AGRICULTURE COMMODITIES: CURSE & FORTUNE FOR ARGENTINA
Why the IMF and other international financial institutions and corporations such as Monsanto are desperate to “control” Argentina in whatever possible way in order to gain a slice of the large agriculture commodity and natural resource cake.
INVESTORS SUCH AS JIM ROGERS AND GEORGE SOROS ARE INTERESTED IN LATAM FARMLAND
By Zachary Fillingham
Farmland has two important attributes that set it apart from most other investments. The first is obvious: its inelastic demand. Humans need food to survive, it’s just a question of what food they eat. Second are the various political and environmental factors that continue to whittle away at an already-finite supply of global farmland: factors like climate change, urbanization, farmland degradation, and erosion. According to the WWF, one-third of the world’s arable land has been destroyed since 1960 by erosion and other types of degradation. Though we’ve heard it all before that ‘they aren’t making any more land,’ it turns out that we are also good at ruining what little we have.
GROWING DEMAND ON MEAT, SOMETHING ARGENTINA HAS PLENTY OFF
This slowly dwindling supply must be juxtaposed to a level of global demand that is only going up. It’s not just the growing global population (8 billion people by 2025 according to the World Bank) that will drive increases in food demand, but also the socio-economic changes that are already altering consumption habits all over the world. As the middle class of countries like China and India continues to swell, their diet shifts from being primarily vegetarian to including a lot more meat, which is more grain-intensive and thus places a greater demand on food producers.
FEED FOR LIVESTOCK
Consider Cornell Professor David Pimentel’s assertion that if the grain used to feed the livestock required for US beef consumption was just eaten directly instead, it could feed over 800 million people. Now extrapolate this dynamic across an Asian middle class that will easily number in the hundreds of millions, and you have some of the economic rationale behind the global farmland boom.
FARMING BOOM
These fundamentals have piqued the interest of many investors around the world, including big names such as Jim Rogers and George Soros.
Farm prices in the United States have also been rising at a steady clip, posting double-digit gains every year since 2005, with the sole exception of a brief recessive blip in 2008. This year, a survey by the Federal Reserve Bank of Chicago revealed that farmland across Iowa, Illinois, Indiana, Wisconsin, and Michigan has increased in value by an average of 15 percent. These kinds of gains have some people worried the potential for an agricultural bubble, but others are quick to point out the relative security of farmland vis-Ã -vis unsettled equity markets and the inevitability of spiking food demand.
FARMLAND IN LATAM
The frenzy to buy farmland in the United States has even spilled over to Brazil, where US farmers have bought up land at a fraction of the price it would cost north of the border. This prompted the government of Brazil to pass a law restricting the amount of foreign ownership to 25 percent per municipality. Government intervention to stop large influxes of foreign investment has increased worldwide as arable land is increasingly seen as a strategic resource, and this is a factor that should be taken into account by people investing in agricultural ETFs or companies with large farmland portfolios. Another example of land protectionism is the ‘Rural Land Law’ that passed in Argentina in 2011. This law limits any foreign ownership of land in Argentina to 1,000 hectares.
Another potential pitfall for farmland investors lies in the increasing unpredictability of global weather patterns. While it’s certainly true that global food demand will be trending upwards, there are no guarantees that a given patch of arable land will remain productive enough to reap the windfall. Given the large gaps in understanding that exist within climate science, it’s always possible that the record droughts experienced in the United States in 2012 will one day become the rule rather than the exception.
INTERNATIONAL CORPORATIONS GAIN RECORD EARNINGS IN LATAM AGRO INDUSTRY
CORN-SEED SALES IN BRAZIL, ARGENTINA AND MEXICO HELP MONSANTO WITH RECORD EARNINGS
US agricultural giant Monsanto Tuesday posted a large increase in quarterly earnings on strong results in corn seed sales in the US and Latin America and better sales of pesticides. The St Louis-based corporation said net income for the first quarter was 339 million dollars, up from 126 million a year earlier.
The results were boosted by particularly strong sales of its gene manipulated corn seed products in Brazil, Argentina and Mexico, the company said.
Farmers in Brazil and Argentina have upgraded to new Monsanto genetically modified products, the company said. Sales in this category rose more than 27% compared to the same period last year.
The company also said it also had a positive US order book that was better than the same point last year.
The other big improvement came in the agricultural productivity category, which includes crop protection products and law-and-garden herbicide products. Sales in this category rose nearly 31% compared with the same period last year.
“We've achieved a successful start to the year, with contributions from multiple areas that speaks to the strength of our global business and provides confidence in our ability to realize a third consecutive year of significant growth,” said Hugh Grant, CEO of Monsanto.
Monsanto's earnings came in at 62 cents per share, excluding exceptional items, well above the 37 cents per share projected by analysts. Monsanto shares were up are currently up 3% to 98.86 dollars.
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ARGENTINA - AGRICULTURE CURSE Updated at :
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Thursday, February 14, 2013
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