Yearly Archives: 2010

The Russian heat wave gives some people sunstroke

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The heat wave combined with the drought in wheat-producing region of Russia is causing some concerns, as the wheat production will be affected. That is annoying but not terribly threatening. Moreover, the price of wheat, as well as the prices of other agricultural commodities were due for a rebound because farmers had reduced production after the price fall of the previous year.

But when politicians and speculators get involved, the problem takes a new dimension.  Vladimir Putin announced a possible ban on Russian wheat exports and hell broke loose. The crisis then appears on all media. From mainstream media to the financial press, the world must know that we are in very big trouble, apparently.

Bloomberg and CNBC reports on the price of wheat on the commodity exchange. The speculators are there, looming. The Wall Street Journal asks whether US farmers should plant more wheat and take advantage of the good wheat prices. The Financial Times reports about the quiet doubling of the price of barley. This is bad news for beer drinkers. Food inflation is around the corner. And what if Ukraine and Kazakhstan have the same problem? The Black Sea region is one of the main wheat producers. Even Lester Brown, of Earth Policy, flooded twitter this morning with an unusual amount of tweets expressing his concerns about the effect of climate change and the rise in temperatures. This is all well-known and well-studied stuff, but suddenly my friends, we are close to the end of the world. Or are we really? Mr. Brown even suggests that an increase of 14 F in temperature in the Mid-West would cause a drop of corn production by 50%. Considering that US corn is used for three purposes: biofuels (not food), high-fructose corn syrup (not food) and animal feed, the consequences for Americans would be positive: less driving, less soft drinks and less meat, all three items for which they largely over-consume, at the expense of their health. The ones who would hurt the most would be the Mexicans.

When hysteria hits, it is always good to sit back, reflect quietly and maybe enjoy a cool drink, as long as we can afford it.

What is really going on? Well, we have a climatic event that affects wheat production. It is not new. We have managed worse crises in the past.

The excitement comes from two events. First, speculators have been active for quite some time on the wheat market and this gives them a good opportunity to jack up the prices. Although, remember the price hike of agricultural commodities of 2008! It was all on paper and not so much in the physical world. Yet, people were hoarding food in supermarkets like there was no tomorrow. Are we going to see the futures contract impact the real economy once more. I believe that if this happens again, we will see governments take action to regulate the trading of futures contracts. The bad thing about this is that the example of the new Wall Street regulations have been very slow to take shape and will take a long time to be implemented. Therefore, the “golden boys” still have some good times ahead with markets. Second event, which has reinforced the first one is the declaration of Vladimir Putin. Should we worry about it? Yes and no. Russia is now famous for its muscle showing policies. When oil prices were jumping up, the Russian government played quite rough with oil companies, especially Shell and BP. Their relation got a chill, and later they became good friends again. Russia’s policy on import of meat and poultry shows a similar pattern. Import restrictions alternate with more relaxed policies. Russia is struggling to achieve a satisfying level of food security and it uses all the means it has to develop and protect its domestic production, while sending a message abroad that Russia is strong. In my first language, a roller coaster is called “montagnes russes” (Russian mountains). That is quite relevant to describe this country’s style.

Is the world food situation at risk? As usual, we need to be vigilant, but there is no need for more panic than last year. What we need is a global production plan and increase production on a regular basis, simply because there is an increasing number of mouths to feed. If our approach is knee jerking on the actions of speculators, we will not achieve greatness. Farmers should consider planting more when the market demand increases. That is market-oriented production! If the farmers rush to plant more out of short-term speculation, they will experience the same as after the situation in 2008. Their suppliers (the ones listed on the stock markets) will increase the prices of inputs, especially fertilizers and gobble up the margin away from the farmers, like in 2009. The reality is that food is going to become more expensive, especially animal products. We need to get used to this idea right now, because over the long-term, this trend will not disappear. We need to act with vision and determination to achieve the goals, as I describe in the soon-t0-be-published “Future Harvests”.

Today ended up on a positive note after all. US Agriculture Secretary Ed Vilsack declared that we were not facing a wheat crisis. And wheat prices eased on news that farmers were planting more. Famine averted.

We need more long-term focused leaders and fewer speculators.

Copyright 2010 – The Happy Future Group Consulting Ltd.

Future Harvests – A preview of the book

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My book, Future Harvests, is expected to be published before the end of August.

Here is a preview to give you a flavor of the content.

For a full view, please click on the thumbnails.

 

 

 

 

 

 

 

 

 

 

Here is a sample containing the table of contents and the preface of the book:

 

For the video trailers, please visit my YouTube channel.

Is the food company grab the next step beyond the land grab?

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In parallel with land tenure deals in developing countries, I foresee a new trend to develop strongly in the years to come.

In order to increase food security, countries in Asia and in the Arab world will invest more aggressively in food and agriculture companies.

In China, the search for acquisitions is gaining momentum. A first attempt, although failed, by China’s Bright Food group to acquire Australia’s CSR sugar is an indicator is this trend to come. But China is not the first country to initiate this.

For instance, Qatar’s sovereign wealth fund created Hassad Foods to invest in food related projects in Qatar and abroad. The purpose of Hassad Foods is to help Qatar achieve food security. They aim at developing their activities in South America and Africa, with the expressed goal of completing at least six projects by the end of 2010. Their focus is on basic crops such as sugar and wheat, but they look at projects in the poultry and livestock sectors as well. As countries realize the limitations and the political risks of focusing only on farmland ventures, they will diversify their possibilities to improve their food security situation.

As the approach of sovereign funds is to focus on long-term food security, the type of investments in food companies might change as well. This will be a different approach from activist investors, such as hedge funds, that try to influence short-term management decisions purely for share price purposes.

Copyright 2010 – The Happy Future Group Consulting Ltd.

Insects on the menu

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I came across a very interesting article from the French newspaper Le Monde, titled “Insects, the steak of the future”.

Photo: AFP/Mario Tama

The article reviews the potential of using insects as a food source to complement the traditional food production in order to meet the needs of the increasing world population.

Here are the main points.The nutritional quality of insects is high. They are a source of protein, fats, minerals (especially iron and zinc) and vitamins.

The production performance of insects out performs the one of traditional livestock, with a feed conversion ratio (number of kg of food to produce 1 kg of insect) ranging between 1 and 2.

There are already 1,400 species of insects consumed regularly in Africa, Asia and Latin America. Among the favorites, they name beetle larvae, ants, caterpillars, locusts, crickets, silkworm chrysalis, scorpions and spiders (although the two latter ones technically are not insects).

In most cases, insect consumption is the consequence of food shortage, but there is also a festive consumption of the bugs. The author mentions that in the old Roman Empire, caterpillars were a delicacy. Of course, in some Western countries, some restaurants offer insects at a premium price for a certain self-proclaimed sophisticated elite… After all, a lobster looks very much like a large aquatic bug.

However, trying to convince Western consumers to switch to insects and other bugs for their protein will be a tough call, especially when served in their original form. An possible alternative would be to process them into sausages and ground patties. There also could be the possibility to texture the protein in similar ways as it happens with soy.

Another interesting potential for insect is to use them as a raw material for animal feed. Bugs and worms can also be a good source of protein for poultry and pigs. After all, in nature, this was a regular part of their diet. Similarly, for many fish species, insects are a natural source of food. Currently, fish feed is made of increasingly expensive raw materials, such as fish meal, fish oil and vegetable oils, for which they compete with human consumption, or are used for feed destined to other farm animals.

There are talks about organizing the first congress on insect as a food source as early as 2012.

Copyright 2010 – The Happy Future Group Consulting Ltd.

Are “land grabs” a necessary evil?

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The large land deals between African and Arab countries or Asian countries, mostly China, have drawn quite some attention.

I mentioned them in an earlier post on this blog (The great unseen land grab).

The discussion has taken an increasing political flavour, but very few people seem to look at the causes of the problem.

The reality is simple: the countries looking for land do so because they have a serious problem to feed their people and to guarantee them access to potable drinking water.

The water problem is obvious in Arab countries. In the past, they tried to grow more food on their land by developing irrigation. Unfortunately, they have concluded that this approach depleted their water reserves, while they also realize that they cannot feed their increasing population. For instance, Saudi Arabia has now turned away from its previous food security strategy and chooses to preserve water and look for other sources of food than their own agriculture. China and other Asian countries also realize that they cannot meet the increasing demand for food.

What should these countries do? Home production will not be sufficient. The first other possibility is to import, but volumes in the current world agriculture will also soon meet limitations. Keeping on buying on the world markets will solve some of the shortage problem, but it leaves the importing countries vulnerable to world market price increases. This is a threat for the domestic social stability as many of their inhabitants can hardly afford food at the current prices. These countries simply cannot remain passive. They needed to take action, and they did.

Why is Africa so attractive? Africa is the only continent where agricultural development has lagged behind. Yields are low. Infrastructure is far from optimal. Africa can increase production if African countries can fund their agricultural development. The main problem is one of money and policies. Africa has huge areas of arable land, but that land is not exploited. The FAO estimates at 700 million hectares the amount of land that could be developed for agricultural production. That area is about the size of Australia. It is twice the size of the current world wheat area. This offers huge potential.

What the importing countries bring to Africa are funds ready for investing in infrastructure and equipment. They could wait for African governments to develop agriculture and then buy from them. Considering how slow agricultural development has been in the past, this solution probably would come down to waiting for nothing to happen and cause serious food shortages in Asia and Arab countries, with all the risks of conflicts that this would generate.

The approach of going to Africa and offering to buy and develop the land makes a lot of sense. By being proactive, the importing countries actually speed up the process of getting investment money at work on the land, and the host countries do not have to worry about how to get the money.

Can these land deals work? In theory, they can. The main issue at stake is how both the importing/investing countries and the host countries set up such deals. The population of Africa is very young and it is growing fast. Africa will see its population double within the next 40 years.  Africa is also a poor continent and the combination poverty and high population increase has the potential to create many problems because of a lack of food security. Developing agriculture in Africa is the way to increase food security, but at the same time, a large part of the food produced on the newly developed land will go abroad, to China and Arab countries. This is why it is utmost important that such deals be set up as win-win situations. The foreign countries must help create agricultural and economic development in Africa in order to feed the local population by developing food production and offering employment so that they also can buy food. Failure to do so will very likely result in riots and violence against the new farms and their staff. This would not feed the local population, and could eventually result in not feeding the foreign countries either. Such land deals must be managed very carefully. The people in charge will have more than just agriculture to look after. Social, cultural and environmental aspects will play a very important role in the execution of these projects.

Africa is the continent where such deals have grown to large proportions, but similar deals are also being made in many Asian nations. It is interesting to see that other regions where large amount of investment money would be useful for agricultural development do not get as much attention from the importing countries. Yet, areas like in Kazakhstan, Ukraine or Russia could use some injection of funds, too. Brazil is starting to attract new money. For instance, the China National Agricultural Development Group Corporation has plans to grow corn and soybeans and it is looking for land in Brazil. The corporation has been allowed an annual budget of US$2 billion to realize the objectives and secure grain supplies to China.

More in my upcoming book Future Harvests.

Copyright 2010 The Happy Future Group Consulting Ltd.

Beyond the book

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Now that the publishing company is working out the final details before the release of the book, time has come for me to spend some time again on the blog part.

During the making of the book, I have been asked about my opinions on a number of subjects. Listing opinions was not the theme of the book, but the blog is a good vector for this. In the course of the coming weeks and months, I will review as concisely as possible specific subjects, present which areas require attention and how I believe the topics will evolve in the future. If you have any request, please let me know.

In addition to these articles, I will develop new topics for seminars and conferences that relate to the book and that offer matter for reflection to the attendees. I also will introduce new modules aimed at improving organization and efficiency of –and within- food value chains. The purpose of these modules will be twofold. They will help participants understand the broader picture, and they will help improving the functioning and the performance of business relationships. This is not only about economic performance, but also about technical, environmental and social performance.

 More about this soon.

Future Harvests – The book is coming soon!

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The editing of my book “Future Harvests – The next agricultural revolution” is about completed. All that is left to do is developing the cover and start the publishing.

I have already received orders, even before the book is out. That is quite a good sign. And a great surprise for me.

If you wish to be updated automatically when the book is published, just subscribe in the sidebar window on the right.

To describe the topics addressed, I have posted three short promotional videos on YouTube. In previous articles (The fun of writing this book and The next agricultural revolution), I had already given an idea about the content of the book.

Video #1: The Fundamentals (duration 2:37) – Introduction to the background and fundamental principles mentioned in the book “Future Harvests – The next agricultural revolution” to achieve food security for 9 billion people in 2050. Topics such as demographics, the shift in economic power, the control of food  and food security strategies are reviewed. Sustainability, innovation, efficient market driven food production and strong leadership are required.

or click here if video does not appear

Video #2: The Actions (duration 2:12) – A short review of some of the actions mentioned in the book to achieve the objectives. Solving the water challenge, finding new land for production, urban farming, hydroponics, farming the desert, rebuilding fisheries and developing aquaculture further are all possibilities.

or click here if video does not appear

Video #3: The Questions (duration 3:08) – A sample of some of the questions raised in the book. They cover technology, land deals in Africa, improving yields, restoring soil fertility, change in consumer needs, organic farming, risks of conflicts, biofuels or meat are some of the topics presented.

or click here if video does not appear

If you know someone who could be interested by the topics on this page, please pass it on!

The next agricultural revolution

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(Excerpt from my upcoming book, Future Harvests)

The next agricultural revolution to feed nine billion people will be different from the previous one. After World War II, agriculture advanced thanks to chemistry and petroleum. This time, biology and renewable energies will lead us to progress. It will not be just a revolution in science and technology. It also will be a different way to think about the economy and the environment. Knowledge and communication will become increasingly important, even more so than today.

Agriculture is a life science. Biological solutions will gradually replace chemical applications. All sorts of organisms will be involved to improve the way farmers and the food industry will produce.

Bacteria and viruses will help fight pests and diseases. They will help us reduce our use of chemical herbicides and pesticides dramatically. Genetic engineering will evolve and, as a business, it will mature. DNA science will focus on eliminating flaws and on increasing the metabolic efficiency of living organisms. Genetic engineering cannot continue to be about intellectual property and patents. Soon, seed companies all over the world will know how to do the same. Competition and market forces will determine which model will survive. Governments will not allow a select few to control food. They will get involved in genetic engineering programs and they will break monopolies. Genetic improvement will become collective property again.

Ecology will be a part of food production. Agriculture will manage ecosystems, and economy will become the management of the planet. Living organisms on land and in water will assist us. Farmers will think in terms of systems and cycles. Instead of isolating the field, they will integrate environmental parameters as well.

Organic matter will become central in the future agriculture. Farmers will recreate the cycles to improve the structure of the soil and its fertility. Agriculture will help fixing carbon. The use of mineral fertilizers will decrease sharply.

The economics of agriculture will be different, because the economics of energy will be different. New technologies will come. Solar power and wind energy will become common sources of energy. The economics of water will change, too. The management of water will reshape our food production. Water will become substantially more expensive and only systems that save and preserve water will survive.

Information technology will help make decisions faster than ever before. Portable computers will give the farmer the ability to get data almost instantly about the status of the crops, markets, health status and conditions of production. It will allow them to optimize inputs and outputs better and faster. It will save time, inputs and money. Knowledge and information will be our best tool to act efficiently and to improve our food production.

Transparency will become the rule. There will be no secret because consumers will be better informed and because there will be nothing left to hide.

The most critical part of the next agricultural revolution is leadership. Having a responsible long-term vision is critical, but it will not be enough. The world will need leaders that will make the right things happen. In all sectors of the society, there will be a need for such leaders who can muster the energies and who make the general interest and the long-term come first. The need for food security will alter our governance systems, in government as in business ethics. A challenge will be to manage greed and fear. First, there will be greed. Then, there will be fear. Until this day, humans have done a poor job of feeding the world. Famines have come and have gone and there still are hungry people. Humans have done a poor job at preserving their environment, too. With nine billion people, such a poor performance will have much heavier consequences. Procrastinate or being sloppy are attitudes the world cannot afford anymore. The proper leadership will come, but the change will not happen per accident. There will be a heavy crisis first.

Agriculture will regain its place in the economy as the most important activity. A change in the attitude towards funding and investments will also be part of the revolution. More players will engage in agriculture because returns will be higher for all.

The revolution will not just be for farmers and the other players in agriculture to carry out, but consumers will have their share to deliver. A change in mentalities is necessary. Wasting food is not acceptable. Selfishness will not work anymore. Food security is not a given, it is work in progress.

Copyright 2010 – The Happy Future Group Consulting Ltd.