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Agriculture Is Expected To Remain Strong In The Coming Decade
Mark Seamon, Michigan State University Extension | May 14, 2013 It can be tricky to predict the future, especially when this future includes factors of weather and world economies. By using specific assumptions, the USDA has developed a “conditional scenario” of the future of agriculture in the next decade, according to “ USDA Agricultural Projections to 2022 .” Overall, this report indicates an optimistic future that includes some bumps along the way. A couple of these bumps include the short-term softening of commodity prices which are affected by increased production encouraged by high prices from the drought induced short crops of 2012 and increasing crude oil prices. The prediction of an optimistic future is formed by the consideration of many factors both domestically and internationally. According to the USDA report: Global developments of strengthening economies in many countries around the world support demand of agricultural products. Improved economies indicate an increase in demand for diversified food products (like processed foods, meat and poultry) as well as increased demand for biofuels. World economic growth is projected to occur at 3.3 percent annually while the U.S. economy is projected to grow at a rate of 2.6 percent. The U.S. dollar is expected to continue to depreciate, which can be positive for encouraging exports. The USDA report further explains how energy is expected to continue to be an important factor for agriculture due to these factors: Crude oil prices are expected to increase over the next decade. Domestic corn-based ethanol and biodiesel production will continue at current, or slightly increased, levels. Global biofuel production is expected to expand steadily. The European Union will remain the largest importer of biofuels, increasing the utilization of feedstocks (wheat and corn). Argentina and Brazil will remain the dominant biofuels exporters, increasing the utilization of feedstocks (soybeans for biodiesel and sugarcane for ethanol). An effect of improving global economies is the demand for processed foods and meat products. In the short term, meat prices may rise due to reduced production but as feed costs moderate and meat demand strengthens this sector should realize improved profits. While the factors that were used in developing these projections are critical to the accuracy of the future outcomes, unpredictable factors can have significant impacts on actual performance. One clear example of this is the sharply reduced crop production of 2012 that was a result of a drought. Michigan State University Extension will continue to use this type of information to help plan programs to meet the needs of Michigan farmers, citizens and businesses. Continue reading
Grow Africa Reports Substantial Early Impact of Agricultural Investments
Grow Africa Investment Forum marks historic shift in private-sector investments in Africa’s agriculture as a growing group of companies commit to creating economic opportunity for smallholders and improving food security. Grow Africa has helped mobilize over US$ 3.5 billion in new investment commitments, engaging over 800,000 farmers in eight African countries in under one year. For more information about Grow Africa and its progress in 2012-2013, download the newly launched annual report here: www.growafrica.com. Africa annual report captures the ways in which investment commitments have been put into action. This early progress shows promise for smallholders, including: More than US$ 60 million invested in activities that incorporate smallholder farmers into commercial, market-based activities Approximately 270,000 million tonnes of commodities sourced within partner countries – the vast majority from smallholders – and the equivalent of around US$ 300 million in sales from these farmers fed into the market system Almost 800,000 smallholders reached with a mix of training, sourcing and service provision Speaking at the Grow Africa Investment Forum today, Ibrahim Assane Mayaki, Chief Executive Officer, NEPAD Planning and Coordinating Agency, said: “The Grow Africa countries have made agricultural transformation a priority. It is encouraging to see companies respond concretely and apply their knowledge, finance and market access in a way that will drive Africa’s development.” Joergen Haslestad, President and Chief Executive Officer of Yara International, said: “Africa’s agricultural transformation is clearly underway. But to achieve its full potential impact on poverty and food security, partners need to renew and redouble their commitment to act in concert.” Continue reading
Ways Of Gaining Exposure To Renewable Energy
Biofuel projects are currently in a very strong position. By Jonathan Turney | Published May 13, 2013 The rapidly developing biofuels industry has helped to put renewable energy on the map, with mandated blending targets indicating that the sector is ripe for further growth. Currently, just 6bn litres (or 4.75 per cent) of European transport fuel comes from renewable sources but as this figure needs to rise to 18.5bn litres by 2020, the renewable transport fuel market is set to triple in just seven years. Sustainable biofuel projects are currently in a very strong position. These schemes use technology with known commercial results and operate within a supportive regulatory environment – as demonstrated by the now binding UK Renewable Transport Fuel Obligation. Furthermore the UK is ideally suited to domestic biofuel production, with a large transport fleet, a surplus of low-grade feedstock and an existing petrochemical infrastructure. The renewable energy sector has undergone huge leaps in technology and development in the past few years and there are a range of projects offering attractive investment propositions with market-wide appeal. Many opportunities in the renewable energy sector are supported by government incentives to encourage investment. As a result, these tax efficiencies can be used to enhance returns or offer downside risk protection. Biofuel projects are particularly attractive as they usually have large capital expenditure requirements that generate in-year capital allowance relief that can be used in mitigating tax liabilities. These schemes may also contain expenditure on energy-saving plant and machinery, attracting enhanced capital allowances that generate 100 per cent first-year allowances. Such projects tend to be sited in regeneration areas or ‘enterprise zones’, which may also attract Business Premises Renovation Allowance relief on renovation costs. But project finance can be difficult to secure in the current climate. An alternative source of finance, which is starting to attract interest in the renewable energy sector, is ‘retail debt’. Products often referred to as ‘mini-bonds’ with a fixed term and return have been borne out of a clear demand from retail investors. The best-known example is energy firm Ecotricity, which raised £20m in two tranches – offering a four-year term of 6-7 per cent interest with a minimum investment of £500,000. While other investments look towards peer-to-peer lending, doubts surround the regulation and default-rate risks associated with this type of finance. With retail debt – a proven source for raising project finance in the renewable sector – this type of investment can bypass many of the issues faced and secure the necessary funding. Jonathan Turney is an associate director at Future Capital Partners Continue reading
