Saturday, March 21, 2009

The Rise of Agriculture

The Economist has got an interesting story on the happenings in the world agriculture market recently. Prices of agricultural produce are rising despite the economic crisis. Part of it is because of shift in use of agricultural land for fuel instead of food. But more prominent reason is the demand form poorer countries. People are consuming more and better nourished, however they are far behind as compared to developed countries.

Lot of companies are milking profits and planning investments considering this boom in agriculture sector. BASF, one of the largest producers of agrochemicals, saw 9% growth last year in agricultural sales, including 16% growth in Asia. The competitors like Agrium, CF Industries, Bunge and Syngenta are also prospering. Monsanto is celebrating the glory of genetically modified seeds.

Investment is also growing. Terra Firma, a private-equity firm based in London, announced it would buy 90% of Consolidated Pastoral Company, the vast Australian cattle holdings of the Packer family, which encompass 5m hectares (12m acres) of land. Nufarm, an Australian agrochemical maker, won approval for its acquisition of AH Marks, one of Britain’s oldest chemical companies, which has a valuable portfolio of herbicides. Last year COFCO, China’s state-controlled food conglomerate, bought 5% of Smithfield, the world’s largest pork producer. Al Qudra, an Abu Dhabi-based investment company, said it had bought big tracts of farmland in Morocco and Algeria, and was closing in on purchases in Pakistan, Syria, Vietnam, Thailand, Sudan and India. China Agri-Industries, a subsidiary of COFCO, established a partnership with Wilmar, the world’s largest trader in palm oil. Landkom, listed on London’s AIM market, and Black Earth Farming, listed in Stockholm, have each made big investments in farming in Ukraine. And reports are circulating in China about local investors buying 50,000 hectares of farmland in Argentina, and considering other investments in Argentina and Brazil.

I am sure stock analysts (in India as well) will soon hailing agriculture as next sunrise sector.

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