Sustainability in tropical countries

In some tropical countries the concept of sustainability in agriculture takes off largely when foreign buyers make relevant demands and force suppliers to seek the proper certification. For instance a fish farming operation will get the best prices on foreign markets, but with strings attached...which often mean being able to supply a sustainable product with demonstrated traceability. This is why export markets are so crucial to habitats and natural resources.

Intensive tilapia farming video

http://www.youtube.com/watch?v=EHFEKuT5gW4

Fish farming in Ghana

This is a nice and energizing video to watch, besides there's an owner who talks good business sense:
http://www.youtube.com/watch?v=opRzlpS4mQQ

"If our feed was produced in Ghana and we didn't have to consume so much diesel, yes we'd be totally sustainable"

Worst nightmare of the food industry: DEMAND DESTRUCTION

Below I'm risking a socioeconomic parenthesis:

Some experts would know that the US has seen a steady decline in its cattle herd and shifts in protein consumption (there's been even more downtrading this year), although meat exports have been strong. The problem that we see with weak consumption is partly down to the destruction of the middle class after the 2008 crisis. Increasingly adults have to work at fast-food joints to make ends meet, and the rise of QSR industry has reflected the decline of higher paid sectors...The Bloomberg paper below is a good illustration of the wage gap and trends in the US society, which all suggest a continuation of demand destruction in food and widening of the Gini index (inequality index). We wouldn't say that the rise in QSR is a cause, rather an effect of gradual dislocation of society. This said, patties served in QSR restaurants are a far cry from premium beef cuts or poultry breast sold in supermarkets or butchers...

McDonald's grows very well when there's a recession, and grows well when there isn't one. The problem is that rapid job creation by the QSR sector does not create a consumer that will support the growth of F&B industry.

http://www.bloomberg.com/news/2012-12-12/mcdonald-s-8-25-man-and-8-75-million-ceo-shows-pay-gap.html

Amazon forest destruction: numbers are truly shocking

According to RAISG, a group which deals with socioenvironmental issues impacting the Amazon region, pristine forest destruction between 2000 and 2010 has reached an area equivalent to the size of the UK (around 24 mio hectares). Spanish and Portuguese links follows below:

http://raisg.socioambiental.org/

http://www.valor.com.br/brasil/2927048/atlas-disseca-amazonia-e-faz-alertas-para-o-futuro#ixzz2ENCo5kay

La Amazonía sufrió deforestación de 24 millones de hectáreas
Enviado por dlarrea en Vie, 07/12/2012 - 16:29

En los últimos diez años, los bosques de la Amazonía fueron deforestados en una extensión de 24 millones de hectáreas (ha), territorio equivalente al Reino Unido o al doble de la Amazonía ecuatoriana, según el atlas Amazonía bajo presión, presentado en día martes 4 de diciembre en la ciudad de Santa Cruz de la Sierra. Bolivia.

TIAA-CREF formally launched a $2 billion agriculture investment company

An interesting development saw a pension fund recently set up a company (see name and link below) that will that will invest its own assets as well as those of peers in actual farms in the developed and developing world.

TIAA-CREF Global Agriculture LLC

Set of skills needed to run an agfund follow:
"In every acquisition, our agricultural investment team considers farm-specific investment criteria. These factors take into account regional and micro-climate factors, including weather variability and soil types; the strength of local infrastructure and tenant markets; water availability and sustainability; crop returns; environmental and social impacts; the potential for future operational growth; and capital gains. Our investment decision-making is also based on crop type. Row crops generally exhibit stable income and capital return, while permanent crops offer higher income, but also higher risk. As a result, we focus on row-crop farmland and make select, opportunistic investments in permanent-crop farmland. To ensure sustainability, we place a strong emphasis on environmental stewardship and seek investments in line with this philosophy... Access to water and rainfall is one of the most important factors that the organization’s analysts consider before acquiring farmland. Especially in Australia, where the country goes from periods of drought to severe rainfall, water rights are significant to the agriculture portfolio. The property’s ability to capture and store water is also vital to its productivity.”

Link:
http://www.institutionalinvestor.com/Popups/PrintArticle.aspx?ArticleID=3034187

RepRisk SRI index on large BRIC corporations

I just came across a FT report on RepRisk, a company which has constructed a risk index for companies operating in BRIC. Interesting read, but perhaps there could be some questions about the selection process for the worst performers and the methodology used by researchers, as the target is pretty wide...we'll need to dig a bit into this.

https://www.reprisk.com/downloads/mccreports/27/MCC%20BRIC%20Report%20FINAL.pdf

SRI fund offloaded

Aviva Investors offloads SRI fund

http://www.efinancialnews.com

 

Aviva Investors, which earlier this year said it planned to refocus its business on core strategies, has sold its £1.2bn sustainable and responsible investment funds to Alliance Trust Investments.

The team from Aviva will move to Alliance Trust to establish its first SRI capability and the seven funds they manage will transfer over in early 2013, according to a statement today. The investment objectives and processes of the funds will not change.

In January, Aviva Investors, which has £263bn in assets under management, chose to focus its business on areas of “existing competitive strength”, including fixed income, multi-asset solutions, real estate and core equities.

Paul Abberley, interim chief executive at Aviva Investors, said in a statement: “As a result, the decision was taken that a new institutional home should be found for our dedicated SRI capabilities.”

In February, Alain Dromer – who stepped down as chief executive of Aviva Investors in April – said while investors are keen that the manager maintain its sustainable investment focus, business was not backing that up. He said at the time: “These are themes that do not particularly generate any revenues. Funds under management in our SRI funds have been stagnant.”

Food for thought...

Rabobank sees "record S Am harvests". Let's hope Rabo is right

Rabobank forecasts: "corn will retreat in 2013 from a first-quarter high of nearly $8 a bushel to $6.00 a bushel by the October-to-December period, sapped by record South American harvests, with Argentina and Brazilian output pegged at a combined 97.3m tonnes, and a further rise in US seedings.
http://www.agrimoney.com/news/palm-coffee-best-bets-for-2013---grains-the-worst--5274.html

I'm not too sure I'd agree with the bank's bet on S America's 12/13 harvest. "Record S American harvests" have not meterialised yet, and for a start the weather in the region is absolutely rubbish. It's a bit early to load the containers...Let's see...Personally I would not bet too much on a "record harvest" for 12/13. Could be bad, could be OK, but "record" is hard to foresee at this point, although my only wish is to be proven dead wrong.

Can Brazil really feed the world?

It's fast becoming very hard to buy Brazil's ambitious promise to "feed the world by 2050". The reason is mainly down to a few structural issues but also a number of risky strategic choices:

- Firstly an inadequate infrastructure and rising transport costs

The latest good intentions of the federal government will be put to the test by last minute preparations for the 2014 World Cup, followed immediately by a pick up in preparations for the 2016 Olympics. By that time Brazil will have another administration that will presumably apply the usual patches while focusing on oil extraction off the coast of RJ, administer the royalties and...watch the R$ appreciate, which could possibly slowly remove any remaining competitiveness from ag exports.

- Secondly Brazil's agriculture is over-reliant on fertilisers

That means that the peak may only only a few yards away, unless more is done to prevent soil fatigue, such as no-till, rotation and other strategies. The current model is not highly sustainable.

- Thirdly the country is dangerously moving towards a dominant crop system

This is the result of a very risky "one client - one product" strategy (China's seemingly unlimited apetite for soyabeans drives the whole Brazilian ag sector). Indeed soy acreage expands, while other crops shrink dangerously...

There may well be a hard landing at some point, possibly when China's economic model matures and its GDP cools down to align with levels now endured by Japan or South Korea. Unbalances in the agricultural model & supply chain will be hard and expensive to fix.

- Further exports are increasingly dominated by commodities, with manufactured goods ebbing away

De-industrialisation is a key risk facing the country, and worryingly there's a near-complete absence of value addition in the mindset of established players which limits the potential for jvs, cross-border M&As and technology transfers. In addition education is lagging international standards, labour productivity has been on a slow decline, while a very heavy tax administration and bloated red tape suffocate businesses.

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