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Sector ‘Can Be Part Of Climate Change Solution’
BY NEELS BLOM, JULY 01 2013 Agriculture is a major contributor of greenhouse gases, with 15% emissions. Picture: THINKSTOCK THE South African social enterprise Food & Trees for Africa’s crop of choice for the mitigation of anthropogenic climate change is an unlikely member of the bamboo family, but there may be more to this grass species than meets the eye — and to the arguments made in favour of carbon sequestration with which alternative crops are credited. Climate change may not be the only constraint affecting sustainability in agriculture, but adaptation in farming may be highly effective in mitigating anthropogenic global warming now generally accepted to be the consequence of the emission of greenhouse gases, chiefly carbon-rich gases released by combustion. While agriculture is the sector most vulnerable to climate change, it is also a major contributor of greenhouse gases, accounting for about 15% of emissions, or as much as 30% when considering land-use change, including deforestation. However, agriculture can still be part of the solution, says a report on a concept known as climate-smart agriculture. One proposed adaptation is the cultivation of crops that act as carbon sinks by absorbing greenhouse gases from the atmosphere, while simultaneously addressing the social, economic and developmental constraints to sustainability. Food & Trees for Africa launched its Bamboo for Africa programme in 2010. The programme is now internationally accredited through the Verified Carbon Standard as a verified emission reduction programme. The organisation also calls the programme a greening, climate change response offering carbon offsets and which includes corporate social investment, enterprise development and black economic empowerment. The bamboo project — climate smart in that it encompasses what its proponents call a triple win — includes cultivation techniques such as mulching, intercropping, zero tillage, agro-forestry, improved grazing and improved water management. By increasing the soil’s organic content, the wins are greater water-holding capacity, crops that are resilient to climate change and carbon storage. According to the climate smart report, projects of this nature are under way in Burkina Faso, Ethiopia, Kenya, Malawi and Niger, as well as in Yemen, China, Brazil and Mexico. But the critics of carbon sequestration programmes in agriculture say the credits generated by farmers and sold to emitters in developed economies generate a false belief that they have offset their polluting activities. They say also that the idea of leveraging finance for African agriculture is misleading and that they are more likely to threaten farmers’ livelihoods. The Institute for Agriculture and Trade Policy says in a report by Steve Suppan that there is no money for agriculture in Africa from carbon offsets. “The financial structure of climate smart agriculture is built on evaporating carbon markets. Carbon markets are in collapse, and projects will have inadequate finance.” The reports says it will take several years of project implementation before any carbon credits can be sold, and that offset projects will struggle to find investors. The responsibility for pre-financing these projects has so far fallen to governments, with the result that they have become a diversion of public funds that are needed to tackle climate change. Carbon prices have fallen to a low of less than €3 per ton, which is too low to persuade emitters to switch to greener energy. For African farmers the meagre profit thus generated cannot recoup the public finance investment, let alone leverage real funds, critics say. A much-vaunted World Bank pilot project in Kenya, for instance, is likely to generate between $5 and $1 per year per farmer. All that happens is that taxpayers will prop up failing carbon markets for the benefit of speculators. Continue reading
China & Sudan Sign Agricultural Agreement
June 29, 2013, (KHARTOUM) – Sudan’s minister of agriculture Abdel Halim al-Mutafi, announced that his government signed an agricultural cooperation agreement with Beijing which gives Chinese companies several options to operate in Sudan. A Sudanese farmer stands in a field of sorghum in Gezira state (AFP) According to the agreement Chinese companies could directly invest in Sudan, engage in partnerships with local partners, or fund agro-processing and food production projects. The accord aims at promoting Sudan self-sufficiency and exporting surpluses to China and the rest of the world to contribute to solving the world’s food shortage, the minister said. Al-Mutafi added in statements to Chinese media on the sidelines of the second session of the strategic dialogue between China and Sudan on Saturday that Sudan seeks to transfer the Chinese experience and advanced technologies to boost agricultural production. He said that the visit also aimed at attending the fourth forum on Small and Medium Enterprises (SMEs) cooperation between China, West Asia, and North Africa countries. The Sudanese delegation currently visiting Beijing is led by presidential assistant Nafie Ali Nafie and several ministers from Sudan’s economic sector as well as a group of businessmen. Al-Mutafi, disclosed that both countries have agreed on the major strategic issues and regional and international relations as well as Sudan’s internal issues. He underscored the importance of the dialogue and said that it offered a good opportunity to discuss the recent problems between Sudan and South Sudan, mentioning the positive role which China could play to promote peace between the two countries. The Sudanese official further said that his country’s relation with China is progressing slowly but in a deliberate and calculated manner, pointing to the joint investment in oil industry as well as minerals and agriculture. He added that China’s increasing food consumption and Sudan’s large fertile land enhance opportunities for agricultural cooperation between the two countries. Last year Sudan granted China permission to set up a free-trade zone for agricultural products and livestock to boost bilateral transactions. Once hoped to be the breadbasket of the Arab world, Sudan’s agricultural sector has continued to deteriorate over the years mainly as a result of negligence, drought, mismanagement, high taxes and the overall economic climate. Sudanese farmers often complain about the high costs of imported materials such as fertilizers. Many of them were sent to jail as their debt piled up. Several ambitious plans enacted to bring life to the sector have failed to materialize and critics say the government forfeited a golden opportunity during the oil boom to boost agriculture. Foreign investors also complain about lack of infrastructure and unfriendly laws which they say deters them from putting money in Sudan’s vast farmlands. (ST) Continue reading
Active vs Passive: The Pros And Cons
When it comes to exposure to the agriculture sector, could exchange traded products be the better choice? By Laura Mossman | Published Jul 01, 2013 The appeal of the agriculture sector for investors is easy to understand – long-term drivers of growth and short-term opportunities make it a compelling option. Indeed, with the United Nations anticipating the global population could reach 10bn by 2100, the demand for food coupled with pressure on the amount of farmland look set to drive up the price of agricultural commodities and necessitate more investment in technology to improve efficiency. While the fundamentals are convincing, the best way for an investor to access agriculture is not as clear-cut. From opting to take a direct bet on an individual stock through to investing in a passive or active fund, the choice can be bewildering. Neil Jamieson, head of UK sales at ETF Securities, says the best way to navigate the options is to examine the motivation for the investment. “Investors need to consider whether they are investing for diversification and optimisation of returns in their broader portfolio or… to tilt their equity exposure towards a particular theme,” he says. “While equities are geared to the business cycle and driven up and down by underlying sentiment, agricultural commodities do not, on the whole, behave like that.” The key benefits of going for an exchange traded product are fundamentally the same as those that underpin passive investments in general: they are available at a much lower cost, they tend to perform in line with the average actively managed fund over the longer term and there is a wide choice. “For broad exposure, a basket of, say, 30 commodities will generally rise a little faster than the MSCI World index, but also fall a little faster, too,” Mr Jamieson adds. “Equally, agricultural commodities also afford some tactical options.” In the actively managed fund space, there are a number of options for investors who are willing to take on the risk and reward associated with the equity market. “Within [equities], agriculture looks attractive,” says Mike Horseman, managing director at investment specialist Cockburn Lucas. “We tend to use active managers, utilising the good managers there are in that space, then perhaps blending in some passive building blocks.” Mr Horseman cites the Sarasin AgriSar and Baring Global Agriculture funds as the leaders in the sector, offering good performance and diversification. The former has secured an annualised return of 5.1 per cent since it launched in 2008, while the latter has returned 7.8 per cent on an annualised basis in the past three years. Other strong offerings include the Allianz RCM Global Agriculture Trends, First State Global Agribusiness, Eclectica Agriculture and JPMorgan Natural Resources funds. Henry Boucher, manager of the Sarasin AgriSar fund, suggests seeking to understand the definition of agriculture each manager is working to. “For a lot of funds, the focus is large-cap North American agriculture stocks,” he says. “Instead, we look not only at the production of food in the developed world, but also the consumption of food in the emerging markets. It provides a wider spectrum of choice, and goes further than simply looking at how different stocks are going to perform in line with different commodity prices.” Overall, much of the choice boils down to each investor’s views on active versus passive funds, plus their desire to gain exposure directly to commodities or via a broader equity portfolio. The passive options stand up well, but a number of outstanding active managers in the space have proved their ability to add alpha over the long term. Laura Mossman is a freelance journalist Continue reading
