Agriculture research
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Agriculture market research 2016
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Transcript of Agriculture research
Agriculturemarketresearch2016
Evolutionofnettradeinagriculturalproduct(2000-24)
Agriculturetradebalance(2023prediction)
Foodpriceindex(1990-2015)
Globalfoodsupply
Globaldistributionofcattle
QuantityoffarmlandintheUS
FarmlandReturnsvs.Inflation
Correlationoffarmlandreturns
Efficientportfoliosw/andw/ofarmland
Amajoropportunitytoinvestinagricultureresourceproducingassetsandbusinesses1. Increasedfoodpricesarebeingdrivenbychanginggloballifestyles
andagrowingworldpopulation2. Agriculturaltradewillincreaseovertimeastradebarriersare
lowered3. Usablefarmlandisdecreasingaswaterandothervaluable
resourcesbecomemorescarce4. Investinginfarmlandisadefensivestrategyandmaybe
appropriateinthisinvestingenvironment
ForecastinganIncreaseinWaterWithdrawals
Decliningsupplyandrisingdemandforfreshwaterisleadingtoasharpincreaseinwaterwithdrawals.Forexample,theUSwithdrawal rateisforecasttobebetween20%and40%by2025,upfrombetween10%and20%in1995.
Mapofwatertradenetwork
Geographicbreakdownofglobalfreshwater
Percapitafreshwaterresources
Breakdownofglobalfreshwaterwithdrawals
Developingeconomieshavebeenmajordriversofglobalwaterdemand.
Percentagechangeintotalwaterwithdrawals(1997-2011)
Waterwithdrawalshaveincreasedrapidlyindevelopingcountries.
Breakdownofglobalwaterwithdrawals
ChinaandIndiaaccountforonethirdofworldwidewateruse.
Agricultureaccountsforthemajorityoftheworld’sfreshwateruse
Breakdownoftheworld’swaterresources
Freshwatermakesup2.5%oftheglobalwatersupply.
Populationslivingundervariouslevelsofwaterstress
Closetohalfoftheglobalpopulationcouldbelivinginregionswithseverewaterstressby2030.
Breakdownofpopulationslivingunderseverewaterstressbygeography
60%oftheadditionalpeopleinhighwaterstressareasareprojectedtoresideintheBRICs.
BreakdownofwaterwithdrawalintheUS
Powergenerationaccountsfor40%ofwithdrawals.
BreakdownofwaterconsumptionintheUS
Californiadrought’seffectoffoodprices
Globalaveragevirtualwatercontentpertonoffood
Meatproductioninparticularbeefrequireslargeamountsofwater.
DemandforpoultrymeatinChinaandIndia(2000-30)
PercapitaconsumptionintheUSandChina
Chinaistheworld’slargestconsumerofpork.
Waterwithdrawnvs.consumedduringelectricitygeneration
Waterisamajorinvestingopportunitybyitself1. Freshwaterwithdrawalandconsumptionwillincreaseasmoreof
theworldiseconomicallydeveloped2. Waterscarcitywillmostlikelyhaveenormoussocialandpolitical
impacts3. Increasewaterdemandmaychangetheworld’seatinghabitsand
electricitygenerationmethods
GrowingfreshwatersupplythroughdesalinationDesalinationprocessisexpensiveandenergy- intensive,butcostshavebeendeclining.Desalinationistheprocessofremovingsaltsandothermineralsfromseaorsalinewatertoproduceapotablesupplyofwater.Currently,thereareapproximately15,000desalinationplantsworldwide,themajorityofwhicharelocatedinwater-scarceregionsliketheMiddleEast.ItisestimatedthatSaudiArabiahasabout25%oftheglobaldesalinationcapacity,whichprovidesroughly70%ofthecountry’swaterusedincitiesandbytheindustrialsector.Amidconcernsaboutthegrowingwaterdemandandpotentialshortages,othercountrieslikeAustralia,ChinaandtheUnitedStates,havealsostartedtoexpandtheirdesalinationcapacity.
Desalinationcont.
Thedesalinationprocessisexpensive,primarilyduetothelargeamountsofenergyrequiredintheprocedure.1. Decliningcostshavebeendrivenlargelybyashiftfromtheuseof
traditionalthermaltechnologytothelessenergy-intensivereverseosmosisprocess.
2. Thecostforreverseosmosisdesalinationplantshasfallenfrom$1.50/cubicmeterofwaterinthe1990stobelow$0.60/cubicmeterinrecentfacilities.
3. Oneareaunderdevelopmentistheuseofrenewablesources,suchassolarenergy,topowerthedesalinationplants.
Largecorporationsrecognizetherisksofwaterscarcity1. Starbucks(ConsumerDiscretionary)hassetatargettoreduce
waterconsumptioninitsstoresby25%by2015.Oneeffortincludesthereplacementof“dipperwells”instoreswithmanualfaucets,whichuse15%lesswater.Thecompanyhasalsobeguntoinstallfiltrationsystemsthatreducewastewaterby50%.
2. Intel(InformationTechnology)isworkingtoreduceitswaterfootprintbyminimizingtheamountofultra-purewater(UPW)neededtocleansiliconwafersduringthefabricationprocess.Thevolumeofwaterrequiredtomake1gallonofUPWhasbeenreducedfrom2gallonstobetween1.25to1.5gallons.Thewater,afterbeingusedtocleanwafers,isreusedinotherequipment.In2011,30%ofthecompany’swaterwithdrawalswererecycled.
Largecorporationsrecognizetherisksofwaterscarcitycont.1. GeneralMotors(Automobiles)hascommittedtoreducingwater
consumptioninitsmanufacturingfacilities.Byimplementingwaterconservationstrategiesateveryplant,waterusewasreducedby32%onaper-vehicle-producedbasisbetween2005and2010.OneexampleisanewassemblyplantinMexico,whichwasdesignedwithazerodischargeconcept(90%ofwastewateristreatedandreusedinthemanufacturingprocess).Thisdesignisestimatedtoreducetheamountofwaterusedby20milliongallonsannually.
2. SouthernCompany(Utilities)withdrawsover6billiongallonsofwatereachdayforuseintheelectricitygenerationprocessbutapproximately95%isreturnedtothesource(rivers,lakesetc.).Thecompanyhasplanstoestablishawaterresearchfacilitythatwilldeveloptechnologiestoimprovewaterefficiencyandquality.
InterestingopportunitiesinsustainabilityandagricultureAnimalWelfare• Humanetreatmentoffarmanimals• AnimalwelfarepoliciesandpracticesinitssupplychainCoffee• Sustainabilityofitscoffeesupplychain• Improvefarmingconditions,yields,andsmall-scalecoffee-farmingfamilyincomes
Interestingopportunitiesinagriculturecont.
Fisheries• Conservationof“redlist”species• RequireallitsfarmedsalmonsupplierstoadheretotheSalmonAquacultureDialoguestandards
GeneticallyModifiedOrganisms• LabelingGMOonallfoodLandGrabs• Asthedemandforsugarcaneincreases,thereisconcernoverlarge-scalelandgrabsindevelopingcountriesthatevicttraditionalfarmersthroughcoercionorfraud• Zero-tolerancepolicyforillegallandacquisitionsinitssupplychain
Interestingopportunitiesinagriculturecont.
PalmOil• Palmoil,whichisusedinhundredsofproductsandfoods,isasignificantsourceofgreenhousegasemissionsduetotheconversionofswampforestsintopalmtreeplantations.• Ensurepurchasesofpalmoilarecomingfromresponsiblesources,includingano-deforestationcommitmenttomitigatecompanyreputationalrisk
Pesticides/Bees• Honeybeesarethemosteconomicallyimportantpollinatorsinourfoodsupplychain,butareindouble-digitdecline• Mitigatetherisksofbee-toxicpesticides(knownasneonicotinoids)topollinatordependentfruitsandvegetablesinitssupplychain• Educateconsumersandtakediscerniblestepstoreducebees’exposuretoharmfulpesticides.
Agricultureequitiesoverview
AgriculturalCompanies:Mid-CapStocks• BungeLimited(BG)(Diversifiedactivities:bioenergy,ingredients,fertilizer,sugarandagribusinessnetworkfacilities)
• FreshDelMonteProduce,Inc.(FDP)(VerticallyIntegratedProducerandDistributorofFreshandFresh-CutFruitsandVegetables)
AgriculturalCompanies:Small-CapStocks• Adecoagro S.A.(AGRO)(FarmlandandIndustrial)• Calavo Growers,Inc.(CVGW)(Avocados)• Cosan Limited(CZZ)(Brazil:agriculturallandandsugar)• Cresud S.A(CRESY)(Argentina:cattle,corn,milk,soybeans,wheatandrealestatedevelopment)• Tejon RanchCo.(TRC)(270,000acresoflandinCalifornia;realestatedevelopment;almonds,pistachios,walnutsandwinegrapes)
• TheAndersons,Inc.(ANDE)(Agriculturalservices:grainservices,plantnutrients,ethanol)
Agricultureequitiesoverviewcont.
AgriculturalCompanies:Micro-CapStocks• Agria Corporation(GRO)(China,agriculturalservices:seeddevelopment,retailstoresandagriculturalservices)
• Alico,Inc.(ALCO)(Citrusandcattle)• Brasilagro CiaBrasileira DePropriedadesAgricolas (LND)(Brazil:ruralagriculturallanddevelopment)
• Limoneira Co.(LMNR)(LemonsandAvocados)AgriculturalChemicals:Large-CapStocks• AgriumInc.(AGU)(Canada: Potash,NitrogenandPhosphate)• MonsantoCompany(MON)(SeedsandTraits;CropProtection)• PotashCorporationofSaskatchewanInc.(POT)(Canada:Potash,NitrogenandPhosphate)
• SyngentaAG(SYT)(Switzerland– Herbicides,InsecticidesandFungicides)
Agricultureequitiesoverviewcont.
AgriculturalStores:Large-CapStocks• TractorSupplyCompany(TSCO)(Farmandranchstores)AgriculturalStores:Micro-CapStocks• Agria Corporation(GRO)(China:seeddevelopment,retailstoresandagriculturalservices)• TitanMachineryInc.(TITN)(Agriculturalandconstructionequipmentstores)
Farmland:Micro-CapStocks• AmericanFarmlandCompany(AFCO)(REIT:IPOinOctoberof2015)• FarmlandPartnersInc.(FPI)GladstoneLandCorporation(LAND)
Agricultureequitiesoverviewcont.AgriculturalEquipmentManufacturers:Large-CapStocks• Deere&Company(DE)(Agricultural, construction,forestryandturfequipment)AgriculturalEquipmentManufacturers:Mid-CapStocks• AGCOCorporation(AGCO)(Grainstoragesystems,harvesters,tractorsandtillage equipment)• CNHIndustrialN.V.(CNHI)(ItalianCompany:diversifiedequipment,agricultural, construction,commercial vehiclesandspecialty
vehicles)AgriculturalEquipmentManufacturers:Small-CapStocks• AgroFresh Solutions,Inc.(AGFS)(Productsdesignedtosuppressethylenedevelopmentandtheresultingdegradingeffectson
produce)• AlamoGroup,Inc.(ALG)(Agriculturalandmaintenanceequipment)• LindsayCorporation(LNN)(Diversifiedcompany:irrigationequipmentandservices)• RavenIndustries,Inc.(RAVN)(Agriculturaltechnologyproducts;engineered films;aerospaceproducts;manufacturingservices)AgriculturalEquipmentManufacturers:Micro-CapStocks• Art’s-WayManufacturingCo.,Inc.(ARTW)(Harvesters,grindermixers,hayandforageequipment)
Agricultureequitiesoverviewcont.
SeedandPlantBiotechCompanies:Large-CapStocks• SyngentaAG(SYT)(Switzerland:primarilyagriculturalchemicals,herbicides,insecticidesandfungicides)
SeedandPlantBiotechCompanies:Micro-CapStocks• Agria Corporation(GRO)(China:seeddevelopment,retailstoresandagriculturalservices)• ArcadiaBiosciences,Inc.(RKDA)(IPOinMay2015:Developsgeneticallymodifiedfoodcrops)• Evogene Ltd.(EVGN)(Israel:plantgenomics)• OriginAgritech Limited(SEED)(Agriculturalbiotechnologycompany)• S&WSeedCompany(SANW)(Alfalfaseedsandstevia)
Agriculturecompanies
• MonsantoCompany(MON):Thisseedproducerisastaplenameintheagriculturesector.• PotashCorporationofSaskatchewan(POT):PotashisafertilizercompanythatdistributesitsproductsprimarilyintheUnitedStatesandCanada.• Deere&Company(DE):Deereisawell-knownnamewithitsproductionofmachineryfortheagricultureandforestrysectoraroundtheworld.• MosaicCompany(MOS):BasedinMinnesota,thiscompanyderivesitsmainrevenuesfromproducingcropnutrientsfortheagricultureindustry.• Archer-Daniels-Midland(ADM):ADMwillmakeforaniceglobalplay,asthefirmstores,transports,andmerchandisesagriculturalcommoditiesallaroundtheworld.• AgriumInc.(AGU):AgriumisbasedinCanadaand,similartoMosaic,itproducessoilnutrientsaswellasotherindustrialandspecialtyproducts.
Agriculturecompaniescont.
• CFIndustriesHoldings(CF):Likemanyotherfirmsonthelist,thiscompanyanditssubsidiariesmanufacturenitrogenandphosphatefertilizerproductsforagriculturalandindustrialconsumersaroundtheworld.
• BungeLimited(BG):Thecompanyhasitshandsallaroundtheagriculturalsector,thoughitsmainbusinesscomesfromthepurchase,store,transport,processing,andsaleofagriculturalcommodities.
• TerraNitrogenCompany(TNH):Thiscompany,asthenamewouldsuggest,primarilydealswiththeproductionandsaleofnitrogen-basedfertilizers.
• Cosan Limited(CZZ):ThisBrazilian-basedfirmhandlesthelogisticsandsaleofagriculturalpropertytoareaslikeEurope,Asia,andtheMiddleEast.
• ScottsMiracle-Gro Company(SMG):ThishouseholdnameisoneofthemorepopularfertilizerproducersintheUnitedStates.
• CompassMinerals(CMP):ThisfirmengagesintheproductionofinorganicmineralproductsinNorthAmericaandtheU.K.CMPisdividedintotwosegments:saltandspecialtyfertilizer,makingitanindirectplayontheagribusinesssector.
Agriculturecompaniescont.
• IntrepidPotash(IPI):Thisfirmproducesandmarketspotash,orpotassiumchloride,akeyingredientinmanyfertilizers.
• FreshDelMonteProduce(FDP):Anotherindirectplay,thiscompanyisbasedintheCaymanIslandsandhandlestheproduction,transportation,anddistributionoffreshfruitsandvegetablesaroundtheworld.
• RavenIndustries(RAVN):Ravenissomethingofajack-of-all-tradesasithasoperationsoutsideoftheagriculturalsector,includingtheconstructionandmilitaryindustries.
• Adecoagro S.A.(AGRO):ThoughthisfirmistechnicallyheadquarteredinLuxembourg,itoperatesinSouthAmerica.AGROplants,harvests,andsellsagriculturalcommoditiessuchascorn,wheat,soybeans,cottonandmanyothers.Thisyoungstockmaybeagoodgrowthopportunityforthoselookingforalong-termplay.
• Industrias Bachoco (IBA):StationedinCelaya,Mexico,IBAoperatesasapoultryproducer,breeding,processing,andmarketingchicken.
• Cal-MaineFoods(CALM):Thiscompanydealswiththepackaginganddistributionofvariouskindsofeggs.Thestockwillrepresentanindirectplayintheagriculturalsector.
Agriculturecompaniescont.
• TheAndersons(ANDE):Thiscompany,basedinOhio,dedicatesasignificantamountofitsassetstotheagriculturesectorincludingplantnutrients,turfproducts,grains,andethanol.• DoleFoodCompany(DOLE):Doleiswell-knownfortheirwideproductionanddistributionoffreshfruitsandvegetablesaswellaspackagedfoods.• Cresud (CRESY):ThisArgentinianfirmdoesalmostallofitsbusinessinLatinAmerica,whereitengagesintheproductionofvariousagriculturalcommoditieslikewheat,corn,soybeans,andothers.• Tejon Ranch(TRC):Thiscompanyoffersadifferentapproachfromsomeoftheotheroptionsonthelist.TRCengagesinthedevelopmentofrealestateforagribusinessactivitiesintheU.S.ratherthanphysicallyproducingaspecificcommodity.• Yongye International(YONG):ThisChinese-basedstockresearches,develops,andmanufacturesfulvic acidliquidsandpowdernutrientsforplantsandanimals.
AgricultureETFs
• MarketVectors-AgribusinessETF(MOO):Thisfundprovidesexposuretopublicly-tradedcompaniesworldwidethatderiveatleast50%oftheirrevenuesfromthebusinessofagriculture.
• DBAgricultureFund(DBA):ThisETFinvestsinfuturescontractsonsomeofthemostliquidandwidelytradedagriculturalcommodities,makingitoneofthemostpopularoptionsforachievingexposuretothissector.SomeofDBA’scurrentholdingsincludecontractsonsugar,cattle,coffee,cocoa,soybeanandcorn.
• DJ-UBSGrainsTotalReturnSub-IndexETN(JJG):ThisETNisafutures-basedproductthatfocusesexclusivelyononesectoroftheagriculturalindustry,grains.JJGinvestsincorn,soybeans,andwheat,whichareallcommoditiesthatoftenreceiveminimalweightinginbroad-basedagriculturalorcommodityproducts.
• DJ-UBSAgricultureSub-IndexTotalReturnETN(JJA):JJAinvestsinsevenfuturescontractsonagriculturalcommodities:corn,soybeans,wheat,sugar,soybeanoil,coffee,andcotton.
• DJ-UBSLivestockTotalReturnSub-IndexETN(COW):ThisETFemploysafutures-basedstrategytoinvestinbothleanhogsandlivecattle.
• CornFund(CORN):Thisfundisanext-generationcommodityproductthatoffersexposuretoanumberofdifferentcornfuturescontract.
AgricultureETFscont.• DowJones-UBSCottonTotalReturnSub-IndexETN(BAL):BALinvestsinfront-monthcottonfuturesandassuch,shouldbeusedas
moreofatradinginstrumentratherthanabuy-and-holdproduct.• RogersIntlCommodityAgric ETN(RJA):Thisproductrepresents thevalueofabasketof20agricultural commodityfutures
contractsincludingcorn,wheatandcotton.• E-TRACSUBSBloombergCMCIFoodETN(FUD):FUDmeasuresabasketof11futurescontractsfromtheagricultural andlivestock
sectors.Investorsshouldnotethatthefundaimstoavoidcontango byinvestingincontractsthatmatureanywherefromthreemonthstooneyear.
• DowJones-UBSSugarSub-IndexTotalReturnETN(SGG):Anotherfutures-basedproduct,SGGconsistsofasingle futurescontractforsugar.
• DowJones-UBSCoffeeETN(JO):Thiscleverly namediPath productsimplymeasuresfront-monthcoffeefutures.• DowJones-UBSCocoaTotalReturnSub-IndexETN(NIB):AnotherinthelineofiPath’s futuresproducts,NIBtrackscocoafutures.• DowJones-UBSSoftsTotalReturnSub-IndexETN(JJS):Thisfuturesfundmaintainsexposuretothreeofthefoursoftswiththe
followingbreakdown:sugar(47.85%),cotton(14.78%),andcoffee(37.37%)(dataasof05/14/2015).• MLCXGrainsIndexTRETN(GRU):Thisfundtracksanindex thatisdesignedtoprovideabenchmarkforthegrainssectorandfor
investmentincommoditiesasanassetclass.Thefundcomprisesfuturescontractsoncorn,soybeans,soybeanoil,andwheat.• E-TRACSUBSBloombergCMCIAgric ETN(UAG):ThisETNrepresentsthecollateralized returnsfromabasketof10futures
contractsrepresentingtheagricultural sector.
Commoditiesoverview• Cocoa(CJ):Thesefutures,whicharenotoptionable, arequoted inU.S.dollarsandcentsperton.Eachcontractrepresents10metrictonswithexposurereachingouttotheendof2013.Thoseinterestedincocoashould look toWestAfricaasthebiggestpricedriver sincethisiswherethemajorityoftheworld’scocoaisproduced.
• Coffee(KT):Thesefutures,whicharenotoptionable, aretradedontheNYMEXandarequoted inU.S.dollarsperpound.Eachcoffeecontractrepresents37,500poundsandtradingisconductedinMarch,May,July,September, andDecember.
• Corn(ZC):Theseoptionable futuresareamong themostpopularagriculturalcontracts.Thecontractsymbolchangesbasedonwhichmonth thefutureexpires,buteachcontractrepresents5,000bushels,or127metrictons.Thecontractsarepricedincentsperbushel.
• Cotton(TT):Another softcommodity, cottoncontractsarerelativelypopular asfarasvolume isconcerned.Contractsarequoted inU.S.dollarsperpoundwitheachcontractrepresenting50,000pounds.
• LeanHogs(HE):Hogsareanotherpopularcontractastheyofferboth futuresandoptionsoncontracts.Eachquoterepresents40,000pounds, or18metrictons,withthepricingunitbeingcentsperpound.ThesefuturesaretradedontheCME.
• LiveCattle(LE):Similartoleanhogs, thesefuturesappearontheCME.Theyarealsoquoted incentsperpound, areoptionable, andeachcontractrepresents40,000pounds, or18metrictons.
Commoditiesoverviewcont.• Oats(ZO):TheseCBOTcontractsareoptionable andarequoted incentsperbushel.Eachcontractofoatsisrepresentativeof5,000bushels,or86metrictons.ThefutureshavecontractsthatexpireinMarch,May,June,July,September, andDecember.
• RandomLengthLumber (LBS):Thesecontractsarebothoptionable aswellasfutures-basedandareofferedontheCME.Eachcontractrepresents110,000board feetandthepricingunitisrepresentedbydollarsper1,000boardfeet(mbf).
• RoughRice(ZR):RicefuturesareofferedontheCBOTandtheirsymbolwillfluctuatebasedonwhichmonthyouarebuying.Thefuturesarequoted incentsperhundredweight andeachcontractcomprises2,000hundredweights, or91metrictons.
• Soybeans (ZS):TheseCBOTfuturesextendexposureallthewayouttoNovemberof2015.Eachcontractispricedincentsperbushelwitheachfuture representativeof5,000bushels, or136metrictons.
• Sugar(YO):Thefinalsoftcommodity, SugarNo.11istradedontheNYMEXandofferscontractsforMarch,May,July,andOctober.Eachfuture represents112,000poundswithpricesquoted inU.S.dollarsperpound.
• Wheat(ZW):WheatfuturesaretradedontheCBOTandcurrentlyextendexposureout through2014.Eachcontract,whichisoptionable, represents5,000bushelsor136metrictons,withpricesquoted incentsperbushel.
