Middle East still keen to snap up foreign farmland

Wednesday April 28, 2010 10:39:19 PM GMT

 

FARMLAND-ARAB/INVESTMENT

* Saudi Arabia eyeing investment in Algerian agriculture

* Libya says has acquired land in Mali

* Libya's Ukraine lease deal on hold

* Sudan expects to lease more land to foreign investors

By Hamid Ould Ahmed and Lamine Chikhi

ALGIERS, April 28 (Reuters) - Middle Eastern countries, undeterred by low world wheat prices, plan a fresh wave of deals to lease farmland abroad, Arab agriculture officials said on Wednesday.

Driven by high world cereals prices that peaked in 2008, farmland in developing countries has become a target, especially for Middle Eastern energy producers with large cash reserves but small areas of land suitable for cultivation.

John Deere Opens Factory in $500M Russian Initiative

28 April 2010

By Maria Antonova

Sergei Karpukhin / Reuters

A tractor driving through fog and flashing lights at the opening of John Deere’s Domodedovo plant Tuesday.

U.S.-based tractor maker John Deere opened a factory in Domodedovo on Tuesday, in the first step of its plan to invest $500 million in the country.

John Deere is betting that Russia, with a rapidly growing supply of cultivated land, will become a key market for its agricultural equipment and other capital goods. Much of that land has lain fallow, however, since the fall of the Soviet Union left many farmers unable to develop the land.

Farmland Fever

Is Farmland the Trade of the Century?

By Chris Nelder
Friday, July 17th, 2009

What should a long-term investor invest in when stocks and bonds aren't working very well?

I've been asking that question a lot lately.

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"What, then, are they putting their money into?

The answer may surprise you: farmland.

Follow the Smart Money

Legendary investor Jim Rogers has been all over the investing press this year, saying that farmland is his preferred vehicle. "If I'm right, agriculture is going to be one of the greatest industries in the next 20 years, 30 years," he said in a March interview with CNBC. He is now the director of two funds which are developing new farmland in Brazil and Canada.

Major investors who have caught the farmland fever include George Soros and Richard Rainwater. A host investing houses like TIAA-CREF and BlackRock Investment Management have plowed serious cash into the sector as well."

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Bonds continue to be hostage to the Fed's monetary policy manipulations, and as such are entangled in the complex web of the global currency trade. It's a hot area for smart forex traders (and about to get a whole lot hotter) but for most mortals, it's just another way to get burned.

The Topsoil Crisis

By Chris Mayer

02/17/10 Gaithersburg, Maryland – “All life is a process of breaking down,” the great F. Scott Fitzgerald once wrote. “But the blows that do the dramatic side of the work…don’t show their effect all at once.” These other blows you don’t feel until it is too late to do anything. Fitzgerald was writing about his own famous crackup in the 1930s, but his comments also apply to the agricultural scene circa 2010.

We return to a theme in last month’s letter. The world will need to boost its production of food. The UN estimates that the world will need to boostinvestment in agriculture by $83 billion a year – that’s a 50% annual increase – to feed a growing population. Its estimate may prove an errant shot from an uncertain bow into an unpredictable future. But it doesn’t matter. Investing is more like horseshoes and hand grenades, as the old saying goes – close counts.

If the UN is half right – others have done similar work with similar conclusions – then we’re talking about a healthy bull market in all things green. The question is where does the boost in production largely come from? The answer is Brazil, as we discussed last month. We’ll explore the idea a little further here from a different angle.

In my last letter, I noted how lack of electricity in India leads people to heat their homes and cook with dung cakes, crop residue and firewood. Why is this a bad thing?

Because the soil needs that precious manure and crop residue. It nourishes the soil and allows it to hold water. Without this natural replenishment, the soil deteriorates. It compacts and turns to dust. When the next monsoon season rolls around, it washes away. And the burning of firewood, on such a scale as the Indian population requires, leads to the disappearance of forests. A similar cycle ensues.

This is the “topsoil crisis” that we first talked about more than a year ago. The world continues to deplete its base of arable land. Though it’s been going on for some time, the dramatic blows are only now showing their effect. In East and North Africa, in the plains of India all the way to Turkey, the story is the same. Some of it is just human carelessness about the land. Some of it is climate driven: the declining snow melts of the Himalayas and more frequent crop-killing heat waves in places such as India.

Daily Telegraph on Future of Agriculture

Food will never be so cheap again

Biofuel refineries in the US have set fresh records for grain use every month since May. Almost a third of the US corn harvest will be diverted into ethanol for motors this year, or 12pc of the global crop.

By Ambrose Evans-Pritchard

Published: 7:53PM GMT 25 Oct 2009

Comments 70 | Comment on this article

Wheat prices have tumbled 70pc since 2008 but demand is not going to go away

The world's grain stocks have dropped from four to 2.6 months cover since 2000, despite two bumper harvests in North America. China's inventories are at a 30-year low. Asian rice stocks are near danger level.

Yet farm commodities have largely missed out on Bernanke's reflation rally in metals, oil, and everything else. Dylan Grice from Société Générale sees "bargain basement" prices.

For investors wishing to rotate out of overstretched rallies – Wall Street's Transport index and the Russell 2000 broke down last week – this is a rare chance to buy cheap into a story that will dominate the rest of our lives.Wheat has crashed 70pc from early 2008. Corn has halved. The "Ags" have mostly drifted sideways over the last six months. This divergence within the commodity family is untenable, given the bio-ethanol linkage to oil.

Spectator UK article on farmland investing

Dominic Midgley looks at funds investing in farmland that will feed a population explosion

Food security is the new energy security. So says Susan Payne, chief executive of Emergent Asset Management, a Surrey-based company which claims to run the biggest agricultural fund in Africa following the launch of its first fund less than 18 months ago.

Payne, a Canadian who cut her teeth as an emerging-markets expert first at JPMorgan and then at Goldman Sachs, attracts investors by conjuring up the Malthusian devil. The world’s population is set to grow by 2 billion to 9.1 billion over the next 40 years; feeding the children of tomorrow will require a 50 per cent increase in farm output by 2025 and a doubling by 2050.

Meanwhile, the price of staple crops has risen by more than 80 per cent since 2005, pushing 100 million people into poverty, according to the World Bank. And Payne is fond of pointing out that there were food riots in 15 countries during a period of soaring prices in 2008. This scenario, coupled with a growing demand for biofuels, means — Payne and others argue — that there has never been a better time to invest in agricultural land.

Marc Faber FT interview Feb 23. 2010. - Grains will go up. Likes agriculture.

Jim Rogers - Agricultural Commodities Set to Soar

Jim Rogers: Agricultural Commodity Prices Set to “Go Through the Roof”

By editor|Jan 15, 2010, 10:52 AM|Author's Website

Buying distressed commodities is a better way to make money than investing in stocks, billionaire investor Jim Rogers told CNBC Friday.

“The fundamentals [for agriculture] have gotten better,” Rogers said. “The inventories are now at the lowest they’ve been in decades, not in years.”

“Sometimes in the next few years we’re going to have very serious shortages of food everywhere in the world and prices are going to go through the roof.”

According to Rogers, the problems of the world are not yet behind us ; which is why he believes that commodities are likely to win in both the optimistic and the pessimistic scenario. If the world economy gets better, commodities prices will rise as a result of increased demand caused by shortages, while if the world economy continues to remain weak, central banks will keep printing money and commodities will be used as a hedge against inflation, Rogers explained.

When asked about other commodities, Rogers said he is holding on to oil and he is also holding on to gold, adding “If you want to buy precious metals I’d rather buy silver and palladium, just because they’re cheaper.”

Major drought in China

WANGZHI JOURNAL

Spring Harvest of Debt for Parched Farms in Southern China

Ariana Lindquist for The New York Times

Huang Jianxue's wheat normally brings $585. This year, it will be lucky to sell for $30. The drought is southern China's worst in 80 to 100 years.

By MICHAEL WINES

Published: April 4, 2010

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WANGZHI, China — Odds are that the drought that is parching southwest China’s Yunnan Province and its neighbors will break sometime in the next month, as the region’s usually dry winter gives way to an abundance of summer rains.

Related

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  Countries Blame China, Not Nature, for Water Shortage(April 2, 2010)

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  Times Topic: China

The New York Times

There has been no rainfall in Luliang County since August.

But Huang Jianxue, already weathered at 37 from years in the fields, has stopped betting on rain. In a normal year, his plot of winter wheat brings perhaps $585. This year, he said, it will be lucky to sell for $30.

“It’s only good for the pigs,” he said, brushing perhaps six or eight wheat kernels from a stunted stalk that, in a normal year, would hold dozens. “After this, if it doesn’t rain by May, I will plant nothing this year.”

This drought is southern China’s worst, climatologists say, in 80 to 100 years. From Yunnan eastward through Sichuan and Guizhou Provinces and the Guangxi region, the soil on roughly 30,000 square miles of farmland is too dry to plant crops, the vice minister of water resources, Liu Ning, said last Wednesday. Around 24 million people are short of water. Agricultural losses already total $3.5 billion.

Many areas have not had rain since at least October. Here in Luliang County, about 70 miles east of Yunnan’s capital, Kunming, no rain has fallen since August. The drought’s effects have also reached beyond China, stirring up tensions with its neighbors over energy and environmental concerns.

Fortune Magazine on Farmland Investing

FORTUNE MAGAZINE Retire Rich 2009

Betting the farm

As world population expands, the demand for arable land should soar. At least that's what George Soros, Lord Rothschild, and other investors believe.

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By Brian O'Keefe, senior editor

Last Updated: June 16, 2009: 11:17 AM ET

Harvesting profits: Shonda Warner left the hedge fund industry to start a firm that invests in agricultural land like this acreage near Clarksdale, Miss.

Betting the farm

A rich media presentation created by Fortune and Flyp

(Fortune) -- On a sunny Friday morning, Shonda Warner and I are in her red Toyota pickup heading southwest on Highway 61 out of Clarksdale, Miss., on our way to see one of her farms. While her black standard poodle, Walter, naps in the back seat, she's explaining the pitfalls of being an institutional land investor.

"It's really hard to buy property at the right price," says Warner as we roll past the famous crossroads where Robert Johnson is said to have sold his soul to the devil to get the secret of the blues. "Half of all farmland that trades in the United States never sees a broker. We believe you've got to have a lot of local knowledge of the marketplace. Farmers are smart and they talk. And if one Town Car full of Wall Street types rolls into town and makes a bid, suddenly all of the prices go up."

A Nebraska farm girl who went on to a globetrotting career as a derivatives trader for Goldman Sachs (GS, Fortune 500) and then as a hedge fund executive in London, Warner, 45, is back on the farm pursuing what she believes is a huge moneymaking opportunity. Two years ago Warner launched an investment firm, called Chess Ag Full Harvest Partners, with a fairly simple underlying strategy: Buy undervalued farmland in the U.S. and profit from the coming global agriculture boom.

Last June she closed her first fund with $30 million from wealthy individuals and institutional investors such as the pension fund of Dow Chemical (DOW, Fortune 500). (See correction, below.) She says her ultimate goal is to take the company public as the first farmland-only real estate investment trust in the U.S. "The returns in agriculture haven't looked sexy for a long time, but I think that's about to change," she says.

Warner is just one of many financiers around the world making that same bet. Over the past few years hedge fund gurus like George Soros, investment powerhouses like BlackRock, and retirement plan giants like TIAA-CREF have begun to plow money into farmland - everywhere from the Midwest to Ukraine to Brazil. Canadian private equity firm AgCapita, which raised $18 million in 2008 to invest in Saskatchewan cropland, estimates that as of the first quarter of 2009, more than $2 billion of private equity money had been raised for farmland investments globally, and another $500 million was planned.