spread near Berrien Springs, Michigan. For farmers such as Kerlikowske, the entry of outside investors frees up money for new equipment that they would otherwise have to spend on land. “To really grow the business in today’s economy, you need partners,” Kerlikowske says as he passes around slices of fresh watermelon.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Possible Bubble
The farm-investing boom is making lots of people happy, but could it all end in tears? The Federal Deposit Insurance Corp., which regulates banks that lend to farmers, has examined whether investors may be pumping up prices and creating the conditions for a crash like the one that devastated the market in the 1980s, resulting in the failure of 300 farm banks.
In March, then-FDIC Chairman Sheila Bair devoted a symposium to the topic in Washington with the participation of economists, bankers and agricultural experts. “If there is a bubble in farmland prices, I hope the bulk of any correction is borne by investors such as hedge funds and not by the banking industry,” William Isaac, chairman of the FDIC during the farm banking bust and now senior managing director of FTI Consulting Inc. (FCN) said during the event.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Overpaying
Charles McNairy, whose family has been involved in agriculture since 1871, says neophyte investors who lack a deep understanding of farming are making bad deals. In 2009, McNairy started U.S. Farming Realty Trust LP, a fund based in Kinston, North Carolina, that had raised $261 million as of late May to buy farms, according to a Securities and Exchange Commission filing.
McNairy says funds such as Ceres have been overpaying for land, based on the return from crops. “Ceres shouldn’t be buying in the Midwest,” says McNairy, who declined to disclose the states he invests in. “It’s crazy to be buying up there.”
Vieth disagrees, saying Ceres’s returns prove that his strategy is working. “I certainly don’t want to start slinging mud, but I don’t know what the heck he’s talking about.”
Greyson Colvin, who started farming fund Colvin & Co. LLP in Anoka, Minnesota, in 2009, dismisses the idea of an overheated market. “After the housing bubble, people are a little too quick to assign the word bubble these days,” says Colvin, whose two funds and separately managed accounts hold 2,300 acres of farmland in Iowa, Minnesota and South Dakota valued at more than $10 million.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Head Winds
Colvin, a former analyst at UBS AG (UBSN) and Credit Suisse Group AG (CSGN), says U.S. farmers aren’t carrying as much debt as they did during the 1980s crisis, which contributed to the downfall of banks as agriculture loans defaulted. The farm debt-to-asset ratio, which peaked in 1985 at 23 percent, is expected to fall to 10.7 percent in 2011, according to Agriculture Department estimates.
Vieth’s farm funds are facing head winds in coming months and years: A likely rise in interest rates will push up his acquisition costs and the value of the dollar, which in turn might hurt commodity exports. While the former trader keeps a close eye on the dollar, he says farming will continue to thrive.
Investors seem to agree. At a dining-room table in the farmhouse in Granger, Vieth sits down at his computer one evening and totals the day’s haul: another $900,000 from investors looking for comfort -- and profits -- in one of the oldest and most essential industries on the planet
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Soucre: Bloomberg
Perry Vieth baled hay on a neighbor’s farm in Wisconsin for two summers during high school in 1972 and 1973. The grueling labor left him with no doubt about getting a college degree so that he’d never have to work as hard again for a paycheck. Thirty-eight years later, and after a career as a securities lawyer and fixed-income trader, Vieth is back on the farm.
Except, now, he owns it. As co-founder of Ceres Partners LLC, a Granger, Indiana-based investment firm, Vieth oversees 61 farms valued at $63.3 million in Illinois, Indiana, Michigan and Tennessee. He’s so enthusiastic about the investments that he quit a job in 2008 overseeing $7 billion in fixed-income assets at PanAgora Asset Management Inc., a Boston-based quantitative money management firm, to focus full time on farming, Bloomberg Markets magazine reports in its September issue.
On a spring afternoon, Vieth, 54, barrels along backcountry roads in a Jeep Cherokee in Indiana and Michigan to scout a fruit orchard and corn and soybean farms to buy. Rural towns with names such as Three Rivers pass by in a blur, separated by a wide horizon of fields with young crops popping up.
“When I told people I was leaving to start an investment fund in farmland, they said, ‘You’re doing what?’” says Vieth, in a red polo golf shirt and khakis. “It will always be difficult for Wall Street firms to understand. It’s not like buying stocks on a computer.”
It’s much better: Returns from farmland have trounced those of equities. Ceres Partners produced an average annual gain of 16.4 percent after fees from January 2008, just after the firm started, through June of this year, Vieth says.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
George Soros
The bulk of the returns are in rent payments from tenant farmers who grow and sell the crops and from land appreciation. The Standard & Poor’s GSCI Agriculture Index of eight raw materials gained 5.3 percent annually over the same period, and the S&P 500 Index (SPX) dropped almost 1 percent.
Investors are pouring into farmland in the U.S. and parts of Europe, Latin America and Africa as global food prices soar. A fund controlled by George Soros, the billionaire hedge-fund manager, owns 23.4 percent of South American farmland venture Adecoagro SA.
Hedge funds Ospraie Management LLC and Passport Capital LLC as well as Harvard University’s endowment are also betting on farming. TIAA-CREF, the $466 billion financial services giant, has $2 billion invested in some 600,000 acres (240,000 hectares) of farmland in Australia, Brazil and North America and wants to double the size of its investment.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Jim Rogers
“I have frequently told people that one of the best investments in the world will be farmland,” says Jim Rogers, 68, chairman of Singapore-based Rogers Holdings, who predicted the start of the global commodities rally in 1996. “You’ve got to buy in a place where it rains, and you have to have a farmer who knows what he’s doing. If you can do that, you will make a double whammy because the crops are becoming more valuable.”
The growth in demand for food, spurred by the rising middle classes in China, India and other emerging markets, shows no signs of abating. Food prices in June, as measured by a United Nations index of 55 food commodities, were just slightly below their peak in February. The UN’s Food and Agriculture Organization said in a June report that it expects food costs to remain high through 2012.
So many investors have rushed to capitalize on food prices in the past three years that they may be creating a farmland bubble. The Federal Reserve Bank of Kansas City, which covers Colorado, Kansas, Nebraska and other agricultural states, said in May that farmland prices had surged 20 percent in the first quarter compared with a year earlier.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Safe Haven
“Yes, farmland will be a bubble again; all agricultural products will be in a bubble again,” says Rogers, who is an investor in Agrifirma Brazil Ltd., a South American farmland owner.
Hedge-fund manager Stephen Diggle calls farming the ultimate safe haven. Diggle began buying farms with his own money in 2008 after Lehman Brothers Holdings Inc. (LEHMQ) filed for bankruptcy in September of that year and the S&P 500 plunged 43 percent in the next six months. He purchased 8,000 acres in Uruguay, three smaller plots in southern Illinois and an 80-acre New Zealand kiwi-and-avocado orchard.
“We really thought all the investment banks would go under,” says Diggle, who as a hedge-fund manager uses options and warrants to bet on price swings in the market. “Everyone said, ‘Buy gold.’ But at the end of the day, you can’t eat it. If everything else goes and I just have these farms, it makes me moderately wealthy.”
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
‘Prosperous China’
The hedge fund Diggle co-founded, Artradis Fund Management Pte in Singapore, suffered about $700 million in losses. He closed it in March and opened another Singapore-based hedge fund, Vulpes Investment Management Pte. Diggle plans to incorporate his five farms into an investment management group run by Vulpes.
From his vantage point in Asia, where the British expatriate has worked for the past two decades, Diggle says he’s witnessed aspiring locals eating their way up the food chain.
“You can see what a more prosperous China will consume,” Diggle, 47, says. “It means more dairy, more meat -- not just pork and chicken.”
Investors find in farmland a respite from the cyclical price swings of the commodities market. Since 1970, there have been at least four price jumps of at least 100 percent that were followed by steep declines in the S&P agriculture commodities index. By contrast, the average value of an acre of farmland tracked by the U.S. Department of Agriculture has been on a mostly steady climb from $737 in 1980 to $2,350 in 2011.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Leaving BlackRock
“Farmland is the lowest-risk part of the value chain, but it’s also a key part of production,” says Jose Minaya, TIAA- CREF’s head of natural resources and infrastructure investments.
In the U.K., where farm prices are also rising, one money manager traded his career at BlackRock Inc. (BLK) for one in farming. Graham Birch, 51, left in 2009 as the London-based head of the natural resources team at BlackRock, the world’s biggest asset manager, to run his two dairy, wheat and barley farms in southwest England full time.
Birch, who says farming has suffered from a lack of investment and management talent, has spent $1 million on improvements. He now captures all of the effluent from his 600- cow herd, stores it in a 4 million-liter (1-million-gallon) steel tank and uses it as fertilizer for his crops. “At heart, I am basically a businessman, and I want to try to apply the things I learned over the years to see what I could do,” Birch says.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Wall Street Roots
Ceres Partners’ Wall Street roots are evident in the firm’s makeshift office in an old clapboard farmhouse that sits in the middle of cropland. Lucite tombstones resting on a shelf in a small room mark deals done by Brandon Zick, a former vice president of strategic acquisitions at Morgan Stanley (MS)’s investment management unit. Vieth hired Zick in January to help analyze and manage farm purchases.
Vieth, a 1982 graduate of the University of Notre Dame Law School, began his career as a securities and corporate lawyer before moving to the pits of the Chicago Mercantile Exchange, where he traded S&P 500 options. After a series of stints running an arbitrage team for Fuji Securities Inc. and other firms, he was hired as chief investment officer of fixed income at PanAgora, the quant firm, in 1999.
By about 2006, Vieth’s concerns about the economy were mounting: Inflation was at a low, and the dollar had peaked as U.S. debt and deficits soared. So he searched for an asset class that would benefit from a currency decline and rising prices. His research led him to farms, since a falling dollar boosts U.S. crop exports.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Falling Dollar
Vieth then connected with Paul Blum, a fellow Notre Dame alumnus who spent some of his youth on a farm in upstate New York and today acts as Ceres’s point person with tenant farmers.
As the dollar fell 24 percent against the euro from January 2006 through May 2008, the pair started buying land as personal investments until the business grew too big for Vieth to manage during evenings and weekends. So, in late 2007, he founded Ceres, just as tightening credit markets began to push the global economy into a recession.
He named the firm Ceres for both the Roman goddess of agriculture and a bar he frequented during his trading days in Chicago. “I was more convinced hard assets were where you wanted to be, and farmland was the best investment I could identify,” Vieth says. By May 2011, he had collected 17,238 acres, mostly in the Midwest.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Shade and Rocks
When Vieth wants land, he goes shopping, as he does with Zick and Blum under a partly cloudy southern Michigan sky in May. Armed with aerial and soil maps, they look for farms with predictable rainfall, mineral-rich land and good drainage. They avoid land that slopes too much, which could lead to soil erosion.
The trio drive by a 337-acre farm for sale by a bank, and Vieth frowns at the slant of the land and the trees that line the perimeter. “Those trees will shade the corn and stunt growth,” he says. Blum doesn’t like the many rocks scattered on the unplanted dirt. Zick is skeptical that the bank will get its asking price of $7,000 an acre in a foreclosure sale.
The investors next visit a farmer they hired, Ed Kerlikowske Jr., who grows watermelon, peas and corn on their 782-acre spread near Berrien Springs, Michigan. For farmers such as Kerlikowske, the entry of outside investors frees up money for new equipment that they would otherwise have to spend on land. “To really grow the business in today’s economy, you need partners,” Kerlikowske says as he passes around slices of fresh watermelon.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Possible Bubble
The farm-investing boom is making lots of people happy, but could it all end in tears? The Federal Deposit Insurance Corp., which regulates banks that lend to farmers, has examined whether investors may be pumping up prices and creating the conditions for a crash like the one that devastated the market in the 1980s, resulting in the failure of 300 farm banks.
In March, then-FDIC Chairman Sheila Bair devoted a symposium to the topic in Washington with the participation of economists, bankers and agricultural experts. “If there is a bubble in farmland prices, I hope the bulk of any correction is borne by investors such as hedge funds and not by the banking industry,” William Isaac, chairman of the FDIC during the farm banking bust and now senior managing director of FTI Consulting Inc. (FCN) said during the event.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Overpaying
Charles McNairy, whose family has been involved in agriculture since 1871, says neophyte investors who lack a deep understanding of farming are making bad deals. In 2009, McNairy started U.S. Farming Realty Trust LP, a fund based in Kinston, North Carolina, that had raised $261 million as of late May to buy farms, according to a Securities and Exchange Commission filing.
McNairy says funds such as Ceres have been overpaying for land, based on the return from crops. “Ceres shouldn’t be buying in the Midwest,” says McNairy, who declined to disclose the states he invests in. “It’s crazy to be buying up there.”
Vieth disagrees, saying Ceres’s returns prove that his strategy is working. “I certainly don’t want to start slinging mud, but I don’t know what the heck he’s talking about.”
Greyson Colvin, who started farming fund Colvin & Co. LLP in Anoka, Minnesota, in 2009, dismisses the idea of an overheated market. “After the housing bubble, people are a little too quick to assign the word bubble these days,” says Colvin, whose two funds and separately managed accounts hold 2,300 acres of farmland in Iowa, Minnesota and South Dakota valued at more than $10 million.
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Head Winds
Colvin, a former analyst at UBS AG (UBSN) and Credit Suisse Group AG (CSGN), says U.S. farmers aren’t carrying as much debt as they did during the 1980s crisis, which contributed to the downfall of banks as agriculture loans defaulted. The farm debt-to-asset ratio, which peaked in 1985 at 23 percent, is expected to fall to 10.7 percent in 2011, according to Agriculture Department estimates.
Vieth’s farm funds are facing head winds in coming months and years: A likely rise in interest rates will push up his acquisition costs and the value of the dollar, which in turn might hurt commodity exports. While the former trader keeps a close eye on the dollar, he says farming will continue to thrive.
Investors seem to agree. At a dining-room table in the farmhouse in Granger, Vieth sits down at his computer one evening and totals the day’s haul: another $900,000 from investors looking for comfort -- and profits -- in one of the oldest and most essential industries on the planet
Download your FREE DGC Asset Management Farmland Investment and Agriculture Investment Guide here
Soucre: Bloomberg
Friday 17 June 2011
New Farmland Sale Record Set in IL: $13,500 Per Acre!
The Illinois farmland investment market rings up another record this year as a plot of land sold for $13,500 per acre.
The transaction was made on June 3, just eight days after setting a record of $12,900 per acre. Both sales were in Champaign County.
Last fall, an area of farmland was sold in Iowa for $13,950 an acre.
Economist say farmland is a hot investment in the market right now because of its stability.
The transaction was made on June 3, just eight days after setting a record of $12,900 per acre. Both sales were in Champaign County.
Last fall, an area of farmland was sold in Iowa for $13,950 an acre.
Economist say farmland is a hot investment in the market right now because of its stability.
Is a Arkansas Farmland Investment Boom Coming?
In news from Arkansas, demand for farmland there has spiked dramatically since a year ago. While other investment vehicles still remain stagnant, rising grain prices have rocketed farmers into acquisition mode.
Commodity prices and farmer profits have spurred what may be called a sort of Arkansas land bonanza of late. Profits are being directly re-invested into buying more farmland, while interest rates make such purchases even more desirable. Now investors other than farmers are seeing benefit as well, which is only making the demand rise too. Lee Vermeer, AFM, Vice President of Real Estate Operations at Farmers National Company, had this to say about the situation:
“While 75 to 85 percent of land buyers continue to be farmers, interest among outside investors has risen. Despite the robust demand driving sales activity levels, reports show that lenders are taking a relatively conservative approach to lending. Strong profits the past few years have provided cash for farmer buyers, while investors are taking cash from other sources to rebalance portfolios.”
Land prices are rising in other areas of the country as well. Flooding and other factors, combined with the growing demand for certain crops, has made farmland investment a viable alternative even for commercial investors. Tennessee, Mississippi, Arkansas, Alabama, western Kentucky, Louisiana, and southern Missouri are all seeing the same kind of price increases as Arkansas.
Monty Meusch, an expert from Farmers National Company, reported on land prices in Iowa, Kansas, Missouri, Nebraska, and South Dakota recently, showing cases where prices far exceeded expectations in recent land auctions. And while not much is mentioned about prices tied to high tech alternative fuels, food shortages, and similar market drivers, it seems clear farm land will see sustained price and demand stimulation.
The Watt reports 2011 seeing a 20 % rise in demand for biofuels, and already Brazil is on the verge of severe constraints where the ethanol industry there is concerned. Land may soon come at a bigger premium than any other real estate commodity.
Arkansas and other agriculturally grounded states may be the first to see farmland prices spike, but as the demand for farm products grows, farmers everywhere will clearly rich in cash to invest elsewhere. Georgia, South Carolina, North Carolina, and others of the Southern states once abundantly agricultural, may well see a resurgence with the need for biofuels and more argi-business.
But like all markets, farm land is also tied to so many other crucial sectors – in short, good news for some generally means higher prices and constraints for others. We will follow how these economies affect Arkansas’ other real estate sectors.
Source: http://realtybiznews.com/arkansas-land-boom/9873448/
Commodity prices and farmer profits have spurred what may be called a sort of Arkansas land bonanza of late. Profits are being directly re-invested into buying more farmland, while interest rates make such purchases even more desirable. Now investors other than farmers are seeing benefit as well, which is only making the demand rise too. Lee Vermeer, AFM, Vice President of Real Estate Operations at Farmers National Company, had this to say about the situation:
“While 75 to 85 percent of land buyers continue to be farmers, interest among outside investors has risen. Despite the robust demand driving sales activity levels, reports show that lenders are taking a relatively conservative approach to lending. Strong profits the past few years have provided cash for farmer buyers, while investors are taking cash from other sources to rebalance portfolios.”
Land prices are rising in other areas of the country as well. Flooding and other factors, combined with the growing demand for certain crops, has made farmland investment a viable alternative even for commercial investors. Tennessee, Mississippi, Arkansas, Alabama, western Kentucky, Louisiana, and southern Missouri are all seeing the same kind of price increases as Arkansas.
Monty Meusch, an expert from Farmers National Company, reported on land prices in Iowa, Kansas, Missouri, Nebraska, and South Dakota recently, showing cases where prices far exceeded expectations in recent land auctions. And while not much is mentioned about prices tied to high tech alternative fuels, food shortages, and similar market drivers, it seems clear farm land will see sustained price and demand stimulation.
The Watt reports 2011 seeing a 20 % rise in demand for biofuels, and already Brazil is on the verge of severe constraints where the ethanol industry there is concerned. Land may soon come at a bigger premium than any other real estate commodity.
Arkansas and other agriculturally grounded states may be the first to see farmland prices spike, but as the demand for farm products grows, farmers everywhere will clearly rich in cash to invest elsewhere. Georgia, South Carolina, North Carolina, and others of the Southern states once abundantly agricultural, may well see a resurgence with the need for biofuels and more argi-business.
But like all markets, farm land is also tied to so many other crucial sectors – in short, good news for some generally means higher prices and constraints for others. We will follow how these economies affect Arkansas’ other real estate sectors.
Source: http://realtybiznews.com/arkansas-land-boom/9873448/
Largest Ever Farmland Investment For Sale
Savills has been instructed to sell close to 1 million acres of land in Argentina. Situated in the San Juan province in the north west of Argentina, Estancia Punta del Agua totals approximately 989,000 acres in a single location to the north west of San Juan city.
The land is being marketed through Savills and joint agents Gateway to South America based in Buenos Aires, on behalf of a multi-national family who have owned the land since the 1980’s and now wish to concentrate on other projects.
Ken Jones, head of international farmland for Savills says “This is probably the largest ring fenced freehold block of land to be offered for sale in the open market ever. Given the current interest in farmland from international investors, we expect the Estancia to appeal to a number of potential purchasers. With soil reports showing vast areas of silt soils, and the potential of tapping into one of the largest aquifers in Argentina, the Estancia needs an investor who understands agriculture and has the capital to invest after the purchase in a scheme of works to bring the land into line with 21st century farming techniques. We feel, once implemented, not only will the owner have one of the largest farms in the world, but also will have added value far beyond the cost of the scheme.”
Joint agent Geoffrey McRae of Gateway to South America adds; “The Estancia was a productive farming estate until the 1950’s when lack of infrastructure meant that the province of San Juan became less competitive in comparison to the more strategically located provinces like Mendoza and La Pampa. In recent years, a strategic alliance between the countries of Chile, Argentina, Uruguay and Brazil has meant significant investment in, amongst others, a road network connecting major ports on the Atlantic and Pacific oceans. Part of this network of road runs the full width of the Estancia meaning produce can be transported from the land with ease. Investment in the 132kv grid network means that the Estancia will also benefit from a modern, reliable electricity supply.”
The Estancia totals approximately 989,000 acres and is available as a whole by Private Treaty.
Source: http://www.landgazette.co.uk/index.php/rural-agency-/935-largest-block
The land is being marketed through Savills and joint agents Gateway to South America based in Buenos Aires, on behalf of a multi-national family who have owned the land since the 1980’s and now wish to concentrate on other projects.
Ken Jones, head of international farmland for Savills says “This is probably the largest ring fenced freehold block of land to be offered for sale in the open market ever. Given the current interest in farmland from international investors, we expect the Estancia to appeal to a number of potential purchasers. With soil reports showing vast areas of silt soils, and the potential of tapping into one of the largest aquifers in Argentina, the Estancia needs an investor who understands agriculture and has the capital to invest after the purchase in a scheme of works to bring the land into line with 21st century farming techniques. We feel, once implemented, not only will the owner have one of the largest farms in the world, but also will have added value far beyond the cost of the scheme.”
Joint agent Geoffrey McRae of Gateway to South America adds; “The Estancia was a productive farming estate until the 1950’s when lack of infrastructure meant that the province of San Juan became less competitive in comparison to the more strategically located provinces like Mendoza and La Pampa. In recent years, a strategic alliance between the countries of Chile, Argentina, Uruguay and Brazil has meant significant investment in, amongst others, a road network connecting major ports on the Atlantic and Pacific oceans. Part of this network of road runs the full width of the Estancia meaning produce can be transported from the land with ease. Investment in the 132kv grid network means that the Estancia will also benefit from a modern, reliable electricity supply.”
The Estancia totals approximately 989,000 acres and is available as a whole by Private Treaty.
Source: http://www.landgazette.co.uk/index.php/rural-agency-/935-largest-block
Chinese agro firm make $1.5b agriculture investment in Argentina
Beidahuang Group, a company based in Northeast China's Heilongjiang province, expressed its intention to invest in an agricultural cooperation project with Argentina’s Rio Negro Province, ce.cn reported Monday, quoting media reports in Argentina.
The Chinese company will invest $1.5 billion over 20 years to grow farm produce, including soybeans and corn, and export those crops back to China. The project will use advanced irrigation facilities to develop 300,000 hectares of arable lands for agriculture use, and construct supporting power generators and port expansions.
This project, expected to start this year, will be the first investment in Argentina’s agriculture by Chinese companies, according to the media.
The Chinese company will invest $1.5 billion over 20 years to grow farm produce, including soybeans and corn, and export those crops back to China. The project will use advanced irrigation facilities to develop 300,000 hectares of arable lands for agriculture use, and construct supporting power generators and port expansions.
This project, expected to start this year, will be the first investment in Argentina’s agriculture by Chinese companies, according to the media.
USDA makes $20 million bio-mass investment
JEFFERSON CITY, Mo. – The U.S. Department of Agriculture has announced new subsidies to encourage Missouri farmers to grow bio-mass crops.
On Wednesday, Agriculture Secretary Tom Vilsack unveiled two new Biomass Crop Assistance Programs for the areas near Columbia and Aurora. The plan would subsidize eligible farmers up to 75 percent of the cost for seeding giant miscanthus, a hybrid grass which is converted into energy for heat, power and liquid bio-fuels.
“Our hope is that they will convert this crop into energy and at the same time also produce needed jobs in the areas surrounding Columbia and Aurora,” Vilsack said.
The plan applies to a combined 820,000 acres around both cities. Both towns already host bio-mass conversion facilities. The USDA estimates that these projects and the related conversion plants would generate about $50 million per year and create nearly 4,000 jobs in Missouri by 2014.
The projects are part of a four-state, $20 million investment by the USDA for increasing biomass crop production, which Vilsack said was an integral part of the President’s plan to increase renewable energy by 15 percent by the start of the next decade.
Sen. Roy Blunt joined the agriculture secretary in making the announcement. He praised the new program, saying it would help encourage farmers to take advantage of land that would otherwise go unused.
Miscanthus is a sterile hybrid warm-season grass that is cultivated through planting of rhizomes in open fields and is cable of producing up to 12 tons of crop per acre. Blunt said the crop requires little maintenance after planting and would grow in lower quality soil that is not suitable for food crops.
“It will grow on land that is not necessarily the best farmland for anything else,” he said.
Vilsack said part of the reason for the bio-mass investment has been the growing movement among states like Missouri to place new restrictions on utility companies, requiring them to obtain a certain amount of their energy portfolio from renewable sources.
“We see this program as a way of partnering with the states and with utility companies to meet those portfolio standards,” the secretary said.
Source: http://missouri-news.org/featured/usda-makes-20-million-bio-mass-investment-in-missouri-other-states/6050
On Wednesday, Agriculture Secretary Tom Vilsack unveiled two new Biomass Crop Assistance Programs for the areas near Columbia and Aurora. The plan would subsidize eligible farmers up to 75 percent of the cost for seeding giant miscanthus, a hybrid grass which is converted into energy for heat, power and liquid bio-fuels.
“Our hope is that they will convert this crop into energy and at the same time also produce needed jobs in the areas surrounding Columbia and Aurora,” Vilsack said.
The plan applies to a combined 820,000 acres around both cities. Both towns already host bio-mass conversion facilities. The USDA estimates that these projects and the related conversion plants would generate about $50 million per year and create nearly 4,000 jobs in Missouri by 2014.
The projects are part of a four-state, $20 million investment by the USDA for increasing biomass crop production, which Vilsack said was an integral part of the President’s plan to increase renewable energy by 15 percent by the start of the next decade.
Sen. Roy Blunt joined the agriculture secretary in making the announcement. He praised the new program, saying it would help encourage farmers to take advantage of land that would otherwise go unused.
Miscanthus is a sterile hybrid warm-season grass that is cultivated through planting of rhizomes in open fields and is cable of producing up to 12 tons of crop per acre. Blunt said the crop requires little maintenance after planting and would grow in lower quality soil that is not suitable for food crops.
“It will grow on land that is not necessarily the best farmland for anything else,” he said.
Vilsack said part of the reason for the bio-mass investment has been the growing movement among states like Missouri to place new restrictions on utility companies, requiring them to obtain a certain amount of their energy portfolio from renewable sources.
“We see this program as a way of partnering with the states and with utility companies to meet those portfolio standards,” the secretary said.
Source: http://missouri-news.org/featured/usda-makes-20-million-bio-mass-investment-in-missouri-other-states/6050
Sarkozy Demands Regulation of Global Agricultural Futures Markets
Agricultural futures markets need global regulation because price swings are damaging producers and consumers, French President Nicolas Sarkozy said, a week before G-20 ministers meet to discuss global food supply.
France, which heads the Group of 20 nations this year, will propose a market-information system similar to what already exists in oil, Sarkozy told a conference of farm groups in Paris today. The G-20 members account for 70 percent of agricultural land and 80 percent of world food trade, he said. Their farm ministers meet in Paris on June 22.
Global food prices monitored by the United Nations rose to a record in February and the World Bank estimates the increase contributed to 44 million people falling into poverty in the past year. Rising costs are stoking inflation worldwide, spurring central banks from China to the euro region to increase interest rates, potentially curbing economic expansion.
“We have to regulate the financial futures markets for agricultural commodities,” Sarkozy told the conference. “If we wait, we’ll do nothing. And we can’t permit ourselves the luxury of not doing anything.”
The Standard & Poor’s Agriculture Index of eight raw materials rose 60 percent in the past 12 months, led by corn, cotton, wheat and coffee. The compares with a 32 percent advance in the S&P GSCI index of 24 commodities and a 15 percent gain in the MSCI All-Country World Index of equities.
‘Volatility Insupportable’
“This price volatility has become insupportable,” Sarkozy told representatives from about 120 farm groups at today’s meeting. “Name me one other profession where every year, one can lose more than 30 percent of their revenue.”
The last time food prices surged, from 2007 to 2009, more than 60 food riots occurred worldwide, according to the U.S. State Department. Corn gained 75 percent in the past 12 months, wheat 54 percent and rice 28 percent.
“Price volatility is also insupportable for consumers,” the French president said. “The food crisis of 2007-08, the cause of food riots, is the dramatic illustration of the consequences of the fluctuations.”
Farming needs more investment, particularly in research, and global governance is needed because “the world agricultural markets are the least transparent of all,” the president said. Growth in farm output slowed to less than 1.5 percent a year from 3 percent between 1960 and 1990, he said.
Global Population
The world population is forecast to climb to 9.2 billion in 2050 from an estimated 6.9 billion in 2010, requiring a 70 percent jump in agricultural production, according to the Rome- based Food and Agriculture Organization.
“Agronomy has to again become the driving force to ensure the necessary growth of world food production,” Sarkozy said. “Obviously, public aid isn’t sufficient. We have to encourage private investment in agriculture.”
The so-called Green Revolution that started in the 1950s and spread in the 1960s introduced more productive wheat, corn and rice varieties. That raised cereal yields and food production, saving an estimated 1 billion people from famine and jump-starting Asian economies, according to the FAO.
“We want to launch a new system of market information for agriculture, as it was done about 10 years ago for oil,” Sarkozy said. “This new system should allow us to increase international cooperation on the subject of food security.”
‘Damaging Decisions’
The FAO could host the database and there needs to be an international forum to discuss responses to crises, which “will help avoid unilateral and damaging decisions,” Sarkozy said.
Russia, once the world’s second-biggest wheat exporter, banned grain exports last year after its worst drought in a half century and Ukraine imposed quotas on overseas sales.
Financial regulation to improve the working of the futures markets must be extended to agricultural commodities, according to the president.
“What we have done for the oil futures markets, is there one reason, one argument, to refuse to do it for the agricultural commodity futures markets?” Sarkozy asked at the conference.
In Chicago, trading volumes are equal to 46 times annual U.S. wheat production and 24 times the country’s corn harvest, according to the French president.
“And people tell me there is no speculation,” Sarkozy said. “On the commodity markets in Chicago, 85 percent of buy positions are held by purely financial players, whose business has no link with the traded goods.”
“Our world has lost the notion of value, the notion of reality,” Sarkozy said. “This sort of capitalism has nothing to do with our values. The capitalism we want is a capitalism of production, not a purely financial capitalism.”
Source: http://www.bloomberg.com/news/2011-06-16/agriculture-markets-require-global-governance-and-regulation-sarkozy-says.html
France, which heads the Group of 20 nations this year, will propose a market-information system similar to what already exists in oil, Sarkozy told a conference of farm groups in Paris today. The G-20 members account for 70 percent of agricultural land and 80 percent of world food trade, he said. Their farm ministers meet in Paris on June 22.
Global food prices monitored by the United Nations rose to a record in February and the World Bank estimates the increase contributed to 44 million people falling into poverty in the past year. Rising costs are stoking inflation worldwide, spurring central banks from China to the euro region to increase interest rates, potentially curbing economic expansion.
“We have to regulate the financial futures markets for agricultural commodities,” Sarkozy told the conference. “If we wait, we’ll do nothing. And we can’t permit ourselves the luxury of not doing anything.”
The Standard & Poor’s Agriculture Index of eight raw materials rose 60 percent in the past 12 months, led by corn, cotton, wheat and coffee. The compares with a 32 percent advance in the S&P GSCI index of 24 commodities and a 15 percent gain in the MSCI All-Country World Index of equities.
‘Volatility Insupportable’
“This price volatility has become insupportable,” Sarkozy told representatives from about 120 farm groups at today’s meeting. “Name me one other profession where every year, one can lose more than 30 percent of their revenue.”
The last time food prices surged, from 2007 to 2009, more than 60 food riots occurred worldwide, according to the U.S. State Department. Corn gained 75 percent in the past 12 months, wheat 54 percent and rice 28 percent.
“Price volatility is also insupportable for consumers,” the French president said. “The food crisis of 2007-08, the cause of food riots, is the dramatic illustration of the consequences of the fluctuations.”
Farming needs more investment, particularly in research, and global governance is needed because “the world agricultural markets are the least transparent of all,” the president said. Growth in farm output slowed to less than 1.5 percent a year from 3 percent between 1960 and 1990, he said.
Global Population
The world population is forecast to climb to 9.2 billion in 2050 from an estimated 6.9 billion in 2010, requiring a 70 percent jump in agricultural production, according to the Rome- based Food and Agriculture Organization.
“Agronomy has to again become the driving force to ensure the necessary growth of world food production,” Sarkozy said. “Obviously, public aid isn’t sufficient. We have to encourage private investment in agriculture.”
The so-called Green Revolution that started in the 1950s and spread in the 1960s introduced more productive wheat, corn and rice varieties. That raised cereal yields and food production, saving an estimated 1 billion people from famine and jump-starting Asian economies, according to the FAO.
“We want to launch a new system of market information for agriculture, as it was done about 10 years ago for oil,” Sarkozy said. “This new system should allow us to increase international cooperation on the subject of food security.”
‘Damaging Decisions’
The FAO could host the database and there needs to be an international forum to discuss responses to crises, which “will help avoid unilateral and damaging decisions,” Sarkozy said.
Russia, once the world’s second-biggest wheat exporter, banned grain exports last year after its worst drought in a half century and Ukraine imposed quotas on overseas sales.
Financial regulation to improve the working of the futures markets must be extended to agricultural commodities, according to the president.
“What we have done for the oil futures markets, is there one reason, one argument, to refuse to do it for the agricultural commodity futures markets?” Sarkozy asked at the conference.
In Chicago, trading volumes are equal to 46 times annual U.S. wheat production and 24 times the country’s corn harvest, according to the French president.
“And people tell me there is no speculation,” Sarkozy said. “On the commodity markets in Chicago, 85 percent of buy positions are held by purely financial players, whose business has no link with the traded goods.”
“Our world has lost the notion of value, the notion of reality,” Sarkozy said. “This sort of capitalism has nothing to do with our values. The capitalism we want is a capitalism of production, not a purely financial capitalism.”
Source: http://www.bloomberg.com/news/2011-06-16/agriculture-markets-require-global-governance-and-regulation-sarkozy-says.html
Tony Elumelu Foundation (TEF) to Make $500m Agriculture Investment
The agricultural sector in Nigeria will soon experience a revolution as the Tony Elumelu Foundation (TEF) is set to pump in $500 million to boost activities in the sector.
To this end, the Foundation has entered into partnership with some state governments for the allocation of lands to commence large scale agricultural activities in the country.
Mr. Tony Elumelu, Founder of TEF who disclosed this to journalist in Lagos stated that the world is potentially facing a food security crisis meanwhile Nigeria has land that can feed the continent of Africa as well provide employment to a significant percentage of the teeming unemployed people.
In his words, “The world is facing a potentially food security crisis and I said to my friends and associates ‘team up with me lets create an agricultural revolution. I am not just telling you to come and invest; I am also ready to co-invest with you. Team up with me lets see how we can do this’ and they are responding to it.”
Elumelu stated that the Foundation has appointed a consultant and spoken to six state governments who have promised to give 50 acres of land each, adding “And our consultants are working with the various state ministries to see how we can make it happen.
The Central Bank of Nigeria (CBN) Governor and I spoke, we have a master plan for agriculture revolution in Nigeria so we are trying to see what we want to do, so that together it’s a win-win for agriculture and the country.
Elumelu also stated that he has foreign associates who have indicated interest that they will like to invest in Nigerian agricultural sector, as such the Foundation has been talking to them, telling them that Nigeria has a lot of valuable land, water, the right climate etc and they should come and invest in Nigeria, stating “Our land is huge, come so that we can collectively deal with the issue of food security and also engage our people.”
On what the government should do to make the country an attractive destination for investment, Elumelu stated that the government needs to turn the environment around, stating that it is possible and achievable to do so. “We have to consider all the factors that can make us an attractive destination for investors who have capital to invest; for tourists who wants to visit the country, as well as for workers who want to work and grow a career.
My hope is that in the next four years, the new government would pay strong attention to the issue of competitiveness and ease of doing business so that Nigeria will become a good destination for investment,” he stated.
The TEF founder noted that the country needs to deal with all the factors that will make Nigeria a good destination for investors so that if foreigners have money and are looking for a place to invest, they should come to Nigeria. “Some factors should make a rational investor come to Nigeria.
For instance if you want to import goods into the country for your business, how many days will it take you to clear goods at the ports? Countries have moved to a level where they can clear goods within hours or days.
Can we achieve this in Nigeria? Lets say at the end of this year, we achieve a system whereby people can clear goods at the ports within one week, that will help the investment drive of the country. Similarly other infrastructure that will make us do well as a country, we need to build these things,” he noted.
Source: http://www.vanguardngr.com/2011/06/tef-to-invest-500m-into-agriculture/
To this end, the Foundation has entered into partnership with some state governments for the allocation of lands to commence large scale agricultural activities in the country.
Mr. Tony Elumelu, Founder of TEF who disclosed this to journalist in Lagos stated that the world is potentially facing a food security crisis meanwhile Nigeria has land that can feed the continent of Africa as well provide employment to a significant percentage of the teeming unemployed people.
In his words, “The world is facing a potentially food security crisis and I said to my friends and associates ‘team up with me lets create an agricultural revolution. I am not just telling you to come and invest; I am also ready to co-invest with you. Team up with me lets see how we can do this’ and they are responding to it.”
Elumelu stated that the Foundation has appointed a consultant and spoken to six state governments who have promised to give 50 acres of land each, adding “And our consultants are working with the various state ministries to see how we can make it happen.
The Central Bank of Nigeria (CBN) Governor and I spoke, we have a master plan for agriculture revolution in Nigeria so we are trying to see what we want to do, so that together it’s a win-win for agriculture and the country.
Elumelu also stated that he has foreign associates who have indicated interest that they will like to invest in Nigerian agricultural sector, as such the Foundation has been talking to them, telling them that Nigeria has a lot of valuable land, water, the right climate etc and they should come and invest in Nigeria, stating “Our land is huge, come so that we can collectively deal with the issue of food security and also engage our people.”
On what the government should do to make the country an attractive destination for investment, Elumelu stated that the government needs to turn the environment around, stating that it is possible and achievable to do so. “We have to consider all the factors that can make us an attractive destination for investors who have capital to invest; for tourists who wants to visit the country, as well as for workers who want to work and grow a career.
My hope is that in the next four years, the new government would pay strong attention to the issue of competitiveness and ease of doing business so that Nigeria will become a good destination for investment,” he stated.
The TEF founder noted that the country needs to deal with all the factors that will make Nigeria a good destination for investors so that if foreigners have money and are looking for a place to invest, they should come to Nigeria. “Some factors should make a rational investor come to Nigeria.
For instance if you want to import goods into the country for your business, how many days will it take you to clear goods at the ports? Countries have moved to a level where they can clear goods within hours or days.
Can we achieve this in Nigeria? Lets say at the end of this year, we achieve a system whereby people can clear goods at the ports within one week, that will help the investment drive of the country. Similarly other infrastructure that will make us do well as a country, we need to build these things,” he noted.
Source: http://www.vanguardngr.com/2011/06/tef-to-invest-500m-into-agriculture/
Thursday 16 June 2011
Investors see the forest for the trees
Timber is increasingly attractive for institutional investors as part of an alternatives exposure, with benefits including diversification and inflation-hedging. To date most of the investments have been in the US, but a new report predicts this will move to emerging countries including those in Asia, with consultants advising investors spread their timber exposures to capture growth opportunities.
Timber investments offer the lure of returns uncorrelated to other financial assets and also play into several attractive potential thematic opportunities such as population growth and resource scarcity, climate change and the growing consumer-base in emerging markets.
While timber has previously been the domain of the endowments – with investors such as Harvard Management Corporation allocating 14 per cent to commodities exposures – pension funds have also been looking at these assets both for their risk diversification potential and as a hedge against inflation.
Sovereign wealth funds, including Australia’s FutureFund, and the Alaska Permanent Fund are among investors which have been vocal about increasing their timberland investments.
In 2008, CalPERS announced it would more than double its investment in timber to $2.4 billion or 1 per cent of total assets. Timber investments fall under CalPERS’ “inflation-linked” asset class, which also includes commodities, inflation-linked bonds and infrastructure.
As of this year, inflation-linked assets made up 3.5 per cent or $7.9 billion of CalPERS total asset allocation and California’s biggest public pension fund aims to increase this to 5 per cent.
Other public pension funds to move into timber include two Canadian pension funds that this week paid more than $1.03 billion in a shareholder approved buy-out of publically listed timber company, TimberWest.
British Columbia Investment Management Corporation and the federal Public Sector Pension Investment Board purchased TimberWest, Western Canada’s largest private timber and land management company.
Despite having more than 327,000 hectares of private land, TimberWest was hit by the downturn in the US housing market, making it an attractive acquisition target for the two long-term investors.
The general trend by institutional investors into timber assets can be seen in the context of a steady increase to alternatives among institutional investors. Cliffwater LLC’s recent Allocations to Alternative Assets 2011 survey found public pension funds on average allocated about 20 per cent and corporate pension funds 14 per cent to alternatives.
The survey of 97 state-wide pension funds in the US found that on average funds had 6 per cent of their alternatives’ allocation in real assets. The move is mostly coming from real estate exposures.
Principal in Mercer’s alternatives boutique within investment consulting, Simon Fox, says timber has been one of the best performing assets over the past two decades.
Taking the US NCREIF Timberland Index, timber assets have delivered an annual return of 14.1 per cent since the index was started 23 years ago.
A key diversification of risk comes from the biological growth cycle, which is uncorrelated to markets generally. As the trees grow they increase the value and the ultimate volume of wood available for sale.
Trees also mature through a number of so-called “life stages” which are suitable for different products, each providing a higher price per ton.
Mercer also says young trees are typically harvested for pulp, more established trees for chip ‘n’ saw, and mature trees for sawtimber.
There is also a growing market in trees with ongoing cashflows such as rubber trees where the latex can be harvested on an ongoing basis while the trees grow.
An attractive element of investment is also that trees can be left “on stump” during a timber price downturn and harvested when prices pick up.
Fox said Mercer is recommending the asset class from a strategic perspective for institutional investors with a 10-year-plus time horizon, describing it as “a beneficial time to enter the asset class”.
“What has been interesting for us has been the expansion of the timber opportunity into a global context and that opportunity is still maturing,” he says.
“You do potentially have risks when you move away from very mature markets like the US but it also creates opportunities as well particularly in areas such as South America and Asia now.”
The investment manager, Timberland Investment Resources LLC estimated this year that total global timber assets amounted to somewhere around the $300 billion mark.
Of this, institutional investors make up about 16 per cent only, meaning strong future demand is expected for quality forestry assets.
In recent times several funds have shown confidence in a sector that is maturing quickly on the back of growing institutional interest.
To date, more than 70 per cent of the timberland investments by institutional investors is located in forests in the US. But that is predicted to change in the coming years.
In a report released this year Timberland Investment Resources economist Chung-Hong Fu looked at global timber assets, breaking them down into established, broad and potential markets.
Established markets with a track record of investment were Australia, Brazil, Canada, Chile, New Zealand, the United States and Uruguay.
Of the non-US markets Brazil was the biggest with timber assets of more than $14.82 billion followed by Australia ($7.02 billion).
The remaining broad timber market – where investment returns are not yet proven – and more established elements of the potential timber market have about $44.5 billion in assets.
Timberland Investment Resources LLC estimates that more than 86 per cent of the global timber market is the United States.
Because housing starts at historic low levels, timber seems cheap, and many institutional funds with a long-term outlook have seen buying opportunities in US timber assets.
However, with soft demand in the US construction industry, and a realigning of demand for timber to emerging markets, particularly China and India, others are seeing that timber production will inevitably shift to emerging markets across the globe.
While housing starts in the United States have almost halved from their peak of 1.6 million units in 2006, in China housing starts were estimated at 10 million units last year.
A major beneficiary of this realignment of timber demand to Asia has been New Zealand foresters, with New Zealand timber exports growing four fold since 2008.
Canadian David Brand is the managing director of New Forests, a timber advisory company that is riding high on the back of landing the management contract for the biggest ever timber investment in Australia.
A joint venture between Alberta Investment Management Company (AIMCO) and the Australia New Zealand Forest Fund announced it would purchase more than $481 million in forest assets in Australia in January this year.
In addition, New Forest also runs a $700 million fund of established timber assets mainly in Australia and New Zealand that has attracted seven institutional investors.
Brand says more than 40 per cent of the world’s timber supply now comes from high yield plantations and to meet growing expected demand, investors will increasingly look to Asia’s attractive timber business models.
“All the emerging markets are areas where you can invest capital in growing trees and make a return but in the US you can buy an existing forest but the return on capital for new plantings would not be sufficient to attract new capital,” Brand says.
In a recently released New Forest five-year outlook for timber investment released in January, Brand says he expected that over the coming decades that the bulk of investment capital would be directed to assets in Latin America, Australia, New Zealand, African and Asian.
With investors in timber looking at 10- to 15-year time horizons, structuring timber portfolios should also look at both diversifying risk across regions and where future growth in the industry would come from, says Brand.
New Forest recommends a general portfolio that has 30-40 per cent of its timber assets in Canada and the US, 25 per cent in Latin America, 15 per cent in Australia and New Zealand and 15 per cent emerging markets such as Asia, Africa and Eastern Europe.
While the regulatory landscape is still unclear, Brand also recommends putting between 5 to 10 per cent of a portfolio in so-called “ecosystem services” that target potential carbon markets or biomass energy opportunities.
Both Fox and Brand say that timber can be part of a hedging strategy for climate change risk, with attractive potential opportunities in construction and as carbon sinks.
But the unknowns in terms of the shape and regulatory framework of any potential future global market carbon market make this a very difficult potential return to quantify.
Source: http://www.top1000funds.com/photo-stories/2011/06/15/investors-see-the-forest-for-the-trees/
Timber investments offer the lure of returns uncorrelated to other financial assets and also play into several attractive potential thematic opportunities such as population growth and resource scarcity, climate change and the growing consumer-base in emerging markets.
While timber has previously been the domain of the endowments – with investors such as Harvard Management Corporation allocating 14 per cent to commodities exposures – pension funds have also been looking at these assets both for their risk diversification potential and as a hedge against inflation.
Sovereign wealth funds, including Australia’s FutureFund, and the Alaska Permanent Fund are among investors which have been vocal about increasing their timberland investments.
In 2008, CalPERS announced it would more than double its investment in timber to $2.4 billion or 1 per cent of total assets. Timber investments fall under CalPERS’ “inflation-linked” asset class, which also includes commodities, inflation-linked bonds and infrastructure.
As of this year, inflation-linked assets made up 3.5 per cent or $7.9 billion of CalPERS total asset allocation and California’s biggest public pension fund aims to increase this to 5 per cent.
Other public pension funds to move into timber include two Canadian pension funds that this week paid more than $1.03 billion in a shareholder approved buy-out of publically listed timber company, TimberWest.
British Columbia Investment Management Corporation and the federal Public Sector Pension Investment Board purchased TimberWest, Western Canada’s largest private timber and land management company.
Despite having more than 327,000 hectares of private land, TimberWest was hit by the downturn in the US housing market, making it an attractive acquisition target for the two long-term investors.
The general trend by institutional investors into timber assets can be seen in the context of a steady increase to alternatives among institutional investors. Cliffwater LLC’s recent Allocations to Alternative Assets 2011 survey found public pension funds on average allocated about 20 per cent and corporate pension funds 14 per cent to alternatives.
The survey of 97 state-wide pension funds in the US found that on average funds had 6 per cent of their alternatives’ allocation in real assets. The move is mostly coming from real estate exposures.
Principal in Mercer’s alternatives boutique within investment consulting, Simon Fox, says timber has been one of the best performing assets over the past two decades.
Taking the US NCREIF Timberland Index, timber assets have delivered an annual return of 14.1 per cent since the index was started 23 years ago.
A key diversification of risk comes from the biological growth cycle, which is uncorrelated to markets generally. As the trees grow they increase the value and the ultimate volume of wood available for sale.
Trees also mature through a number of so-called “life stages” which are suitable for different products, each providing a higher price per ton.
Mercer also says young trees are typically harvested for pulp, more established trees for chip ‘n’ saw, and mature trees for sawtimber.
There is also a growing market in trees with ongoing cashflows such as rubber trees where the latex can be harvested on an ongoing basis while the trees grow.
An attractive element of investment is also that trees can be left “on stump” during a timber price downturn and harvested when prices pick up.
Fox said Mercer is recommending the asset class from a strategic perspective for institutional investors with a 10-year-plus time horizon, describing it as “a beneficial time to enter the asset class”.
“What has been interesting for us has been the expansion of the timber opportunity into a global context and that opportunity is still maturing,” he says.
“You do potentially have risks when you move away from very mature markets like the US but it also creates opportunities as well particularly in areas such as South America and Asia now.”
The investment manager, Timberland Investment Resources LLC estimated this year that total global timber assets amounted to somewhere around the $300 billion mark.
Of this, institutional investors make up about 16 per cent only, meaning strong future demand is expected for quality forestry assets.
In recent times several funds have shown confidence in a sector that is maturing quickly on the back of growing institutional interest.
To date, more than 70 per cent of the timberland investments by institutional investors is located in forests in the US. But that is predicted to change in the coming years.
In a report released this year Timberland Investment Resources economist Chung-Hong Fu looked at global timber assets, breaking them down into established, broad and potential markets.
Established markets with a track record of investment were Australia, Brazil, Canada, Chile, New Zealand, the United States and Uruguay.
Of the non-US markets Brazil was the biggest with timber assets of more than $14.82 billion followed by Australia ($7.02 billion).
The remaining broad timber market – where investment returns are not yet proven – and more established elements of the potential timber market have about $44.5 billion in assets.
Timberland Investment Resources LLC estimates that more than 86 per cent of the global timber market is the United States.
Because housing starts at historic low levels, timber seems cheap, and many institutional funds with a long-term outlook have seen buying opportunities in US timber assets.
However, with soft demand in the US construction industry, and a realigning of demand for timber to emerging markets, particularly China and India, others are seeing that timber production will inevitably shift to emerging markets across the globe.
While housing starts in the United States have almost halved from their peak of 1.6 million units in 2006, in China housing starts were estimated at 10 million units last year.
A major beneficiary of this realignment of timber demand to Asia has been New Zealand foresters, with New Zealand timber exports growing four fold since 2008.
Canadian David Brand is the managing director of New Forests, a timber advisory company that is riding high on the back of landing the management contract for the biggest ever timber investment in Australia.
A joint venture between Alberta Investment Management Company (AIMCO) and the Australia New Zealand Forest Fund announced it would purchase more than $481 million in forest assets in Australia in January this year.
In addition, New Forest also runs a $700 million fund of established timber assets mainly in Australia and New Zealand that has attracted seven institutional investors.
Brand says more than 40 per cent of the world’s timber supply now comes from high yield plantations and to meet growing expected demand, investors will increasingly look to Asia’s attractive timber business models.
“All the emerging markets are areas where you can invest capital in growing trees and make a return but in the US you can buy an existing forest but the return on capital for new plantings would not be sufficient to attract new capital,” Brand says.
In a recently released New Forest five-year outlook for timber investment released in January, Brand says he expected that over the coming decades that the bulk of investment capital would be directed to assets in Latin America, Australia, New Zealand, African and Asian.
With investors in timber looking at 10- to 15-year time horizons, structuring timber portfolios should also look at both diversifying risk across regions and where future growth in the industry would come from, says Brand.
New Forest recommends a general portfolio that has 30-40 per cent of its timber assets in Canada and the US, 25 per cent in Latin America, 15 per cent in Australia and New Zealand and 15 per cent emerging markets such as Asia, Africa and Eastern Europe.
While the regulatory landscape is still unclear, Brand also recommends putting between 5 to 10 per cent of a portfolio in so-called “ecosystem services” that target potential carbon markets or biomass energy opportunities.
Both Fox and Brand say that timber can be part of a hedging strategy for climate change risk, with attractive potential opportunities in construction and as carbon sinks.
But the unknowns in terms of the shape and regulatory framework of any potential future global market carbon market make this a very difficult potential return to quantify.
Source: http://www.top1000funds.com/photo-stories/2011/06/15/investors-see-the-forest-for-the-trees/
Pension Funds make $1 Billion Canadian Timber Investment
VANCOUVER — Shareholders of TimberWest Forest Corp. (TSX:TWF.UN) have overwhelmingly approved the $1.03-billion acquisition of the timber and land management company by two major pension fund managers.
The acquisition bid by the British Columbia Investment Management Corp. and the Public Sector Pension Investment Board, is equivalent to $6.16 per stapled unit, including debt.
TimberWest said about 98 per cent of shareholders approved the transaction at a meeting on Tuesday.
Closing of the transaction is subject to final court and other approvals but is expected to be completed by the end of the month.
TimberWest is Western Canada's largest private timber and land management company, with about 327,000 hectares of private land. It sells timber and real estate.
BC Investment Management is an independent money manager that manages a global investment portfolio of more than $86 billion for its clients, which include public sector pension plans, insurance funds and public trusts.
PSP Investments is an investment manager that manages investments for the pension funds of the Public Service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force.
TimberWest units were unchanged at $6.07 Tuesday afternoon on the Toronto Stock Exchange.
Source: http://www.google.com/hostednews/canadianpress/article/ALeqM5jFux7viKS52xT8eNl-4DYvcBctQg?docId=7148404
The acquisition bid by the British Columbia Investment Management Corp. and the Public Sector Pension Investment Board, is equivalent to $6.16 per stapled unit, including debt.
TimberWest said about 98 per cent of shareholders approved the transaction at a meeting on Tuesday.
Closing of the transaction is subject to final court and other approvals but is expected to be completed by the end of the month.
TimberWest is Western Canada's largest private timber and land management company, with about 327,000 hectares of private land. It sells timber and real estate.
BC Investment Management is an independent money manager that manages a global investment portfolio of more than $86 billion for its clients, which include public sector pension plans, insurance funds and public trusts.
PSP Investments is an investment manager that manages investments for the pension funds of the Public Service, the Canadian Forces, the Royal Canadian Mounted Police and the Reserve Force.
TimberWest units were unchanged at $6.07 Tuesday afternoon on the Toronto Stock Exchange.
Source: http://www.google.com/hostednews/canadianpress/article/ALeqM5jFux7viKS52xT8eNl-4DYvcBctQg?docId=7148404
Saudi to Double Wheat Stocks with Agriculture Investments
RIYADH: Saudi Arabia expects about two million tons of wheat imports this year unchanged from 2010, and aims to double its reserves to one year’s consumption by 2014, the Kingdom’s Minister of Agriculture said.
Saudi Arabia, which has emerged as a major buyer of wheat, wants to build up reserves of basic commodities such as wheat, rice, oils and sugar to protect itself against the impact of a spike in global food prices and to support its rapidly growing population.
The country began importing wheat in 2009 and is looking to rely entirely on wheat imports by 2016 as it seeks to save precious water.
“We set a policy that we should always have six months of supply in reserves at any moment. We decided this year to increase it to one year,” Fahd Balghunaim said.
The Kingdom currently has around 1.4 million tons of wheat reserves — the equivalent of six months — and will look to double that by 2014, Waleed El-Khereiji, Director General of the Grains Silos and Flour Mills Organization (GSFMO), later said.
The Kingdom is planning to phase out production of other water intensive crops including soya beans and animal fodder.
Saudi Arabia continues to invest in farmland abroad as part of its strategy to secure food supplies and is looking at Kazakhstan, Russia and Ukraine as “probable countries of investment” for growing, Balghunaim said.
Gulf states suffered when international food prices spiked to record levels in 2008, forcing up their import bills.
Last year Saudi Arabia set up a company with a capital of $800 million to invest in farmland abroad, focusing on wheat, rice, sugar and soybeans.
Saudi Industrial Development Fund is granting financing facilities to firms exploring agricultural investments abroad ranging from Indonesia to Ethiopia.
The Ministry of Agriculture acts as a “door opener” for private Saudi investors abroad, Balghunaim said.
Balghunaim said the kingdom, which already invests in Africa, would be interested in investing in south Sudan despite heightened tensions around the ill-defined north-south border.
South Sudan is due to become independent on July 9.
Companies such as Saudi-based National Agricultural Development Co (Nadec) and Abu Dhabi private firm Jenaan — have invested in farmland in northern Sudan.
“The intention is still there. For both north and south,” he said.
Source: http://arabnews.com/economy/article454885.ece
Saudi Arabia, which has emerged as a major buyer of wheat, wants to build up reserves of basic commodities such as wheat, rice, oils and sugar to protect itself against the impact of a spike in global food prices and to support its rapidly growing population.
The country began importing wheat in 2009 and is looking to rely entirely on wheat imports by 2016 as it seeks to save precious water.
“We set a policy that we should always have six months of supply in reserves at any moment. We decided this year to increase it to one year,” Fahd Balghunaim said.
The Kingdom currently has around 1.4 million tons of wheat reserves — the equivalent of six months — and will look to double that by 2014, Waleed El-Khereiji, Director General of the Grains Silos and Flour Mills Organization (GSFMO), later said.
The Kingdom is planning to phase out production of other water intensive crops including soya beans and animal fodder.
Saudi Arabia continues to invest in farmland abroad as part of its strategy to secure food supplies and is looking at Kazakhstan, Russia and Ukraine as “probable countries of investment” for growing, Balghunaim said.
Gulf states suffered when international food prices spiked to record levels in 2008, forcing up their import bills.
Last year Saudi Arabia set up a company with a capital of $800 million to invest in farmland abroad, focusing on wheat, rice, sugar and soybeans.
Saudi Industrial Development Fund is granting financing facilities to firms exploring agricultural investments abroad ranging from Indonesia to Ethiopia.
The Ministry of Agriculture acts as a “door opener” for private Saudi investors abroad, Balghunaim said.
Balghunaim said the kingdom, which already invests in Africa, would be interested in investing in south Sudan despite heightened tensions around the ill-defined north-south border.
South Sudan is due to become independent on July 9.
Companies such as Saudi-based National Agricultural Development Co (Nadec) and Abu Dhabi private firm Jenaan — have invested in farmland in northern Sudan.
“The intention is still there. For both north and south,” he said.
Source: http://arabnews.com/economy/article454885.ece
Farmland investment, the next big portfoilo allocation
Many investment professionals, including the legendary Jim Rogers, believe agriculture commodities are only in the early-to-middle innings of a major "super cycle" of increasing prices.
The argument for this is fairly simple. The number of people in the world is increasing, and projected to reach nearly 9.1 billion by 2050 according to the United Nations. Meanwhile, the amount of arable farmland has been decreasing.
Source: http://www.commodityonline.com/news/Farmland-investment-the-next-big-portfoilo-39990-2-1.html
In addition, as with many major trends in the world today, a large reason behind the rapid run-up in food prices is China's development. As investors we always want to be on the correct side of global macro trends, and whatever China needs or is buying lots of, we want to own as investments.
The question is what are the best ways for making money from the agricultural sector? One way is to invest directly into agriculture stocks such as farm equipment maker John Deere (DE), global seed giant Monsanto (MON) or fertilizer company Potash Corp of Saskatchewan (POT).
Another method is to invest in agricultural futures through Exchange Traded Funds (ETFs) such as AIGA on the London Stock Exchange or DBC in the US which tracks an entire basket of agricultural commodities including corn, soybeans, wheat, cotton, sugar, coffee, cattle and pigs. These commodities ETFs try to track the spot price of the various commodities they include.
The advantage of these stocks or ETFs is that they are easily trade-able by anyone who has an online brokerage account. The disadvantage, however, is that they are still financial instruments, and as such can fluctuate widely in price.
One option most individual investors tend to overlook is direct investment in farmland. In many ways, a farmland investment is more secure, stable and tangible then putting money into stocks.
Farmland allows investors to still benefit from the global trends in agriculture we have discussed, whilst providing much greater stability then agriculture stocks or commodities which can fluctuate wildly.
Just to take one example, in the last 20 years farmland in the United States has never had a down year according to the National Council of Real Estate Investment Fiduciaries (NCREIF) in the US demonstrates.
Not surprisingly, many large institutional investors have been investing heavily in farmland the last several years. For example TIAA-CREF, one of the largest pension funds in the world, has recently made a large move into farmland investing.
Prices for farmland in the West - particularly in Europe - have already moved up considerably, reaching as high £17,300 per hectare in the northwest of England to take just one example.
Whilst there are considerable advantages in terms of political stability to farmland investment in Europe or the US, the real opportunities for spectacular gains lie in emerging markets, especially in Africa, which holds 60% of the world's remaining arable land suitable for farming.
Whilst farmland investment has been dominated by larger institutions historically, in just the last two years a number of options have been developed for individuals. The most common is to pool a number of individual investors' capital together to purchase a large parcel of land, and then divide it into individual freehold parcels.
Farmland investments for individuals generally pay a regular yearly dividend from the sale of crops, and also provide the opportunity for long-term capital gains as farmland continues to increase in value.
We are now starting to see options starting as low as £1,950/hectare for high quality farmland in Africa, making it easily accessible by individuals and a great way to diversify.
There are, of course, risks with any investment, but by doing one's due-diligence and investing in the right structure with the right people and institution, farmland investment can be both safe and profitable for individual investors as well as large institutions.
The argument for this is fairly simple. The number of people in the world is increasing, and projected to reach nearly 9.1 billion by 2050 according to the United Nations. Meanwhile, the amount of arable farmland has been decreasing.
Source: http://www.commodityonline.com/news/Farmland-investment-the-next-big-portfoilo-39990-2-1.html
In addition, as with many major trends in the world today, a large reason behind the rapid run-up in food prices is China's development. As investors we always want to be on the correct side of global macro trends, and whatever China needs or is buying lots of, we want to own as investments.
The question is what are the best ways for making money from the agricultural sector? One way is to invest directly into agriculture stocks such as farm equipment maker John Deere (DE), global seed giant Monsanto (MON) or fertilizer company Potash Corp of Saskatchewan (POT).
Another method is to invest in agricultural futures through Exchange Traded Funds (ETFs) such as AIGA on the London Stock Exchange or DBC in the US which tracks an entire basket of agricultural commodities including corn, soybeans, wheat, cotton, sugar, coffee, cattle and pigs. These commodities ETFs try to track the spot price of the various commodities they include.
The advantage of these stocks or ETFs is that they are easily trade-able by anyone who has an online brokerage account. The disadvantage, however, is that they are still financial instruments, and as such can fluctuate widely in price.
One option most individual investors tend to overlook is direct investment in farmland. In many ways, a farmland investment is more secure, stable and tangible then putting money into stocks.
Farmland allows investors to still benefit from the global trends in agriculture we have discussed, whilst providing much greater stability then agriculture stocks or commodities which can fluctuate wildly.
Just to take one example, in the last 20 years farmland in the United States has never had a down year according to the National Council of Real Estate Investment Fiduciaries (NCREIF) in the US demonstrates.
Not surprisingly, many large institutional investors have been investing heavily in farmland the last several years. For example TIAA-CREF, one of the largest pension funds in the world, has recently made a large move into farmland investing.
Prices for farmland in the West - particularly in Europe - have already moved up considerably, reaching as high £17,300 per hectare in the northwest of England to take just one example.
Whilst there are considerable advantages in terms of political stability to farmland investment in Europe or the US, the real opportunities for spectacular gains lie in emerging markets, especially in Africa, which holds 60% of the world's remaining arable land suitable for farming.
Whilst farmland investment has been dominated by larger institutions historically, in just the last two years a number of options have been developed for individuals. The most common is to pool a number of individual investors' capital together to purchase a large parcel of land, and then divide it into individual freehold parcels.
Farmland investments for individuals generally pay a regular yearly dividend from the sale of crops, and also provide the opportunity for long-term capital gains as farmland continues to increase in value.
We are now starting to see options starting as low as £1,950/hectare for high quality farmland in Africa, making it easily accessible by individuals and a great way to diversify.
There are, of course, risks with any investment, but by doing one's due-diligence and investing in the right structure with the right people and institution, farmland investment can be both safe and profitable for individual investors as well as large institutions.
Why International Farmland Investments Can Be Perilous
In this age of global uncertainty in the area of food producing and wealth preservation, productive farmland around the world has been placed into the spotlight by "guru investors," wealth management funds, growing mega agri-industries, wealthy individuals, and especially, food insecure nations.
If ownership of the farmland of a nation doesn't define a nation, then what does, I ask? Why are the deals popular? The same reason any deal is popular. There is strong demand and there are willing suppliers. Opportunism, if you will.
Sovereign wealth funds hold about $4 trillion in assets globally, and many, are food challenged, such as Saudi Arabia, United Arab Emirates, Abu Dhabi, Qatar, South Korea, and China. They are actively seeking out foreign farmland. China is by far the largest investor, buying or leasing twice as much as anyone else.
Indeed, the subject of foreign ownership of farmland is so common today that it is difficult to keep up. A lack of transparency in many of the land deals makes it impossible to make very accurate assessments.
How much foreign farmland has been acquired in recent years?
It is estimated that the amount of global farmland that has been acquired by foreign entities equals about 198 million acres. There is $100 billion waiting to be invested by 120 investment groups. Food insecure nations such as the Gulf States, China, Japan, South Korea and Western Europe are all interested in increasing their farmland holdings.
What are the benefits for those who sell out?
Let's use the Canadian farmer as an example. Canada does not regulate foreign ownership of farmland, its provinces do. In Canada, an average farm debt burden of 23 dollars per dollar of net farm income entices farmers to sell the land in exchange for farming it and having an outside business pay for expensive inputs in return for some form of crop sharing.
Some poor nations see opportunities to benefit from infrastructure building of rail, roads and ports. Often, however, high levels of corruption are involved in the land deals with low levels of benefit. There is frequently a lack of follow-through.
How much investment is from the private investment sector?
According to Reuters, the amount of private capital in agricultural farmland worldwide is expected to more than double to around $5-$7 billion in the next couple of years from an estimated $2.5-$3 billion invested in the last couple of years. U.S.-based agriculture consultants HighQuest Partners estimates that the total value of investment funds in agriculture lands worldwide is $15-$20 billion.
The larger buyer categories are sovereign wealth funds and agri-businesses. Mega farms being developed in central and eastern Europe, for example, now equal the size of Denmark.
What ecological harm comes from foreign ownership of a nation's farmland?
Local farmland ownership promotes sustainable practices over corporate large-scale production practices, preserves local food systems and family farms, and helps to ensure food security for the locality as well as for the nation.
What are the political risks?
Any nation faced with civil disobedience or unrest, for whatever reason, might be subject to regime changes which might quickly change foreign land ownership policy. Argentina has recently threatened to reverse honoring foreign land holdings. This quickly becomes what wars are made of, should the right conditions exist.
Citizens unhappy with foreign ownership of farmland could result in toppled governments.
Every nation is (or will be) considering its policy regulating foreign ownership of farmland. Many with loose standards will be tightening them. Brazil and Argentina are limiting the size of land foreign enterprises can own. Brazil would like to see partnerships instead of land transfers.
Investors in Africa’s agriculture sector need to understand that land ownership there is complex, fraught with politcal, emotive, and survival issues.
Other political risks would include farm policy regulation changes including biofuels policies, chemical use, GMO use, land set-aside policies, and land practice management.
Over time, there is a poor history of successful attempts to farm across borders.
Is it true that there is no more farmland in the world to come into production?
There are large areas in Latin America, Africa, the Ukraine, and Eastern Europe which could come into production. In addition, the developing nations have the potential and desire to increase their own agricultural commodity production through efficiency gains.
What are the economic risks?
Contrary to prevailing wisdom, there is no guarantee that corporate farming or farming for investors will pay.
One risk affecting profit potential is that of increasing global competition. Latin America, BRIC, and other nations are setting up reciprocal trade agreements and increasing output through increased efficiency.
Farmers in the U.S., Canada, the E.U., and Japan all rely upon farm price supports while individual farmers have relied upon off-farm income to survive. Future farm policies will be affected by debt burdens in developed nations.
What are a few examples of global farmland deals?
The Saudi Kingdom is behind a seven year project of acquiring 1.7 million irrigated rice acres in Senegal and Mali, enough to produce 7 million tonnes of rice. Proposals would allow Saudi business groups to take control of 70% of the rice-growing area of Senegal. Saudi Arabia has farming interests in Egypt, Ethiopia, Tanzania, Syria, Turkey and the Ukraine.
South Koreans want to produce rice, corn, sugar, fish, and livestock in the Philippines.
Japan is believed to hold three times the amount of its own farmable land outside of its borders.
Argentina and Brazil have acquired land in Uruguay.
The Qatari government has leased large amounts of land in Kenya. They also have or are working on deals in Brazil, Argentina, Australia, Sudan, and the Ukraine.
Egypt leases land in Uganda to produce rice, wheat and beef.
Foreign firms have invested in dairies, meat processing, crops and others areas in Serbia and other non-European Union members of the Balkans.
The World Bank says that the 463 projects covering 116 million acres, mostly in sub-Saharan Africa were acquired in eight months during 2008-9.
Some of Australia's biggest companies in the food business have been taken over by foreign companies in recent years. Australia allows 99-year land leasing.
Nigeria is appealing to the Gulf nations to utilize its land. It has 175 million acres and is only farming half of that. It desires investment in that land, it desires employment opportunities, and it claims that it could provide 100% of the Gulf's food needs.
Chinese investment in Kazakhstan reached $5 billion by the end of last year, slightly less than 4 percent of the country's total foreign direct investment. They are buying land in Brazil for soybean cultivation, as part of a $3.4 billion plan to build oilseed and rice production bases overseas including bases for rapeseed in Canada and Australia, palm oil in Malaysia and rice in Cambodia.
Conclusion
As an investment idea, it is altogether possible that acquiring foreign farmland is a fad, and when balance sheets disappoint, exits will be taken, returning the land to the local communities.
As an agri-business decision, I expect this movement to continue and perhaps accelerate.
Foreign farmland deals as a solution for wealthy but food insecure nations may be successful in some regions. Future agricultural production will be stressed by climate change and competition for remaining oil and water supplies while population numbers grow. In more stressful times, expect these land deals to lead to unrest and lay the groundwork for wars and national boundary or ownership changes. Eventually, expect trade agreements of oil for food, too.
This piece originally appeared on The Big Picture Agriculture.
Read more: http://bigpictureagriculture.blogspot.com/2011/06/perils-of-international-farmland.html#ixzz1PRLfleBI
If ownership of the farmland of a nation doesn't define a nation, then what does, I ask? Why are the deals popular? The same reason any deal is popular. There is strong demand and there are willing suppliers. Opportunism, if you will.
Sovereign wealth funds hold about $4 trillion in assets globally, and many, are food challenged, such as Saudi Arabia, United Arab Emirates, Abu Dhabi, Qatar, South Korea, and China. They are actively seeking out foreign farmland. China is by far the largest investor, buying or leasing twice as much as anyone else.
Indeed, the subject of foreign ownership of farmland is so common today that it is difficult to keep up. A lack of transparency in many of the land deals makes it impossible to make very accurate assessments.
How much foreign farmland has been acquired in recent years?
It is estimated that the amount of global farmland that has been acquired by foreign entities equals about 198 million acres. There is $100 billion waiting to be invested by 120 investment groups. Food insecure nations such as the Gulf States, China, Japan, South Korea and Western Europe are all interested in increasing their farmland holdings.
What are the benefits for those who sell out?
Let's use the Canadian farmer as an example. Canada does not regulate foreign ownership of farmland, its provinces do. In Canada, an average farm debt burden of 23 dollars per dollar of net farm income entices farmers to sell the land in exchange for farming it and having an outside business pay for expensive inputs in return for some form of crop sharing.
Some poor nations see opportunities to benefit from infrastructure building of rail, roads and ports. Often, however, high levels of corruption are involved in the land deals with low levels of benefit. There is frequently a lack of follow-through.
How much investment is from the private investment sector?
According to Reuters, the amount of private capital in agricultural farmland worldwide is expected to more than double to around $5-$7 billion in the next couple of years from an estimated $2.5-$3 billion invested in the last couple of years. U.S.-based agriculture consultants HighQuest Partners estimates that the total value of investment funds in agriculture lands worldwide is $15-$20 billion.
The larger buyer categories are sovereign wealth funds and agri-businesses. Mega farms being developed in central and eastern Europe, for example, now equal the size of Denmark.
What ecological harm comes from foreign ownership of a nation's farmland?
Local farmland ownership promotes sustainable practices over corporate large-scale production practices, preserves local food systems and family farms, and helps to ensure food security for the locality as well as for the nation.
What are the political risks?
Any nation faced with civil disobedience or unrest, for whatever reason, might be subject to regime changes which might quickly change foreign land ownership policy. Argentina has recently threatened to reverse honoring foreign land holdings. This quickly becomes what wars are made of, should the right conditions exist.
Citizens unhappy with foreign ownership of farmland could result in toppled governments.
Every nation is (or will be) considering its policy regulating foreign ownership of farmland. Many with loose standards will be tightening them. Brazil and Argentina are limiting the size of land foreign enterprises can own. Brazil would like to see partnerships instead of land transfers.
Investors in Africa’s agriculture sector need to understand that land ownership there is complex, fraught with politcal, emotive, and survival issues.
Other political risks would include farm policy regulation changes including biofuels policies, chemical use, GMO use, land set-aside policies, and land practice management.
Over time, there is a poor history of successful attempts to farm across borders.
Is it true that there is no more farmland in the world to come into production?
There are large areas in Latin America, Africa, the Ukraine, and Eastern Europe which could come into production. In addition, the developing nations have the potential and desire to increase their own agricultural commodity production through efficiency gains.
What are the economic risks?
Contrary to prevailing wisdom, there is no guarantee that corporate farming or farming for investors will pay.
One risk affecting profit potential is that of increasing global competition. Latin America, BRIC, and other nations are setting up reciprocal trade agreements and increasing output through increased efficiency.
Farmers in the U.S., Canada, the E.U., and Japan all rely upon farm price supports while individual farmers have relied upon off-farm income to survive. Future farm policies will be affected by debt burdens in developed nations.
What are a few examples of global farmland deals?
The Saudi Kingdom is behind a seven year project of acquiring 1.7 million irrigated rice acres in Senegal and Mali, enough to produce 7 million tonnes of rice. Proposals would allow Saudi business groups to take control of 70% of the rice-growing area of Senegal. Saudi Arabia has farming interests in Egypt, Ethiopia, Tanzania, Syria, Turkey and the Ukraine.
South Koreans want to produce rice, corn, sugar, fish, and livestock in the Philippines.
Japan is believed to hold three times the amount of its own farmable land outside of its borders.
Argentina and Brazil have acquired land in Uruguay.
The Qatari government has leased large amounts of land in Kenya. They also have or are working on deals in Brazil, Argentina, Australia, Sudan, and the Ukraine.
Egypt leases land in Uganda to produce rice, wheat and beef.
Foreign firms have invested in dairies, meat processing, crops and others areas in Serbia and other non-European Union members of the Balkans.
The World Bank says that the 463 projects covering 116 million acres, mostly in sub-Saharan Africa were acquired in eight months during 2008-9.
Some of Australia's biggest companies in the food business have been taken over by foreign companies in recent years. Australia allows 99-year land leasing.
Nigeria is appealing to the Gulf nations to utilize its land. It has 175 million acres and is only farming half of that. It desires investment in that land, it desires employment opportunities, and it claims that it could provide 100% of the Gulf's food needs.
Chinese investment in Kazakhstan reached $5 billion by the end of last year, slightly less than 4 percent of the country's total foreign direct investment. They are buying land in Brazil for soybean cultivation, as part of a $3.4 billion plan to build oilseed and rice production bases overseas including bases for rapeseed in Canada and Australia, palm oil in Malaysia and rice in Cambodia.
Conclusion
As an investment idea, it is altogether possible that acquiring foreign farmland is a fad, and when balance sheets disappoint, exits will be taken, returning the land to the local communities.
As an agri-business decision, I expect this movement to continue and perhaps accelerate.
Foreign farmland deals as a solution for wealthy but food insecure nations may be successful in some regions. Future agricultural production will be stressed by climate change and competition for remaining oil and water supplies while population numbers grow. In more stressful times, expect these land deals to lead to unrest and lay the groundwork for wars and national boundary or ownership changes. Eventually, expect trade agreements of oil for food, too.
This piece originally appeared on The Big Picture Agriculture.
Read more: http://bigpictureagriculture.blogspot.com/2011/06/perils-of-international-farmland.html#ixzz1PRLfleBI
Friday 10 June 2011
Uruguay Farmland Investment Tax Feared by Investors
The Uruguayan government is trying to decide how to implement a controversial new tax on land holdings involving approximately 60 million dollars per annum and which has exposed deep differences in the ruling coalition, is rejected by farmers and feared by investors.
President Jose Mujica last Monday during the cabinet meeting presented a fiscal proposal, elaborated with the head of the Planning Office which considers three main brackets: over 2.000 hectares, 8 US dollars per hectare; over 5.000 hectares, 12 USD per hectare and over 10.000 hectares, 16 USD.
However Vice-president Danilo Astori, Economy Minister Fernando Lorenzo, Agriculture minister Tabare Aguerre and Public Works and Transport minister Enrique Pintado are proposing a tax linked to the production and profitability of farma, not its size, and taking advantage of the already existent mechanism.
Furthermore Astori, a former Economy minister feels that the tax proposed by President Mujica could have negative effects for farming and investors, besides the fact it means ‘changing the rules of the game’ even when the sums involved are minimum.
“As the scheme was presented it could have an impact on the value of land and the high productivity rates Uruguay has experienced in its farming sector, so we believe an alternative must be worked out” said Astori.
“The sixty million dollars is not much money for the government but the problem is that an unexpected change can be suggesting that in the future there could be major changes and this can generate uncertainties, lack of predictability which means risks in the horizon for investors and could have a negative impact on investment decisions; that is what worries me”, underlined Astori.
Asked if he supported the initiative from Mujica and his Planning Office minister Gabriel Frugoni, Astori replied that “I would like to see if we can have or come up with improved alternatives; I think we have them”.
He added that what really concerns is the fact the current fiscal system for the farming sector is based on taxing income and “now we are moving to a proposal that would tax land holdings”.
“I think we are running into a contradiction, if we change the rules of the game. Of course I agree with the purpose of the tax revenue, improved roads, infrastructure, communications in the camp; we need them camp production has been growing sustainedly for the last decade”, said Vice-president Astori.
Another factor to take into account is that the results of a camp census will be known after the third quarter and “I agree with Agriculture minister Aguerre that we should have that information before moving ahead. But I also believe we can’t have an open discussion on taxes during months”, pointed out Astori.
The different farmers’ organizations are not unanimous about the overall initiative. The more combative Rural Federation simply said “enough with taxes”.
“To imagine Uruguay with more taxes, be it the camp or the city, simply makes unviable any production. The gap between tax burden and delivery in Uruguay is too wide”, said Miguel Sanguinetti, president of the federation.
However the more conservative Rural Association (ARU), cooperatives and the dairy sector preferred to wait and see “the definitive proposal from the government”, before making any statements.
ARU president Jose Bonica said that the infrastructure problem is “serious” and farmers are willing to consider the proposals and how they are implemented and with the sufficient transparency that those funds don’t end paying other bills. Nevertheless the farming sector is satisfied with the 2007 tax reform which is based on income and profits.
“The best tax is income tax. This makes sense, is fair and balanced, we all pay under the same rules, sometimes more, sometimes less but always according to income”, said Bonica.
The farm leader admitted that rural activities have multiplied, incomes have soared, “but costs have also soared”. Yes, there is a strong international demand, “virtually all that is produced in the camp is sold and at good prices, but we must not forget that inputs and costs have also closed the gap”.
Astori and ministers Lorenzo, Aguerre and Pintado have promised to come up with an alternative on time for the next Monday cabinet meeting.
Source: http://en.mercopress.com/2011/06/09/uruguayan-government-divided-over-implementation-of-a-new-tax-on-farmland
President Jose Mujica last Monday during the cabinet meeting presented a fiscal proposal, elaborated with the head of the Planning Office which considers three main brackets: over 2.000 hectares, 8 US dollars per hectare; over 5.000 hectares, 12 USD per hectare and over 10.000 hectares, 16 USD.
However Vice-president Danilo Astori, Economy Minister Fernando Lorenzo, Agriculture minister Tabare Aguerre and Public Works and Transport minister Enrique Pintado are proposing a tax linked to the production and profitability of farma, not its size, and taking advantage of the already existent mechanism.
Furthermore Astori, a former Economy minister feels that the tax proposed by President Mujica could have negative effects for farming and investors, besides the fact it means ‘changing the rules of the game’ even when the sums involved are minimum.
“As the scheme was presented it could have an impact on the value of land and the high productivity rates Uruguay has experienced in its farming sector, so we believe an alternative must be worked out” said Astori.
“The sixty million dollars is not much money for the government but the problem is that an unexpected change can be suggesting that in the future there could be major changes and this can generate uncertainties, lack of predictability which means risks in the horizon for investors and could have a negative impact on investment decisions; that is what worries me”, underlined Astori.
Asked if he supported the initiative from Mujica and his Planning Office minister Gabriel Frugoni, Astori replied that “I would like to see if we can have or come up with improved alternatives; I think we have them”.
He added that what really concerns is the fact the current fiscal system for the farming sector is based on taxing income and “now we are moving to a proposal that would tax land holdings”.
“I think we are running into a contradiction, if we change the rules of the game. Of course I agree with the purpose of the tax revenue, improved roads, infrastructure, communications in the camp; we need them camp production has been growing sustainedly for the last decade”, said Vice-president Astori.
Another factor to take into account is that the results of a camp census will be known after the third quarter and “I agree with Agriculture minister Aguerre that we should have that information before moving ahead. But I also believe we can’t have an open discussion on taxes during months”, pointed out Astori.
The different farmers’ organizations are not unanimous about the overall initiative. The more combative Rural Federation simply said “enough with taxes”.
“To imagine Uruguay with more taxes, be it the camp or the city, simply makes unviable any production. The gap between tax burden and delivery in Uruguay is too wide”, said Miguel Sanguinetti, president of the federation.
However the more conservative Rural Association (ARU), cooperatives and the dairy sector preferred to wait and see “the definitive proposal from the government”, before making any statements.
ARU president Jose Bonica said that the infrastructure problem is “serious” and farmers are willing to consider the proposals and how they are implemented and with the sufficient transparency that those funds don’t end paying other bills. Nevertheless the farming sector is satisfied with the 2007 tax reform which is based on income and profits.
“The best tax is income tax. This makes sense, is fair and balanced, we all pay under the same rules, sometimes more, sometimes less but always according to income”, said Bonica.
The farm leader admitted that rural activities have multiplied, incomes have soared, “but costs have also soared”. Yes, there is a strong international demand, “virtually all that is produced in the camp is sold and at good prices, but we must not forget that inputs and costs have also closed the gap”.
Astori and ministers Lorenzo, Aguerre and Pintado have promised to come up with an alternative on time for the next Monday cabinet meeting.
Source: http://en.mercopress.com/2011/06/09/uruguayan-government-divided-over-implementation-of-a-new-tax-on-farmland
Thursday 9 June 2011
Timberland Launches Forestry Investment Fund
The Fund aims to provide UK and European institutional and professional investors with attractive real returns that have minimal correlation with other traditional asset-classes.
Registered in Luxembourg as a Specialised Investment Fund (SIF), Timberland Investment Resources (TIR) Europe's investment strategy is to focus on building a diversified global portfolio of timberland properties and related assets in Europe, the US and Latin America, as well as more niche market opportunities. TIR-Europe will target a total return of 8-10% per annum net of fees and operating costs, but prior to any investor tax.
Hugh Humfrey, Managing Partner of TIR-Europe, comments: “Our aim for the Fund is to generate above market returns on a risk-adjusted basis for its investors, while focusing on managing risk by building a diversified global portfolio of forest properties that generate cash flows and long-term asset appreciation.”
The investment team will operate with a disciplined and cautious style, underpinned by extensive economic research and forest biometric analysis to identify long-term trends and market inefficiencies.TIR-Europe places a strong emphasis on environmental stewardship and will manage all of the Fund’s investments in accordance with sound principles of natural resource sustainability.
Humfrey adds: “Forestry investments offer excellent inflation hedging characteristics and have generated a long history of stable investment performance consisting of both current income and asset appreciation. As a result, the asset-class tends to offer a great deal of flexibility from both a tax and cash flow planning standpoint, which makes it very compelling given the prevailing market conditions.”
The minimum investment in the fund is $2m and there is a 1.5% annual management fee.
Founded in 2010, TIR-Europe is a privately-owned investment management partnership specialising in forestry and related assets. It forms the European investment business of US-based Timberland Investment Resources which was founded in 2003 and is an independent forestry investment firm with over $750m under management.
Read more: http://www.ifaonline.co.uk/international-investment/news/2076624/timberland-launches-luxembourg-global-forestry-fund#ixzz1OmV4z9jl
IFA Online - News, blogs and analysis for IFAs. Visit the website now.
Registered in Luxembourg as a Specialised Investment Fund (SIF), Timberland Investment Resources (TIR) Europe's investment strategy is to focus on building a diversified global portfolio of timberland properties and related assets in Europe, the US and Latin America, as well as more niche market opportunities. TIR-Europe will target a total return of 8-10% per annum net of fees and operating costs, but prior to any investor tax.
Hugh Humfrey, Managing Partner of TIR-Europe, comments: “Our aim for the Fund is to generate above market returns on a risk-adjusted basis for its investors, while focusing on managing risk by building a diversified global portfolio of forest properties that generate cash flows and long-term asset appreciation.”
The investment team will operate with a disciplined and cautious style, underpinned by extensive economic research and forest biometric analysis to identify long-term trends and market inefficiencies.TIR-Europe places a strong emphasis on environmental stewardship and will manage all of the Fund’s investments in accordance with sound principles of natural resource sustainability.
Humfrey adds: “Forestry investments offer excellent inflation hedging characteristics and have generated a long history of stable investment performance consisting of both current income and asset appreciation. As a result, the asset-class tends to offer a great deal of flexibility from both a tax and cash flow planning standpoint, which makes it very compelling given the prevailing market conditions.”
The minimum investment in the fund is $2m and there is a 1.5% annual management fee.
Founded in 2010, TIR-Europe is a privately-owned investment management partnership specialising in forestry and related assets. It forms the European investment business of US-based Timberland Investment Resources which was founded in 2003 and is an independent forestry investment firm with over $750m under management.
Read more: http://www.ifaonline.co.uk/international-investment/news/2076624/timberland-launches-luxembourg-global-forestry-fund#ixzz1OmV4z9jl
IFA Online - News, blogs and analysis for IFAs. Visit the website now.
Spotlight turned on agriculture investment boom
Protestors have been demonstrating in Geneva against the growth in investments in agriculture that they say endangers food security in many developing countries.
The second “jetfin AGRO” conference for investors with an eye on agriculture and water took place in the western Swiss city on Tuesday. Meanwhile, the global land-grab phenomenon continues to expand as states attempt to regulate the issue.
Activists from some 25 Swiss non-governmental organisations and unions demonstrated outside the conference at the five-star Kempinski Hotel in Geneva against investments in agriculture and water in developing nations, which they say threaten people’s right to food and water and encourage speculation.
“We have to react against this new phenomenon where pension funds are investing massively in funds promoted by this conference,” said Margot Brogniart, coordinator for the coalition of protestors.
The fact that this is the third such meeting in Geneva in the space of a year, with others planned next week and in September, points to the growing interest by investors and Geneva’s major role, says Ester Wolf, a development specialist with the Bread for all NGO.
“Geneva is becoming a hub for such investments,” she told swissinfo.ch.
“Bright light”
The jetfin AGRO meeting brought together investors, wealth managers and commodity specialists from around the world to discuss strategies for agriculture, described as “the bright light of today’s investment universe”.
Topics included building an agro-business equity portfolio, hedging contracts for agro-investments, agricultural commodities and specific investment destinations such as India, Latin America and the US, as well as strategies for investing in timber and water.
Shaken by two food-price spikes in four years, countries from the Middle East, China, South Korea and elsewhere, concerned about feeding their own people, continue to invest heavily in farmland in places like Africa.
The recent financial crisis has pushed a second wave of private investors to diversify into agriculture.
“It’s a fashionable topic right now,” said Geneva wealth manager Philippe Szokolóczy-Syllaba, founder of My Global Advisor, who was present at the conference.
But investments in agriculture or specific projects remain very complex, he explained, as there is a race to find good quality land that is not too expensive and large financial outlays are needed.
Banks and funds
In Switzerland a number of banks, investment funds and firms are busy in this field, and many others are thought to be active behind the scenes.
In 2009 Credit Suisse and UBS participated in a share issue for Golden Agri-Resources, the world's second-largest palm oil plantation company based in Indonesia.
Private banks Sarasin and Pictet propose agro-related investments, and investment funds have been created in Switzerland, such as GlobalAgriCap in Zurich, GAIA World Agri Fund in Geneva and Man Investments in Pfäffikon.
Myret Zaki, deputy editor of the Swiss financial magazine Bilan, who attended the conference, said there was currently a huge demand to diversify investment portfolios.
“The yield potential from agro investments is not enormous – maybe ten to 20 per cent – and they can be volatile,” she told swissinfo.ch. “But people know that in the long term they can only but appreciate.”
Institutional investors like pension funds have been “disorientated” by recent events and are very open to new types of investments, says Zaki.
“What was formerly seen as exotic is now the norm,” she noted.
Swiss firms
Certain Swiss-based firms are also publicly active in major agriculture projects, such as Glencore, the world’s biggest commodities trader, which is said to own almost 300,000 hectares of farm land around the world.
In 2008 the Geneva-based firm Addax Bioenergy launched a high-profile sugarcane ethanol project on 10,000 hectares of land leased in Sierra Leone. It hopes to create more than 2,000 jobs when the project is fully operational in 2013.
“We need to have a much better idea who the Swiss firms are that are investing in agriculture abroad,” said Maya Graf, a Green Party MP.
She recently filed a series of parliamentary questions on the land-grab phenomenon, including one about how to best ensure investments comply with human rights in the countries concerned.
“Switzerland is actively committed so that the renewed public and private interest for investments in agriculture lead to a win-win solution for all sides,” said Swiss foreign ministry spokeswoman Carole Wälti.
It has also been supporting efforts to improve global regulatory mechanisms governing investment in land and natural resources, such as the “Voluntary Guidelines on the Responsible Governance of Tenure of Land and Other Natural Resources”.
Experts hope the text will be adopted during the next Committee on World Food Security in October 2011.
Source: http://www.swissinfo.ch/eng/politics/Spotlight_turned_on_agro_investment_boom_.html?cid=30421416
The second “jetfin AGRO” conference for investors with an eye on agriculture and water took place in the western Swiss city on Tuesday. Meanwhile, the global land-grab phenomenon continues to expand as states attempt to regulate the issue.
Activists from some 25 Swiss non-governmental organisations and unions demonstrated outside the conference at the five-star Kempinski Hotel in Geneva against investments in agriculture and water in developing nations, which they say threaten people’s right to food and water and encourage speculation.
“We have to react against this new phenomenon where pension funds are investing massively in funds promoted by this conference,” said Margot Brogniart, coordinator for the coalition of protestors.
The fact that this is the third such meeting in Geneva in the space of a year, with others planned next week and in September, points to the growing interest by investors and Geneva’s major role, says Ester Wolf, a development specialist with the Bread for all NGO.
“Geneva is becoming a hub for such investments,” she told swissinfo.ch.
“Bright light”
The jetfin AGRO meeting brought together investors, wealth managers and commodity specialists from around the world to discuss strategies for agriculture, described as “the bright light of today’s investment universe”.
Topics included building an agro-business equity portfolio, hedging contracts for agro-investments, agricultural commodities and specific investment destinations such as India, Latin America and the US, as well as strategies for investing in timber and water.
Shaken by two food-price spikes in four years, countries from the Middle East, China, South Korea and elsewhere, concerned about feeding their own people, continue to invest heavily in farmland in places like Africa.
The recent financial crisis has pushed a second wave of private investors to diversify into agriculture.
“It’s a fashionable topic right now,” said Geneva wealth manager Philippe Szokolóczy-Syllaba, founder of My Global Advisor, who was present at the conference.
But investments in agriculture or specific projects remain very complex, he explained, as there is a race to find good quality land that is not too expensive and large financial outlays are needed.
Banks and funds
In Switzerland a number of banks, investment funds and firms are busy in this field, and many others are thought to be active behind the scenes.
In 2009 Credit Suisse and UBS participated in a share issue for Golden Agri-Resources, the world's second-largest palm oil plantation company based in Indonesia.
Private banks Sarasin and Pictet propose agro-related investments, and investment funds have been created in Switzerland, such as GlobalAgriCap in Zurich, GAIA World Agri Fund in Geneva and Man Investments in Pfäffikon.
Myret Zaki, deputy editor of the Swiss financial magazine Bilan, who attended the conference, said there was currently a huge demand to diversify investment portfolios.
“The yield potential from agro investments is not enormous – maybe ten to 20 per cent – and they can be volatile,” she told swissinfo.ch. “But people know that in the long term they can only but appreciate.”
Institutional investors like pension funds have been “disorientated” by recent events and are very open to new types of investments, says Zaki.
“What was formerly seen as exotic is now the norm,” she noted.
Swiss firms
Certain Swiss-based firms are also publicly active in major agriculture projects, such as Glencore, the world’s biggest commodities trader, which is said to own almost 300,000 hectares of farm land around the world.
In 2008 the Geneva-based firm Addax Bioenergy launched a high-profile sugarcane ethanol project on 10,000 hectares of land leased in Sierra Leone. It hopes to create more than 2,000 jobs when the project is fully operational in 2013.
“We need to have a much better idea who the Swiss firms are that are investing in agriculture abroad,” said Maya Graf, a Green Party MP.
She recently filed a series of parliamentary questions on the land-grab phenomenon, including one about how to best ensure investments comply with human rights in the countries concerned.
“Switzerland is actively committed so that the renewed public and private interest for investments in agriculture lead to a win-win solution for all sides,” said Swiss foreign ministry spokeswoman Carole Wälti.
It has also been supporting efforts to improve global regulatory mechanisms governing investment in land and natural resources, such as the “Voluntary Guidelines on the Responsible Governance of Tenure of Land and Other Natural Resources”.
Experts hope the text will be adopted during the next Committee on World Food Security in October 2011.
Source: http://www.swissinfo.ch/eng/politics/Spotlight_turned_on_agro_investment_boom_.html?cid=30421416
Farm ministers to rein in commodity speculation
Plans to limit speculation in commodity markets could be approved by 20 of the world's leading agriculture ministers later this month.
French minister Bruno le Maire will lead his counterparts from G20 member countries on 23 June in seeking measures to reduce price volatility and improve food security.
Agricultural markets needed investment, transparency and international co-ordination, not speculation, said Mr le Maire at the International Grains Council's conference this week.
"We need investors not speculators - we do not need people who come and make excessive profits in a few days in agricultural markets," said Mr le Maire, commenting that in Chicago, more than 80% of positions were held by purely financial players who had no link with production agriculture.
"We don't want to control prices. What we want to fight is not higher prices but excessive volatility." Strategic emergency food reserves would also be part of the plan.
Addressing the challenges of world food security and price volatility, this year's French presidency of the G20 has developed a five-point action plan for agricultural markets (see panel).
However, grain traders at the conference were generally opposed to limits on speculation. "The best markets are unregulated and allowed to perform in a free manner," said Frontier's trading director Jon Duffy.
"Speculation will never make a market, the fundamentals will always make a market.
"The markets are where they are today because of pure supply and demand," he told Farmers Weekly.
"Speculation may make it get there quicker but I would be fairly wary of anything that's going to limit the free market; I don't believe it's good news for anybody. Controlling speculation won't alter food security."
Moves to limit speculation were roundly rejected by other speakers at the International Grains Council conference.
"The greatest risk for trade from government is not that they will do too little but that they will do too much," said US Wheat Associates president Alan Tracy.
"The markets are not perfect but at the end of the day signals given out by the market are better than those given out by governments," said Rod Gravelet-Blondin, senior general manager of commodity derivatives at the Johannesburg Stock Exchange.
In a similar bid to that of the G20, an EU review of financial regulation is also considering market intervention by limiting the size of positions which can be taken on commodity futures markets.
Source: http://www.fwi.co.uk/Articles/2011/06/09/127236/Farm-ministers-to-rein-in-commodity-speculation.htm
French minister Bruno le Maire will lead his counterparts from G20 member countries on 23 June in seeking measures to reduce price volatility and improve food security.
Agricultural markets needed investment, transparency and international co-ordination, not speculation, said Mr le Maire at the International Grains Council's conference this week.
"We need investors not speculators - we do not need people who come and make excessive profits in a few days in agricultural markets," said Mr le Maire, commenting that in Chicago, more than 80% of positions were held by purely financial players who had no link with production agriculture.
"We don't want to control prices. What we want to fight is not higher prices but excessive volatility." Strategic emergency food reserves would also be part of the plan.
Addressing the challenges of world food security and price volatility, this year's French presidency of the G20 has developed a five-point action plan for agricultural markets (see panel).
However, grain traders at the conference were generally opposed to limits on speculation. "The best markets are unregulated and allowed to perform in a free manner," said Frontier's trading director Jon Duffy.
"Speculation will never make a market, the fundamentals will always make a market.
"The markets are where they are today because of pure supply and demand," he told Farmers Weekly.
"Speculation may make it get there quicker but I would be fairly wary of anything that's going to limit the free market; I don't believe it's good news for anybody. Controlling speculation won't alter food security."
Moves to limit speculation were roundly rejected by other speakers at the International Grains Council conference.
"The greatest risk for trade from government is not that they will do too little but that they will do too much," said US Wheat Associates president Alan Tracy.
"The markets are not perfect but at the end of the day signals given out by the market are better than those given out by governments," said Rod Gravelet-Blondin, senior general manager of commodity derivatives at the Johannesburg Stock Exchange.
In a similar bid to that of the G20, an EU review of financial regulation is also considering market intervention by limiting the size of positions which can be taken on commodity futures markets.
Source: http://www.fwi.co.uk/Articles/2011/06/09/127236/Farm-ministers-to-rein-in-commodity-speculation.htm
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