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.
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.
Friday 17 June 2011
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
Wednesday 8 June 2011
Huge Timber Investment in Australia
STATE Treasurer Jack Snelling has met with a Victorian private plantation management company that is emerging as one of the possible contenders in the multi-million-dollar forward sale of the region’s plantation estate.
Mr Snelling met on May 18 with representatives from Hancock Victoria Plantations (HVP), which is part of a global timber resource management group.
According to Mr Snelling’s office, Hancock is the only potential buyer he has met with to date.
“It was best described as a preliminary meeting and it would be more than likely that he would meet with any other interested parties down the track, but Hancocks was the first one,” a spokesperson said.
Mr Snelling — who attended yesterday’s first roundtable forestry meeting in Adelaide with key South East stakeholders — announced last month that the government planned to move ahead with the forward sale, despite widespread outcry.
HVP — which has a regional office in Mount Gambier and owns some softwood plantations in the South East — is one of Australia’s largest privately-owned plantation timber companies and is owned jointly by Australian and US superannuation and investment funds.
The Hancock Timber Resource Group also purchased 204,000ha of Queensland Government-owned plantations last year for $603m under a 99-year lease.
While the government has not revealed the reserve sale price for South Australia’s sprawling plantation estate, the price is reportedly between $500-$700m.
No comment was available from Hancock on the issue.
According to a local timber industry expert, Hancock could be interested in the historic deal after buying the rights of Victoria’s plantation estate in 1996 for 99 years.
“They could be well-positioned to make an offer,” said an industry insider, who did not want to be named.
They said Hancock had a track record in managing plantation estates in Victoria.
Meanwhile, another forestry expert — who also did not want to be named — said Hancock had done an “excellent job” in managing plantations in Victoria.
“They could be interested, but it is not confirmed,” the industry person said.
According to the company’s website, HVP manages around 245,000 hectares of land across Victoria, including 50,000 hectares of native vegetation for conservation.
“HVP annually supplies some three million tonnes of softwood (pine) and 300,000 tonnes of hardwood (eucalypt) to sawmillers, panel producers and pulp and paper mills in Australia and overseas,” the website said.
“Each year, HVP plantation timber is replacing half a billion dollars of potential forest product imports into Australia, supporting local investment and employment.”
The company supplies around 1.5 million tonnes a year of sawlogs and pulpwood to sawmills in Victoria’s Gippsland region, including Australian Paper’s Maryvale pulp and paper mill.
Through a joint venture business, Softwood Plantation Exporters (SPE) in Geelong, which processes plantation pine thinnings and sawmill residues for export, HVP also contributes to Australia’s export performance in expanding overseas markets
According to the company’s website, it also has an extensive firefighting commitment to the sector.
HVP fire crews are part of the Victorian Country Fire Authority, registered as CFA Forest Industry Brigades.
“As active members of the CFA, our fire crews are trained in wildfire control and work alongside other CFA volunteers on the fire frontline,” the company’s website said.
The company’s firefighting effort includes 235 trained firefighters, 40 support staff, 18 fire tankers, 32 smaller fire fighting appliances, 28 bulldozers available, six graders available, four fire towers, one aerial fire surveillance plane and two first attack helicopters.
Hancock Timber Resource Group is a global timberland investment management organisation based in Boston, Massachusetts, that manages more than two million hectares of timberland in Australia, New Zealand, Canada, Brazil and the United States.
Source: http://www.borderwatch.com.au/archives/9278
Mr Snelling met on May 18 with representatives from Hancock Victoria Plantations (HVP), which is part of a global timber resource management group.
According to Mr Snelling’s office, Hancock is the only potential buyer he has met with to date.
“It was best described as a preliminary meeting and it would be more than likely that he would meet with any other interested parties down the track, but Hancocks was the first one,” a spokesperson said.
Mr Snelling — who attended yesterday’s first roundtable forestry meeting in Adelaide with key South East stakeholders — announced last month that the government planned to move ahead with the forward sale, despite widespread outcry.
HVP — which has a regional office in Mount Gambier and owns some softwood plantations in the South East — is one of Australia’s largest privately-owned plantation timber companies and is owned jointly by Australian and US superannuation and investment funds.
The Hancock Timber Resource Group also purchased 204,000ha of Queensland Government-owned plantations last year for $603m under a 99-year lease.
While the government has not revealed the reserve sale price for South Australia’s sprawling plantation estate, the price is reportedly between $500-$700m.
No comment was available from Hancock on the issue.
According to a local timber industry expert, Hancock could be interested in the historic deal after buying the rights of Victoria’s plantation estate in 1996 for 99 years.
“They could be well-positioned to make an offer,” said an industry insider, who did not want to be named.
They said Hancock had a track record in managing plantation estates in Victoria.
Meanwhile, another forestry expert — who also did not want to be named — said Hancock had done an “excellent job” in managing plantations in Victoria.
“They could be interested, but it is not confirmed,” the industry person said.
According to the company’s website, HVP manages around 245,000 hectares of land across Victoria, including 50,000 hectares of native vegetation for conservation.
“HVP annually supplies some three million tonnes of softwood (pine) and 300,000 tonnes of hardwood (eucalypt) to sawmillers, panel producers and pulp and paper mills in Australia and overseas,” the website said.
“Each year, HVP plantation timber is replacing half a billion dollars of potential forest product imports into Australia, supporting local investment and employment.”
The company supplies around 1.5 million tonnes a year of sawlogs and pulpwood to sawmills in Victoria’s Gippsland region, including Australian Paper’s Maryvale pulp and paper mill.
Through a joint venture business, Softwood Plantation Exporters (SPE) in Geelong, which processes plantation pine thinnings and sawmill residues for export, HVP also contributes to Australia’s export performance in expanding overseas markets
According to the company’s website, it also has an extensive firefighting commitment to the sector.
HVP fire crews are part of the Victorian Country Fire Authority, registered as CFA Forest Industry Brigades.
“As active members of the CFA, our fire crews are trained in wildfire control and work alongside other CFA volunteers on the fire frontline,” the company’s website said.
The company’s firefighting effort includes 235 trained firefighters, 40 support staff, 18 fire tankers, 32 smaller fire fighting appliances, 28 bulldozers available, six graders available, four fire towers, one aerial fire surveillance plane and two first attack helicopters.
Hancock Timber Resource Group is a global timberland investment management organisation based in Boston, Massachusetts, that manages more than two million hectares of timberland in Australia, New Zealand, Canada, Brazil and the United States.
Source: http://www.borderwatch.com.au/archives/9278
Investing in Timber: Perceptions vs. Realities
As investors have grappled with uncertain markets in recent years, interest in timberland investing has grown dramatically.
Despite its impressive growth and performance, however, timberland remains a somewhat misunderstood investment opportunity. We have covered some of the most common misperceptions about the asset class in the source article.
Let me add two additional ones:
Myth: Plantation forests (those consisting of trees of the same age and species) yield higher returns than forests that are managed in a more natural mixed age/mixed species state.
Reality: Plantation forests typically produce faster growth rates and higher volumes of timber, but these characteristics alone do not translate into higher returns. Timberland investments are usually valued on a discounted cash flow (DCF) basis. This tends to level return expectations across different forest types and investment locations. Local timber and land market conditions have also a considerable impact on LT investment returns. For instance, a forest stocked with trees of varying ages and species may have a component of high quality hardwoods that are in demand for the production of premium furniture. This timber is likely to sell at a higher unit cost than timber grown in a plantation forest that is being managed to produce lower-valued pulpwood. In addition, bare land values are often considerably higher for the natural, mixed age/mixed species forest because of alternative land use pressures, such as conservation, recreation and rural home development.
Myth: The capture of higher and better use (HBU) land values almost always entails conversion of a forest for purposes of development.
Reality: A forest’s value is determined by the context in which it exists. Forests in proximity to growing metropolitan areas often see their underlying land values eclipse their values as timber production assets. In addition, population and commercial expansion tends to be accompanied by increased public pressure to protect lands for conservation and recreation. For timberland investors, it is essential to determine the “HBU” of a forest asset and to structure one’s management approach accordingly. In some cases, it may entail selling some land for development. In others, it may entail working with public agencies or private conservation groups. Regardless of the prevailing “HBU” scenario confronting an investor, the goal is to respond to land-use market demands in a socially and environmentally responsible fashion and to create additional value in the process.
Timberland is an exciting investment sector.but above all requires a timberland manager with proven knowhow, disciplined investment process and genuinely transparent with interests that are aligned with those of the investors.
Source: http://www.glgroup.com/News/Investing-in-Timberland---Perceptions-vs.-Realities-54203.html
Despite its impressive growth and performance, however, timberland remains a somewhat misunderstood investment opportunity. We have covered some of the most common misperceptions about the asset class in the source article.
Let me add two additional ones:
Myth: Plantation forests (those consisting of trees of the same age and species) yield higher returns than forests that are managed in a more natural mixed age/mixed species state.
Reality: Plantation forests typically produce faster growth rates and higher volumes of timber, but these characteristics alone do not translate into higher returns. Timberland investments are usually valued on a discounted cash flow (DCF) basis. This tends to level return expectations across different forest types and investment locations. Local timber and land market conditions have also a considerable impact on LT investment returns. For instance, a forest stocked with trees of varying ages and species may have a component of high quality hardwoods that are in demand for the production of premium furniture. This timber is likely to sell at a higher unit cost than timber grown in a plantation forest that is being managed to produce lower-valued pulpwood. In addition, bare land values are often considerably higher for the natural, mixed age/mixed species forest because of alternative land use pressures, such as conservation, recreation and rural home development.
Myth: The capture of higher and better use (HBU) land values almost always entails conversion of a forest for purposes of development.
Reality: A forest’s value is determined by the context in which it exists. Forests in proximity to growing metropolitan areas often see their underlying land values eclipse their values as timber production assets. In addition, population and commercial expansion tends to be accompanied by increased public pressure to protect lands for conservation and recreation. For timberland investors, it is essential to determine the “HBU” of a forest asset and to structure one’s management approach accordingly. In some cases, it may entail selling some land for development. In others, it may entail working with public agencies or private conservation groups. Regardless of the prevailing “HBU” scenario confronting an investor, the goal is to respond to land-use market demands in a socially and environmentally responsible fashion and to create additional value in the process.
Timberland is an exciting investment sector.but above all requires a timberland manager with proven knowhow, disciplined investment process and genuinely transparent with interests that are aligned with those of the investors.
Source: http://www.glgroup.com/News/Investing-in-Timberland---Perceptions-vs.-Realities-54203.html
Trees Offer Solid Investment Returns
Investors seeking the great prize of uncorrelated returns plus the inflation protection supposedly promised by commodities have recently had to develop nerves of steel.
Those who favour the sector continue to insist that, in the long term, prices are driven by real demand for raw materials from emerging markets, rather than speculation on price rises. However, in the shorter term, volatility looks set to stay.
Pension funds, which understandably have weaker stomachs for the roller-coaster ride, are seeking alternatives. One is timberland, which, like other commodities, is seen to offer protection against inflation.
As an added bonus for pension funds looking to take into account environmental, social and governance factors, timberland offers “explicit opportunities” as a sustainable investment, according to Mercer, the investment consultant.
Although, it also cautioned, in a report published this year, that where investments are in emerging markets, there may be higher environmental and social risks.
Timberland has been an investible asset class in the US since the mid-1980s, according to Mason Browne, director of operations, global timber acquisitions at Four Winds Capital Management, which manages the UK-listed Phaunos Timber Fund.
Phaunos, named after a classical forest god, became fully invested last year, having been formed in September 2006. It raised £59m ($96m) from institutions in its initial public offering before listing on the Alternative Investment Market in December that year.
The company, which reports in dollars, moved to the LSE main market in June 2008 and recently reported net asset value of $594m on December 31 2010, up from $575m the year before. It has announced its first dividend of 2 cents a share.
Unlike Phaunos, which Mr Browne explains has a global investment strategy and is attempting to gain exposure to emerging markets, the majority of timberland investment companies are US-based and invested in US timber.
This constitutes one of the risks in the sector – heavy exposure to the US dollar and housing market. Opportunities outside the US are limited but growing.
The UN Food and Agriculture Organisation estimates that global trade in timber is worth more than $200bn, about 1 per cent of world GDP.
“There is a huge correlation between GDP and wood consumption,” says Mr Browne.
Timberland offers some protection against fluctuations in demand, he explains. “It doesn’t trade at the spot price of lumber. It also offers a low correlation with other asset classes and a high correlation with inflation.”
The main thing investors have to bear in mind is that timber is an illiquid asset class.
Short term investors and timberland do not go together, says Simon Fox, principal at Mercer’s alternatives boutique.
He says the sector tends to require investment periods of 10-15 years. Mercer tracks about 65 timberland investment managers, most of them in the US, although it finds the global opportunities most compelling – particularly the growth of demand from China and timberland’s growing significance as a “carbon-neutral” fuel source.
“By owning the forest, you are earning that return from the growth of trees and any rise in the price of timber,” says Mr Fox.
The main risk is pricing, which means investors should ensure there is strong investment management.
Timberland also carries physical risks, from fires, hurricanes and even insect blight. Currency risk and taxation should also be taken into account.
However, there are also advantages.
“With timberland, you can control when you take it to market,” says Mr Fox.
“Unlike an agricultural commodity, which has to be harvested, with timber you can leave it on the stump.”
Eva Greger, managing director of GMO Renewable Resources, which has more than $3bn in timber assets, agrees.
“Timber provides a steady yield. The value of that yield is tied to commodity prices and the timing of the yield can be managed – you can cut the trees sooner or let them grow older,” she explains.
She says the asset class appeals to investors with longer time horizons, such as pension plans, who are seeking to hedge inflation risk by holding physical assets.
She says it also appeals to investors with an interest in sustainability and the positive environmental benefits of growing trees.
The NCREIF timber index has shown returns of just under 7 per cent over the past decade.
“But it includes only US timberland, which is considered low risk and has a commensurately low expected return. Our returns have been higher,” says Ms Greger, saying that GMO’s investments in countries such as New Zealand, Australia and Uruguay have paid off.
Source: http://www.ft.com/cms/s/0/b74cc33a-8d7a-11e0-bf0b-00144feab49a,s01=1.html
Those who favour the sector continue to insist that, in the long term, prices are driven by real demand for raw materials from emerging markets, rather than speculation on price rises. However, in the shorter term, volatility looks set to stay.
Pension funds, which understandably have weaker stomachs for the roller-coaster ride, are seeking alternatives. One is timberland, which, like other commodities, is seen to offer protection against inflation.
As an added bonus for pension funds looking to take into account environmental, social and governance factors, timberland offers “explicit opportunities” as a sustainable investment, according to Mercer, the investment consultant.
Although, it also cautioned, in a report published this year, that where investments are in emerging markets, there may be higher environmental and social risks.
Timberland has been an investible asset class in the US since the mid-1980s, according to Mason Browne, director of operations, global timber acquisitions at Four Winds Capital Management, which manages the UK-listed Phaunos Timber Fund.
Phaunos, named after a classical forest god, became fully invested last year, having been formed in September 2006. It raised £59m ($96m) from institutions in its initial public offering before listing on the Alternative Investment Market in December that year.
The company, which reports in dollars, moved to the LSE main market in June 2008 and recently reported net asset value of $594m on December 31 2010, up from $575m the year before. It has announced its first dividend of 2 cents a share.
Unlike Phaunos, which Mr Browne explains has a global investment strategy and is attempting to gain exposure to emerging markets, the majority of timberland investment companies are US-based and invested in US timber.
This constitutes one of the risks in the sector – heavy exposure to the US dollar and housing market. Opportunities outside the US are limited but growing.
The UN Food and Agriculture Organisation estimates that global trade in timber is worth more than $200bn, about 1 per cent of world GDP.
“There is a huge correlation between GDP and wood consumption,” says Mr Browne.
Timberland offers some protection against fluctuations in demand, he explains. “It doesn’t trade at the spot price of lumber. It also offers a low correlation with other asset classes and a high correlation with inflation.”
The main thing investors have to bear in mind is that timber is an illiquid asset class.
Short term investors and timberland do not go together, says Simon Fox, principal at Mercer’s alternatives boutique.
He says the sector tends to require investment periods of 10-15 years. Mercer tracks about 65 timberland investment managers, most of them in the US, although it finds the global opportunities most compelling – particularly the growth of demand from China and timberland’s growing significance as a “carbon-neutral” fuel source.
“By owning the forest, you are earning that return from the growth of trees and any rise in the price of timber,” says Mr Fox.
The main risk is pricing, which means investors should ensure there is strong investment management.
Timberland also carries physical risks, from fires, hurricanes and even insect blight. Currency risk and taxation should also be taken into account.
However, there are also advantages.
“With timberland, you can control when you take it to market,” says Mr Fox.
“Unlike an agricultural commodity, which has to be harvested, with timber you can leave it on the stump.”
Eva Greger, managing director of GMO Renewable Resources, which has more than $3bn in timber assets, agrees.
“Timber provides a steady yield. The value of that yield is tied to commodity prices and the timing of the yield can be managed – you can cut the trees sooner or let them grow older,” she explains.
She says the asset class appeals to investors with longer time horizons, such as pension plans, who are seeking to hedge inflation risk by holding physical assets.
She says it also appeals to investors with an interest in sustainability and the positive environmental benefits of growing trees.
The NCREIF timber index has shown returns of just under 7 per cent over the past decade.
“But it includes only US timberland, which is considered low risk and has a commensurately low expected return. Our returns have been higher,” says Ms Greger, saying that GMO’s investments in countries such as New Zealand, Australia and Uruguay have paid off.
Source: http://www.ft.com/cms/s/0/b74cc33a-8d7a-11e0-bf0b-00144feab49a,s01=1.html
India to be third largest investment destination for renewable energy investment this year: KPMG
NEW DELHI: India is the third most favoured destination globally for investments in the renewable energy sector and will also be a major source of new entrants into the sector, behind the US and China, according to a survey released on Wednesday by global consulting firm KPMG.
The top five targeted countries for renewable energy investment are the US, selected by 53 percent of respondents, China (38 per cent), India (35 per cent) Germany (34 per cent) and the UK (33 per cent)," according to KPMG's annual survey of global renewable energy mergers and acquisitions titled Green Power 2011.
"Some 78 per cent of all survey respondents expect new players to come from China, followed by North America (59 per cent), India (42 per cent) and Western Europe (41 per cent)," it added.
The Indian renewable energy market has become increasingly dynamic in recent years as a result of strong natural resources, greater accommodation to international investments and a variety of government incentives.
"In India, we see increasing trends towards sustained M&A activity in the renewable space, specifically wind, small hydro, and solar sub-segments going forward. With clear thrust on this space, and a supportive policy and regulatory environment, we see this activity picking up slowly but steadily," said Richard Rekhy , Head of Advisory, KPMG in India.
"The deal sizes, however, may be smaller (as compared to global benchmarks) to start with," he added.
The government is providing an array of incentives to firms in the renewable energy sector including setting of renewable energy generating standards for utilities, creating a structure for trading renewable energy certificates.
On the tax incentives front, the government has allowed project developers to take 80 per cent accelerated depreciation on assets deployed in renewable energy generation and given a ten year tax holiday to the sector and concessional duties for imports.
In the Indian renewable energy sector, solar and wind energy will be the driving force for overseas investments and acquisitions. The Indian wind market has experienced rapid growth in recent months.
"Some $586 million of project financing flowed into Indian onshore wind farms in the first quarter of 2011, only 37 per cent below the $934 million that was allocated to the sector throughout 2010," said the survey.
Although a majority of the respondents picked the US as a favoured market for solar energy, about a third said they would seek deals in other countries like India.
One of the reasons why the Indian solar sector is increasingly attractive to acquirers is the plethora of incentives that have been announced to support the sector's development.
"With India it is a combination of factors. There is a portfolio standard on a state by state basis. Developers have the ability to get power purchase agreements due to utility obligations. Then there are the Generation Based Incentive (GBI) and tax depreciation incentives," said Siobhan Smyth, head of renewables at HSBC.
"You are looking at 15-20 per cent returns depending on the state you look at and the type of assets you are buying."
Source: http://economictimes.indiatimes.com/news/news-by-industry/energy/india-to-be-third-largest-investment-destination-for-renewables-this-year-kpmg/articleshow/8773190.cms
The top five targeted countries for renewable energy investment are the US, selected by 53 percent of respondents, China (38 per cent), India (35 per cent) Germany (34 per cent) and the UK (33 per cent)," according to KPMG's annual survey of global renewable energy mergers and acquisitions titled Green Power 2011.
"Some 78 per cent of all survey respondents expect new players to come from China, followed by North America (59 per cent), India (42 per cent) and Western Europe (41 per cent)," it added.
The Indian renewable energy market has become increasingly dynamic in recent years as a result of strong natural resources, greater accommodation to international investments and a variety of government incentives.
"In India, we see increasing trends towards sustained M&A activity in the renewable space, specifically wind, small hydro, and solar sub-segments going forward. With clear thrust on this space, and a supportive policy and regulatory environment, we see this activity picking up slowly but steadily," said Richard Rekhy , Head of Advisory, KPMG in India.
"The deal sizes, however, may be smaller (as compared to global benchmarks) to start with," he added.
The government is providing an array of incentives to firms in the renewable energy sector including setting of renewable energy generating standards for utilities, creating a structure for trading renewable energy certificates.
On the tax incentives front, the government has allowed project developers to take 80 per cent accelerated depreciation on assets deployed in renewable energy generation and given a ten year tax holiday to the sector and concessional duties for imports.
In the Indian renewable energy sector, solar and wind energy will be the driving force for overseas investments and acquisitions. The Indian wind market has experienced rapid growth in recent months.
"Some $586 million of project financing flowed into Indian onshore wind farms in the first quarter of 2011, only 37 per cent below the $934 million that was allocated to the sector throughout 2010," said the survey.
Although a majority of the respondents picked the US as a favoured market for solar energy, about a third said they would seek deals in other countries like India.
One of the reasons why the Indian solar sector is increasingly attractive to acquirers is the plethora of incentives that have been announced to support the sector's development.
"With India it is a combination of factors. There is a portfolio standard on a state by state basis. Developers have the ability to get power purchase agreements due to utility obligations. Then there are the Generation Based Incentive (GBI) and tax depreciation incentives," said Siobhan Smyth, head of renewables at HSBC.
"You are looking at 15-20 per cent returns depending on the state you look at and the type of assets you are buying."
Source: http://economictimes.indiatimes.com/news/news-by-industry/energy/india-to-be-third-largest-investment-destination-for-renewables-this-year-kpmg/articleshow/8773190.cms
Western Australia Plants out 5 Million Hectares of Wheat - Great news for Farmland Investment
Australia's top grain growing state may be on for a near-record canola crop despite the oilseed, like barley's, being downgraded in sowing plans by a stampede for wheat.
Growers in Western Australia, which typically provides roughly 40% of the national wheat harvest, have planted a record 5.4m hectares with the grain, a 10% rise year on year, Australia & New Zealand Bank said.
The increase has come largely at the expense of barley and canola, although growers, encouraged by high prices, have also brought marginal land into production, lifting overall sowings by some 300,000 hectares to 8m hectares.
Barley seedings have dropped to a five-year low of 1.1m hectares, with canola area down some 17% at 1.0m hectares.
Weak prospects
Nonetheless, this figure remains higher than historical levels and - assuming a trend yield of 1.0 tonnes per hectare, which the state fell short of last year because of drought - production should reach 1.07m tonnes, ANZ said.
The current record was set in 2008-09, at 1.18m tonnes.
A big crop of the rapeseed variant would be a welcome boost given setbacks to crops elsewhere, with a wet spring holding back output in Canada, the top canola exporter.
Canada's farm ministry overnight cut by 600,000 tonnes, to 12.7m tonnes, its estimate for domestic production.
Meanwhile, hopes for the rapeseed harvest in Germany, the European Union's biggest producer, have been dented by a dearth of rain.
Oil World, the influential oilseeds analysis group, last week cut to 4.65m tonnes its forecast for the harvest, representing a fall of more than 1m tonnes from last year's result, while German co-operatives have estimated the crop at 4.4m tonnes.
The US Department of Agriculture foresees world rapeseed production, including canola, falling behind consumption in 2011-12 for a second successive season.
Into the red
The cut by Australian growers in canola seedings this year is in part down to weather, with a dry start to autumn persuading many farmers to delay sowings.
"Farmers that chose to wait for rain before sowing would have had to wait until mid-May. At that point, it was quite late to be sowing canola, and most farmers would have opted to sow wheat," ANZ said.
However, it also reflects the higher costs, in fertilizer and pesticide terms, of growing canola, which do not look this season like being rewarded with greater profits.
Gross margins were, at about Aus$120 a tonne last season, roughly 50% higher than those for wheat. However, thanks to especially high wheat prices, those figures have now converged at about Aus$300 a tonne.
With farms in some areas of Western Australia losing Aus$500,000 each last season, because of the drought, "managing cash flows and debt levels for the 2011 cropping season has been a priority", ANZ said.
Source: Agrimoney.com
Growers in Western Australia, which typically provides roughly 40% of the national wheat harvest, have planted a record 5.4m hectares with the grain, a 10% rise year on year, Australia & New Zealand Bank said.
The increase has come largely at the expense of barley and canola, although growers, encouraged by high prices, have also brought marginal land into production, lifting overall sowings by some 300,000 hectares to 8m hectares.
Barley seedings have dropped to a five-year low of 1.1m hectares, with canola area down some 17% at 1.0m hectares.
Weak prospects
Nonetheless, this figure remains higher than historical levels and - assuming a trend yield of 1.0 tonnes per hectare, which the state fell short of last year because of drought - production should reach 1.07m tonnes, ANZ said.
The current record was set in 2008-09, at 1.18m tonnes.
A big crop of the rapeseed variant would be a welcome boost given setbacks to crops elsewhere, with a wet spring holding back output in Canada, the top canola exporter.
Canada's farm ministry overnight cut by 600,000 tonnes, to 12.7m tonnes, its estimate for domestic production.
Meanwhile, hopes for the rapeseed harvest in Germany, the European Union's biggest producer, have been dented by a dearth of rain.
Oil World, the influential oilseeds analysis group, last week cut to 4.65m tonnes its forecast for the harvest, representing a fall of more than 1m tonnes from last year's result, while German co-operatives have estimated the crop at 4.4m tonnes.
The US Department of Agriculture foresees world rapeseed production, including canola, falling behind consumption in 2011-12 for a second successive season.
Into the red
The cut by Australian growers in canola seedings this year is in part down to weather, with a dry start to autumn persuading many farmers to delay sowings.
"Farmers that chose to wait for rain before sowing would have had to wait until mid-May. At that point, it was quite late to be sowing canola, and most farmers would have opted to sow wheat," ANZ said.
However, it also reflects the higher costs, in fertilizer and pesticide terms, of growing canola, which do not look this season like being rewarded with greater profits.
Gross margins were, at about Aus$120 a tonne last season, roughly 50% higher than those for wheat. However, thanks to especially high wheat prices, those figures have now converged at about Aus$300 a tonne.
With farms in some areas of Western Australia losing Aus$500,000 each last season, because of the drought, "managing cash flows and debt levels for the 2011 cropping season has been a priority", ANZ said.
Source: Agrimoney.com
BP Plans Biofuel Investments this Year
ST. GALLEN, Switzerland (MarketWatch) -- BP PLC's (BP.LN) plans to invest $1.5 billion in biofuels in 2011 but won't do so at the expense of food security in the countries where it does invest, Chief Executive Robert Dudley said Friday.
"It is our policy...We will not invest in biofuel, in corn-based ethanol, on lands used for food, it will be in the Brazilian grasslands" which are used specifically for fuel crops, Dudley told an audience at a business conference here.
BP in March bought an 83% stake in Brazilian ethanol and sugar producer Companhia Nacional de Acucar e Alcool, or CNAA, for $680 million. BP was also the first global oil major to make an acquisition in Brazil's ethanol sector, buying a 50% stake in Tropical BioEnergia SA in 2008.
This was echoed by Royal Dutch Shell PLC (RDSA.LN) Chairman Jorma Olila. Shell undertook a $12 billion tie-up with Cosan Industria e Comercio SA, the world's largest sugar and ethanol group, in February last year.
"The only investment in first generation biofuels we have okayed is in Brazil, where it will not interfere with the production of foodstuffs or affect the integrity of the rainforests," Olila said.
Source: http://www.marketwatch.com/story/bp-says-plans-to-invest-in-biofuels-this-year-2011-05-13
"It is our policy...We will not invest in biofuel, in corn-based ethanol, on lands used for food, it will be in the Brazilian grasslands" which are used specifically for fuel crops, Dudley told an audience at a business conference here.
BP in March bought an 83% stake in Brazilian ethanol and sugar producer Companhia Nacional de Acucar e Alcool, or CNAA, for $680 million. BP was also the first global oil major to make an acquisition in Brazil's ethanol sector, buying a 50% stake in Tropical BioEnergia SA in 2008.
This was echoed by Royal Dutch Shell PLC (RDSA.LN) Chairman Jorma Olila. Shell undertook a $12 billion tie-up with Cosan Industria e Comercio SA, the world's largest sugar and ethanol group, in February last year.
"The only investment in first generation biofuels we have okayed is in Brazil, where it will not interfere with the production of foodstuffs or affect the integrity of the rainforests," Olila said.
Source: http://www.marketwatch.com/story/bp-says-plans-to-invest-in-biofuels-this-year-2011-05-13
Bloomberg report says biofuels attractive to investors
Private financial support for technology acceleration continues to be important, and certain technologies are becoming clear favorites for investors, according to a recent Bloomberg New Energy Finance analysis of financial investments made in biofuels projects since 2004.
According to the analysis, venture capitalists and private equity firms have provided 60 percent, or $2.7 billion, of the total private investments made in next-generation biofuels since 2004. Of those investments, biochemical conversion technologies received 66 percent of the action while thermochemical technologies received 30 percent. Sixty percent of the investments made in next-generation biofuels through public markets since 2004 have also been directed toward biochemical technologies. Additionally, the analysis noted that companies backed by a well-known strategic partner appear to receive greater interest from the public markets. The analysis noted that three of the most conspicuous public offerings in recent years have been from companies developing biochemical processes that also have prominent partners, such as oil companies or pharmaceutical firms.
Government agencies also seem to prefer biochemical pathways. Since 2004, those technologies have received the majority of dispersed federal funds, according to Bloomberg’s analysis. Enzymatic hydrolysis projects have received 30 percent of the government’s next-gen biofuels funds, followed by acid hydrolysis projects, which received 21 percent of the dispersed funds. The analysts noted in their report, however, that while the government has announced $3.1 billion in investments to the industry since 2004, less than half of that amount has actually been received by awardees. This has negatively impacted the commercialization of next-generation biofuel technologies. “The clear disparity between the ‘announcement’ and ‘disbursement’ of funds by the DOE and USDA - particularly of loan guarantees - illustrates the inefficacy of the government’s fractional payout scheme,” the analysis noted.
“Technologies are not achieving the covenants set by the lending agencies at the expected pace. Consequently, project developers do not have access to the totality of the funds committed to their projects. As a result, technological developments take longer, forcing projects to seek additional funding from the private sector, which has been near impossible during the financial recession of the past 30 months.” On a positive note, the analysts believe the USDA’s announcement earlier this year to provide $460 million through its loan guarantee program could help to alleviate the bottleneck, if it is able to disburse funds in a more timely fashion.
Bloomberg analysts attributed greater interest in biochemical conversion processes to the fact that those technologies can be proven at a smaller scale than other technologies, such as thermochemical processes. Further, the analysts found that enzymatic hydrolysis appears to be the most attractive biochemical process, likely because it provides the ability to use coproducts produced from the process to generate heat and power and appears to have greater energy input-output benefits when compared with other technologies. The analysts noted, however that international oil companies are particularly well-suited to invest in thermochemical processes. And while most oil companies are publicly traded, many corporate investment deals are not made public, so it is possible that a greater amount of financial support has been given to thermochemical pathways than is illustrated by the analysis.
Source: http://www.ethanolproducer.com/articles/7829/bloomberg-report-says-biochemical-pathway-attractive-to-investors
According to the analysis, venture capitalists and private equity firms have provided 60 percent, or $2.7 billion, of the total private investments made in next-generation biofuels since 2004. Of those investments, biochemical conversion technologies received 66 percent of the action while thermochemical technologies received 30 percent. Sixty percent of the investments made in next-generation biofuels through public markets since 2004 have also been directed toward biochemical technologies. Additionally, the analysis noted that companies backed by a well-known strategic partner appear to receive greater interest from the public markets. The analysis noted that three of the most conspicuous public offerings in recent years have been from companies developing biochemical processes that also have prominent partners, such as oil companies or pharmaceutical firms.
Government agencies also seem to prefer biochemical pathways. Since 2004, those technologies have received the majority of dispersed federal funds, according to Bloomberg’s analysis. Enzymatic hydrolysis projects have received 30 percent of the government’s next-gen biofuels funds, followed by acid hydrolysis projects, which received 21 percent of the dispersed funds. The analysts noted in their report, however, that while the government has announced $3.1 billion in investments to the industry since 2004, less than half of that amount has actually been received by awardees. This has negatively impacted the commercialization of next-generation biofuel technologies. “The clear disparity between the ‘announcement’ and ‘disbursement’ of funds by the DOE and USDA - particularly of loan guarantees - illustrates the inefficacy of the government’s fractional payout scheme,” the analysis noted.
“Technologies are not achieving the covenants set by the lending agencies at the expected pace. Consequently, project developers do not have access to the totality of the funds committed to their projects. As a result, technological developments take longer, forcing projects to seek additional funding from the private sector, which has been near impossible during the financial recession of the past 30 months.” On a positive note, the analysts believe the USDA’s announcement earlier this year to provide $460 million through its loan guarantee program could help to alleviate the bottleneck, if it is able to disburse funds in a more timely fashion.
Bloomberg analysts attributed greater interest in biochemical conversion processes to the fact that those technologies can be proven at a smaller scale than other technologies, such as thermochemical processes. Further, the analysts found that enzymatic hydrolysis appears to be the most attractive biochemical process, likely because it provides the ability to use coproducts produced from the process to generate heat and power and appears to have greater energy input-output benefits when compared with other technologies. The analysts noted, however that international oil companies are particularly well-suited to invest in thermochemical processes. And while most oil companies are publicly traded, many corporate investment deals are not made public, so it is possible that a greater amount of financial support has been given to thermochemical pathways than is illustrated by the analysis.
Source: http://www.ethanolproducer.com/articles/7829/bloomberg-report-says-biochemical-pathway-attractive-to-investors
Australia call for governmental biofuel investment support
Industry stakeholders are calling on the Australian and New Zealand governments to provide guarantees and financial assistance this year to kick-start a local aviation biofuel industry that could be exported to the larger Australasian region.
Launching a new report into alternative fuels, The Flight Path to Sustainable Aviation, Qantas head of risk and resilience John Valastro said: "The government has said that it will back sectors that have the potential to create green jobs that help move Australia to a low-carbon economy. The report we're launching clearly shows that aviation, through the use and development of sustainable aviation fuel, has the potential to be one of those sectors."
Qantas, with Air New Zealand, Boeing and Virgin Australia - regional members of the Sustainable Aviation Fuel Users Group - helped commission and develop the report that provides a roadmap to how the region can achieve an economically and environmentally beneficial biofuel industry.
The report said that without government assistance, financial in particular, supply chains will face "technological and market uncertainties and competition from other users of biomass resources" that will not deliver the "price signals and support for initial value chain investment and expansion" necessary for airlines to purchase biofuels.
Qantas has already formed two small-scale pacts to purchase biofuel from US renewable energy companies Solazyme and Solena. However, Virgin Australia has said that it will announce its own partnership within a few months and airline representatives have said they are unlikely to be heavily involved in a local biofuel industry not supported by the government.
"None of us can solve this problem alone. Developing sustainable aviation fuel involves significant investment and research development. The solution will only be found through industry-wide initiatives and government support," said Virgin Australia corporate advisory executive Merren McArthur.
In addition to the Sustainable Aviation Fuel Users Group, the Defense Science and Technology Organisation, the Climate Group, and the Commonwealth Scientific and Industrial Research Organisation also commissioned and developed the study and report.
Source: http://www.flightglobal.com/articles/2011/06/08/357445/call-for-governmental-biofuel-support.html
Launching a new report into alternative fuels, The Flight Path to Sustainable Aviation, Qantas head of risk and resilience John Valastro said: "The government has said that it will back sectors that have the potential to create green jobs that help move Australia to a low-carbon economy. The report we're launching clearly shows that aviation, through the use and development of sustainable aviation fuel, has the potential to be one of those sectors."
Qantas, with Air New Zealand, Boeing and Virgin Australia - regional members of the Sustainable Aviation Fuel Users Group - helped commission and develop the report that provides a roadmap to how the region can achieve an economically and environmentally beneficial biofuel industry.
The report said that without government assistance, financial in particular, supply chains will face "technological and market uncertainties and competition from other users of biomass resources" that will not deliver the "price signals and support for initial value chain investment and expansion" necessary for airlines to purchase biofuels.
Qantas has already formed two small-scale pacts to purchase biofuel from US renewable energy companies Solazyme and Solena. However, Virgin Australia has said that it will announce its own partnership within a few months and airline representatives have said they are unlikely to be heavily involved in a local biofuel industry not supported by the government.
"None of us can solve this problem alone. Developing sustainable aviation fuel involves significant investment and research development. The solution will only be found through industry-wide initiatives and government support," said Virgin Australia corporate advisory executive Merren McArthur.
In addition to the Sustainable Aviation Fuel Users Group, the Defense Science and Technology Organisation, the Climate Group, and the Commonwealth Scientific and Industrial Research Organisation also commissioned and developed the study and report.
Source: http://www.flightglobal.com/articles/2011/06/08/357445/call-for-governmental-biofuel-support.html
Mozambique has 31 biofuel investment projects
Maputo, Moçambique, 8 June – Mozambique’s Centre for Agricultural Promotion (Cepagri) since 2007 has registered a total of 31 investment projects in biofuel production, covering an area of 324,000 hectares, according to the news bulletin of the Confederation of Economic Associations of Mozambique (CTA).
The text published in the latest edition of the bulletin did not mention the amount of investment in the registered projects.
In order to make the biofuel development project viable in Mozambique the government approved the Strategic Biofuel Policy in 2009.
On 29 March, the council of ministers approved the Regulation on Biofuel Mixtures, as well as establishing the Inter-ministerial Biofuel Commission, headed up by the ministries for Energy and Agriculture.
These instruments were set up to promote the domestic biofuel market, its supervision and coordination.
The government expects these regulations to establish conditions for the introduction of mixtures of 90 percent gasoline with 10 percent ethanol and 97 percent fossil diesel with 3 percent biodiesel.
Source: http://www.macauhub.com.mo/en/2011/06/08/mozambique-has-31-biofuel-investment-projects/
The text published in the latest edition of the bulletin did not mention the amount of investment in the registered projects.
In order to make the biofuel development project viable in Mozambique the government approved the Strategic Biofuel Policy in 2009.
On 29 March, the council of ministers approved the Regulation on Biofuel Mixtures, as well as establishing the Inter-ministerial Biofuel Commission, headed up by the ministries for Energy and Agriculture.
These instruments were set up to promote the domestic biofuel market, its supervision and coordination.
The government expects these regulations to establish conditions for the introduction of mixtures of 90 percent gasoline with 10 percent ethanol and 97 percent fossil diesel with 3 percent biodiesel.
Source: http://www.macauhub.com.mo/en/2011/06/08/mozambique-has-31-biofuel-investment-projects/
America's Hottest Investment: Farmland
This is usually a slow time of the year for farm sales. It's past prime planting season. Yet, Sam Kain, Des Moines area manager for land sales at Farmers National, is busy. He has 3 auctions this week. Most of the 30 or so bidders who show up will be farmers. But an increasing number of people buying land these days have no intention of planting seeds, at least not themselves. They are investors and a growing number of them are getting interested in farmland.
Just how hot is American farmland? By some accounts the value of farmland is up 20% this year alone. That's better than stocks or gold. During the past two decades, owning farmland would have produced an annual return of nearly 11%, according to Hancock Agricultural Investment Group. And that covers a time period when tech stocks boomed and crashed, and housing boomed and crashed. So at a time when investors are still looking for safety, farmland is becoming the "it" investment.
The New York Observer recently had a story saying more hedge funders have been talking farmland. Successful Canadian hedge fund manager Jean-Francois Tardiff, recently said he liked farmland. And a number of investors who gained fame for calling the housing crash, including Michael Burry and Passport Capital's John Burbank have been buying up farmland in the past two years. Famed investor Jim Rodgers, a long-time commodity bull, thinks farmland values will continue to rise.
There are good reasons to believe that is the case, and some not so good. Let's start with the good.
Crop prices are up. That's being driven in part by the emerging markets. Corn is America's number one crop. And nearly half of the corn we grow goes overseas to feed cattle and other animals. As China and the rest of Asia get wealthier they are going to eat more meat, and will therefore need more corn. What's more ethanol has had a huge impact on the price of corn as well. A higher oil price makes ethanol a more attractive substitute.
Commodities prices have been falling recently. And fears that the US economy and the world economy could be slumping again have brought down the price of oil and other commodities. But demand for food is not going away. One of sign of that is that corn after dropping sharply with the rest of the commodity market in early May has rebounded to near its yearly highs, up to about $7.50 a bushel. That's up from about $4.00 a year ago.
Then there is farm technology. Seeds are better than they used to be, requiring less water. Most tractors these days are equipped with GPS, many of which will allow farmers to map out the most and least productive areas of their land so they can better distribute seeds and fertilizer. And when I was recently out in Nebraska I saw a number of farmers just starting to experiment with double row plantin g- staggering seeds so they could fit two rows in space that is not much wider than what they used to use for one. The result is that crop yields are way up, and rising. If farmland is more productive than it was a few years ago, it should be worth more.
All of this, though – the hedge funds getting in, the 20-year track record of positive returns, emerging market riches – smells a little bubbly. Remember housing, mortgage bonds and auction rate securities were also once thought of as can't lose investments. That was until the global pool of money rushed in and inflated the housing market. That global pool of money never really went away. It just went into hibernation or maybe into oil and gold. And now it is surfacing in farmland. The concern is that this is a fear trade, which people are making to protect themselves from inflation or worse. Once the general economy rebounds, and fear abates, farmland could plummet. Remember, farmland was a great investment in the 1970s. Not so much in the 1980s or 1990s.
So is farmland overvalued now? Here's the math: In Nebraska where I was, the farmland prices have reached about $6,000 an acre. Based on the current price of fertilizer and seeds, the farmers told me, it costs about $4 to grow a bushel of corn. That means at current prices, each bushel produces a profit of $3.50. Farmers these days get about 200 bushels per acre of corn. That means a $6,000 investment produces an annual income of about $650, which is an income yield of 10.5%. That's more than double the earnings yield of the S&P 500. And it is three times the yield you would get with 10-year Treasury notes. So by that measure farmland doesn't look overvalued.
That being said, it's very hard to invest in farmland. There are no mutual funds that do it. Pension funds are getting into investing in farmland. So if you are one of the few people who have a pension, you may already be invested in agriculture in some small way. But even if you have no investment exposure to farmland, this all matters. The farm economy, while small relatively in the scheme of things, is playing a more important role in our economic growth. And as farm prices continue to go up that positive affect should remain, creating profits for farmers and jobs in Nebraska, Iowa and elsewhere. What's more, the farm economy has rebounded much faster than the rest of the economy. The unemployment rate in Nebraska is about half that of the rest of the U.S. The reason in large part has to do with our weak dollar and exports. And that says something about where the U.S. economy is headed - I think in a positive way. We have the ability to make things here, even basic things and make money doing it and create jobs. That's a bit of good news in an otherwise bad day.
Read more: http://curiouscapitalist.blogs.time.com/2011/06/01/americas-hottest-investment-farmland/#ixzz1OgUFpFDH
Source: http://curiouscapitalist.blogs.time.com/2011/06/01/americas-hottest-investment-farmland/
Just how hot is American farmland? By some accounts the value of farmland is up 20% this year alone. That's better than stocks or gold. During the past two decades, owning farmland would have produced an annual return of nearly 11%, according to Hancock Agricultural Investment Group. And that covers a time period when tech stocks boomed and crashed, and housing boomed and crashed. So at a time when investors are still looking for safety, farmland is becoming the "it" investment.
The New York Observer recently had a story saying more hedge funders have been talking farmland. Successful Canadian hedge fund manager Jean-Francois Tardiff, recently said he liked farmland. And a number of investors who gained fame for calling the housing crash, including Michael Burry and Passport Capital's John Burbank have been buying up farmland in the past two years. Famed investor Jim Rodgers, a long-time commodity bull, thinks farmland values will continue to rise.
There are good reasons to believe that is the case, and some not so good. Let's start with the good.
Crop prices are up. That's being driven in part by the emerging markets. Corn is America's number one crop. And nearly half of the corn we grow goes overseas to feed cattle and other animals. As China and the rest of Asia get wealthier they are going to eat more meat, and will therefore need more corn. What's more ethanol has had a huge impact on the price of corn as well. A higher oil price makes ethanol a more attractive substitute.
Commodities prices have been falling recently. And fears that the US economy and the world economy could be slumping again have brought down the price of oil and other commodities. But demand for food is not going away. One of sign of that is that corn after dropping sharply with the rest of the commodity market in early May has rebounded to near its yearly highs, up to about $7.50 a bushel. That's up from about $4.00 a year ago.
Then there is farm technology. Seeds are better than they used to be, requiring less water. Most tractors these days are equipped with GPS, many of which will allow farmers to map out the most and least productive areas of their land so they can better distribute seeds and fertilizer. And when I was recently out in Nebraska I saw a number of farmers just starting to experiment with double row plantin g- staggering seeds so they could fit two rows in space that is not much wider than what they used to use for one. The result is that crop yields are way up, and rising. If farmland is more productive than it was a few years ago, it should be worth more.
All of this, though – the hedge funds getting in, the 20-year track record of positive returns, emerging market riches – smells a little bubbly. Remember housing, mortgage bonds and auction rate securities were also once thought of as can't lose investments. That was until the global pool of money rushed in and inflated the housing market. That global pool of money never really went away. It just went into hibernation or maybe into oil and gold. And now it is surfacing in farmland. The concern is that this is a fear trade, which people are making to protect themselves from inflation or worse. Once the general economy rebounds, and fear abates, farmland could plummet. Remember, farmland was a great investment in the 1970s. Not so much in the 1980s or 1990s.
So is farmland overvalued now? Here's the math: In Nebraska where I was, the farmland prices have reached about $6,000 an acre. Based on the current price of fertilizer and seeds, the farmers told me, it costs about $4 to grow a bushel of corn. That means at current prices, each bushel produces a profit of $3.50. Farmers these days get about 200 bushels per acre of corn. That means a $6,000 investment produces an annual income of about $650, which is an income yield of 10.5%. That's more than double the earnings yield of the S&P 500. And it is three times the yield you would get with 10-year Treasury notes. So by that measure farmland doesn't look overvalued.
That being said, it's very hard to invest in farmland. There are no mutual funds that do it. Pension funds are getting into investing in farmland. So if you are one of the few people who have a pension, you may already be invested in agriculture in some small way. But even if you have no investment exposure to farmland, this all matters. The farm economy, while small relatively in the scheme of things, is playing a more important role in our economic growth. And as farm prices continue to go up that positive affect should remain, creating profits for farmers and jobs in Nebraska, Iowa and elsewhere. What's more, the farm economy has rebounded much faster than the rest of the economy. The unemployment rate in Nebraska is about half that of the rest of the U.S. The reason in large part has to do with our weak dollar and exports. And that says something about where the U.S. economy is headed - I think in a positive way. We have the ability to make things here, even basic things and make money doing it and create jobs. That's a bit of good news in an otherwise bad day.
Read more: http://curiouscapitalist.blogs.time.com/2011/06/01/americas-hottest-investment-farmland/#ixzz1OgUFpFDH
Source: http://curiouscapitalist.blogs.time.com/2011/06/01/americas-hottest-investment-farmland/
Foreign farmland investment in Western District Australia sparks support for tighter regulation
Independent Senator Nick Xenophon says the potential purchase of five properties in the Western District of Victoria by a Middle East agricultural company highlights the importance of tightening the laws on foreign investment
It has been reported that Qatar's Hassad Foods is set to purchase 8500 hectares of farmland in a deal worth $35 million.
Currently, the Foreign Investment Review Board only assesses purchases that exceed $230 million.
Senator Xenophon has introduced a Private Member's Bill which will require all purchases of agricultural land more than five hectares to be scrutinised by the FIRB.
"I don't know why we have such an extraordinarily high threshold here in Australia," he says.
Senator Xenophon says foreign countries are investing in Australia because they understand the importance of food security.
"It's going to become the big issue of the 21st century (and) we have been less than smart in our approach to this."
Victorian Farmers Federation President Andrew Broad agrees that tightening the regulation of foreign investment is crucial.
But he says a five hectare threshold would be too onerous to govern.
Mr Broad says investments that exceed $20 million should be investigated.
"It doesn't have to be onerous, I don't think the Foreign Investment Review Board should stop every transaction, it's just a matter of providing some oversight," he says.
"We need to be aware this is what's happening around the world and the Australia Government is going to be 10 years behind the mark and it will be too late."
Mr Broad says Australia is in a good position to increase food production capacity to meet rising global demand.
"But we are selling both the soil and chance to profit off it," he says.
"Id' rather sell them heaps and heaps of milk, heaps and heaps of wool and heaps and heaps of grain, than sell them the farm once and not be able to capitalise into perpetuity."
"There are a lot of people in Federal Government at the moment whose ears are shut to agriculture."
Senator Xenophon says the Bill is due to voted on later this year.
Soucre: http://www.abc.net.au/local/audio/2011/06/08/3238857.htm?site=ballarat
It has been reported that Qatar's Hassad Foods is set to purchase 8500 hectares of farmland in a deal worth $35 million.
Currently, the Foreign Investment Review Board only assesses purchases that exceed $230 million.
Senator Xenophon has introduced a Private Member's Bill which will require all purchases of agricultural land more than five hectares to be scrutinised by the FIRB.
"I don't know why we have such an extraordinarily high threshold here in Australia," he says.
Senator Xenophon says foreign countries are investing in Australia because they understand the importance of food security.
"It's going to become the big issue of the 21st century (and) we have been less than smart in our approach to this."
Victorian Farmers Federation President Andrew Broad agrees that tightening the regulation of foreign investment is crucial.
But he says a five hectare threshold would be too onerous to govern.
Mr Broad says investments that exceed $20 million should be investigated.
"It doesn't have to be onerous, I don't think the Foreign Investment Review Board should stop every transaction, it's just a matter of providing some oversight," he says.
"We need to be aware this is what's happening around the world and the Australia Government is going to be 10 years behind the mark and it will be too late."
Mr Broad says Australia is in a good position to increase food production capacity to meet rising global demand.
"But we are selling both the soil and chance to profit off it," he says.
"Id' rather sell them heaps and heaps of milk, heaps and heaps of wool and heaps and heaps of grain, than sell them the farm once and not be able to capitalise into perpetuity."
"There are a lot of people in Federal Government at the moment whose ears are shut to agriculture."
Senator Xenophon says the Bill is due to voted on later this year.
Soucre: http://www.abc.net.au/local/audio/2011/06/08/3238857.htm?site=ballarat
Saudi prince signs new Egypt farm land
Egypt settled one of a string of disputes over state land sales under deposed President Hosni Mubarak, revising the terms of a farmland deal with Saudi Prince Alwaleed bin Talal, the Egyptian government said on Tuesday.
The Saudi billionaire signed a new contract with the Egyptian government for land allocated to his Kingdom Agricultural Development Holding (KADCO), the cabinet said.
Land sale scandals have torn through Egypt's once booming housing sector and gathered pace after Mubarak's overthrow in a popular uprising.
Courts have scrapped land contracts for Egypt's two largest property developers, Talaat Moustafa Group and Palm Hills and two former government ministers have been sentenced to jail over graft in state land sales.
KADCO, part of Alwaleed's Kingdom Holding Co bought 100,000 feddans (420 million square meters) at Toshka in southern Egypt in 1998 as part of a project to irrigate reclaimed agricultural land near the Sudanese border.
Egypt's public prosecutor said in April that the sale violated the law and the Saudi company later agreed to give back 75,000 feddans, according to Egypt's government.
The new deal stipulates that the company will own 10,000 feddans while cultivating another 15,000 feddans that it would take ownership of at a later date, a government spokesman said in April.
Egyptian Prime Minister Essam Sharaf described the new deal as a sign the government intended to correct "mistakes" in investment and trade deals signed by previous governments, a cabinet statement said on Tuesday.
"This deal signing ... reflects the government's approach to encouraging Arab and foreign investments through amicable negotiation to reach satisfactory solutions for both parties that agree with the law," Mr. Sharaf said.
The government has said it was setting up a committee to settle problems surrounding investment contracts.
Source: http://english.alarabiya.net/articles/2011/06/08/152401.html
The Saudi billionaire signed a new contract with the Egyptian government for land allocated to his Kingdom Agricultural Development Holding (KADCO), the cabinet said.
Land sale scandals have torn through Egypt's once booming housing sector and gathered pace after Mubarak's overthrow in a popular uprising.
Courts have scrapped land contracts for Egypt's two largest property developers, Talaat Moustafa Group and Palm Hills and two former government ministers have been sentenced to jail over graft in state land sales.
KADCO, part of Alwaleed's Kingdom Holding Co bought 100,000 feddans (420 million square meters) at Toshka in southern Egypt in 1998 as part of a project to irrigate reclaimed agricultural land near the Sudanese border.
Egypt's public prosecutor said in April that the sale violated the law and the Saudi company later agreed to give back 75,000 feddans, according to Egypt's government.
The new deal stipulates that the company will own 10,000 feddans while cultivating another 15,000 feddans that it would take ownership of at a later date, a government spokesman said in April.
Egyptian Prime Minister Essam Sharaf described the new deal as a sign the government intended to correct "mistakes" in investment and trade deals signed by previous governments, a cabinet statement said on Tuesday.
"This deal signing ... reflects the government's approach to encouraging Arab and foreign investments through amicable negotiation to reach satisfactory solutions for both parties that agree with the law," Mr. Sharaf said.
The government has said it was setting up a committee to settle problems surrounding investment contracts.
Source: http://english.alarabiya.net/articles/2011/06/08/152401.html
OECD’s Gurria Says Food Production Needs ‘Big’ Investment Boost
OECD Secretary General Jose Angel Gurria said boosting food stockpiles in emerging and developing nations will require increased government and private spending.
“Most of the potential to increase production is outside the OECD countries,” Gurria, head of the Paris-based Organization for Economic Cooperation and Development, said today at a conference in Montreal. “That is where there is land available and where the gap between the current and the potential yields is enormous. But a big increase in investment is needed there.”
The cost of food is projected to remain elevated into 2012. Global wheat production will lag behind demand, helping to keep food prices high and volatile at least through next year, the United Nations Food and Agriculture Organization said today on its website.
Gurria offered two possible solutions to prevent future surges in food costs. “Governments could roll back the measures which mandate and subsidize biofuel consumption and production, which have created conflicts between fuel and food,” he said. “Governments could also refrain from beggar-thy-neighbor policies such as import and export restrictions.”
Prices for staple foods including corn will more than double in two decades unless action is taken, Oxfam International said last week. World grain stocks will fall for a second year by the end of June 2012, the International Grains Council said May 26.
The increase in food prices is “not exclusively an agricultural issue,” Gurria said. “Macroeconomic factors, energy policy, the financial and economic crises, the weather, they have all contributed.”
When asked at a news conference today if the U.S. Federal Reserve’s $600 billion Treasury-purchase program, scheduled to expire at the end of the month, contributed to the recent rise in commodity prices, Gurria said, “Frankly, I don’t see a very direct link.”
The OECD, comprised mostly of developed nations in Europe and North America, has 34 member states.
Source: http://www.bloomberg.com/news/2011-06-07/oecd-s-gurria-says-food-production-needs-big-investment-boost.html
“Most of the potential to increase production is outside the OECD countries,” Gurria, head of the Paris-based Organization for Economic Cooperation and Development, said today at a conference in Montreal. “That is where there is land available and where the gap between the current and the potential yields is enormous. But a big increase in investment is needed there.”
The cost of food is projected to remain elevated into 2012. Global wheat production will lag behind demand, helping to keep food prices high and volatile at least through next year, the United Nations Food and Agriculture Organization said today on its website.
Gurria offered two possible solutions to prevent future surges in food costs. “Governments could roll back the measures which mandate and subsidize biofuel consumption and production, which have created conflicts between fuel and food,” he said. “Governments could also refrain from beggar-thy-neighbor policies such as import and export restrictions.”
Prices for staple foods including corn will more than double in two decades unless action is taken, Oxfam International said last week. World grain stocks will fall for a second year by the end of June 2012, the International Grains Council said May 26.
The increase in food prices is “not exclusively an agricultural issue,” Gurria said. “Macroeconomic factors, energy policy, the financial and economic crises, the weather, they have all contributed.”
When asked at a news conference today if the U.S. Federal Reserve’s $600 billion Treasury-purchase program, scheduled to expire at the end of the month, contributed to the recent rise in commodity prices, Gurria said, “Frankly, I don’t see a very direct link.”
The OECD, comprised mostly of developed nations in Europe and North America, has 34 member states.
Source: http://www.bloomberg.com/news/2011-06-07/oecd-s-gurria-says-food-production-needs-big-investment-boost.html
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