Category Archives: Agriculture

Biofuels may be a non issue

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Biofuels is a topic that divides many people. To some, it is a solution to reduce dependence on oil, and to others it is an insane idea.
I do not think that biofuels will be a discussion topics for very long, and here is why.
Very likely, the future of cars will be electricity. Inevitably, at some point oil prices will rise again to very painful levels and stay there. This is what will make alternative energy sources economically interesting, even without government subsidies.
One of the major opposition to the electric car is being handled in a very smooth way by the Obama administration. General Motors and Chrysler were strong opponents of the electric car, and helped send it to the landfill for a while, but neither company is around anymore. The Obama administration just put an end to the outdated automobile gas guzzler model once and for all, with the new regulations on gas mileage and car emissions. Fact is that an important page has been turned for good.
Just realize that if all US cars have a similar mileage as their Europeans counterparts, the gasoline use would reduce to substantial amounts, in the vicinity of an equivalent of 80-100 million cars less (old US mileage standards). Normally, this should make the price of oil drop, therefore reducing the need for biofuels. And when oil prices increase again, then electricity will take over.
Other signs that biofuels do not have that much of a future is the lack of excitement from the investment community for it. Wind energy attracts investors (for instance think of Boone Pickens’s energy plan). Solar energy attracts investors. But biofuels? The main party that seems to be pushing for it is Brazil, for internal reasons mostly.
The fundamentals do not look good for biofuels, either. They score negatively on all three bottom line criteria.
As such, this is good news for food supplies. If biofuels made out of edible grains do not have much of a future, the situation is different when it comes to biofuels made out of cellulose. These probably have a decent future, as they do not compete with human consumption, and can be a good way of using and recycling materials that further would be of little interest.

Copyright 2009 The Happy Future Group Consulting Ltd.

Value chains are a great way to develop a niche

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In the food production world, just like in other business sectors, there are been two major successful strategies.
One is to produce a non-differentiated commodity at the lowest cost possible. The number of units compensates what is lost in margin per unit.
The other is to produce a limited and controlled volume, and to market it to people who will pay a premium for it as they see an added value in the product.
So far, nothing too revolutionary here.
Generally, other strategies seem to have failed, either because the niche started to expand too much and was losing its specificity. The product becomes something of a better commodity, but not a specialty anymore. More players start to enter the niche and very quickly, the margin per unit drops and so does profitability. The deathblow generally comes when people start to try to counter this decreasing margin by cutting costs in the wrong places, quality being the most obvious.
The mass commodity producers, who try to create an artificial differentiation, by creating an illusion of specialty, cause another type of failure. This marketing tactics usually fails because the difference is mostly an illusion and the customers realize that quickly.

Value chains are very useful for smaller producers who want to market a good superior product.
Often, they are local producers with limited resources. They know how to produce well, but they miss the marketing arm or the industrial arm of the value chain that they are in.
On the other hand, also at the local level, there are other businesses that have the other links of the chain, but that have no production of their own.
When these players join forces and truly collaborate to offer to the right type of customers the type of product that is right for them, the value chain can become very successful. In a previous article, there is a presentation of the Angus Beef story, which also started in such a way.
In order to be successful, a value chain needs a number of basic elements.
The product must indeed differentiate itself by recognizable and superior physical characteristics. Over time the mystique will be created, but do not expect to sell hot air for very long.
The partners need to indeed be partners and play together. This is a critical part of such a joint venture. The worst thing that can happen is a lack of commitment, or worse one of the partners trying to force his own agenda before the common interest. The most successful partnerships come from a balance of power between the parties involved, and also by the necessity of interdependence, as they all should miss – and not be able to easily replace – the other parts of the puzzle.
Another key element is the will to pursue, as very often, and mostly in the early stages, the progress will meet many setbacks. This discipline needs to be applied and someone must fill this role, to constantly enforce the quality specifications and all agreements that are need and made to make the value chain succeed.

Copyright 2009 The Happy Future Group Consulting Ltd.

Recycling and cleaning: the economic drivers of tomorrow?

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Here is an article I wrote a little more than a year ago.

With an increasing population, years of throwaway goods consumption, landfills full of garbage, the pollution of our drinking water reserves and a deteriorating of our air and atmosphere, there is no doubt that our survival will largely depend on our ability to clean and to recycle the waste we produce.

The recycling business has already been developing for quite some years already and the next step should be an increasing part of their products and services as the main source of raw materials for many industries.

What indeed would be the point of trying to get resources in more and more difficult conditions and at higher and higher costs and with more and more energy use while we are sitting on a mountain of metals, plastics, glass, wood, paper, etc… Those are available in many places literally in the open air. The raw materials for the raw materials industries are there. All it takes it to sort them all.

This potentially offers many jobs opportunities as the value of this waste will increase as a result of a growing population’s demand. More machinery will also become necessary to handle this waste in a faster and more importantly safer manner. Images of kids browsing on landfills in order to get a miserable income to feed their siblings and parents are not acceptable, and I bet that one day they will do this in better conditions and for decent wages, as we will have grown from a waste gathering approach to a structured and systematic waste treatment and recycling.

Down this chain, new industries will develop in the area of processing the sorted waste. Some will have as a function to clean, others to recover the main raw material, and others to transform it into semi-finished products or even reprocessed into finished goods. Most of such industries already exist, either as active waste processors or as goods producers that will over time have to adapt and just change the origin of their raw materials and use recycled products instead of “first production” raw materials.

The other main area of need is water treatment. More and more of our water reserves are being polluted by increasing industrial activity and by more intensive agriculture and animal husbandry. In many areas, water is no longer suitable for infants as the mineral content has reached dangerous level.

The level of pollution has created a strategic need to insure health and safety, and thus preserve the sustainability of the populations depending on these water supplies.
A growing need is in sight for water treatment facilities, either for large scale centralized ones as also for smaller scale even individual local solutions. Further, industries will need to provide us with more solutions on how to use less water. There already are many systems on the market to reduce water use in kitchens and toilets. Although, these systems have brought some solutions and relief, more must be done.
Just to name one example, I would like to make you think on how ridiculous, and therefore unacceptable, the amount of water that we flush in the bathroom every time compared with the amount of liquid we produce when we visit those premises. Clearly, this is out of balance, and imagine that by saving a gallon of flush water a day, we save more than our individual need for drinking water!

Copyright 2009 The Happy Future Group Consulting Ltd.

Have we lost touch with Nature?

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Our species has shown a tremendous capacity to understand its environment and develop all sorts of tools to thrive on Earth. Without a doubt, this is one of our greatest achievements.
Yet, this success might have brought one major drawback: because we have been able to overcome many of its challenges, we have lost the sense of how much we are connected to Nature.
We tend to take all our achievements over Nature for granted. For example, we can fly (in planes), we can swim underwater (with scuba diving equipment), or eat tomatoes all year round (thanks to greenhouses and artificial lights and climate). We just seem to forget that all of that is the result of tools and techniques that we have developed, but that are fundamentally linked to Nature providing all the components for us.
What worries me the most is that many people in the industrialized world have lost that connection.
It is simply stunning to read reports from polls among the city youth on food. When asked where meat comes from, they answer: from the supermarket. Many kids just do not realize that milk comes from cows, they do not make the connection between eggs and hens, and they do not even want to think that in order to eat meat, you have to kill an animal, which means lots of blood. No, they live in a world where they only want to consume.
Another absolutely stunning example of that disconnection came across to me on the street: a young mother (I realized her status a bit later) was loading stuff in the back of her car, while the car was running, spitting its amount of nasty fumes in her direction. I thought then: gas is too cheap since you let the engine run while doing something else. And then, there it was! When passing by the rear end of the car, I saw the buggy with the infant inside, next to the mother and just opposite to the exhaust pipe, breathing in his full load of toxic gases. Clearly, that woman has no clue of what a combustion engine produces. Just an isolated case, you may think. Well, recently and with the colder mornings, I can witness the army of those early morning windshields scratchers having their engines running, and filling enthusiastically their lungs with the fumes. Then, no wonder that some people smoke, when it says in bold letters on the package that tobacco kills them.
The funny part of all of this is that I live in a neighbourhood where there are more stores selling all sorts of organic stuff than there are butterflies. Yes, people around here are very environmentally conscious, which, by the way, I have never been able to link so far with the huge amount of SUV’s driving around.
These anecdotes just tell me one thing: we have lost touch with Nature, and I believe more and more that we will not wake up until we get punched in the nose really hard. What does not kill us, we have chosen to ignore. I am not too sure if that makes us stronger, though.
So, what to do to get back in touch with, and more importantly have the proper respect for Nature?
In my opinion, it can only come from education. Our curriculum should include a lot more of activities in which kids have to interact with Nature, and be able to physically experience it. Moreover, this should not be happening in school only. The kids and families should get assignments together as part of the education process, because many parents also need to get the basics taught to them as well. Education is the only voluntary way towards changing our lifestyle. And lifestyle is the key here. We are resisting the change because, let’s face it, our lifestyle in the industrialized world is very comfortable.
Rediscovering agriculture, working on farms, harvesting crops, dealing with farm animals, experiencing seasons and natural cycles, going fishing and hunting, learning on how to make bread, presenting in class full reports of their home energy consumption and energy saving tactics, calculating the carbon balance they produce, are just some examples of education topics that could help us reacting to the total lethargy that has been hitting us over the past few decades. We can preserve only what we know, understand and respect. It is all interconnected. If we do not respect Nature, then how can we respect others? It seems fairly obvious that if we just take from the Earth and do not give back (and on time), the “cookie jar” is going to run empty. In the end, nature is all about balance.

Copyright 2009 The Happy Future Group Consulting Ltd.

The Great Unseen Land Grab

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Interesting article from The Economist on how some countries are already organizing and securing their food supplies for the future. Major political-economic chess game in the running.

Buying farmland abroad – Outsourcing’s third wave

It connects quite well with my previous article about Jim Rogers buying land in Canada and Brazil.

And it also connects well with the move made by the Canadian investment firm Sprott Asset Management to secure a land lease of a million acres in partnership with First Nations on the Canadian prairies to grow crops as an investment in agricultural commodities.

Mergers in agribusiness are building strategic economic blocks of tomorrow

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Only yesterday, two major mergers took place in the agribusiness world.
In Brazil, Sadia and Perdigao will now form the world’s largest poultry producer, as the new company is larger than Tyson Foods. That is not nothing.
In Canada, Viterra, formerly Saskatchewan Wheat Pool is acquiring the Australian ABB Grain.
As there is a growing awareness that agricultural commodities will play an increasing economic role, we certainly can expect more of such mergers & acquisitions.
With larger and more powerful players in the agribusiness, we will see a lot of strategic realignment and shift to gain more control in teh food production chains.
This will not only have an impact at corporate levels as well among suppliers as among the distribution and the retail, but this will also reshape the world map of the politics of food.

We saw two possible strategies here, although of course not new. One is the creation of a national giant in an emerging country with great ambitions as a major economic player in general and in agriculture in particular. The other is a multinational player specialized in their own specific industry, but now active in two very critical production areas.

Copyright 2009 The Happy Future Group Consulting Ltd.

Jim Rogers Buys Land, Starts Farming in Brazil and Canada

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From CNBC, March 3, 2009
See full article and video on http://www.cnbc.com/id/29477080

Commodities are still the best play for the long term, legendary investor Jim Rogers told CNBC, confessing that he has been buying farmland himself.
“We’re still going to eat, probably; we’re still going to wear clothes, probably. Farmers cannot get loans for fertilizers right now. So the supplies of everything are going to continue to be under pressure,” Rogers said.
He is the director of two funds which are buying greenfield land in Brazil and existing farms in Canada and starting to farm it. The funds are clearing the land, fertilizing it, irrigating it and hiring farmers and, Rogers said, some day will probably sell the land but that is a remote prospect.
“If I’m right, agriculture is going to be one of the greatest industries in the next 20 years, 30 years.
“Food inventories are at their lowest in 50 years, Rogers said, while the oil and mining sectors are also good bets.
“Even if demand goes flat or down, as it did in the 30s, as it did in the 70s, you can still have a nice market,” he told CNBC.Despite the recent rally, gold is still a good opportunity if investors choose the right time and way to get in, according to Rogers.
“I own some gold, of course I own some gold. If gold goes down, I’ll buy more,” he said. “The IMF is trying to sell their gold and if they do then they’ll drive the price of gold down a lot. If they do … that’ll be the last opportunity to buy gold in a long, long time.”
“You can buy coins, you can buy the real stuff, you can buy ETFs and ETNs on the exchanges, you can buy mining companies if you know what you’re doing…,” he added.
Earlier this year, Rogers said he liked the Swiss franc and the yen but gave up the Swiss currency. “I stopped buying the Swiss franc when the Swiss (central) bank bailed out UBS. I still hold the yen.”
Asked whether the current collapse in commodities prices worries him, he said: “You’re supposed to buy when they’re collapsing. I expect to own commodities for years, for a long time.”

Eating “Green”: Let’s Get The Facts Right Before We Nosh

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Here is an article (http://www.cnbc.com/id/27828087) found on CNBC.com that challenges the claim that eating locally grown food is more environmental. True or false? Controversial? Up to you to decide.

Eating “Green”: Let’s Get The Facts Right Before We Nosh
Posted By:Cliff Mason November 21 2008
Many environmental activists claim that you can do your part to help fight global warming by eating locally grown foods. Sadly, that’s a myth, albeit one that environmentally conscious millennials, eager to reduce their carbon footprints, vigorously cling to.
My generation really cares about climate change, so the least we can do is get the facts right. The whole “eat local” movement is based on the logic that transporting food over longer distances results in greater carbon dioxide emissions. That’s undeniable, but it really doesn’t mean much by itself.
First off, how much more carbon intensive is it to buy food from the next continent over rather than the next county? Not all that much. In a Reason article called “The Food Miles Mistake,” Ronald Bailey lays out some of the facts about carbon emissions caused by the production and transportation of food.
As it turns out, a study done in the United Kingdom found that consumer shopping trips generated 39.38% of food miles, the distance food travels from the farm to your plate. Since the United States is a much more automobile friendly country than Great Britain, I’d imagine that the percentage is even higher here. The same study found that air freight, loathed by local food activists, accounted for less than 1% of food miles.
Think about those numbers. People driving to their local grocery store make up 40 times more food miles than airplanes shipping food from halfway across the world. The carbon emissions from your car when you go to shop for local foods are way more damaging to the environment than the jet fuel that gets burned shipping that food.
So eating local doesn’t really cut down on the aggregate distance food has to travel to get to our dinner table by a significant margin at all. Better to take a bicycle when you go shopping than to buy local.
Eating local can actually do more damage in terms of global warming than eating foreign. Depending on where you live, local foods may generate far more carbon emissions than foods grown far away. Why? Because transportation isn’t everything.
Here’s an interesting fact from Bailey: “In the United States, a 2007 analysis found that transporting food from producers to retailers accounted for only 4 percent of greenhouse emissions related to food.” Where do the rest of the emissions come from? Growing the food, and you driving to the store to pick it up.
Food production is an energy intensive activity. If your local fruits and vegetables were grown in a greenhouse or hydroponically, that uses a whole lot more energy and releases a whole lot more carbon dioxide into the atmosphere than growing them out in the sun somewhere tropical. In that case, NOT eating local is the green thing to do.
If you live in a temperate climate and you buy local foods that can be produced with far less energy in a tropical or sub-tropical climate, you’re actually doing your part to make the globe just a wee bit warmer. If you really want to reduce your carbon footprint, don’t buy local, buy tropical.
Questions? Comments? Send them to millennialmoney@cnbc.com

Study: Organic food not more nutritional

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Story Highlights:
* New study finds organic foods are not necessarily more nutritious
* The organics market in U.S. to exceed $25 billion in sales this year
* Organic farming is becoming more popular in countries like India

Here is the link to the CNN article: http://edition.cnn.com/2008/TECH/science/08/19/organic.cooking.pv/i…

London (CNN) — If you’ve ever found yourself in your local supermarket agonizing about whether the organic apples will be a more nutritional and greener choice than the cheaper non-organic ones, you’re probably not alone.
A new study reveals organic foods are not necessarily healthier than non-organic food1 of 2 Year on year the organic food market grows as consumers look to make a greener and — often thought — more nutritional choice. A report by the UK’s Soil Association revealed that consumers there spent a record $3.7 billion on organic products in 2006, that’s more than 20 percent growth on 2005 spending on organic goods including food, drinks and health and beauty products.
It’s a similar story in the U.S. where — according to the Organic Trade Association — supermarket chains like Whole Foods have helped the organic food and beverage market grow from around $1 billion in sales in 1990 to around $20 billion in 2007. Total sales for organic food and non-food products in the U.S. are expected to surpass $25 billion this year.
However, one possible spanner in the works for the organic sector could be the results of a new study by the University of Copenhagen which revealed that organic foods contained no more nutrients than non-organic foods grown with the use of pesticides.Researchers studied five different crops — carrots, kale, mature peas, apples and potatoes — which were cultivated both organically (without pesticides) and conventionally (with the use of pesticides) and found that there was no higher level of trace elements in the food grown organically.
Study leader Dr Susanne Bügel said: “No systematic differences between cultivation systems representing organic and conventional production methods were found across the five crops so the study does not support the belief that organically grown foodstuffs generally contain more major and trace elements than conventionally grown foodstuffs.
“This study — published in the latest edition of the Society of Chemical Industry’s (SCI) “Journal of the Science of Food and Agriculture” — is the first to assess the nutritional value of organic fruit and vegetables. It should be noted that the study does not make conclusions about the comparative levels of pesticides or chemicals in conventionally and organically grown food or the health effects of consuming such chemicals.
The study results could be seen to support the idea that shopping organically is a lifestyle choice.
When the idea of organics being a lifestyle choice was floated in 2007 by then UK environment secretary David Miliband it drew fierce reaction from proponents of organic food, including the Soil Association, which represents organic producers.He told the UK’s Sunday Times newspaper in January 2007 that organic food represented a lifestyle choice consumers could make and suggested that the use of chemicals and pesticides in non-organic foods didn’t necessarily mean they were of inferior quality.So if organic foods aren’t necessarily more nutritional, are they better for the environment?According to the Intergovernmental Panel on Climate Change, traditional agriculture accounts for around 11 percent of global greenhouse gas emissions each year, and the nitrous oxide found in fertilizers contributes most to these emissions.
Even still, in 2006 the UK’s Manchester Business School assessed the environmental impacts of food production and consumption and concluded that there isn’t a clear cut answer to whether the environmental impact is greater on a trolley full of organic food compared to a trolley full of non-organic food.
Not so, was the response from the Soil Association. Do you believe organic food is more nutritional?
It countered that: “Overall, organic farming is better for tackling climate change than industrial agricultural methods. As well as lower average energy use, organic farming also avoids the very large nitrous oxide emissions from fertilizer manufacture.”
“Additionally, organic farming builds up soil carbon, removing it from the atmosphere. Organic farming also supports more local food marketing, reducing food miles.”
While the jury might still be out about whether organic farming is, on the whole, better for the environment, there is little doubt that it’s a booming industry which is starting to catch on in other parts of the world.
The United Nation’s Food and Agriculture Organization estimates that organic farming now accounts for around 4.1 million hectares in Asian countries like India, China and Russia.
In India where the Green Revolution in the 1940s helped transform it into an agricultural hub, organic farming is slowly expanding in specialist areas like tea and spices. Perhaps an indication of the potential of the organics market there is that the Prince of Wales is looking to expand his organic food business to the sub-continent by the end of 2008.
With a mandate of sustainability, The Energy and Research Institute (TERI) in India developed an organic farm in the small village of Supi in Uttarakhand in 2002. Here, local farmers are given the know-how and technical skills to develop their own organic enterprises.
“Local farmers are involved in cultivating oregano, parsley, thyme, peppermint, rosemary, rose geranium, artimisia, stevia, lemon grass, and several other herbal and medicinal plants,” TERI’s Madhu Singh Sirohi told CNN.
The herbs are commercially available to hotels and restaurants in the area and Hilton Hotel executive chef Kuntal Kumar was so impressed with the quality, he’s authored an organic cookbook which makes use of the herbs.
Chef Kumar told CNN that organic fruit and vegetables only make up around 14,000 tons of the two million tons of food produced by India’s agricultural industry, but that measures like the “Original Organics Cookbook” would help with wider awareness.
“Our approach is two pronged; firstly we are trying to build awareness about organic farming which is in its infancy in India and secondly we are trying to build awareness within the culinary industry in India.”
Kumar is sold on the superior taste, color and texture of the organic foods he uses in his kitchen, and he says the response from diners has been overwhelming.
“The response has been very positive; they are overwhelmed that we are going so close to nature and that their food is fresh from the farmland to the table.”
With increased consumer awareness perhaps it won’t be long before the choice between the organic and non-organic apples will be played out in markets across India

Food production and environmentalists: time to co-operate

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Food is loaded with emotional symbolism. Therefore, this is no wonder that agribusiness industry and environmentalists regularly have conflicts.

After my graduation, I remember reading a book on such matters, which had as introduction about half a page of complaining about how low the quality of bread had gone. The funny part was that the complaint had been found on some ancient Egypt papyrus document!
The agribusiness, being a business, is about making money. As such, this is not shocking since this is what business is about. Of course, this is acceptable as long as this is does not imperil us, and this is, in my opinion, where environmentalists play a very important role. They balance the power and challenge what the food industry does. This is very useful, as it stimulates thinking about what we do, and it can help stopping us from making mistakes. The problem is when this debate slides into the dogmatic and doctrinal sphere. Then, this is no more about the general interest, but about partisan interests only. The debate shifts from the moral to the political.

On the one hand, we have aggressive opponents to the industry, unfortunately too often supported by the media, because sensation is good for ratings. On the other hand, we have the industry that tends to react too rigidly and too defensively, as they resist change very often because of short-term production costs increase, while on the long term they actually delay the possibility of securing their business. Moreover, they spend a lot of money for lobbying purposes, which could be invested in the systems of the future.

Clearly, neither approach benefits the general interest. The sad thing is that both sides always claim to possess the absolute science to demonstrate their points of view. The main result is that the public opinion is confused, which is normal, since unless you are a specialist of these matters, there is no way of knowing who tells the truth. Once, I was attending a conference organized by Marks & Spencer on public perception of animal husbandry and animal production practices. The master of conference then said one very relevant thing: the main source of scientific knowledge for the public over there was The Sun (very popular British tabloid), not Scientific American!

I believe that most has been said in the debate between the food industry and the environmentalists. They rarely say anything new, just the same old things being repeated over and over again.

Not everything is perfect in the agribusiness, as it is work in progress; and consumers deserve to be properly informed, so that they can cast their vote when they shop by electing the good products and rejecting the bad ones. Eliminating bad practices is exactly what can benefit us all.

This cannot be done through confrontation only. It is highly frustrating to hear people opposing something while not offering a solid alternative based on solid evidence, facts and thorough analysis.

The way of the future is a co-operation between the industry and environmental groups, by joining not only their knowledge and science, but also their financial and business understanding to develop and support sustainable solutions. By joining forces, they will help us develop a better agriculture and find the most sensible ways to feed nine billion people and preserve our ecosystems. Such an approach has already started, for instance with the WWF (World Wildlife Fund) and Unilever that created the MSC (Marine Stewardship Council), which certifies sustainable fisheries. The WWF is busy with a similar approach with aquaculture. In Brazil, the beef industry has agreed with Greenpeace on a moratorium on deforestation and they will not expand their ranches at the expense of the rainforest anymore. This type of co-operation needs to be developed to a much larger scale!

Copyright 2009 The Happy Future Group Consulting Ltd.