maverick
24-04-2008, 06:52 AM
The core of this note discusses how rising levels of urbanisation will shape agriculture and food more profoundly than population growth. As well as increased demand for meat and cereal we also believe that vegetable oil, such as palm oil is an excellent way to play rising levels of urbanisation.
This is particularly relevant for investors in Asian equities. This note does not
address the issue of how agricultural production might be increased and so
does not cover seed vendors, fertiliser companies or the producers of
herbicides and farm equipment. These are highly attractive industries that
require a separate note.
• Agricultural output has almost trebled since the 1960s and yields have
doubled. As a result food production increased at a yearly rate of 2.3% versus global population growth of 1.7%.
However, the Food and Agricultural Organisation (FAO) forecasts that global agricultural output growth will fall to 1.5% over the next decade, after which it will drop below 1%.
• As the world becomes more urban and richer, regions such as Africa and
Asia consume more calories and protein. A greater appetite for protein has a
marked impact on demand for staples.
• At the same time current US energy policy requires that 20% of the nation’s
corn production should be used to create bio-fuels.
• In view of these long term changes and also taking into account shorter term
price movements we favour Palm oil and other vegetable oil producers, such
as Kulim (KUL MK) and IOI (IOI MK). We also favour vertically integrated
food producers who have access to their own primary products, as well as
being involved in the need for value added –longer life- food stuffs.
To this end we would highlight Archer Daniels (ADM US), Bunge (BG US) and China Green (904 HK). In order to place the increased need for livestock feed we would highlight Chaoda (684 HK).
We also believe that aquaculture will continue to be a rewarding investment area and so are highlighting QL Resources (QLG MK) and CP Foods (CPF TB).
This is particularly relevant for investors in Asian equities. This note does not
address the issue of how agricultural production might be increased and so
does not cover seed vendors, fertiliser companies or the producers of
herbicides and farm equipment. These are highly attractive industries that
require a separate note.
• Agricultural output has almost trebled since the 1960s and yields have
doubled. As a result food production increased at a yearly rate of 2.3% versus global population growth of 1.7%.
However, the Food and Agricultural Organisation (FAO) forecasts that global agricultural output growth will fall to 1.5% over the next decade, after which it will drop below 1%.
• As the world becomes more urban and richer, regions such as Africa and
Asia consume more calories and protein. A greater appetite for protein has a
marked impact on demand for staples.
• At the same time current US energy policy requires that 20% of the nation’s
corn production should be used to create bio-fuels.
• In view of these long term changes and also taking into account shorter term
price movements we favour Palm oil and other vegetable oil producers, such
as Kulim (KUL MK) and IOI (IOI MK). We also favour vertically integrated
food producers who have access to their own primary products, as well as
being involved in the need for value added –longer life- food stuffs.
To this end we would highlight Archer Daniels (ADM US), Bunge (BG US) and China Green (904 HK). In order to place the increased need for livestock feed we would highlight Chaoda (684 HK).
We also believe that aquaculture will continue to be a rewarding investment area and so are highlighting QL Resources (QLG MK) and CP Foods (CPF TB).