Strategies for investing in agriculture

By Russell Pearlman

High crop prices could be a boon to farmers and investors alike. Here are ways to buy into the world’s growing demand for food.

Play it safe: farming equipment

The world’s population is growing fast, but the amount of land to grow food is not. So, as simple supply and demand economics would dictate, food prices are rising.

According to the United Nations, grain prices have more than doubled since 2003, and some analysts expect them to continue rising for the foreseeable future. That trend could be a boon to American farmers, and when farmers feel rich, they often shop for new equipment.

Gary Bradshaw, a portfolio manager for the Hodges family of mutual funds, likes Titan Machinery TITN -0.99% , a distributor of tractors in the Great Plains. Titan’s 2011 net income was $44 million, nearly double what it was in 2010.

For a more international bet on farming, Bradshaw also likes Deere DE -1.50% . The Moline, Ill., maker of giant green tractors and other big-ticket farm equipment grew its net income by 56% in four years, from $1.8 billion in 2007 to $2.8 billion last year.

Go for broke: a chicken run

If the rest of the world is going to eat more food, it surely will eat more chicken, right? U.S. chicken-piece prices have risen anywhere from 2% (breasts) to more than 120% (wings) from a year ago.

But buying into poultry is a lot riskier than taking a flier on most other farm-related businesses.

Because prices have been so good, chicken firms could produce a lot more birds. “The danger is you drive prices lower,” says Heather Jones, a managing director at BB&T Capital Markets.

Plus, higher crop prices pose a problem: Sanderson Farms, the nation’s No. 3 chicken producer, says its feed costs (primarily corn and soybeans) were nearly 40% higher last year than in 2010.

Still, chicken producers have made their operations more efficient, and they’ve steadily increased exports to Asia and Europe. Bradshaw says he’d consider buying Pilgrim’s Pride, another major chicken producer, if its stock price dipped. 

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Federal immigration program can help young workers

In an animal laboratory in central California's dairy country, Juan Carlos Martin cleaned and fed dozens of cows.

Smuggled through a U.S. border checkpoint in a car at age 13, the Mexico native had hoped for an education and career, but started working full time at the end of high school after an accident incapacitated his father.

Now 23, Martin was surprised to learn this week that he may be eligible for the new federal program that temporarily defers deportation and grants work permits to young illegal immigrants.

Much of the attention surrounding the program that began last Wednesday has focused on students. But researchers say it could also benefit hundreds of thousands of young adults working in low-wage industries such as agriculture.

"The stereotype about the young people who are eligible is that they're college students and academic superstars that speak English perfectly. And that is, of course, not true for all of them," said Ed Kissam, a labor policy researcher.

To be eligible, immigrants must prove they arrived in the United States before they turned 16, were younger than 31 as of June 15, have been living in the country at least five years, are in school or graduated, and have not been convicted of certain crimes.

The program is also open to individuals who haven't graduated high school or received a GED, as long as they enroll in an adult education program, vocational training or even English language instruction.

Agricultural workers like Martin say a work permit and the benefits that come with it could open doors previously closed, leading to better paying jobs, improved working conditions and benefits, and a path to higher education.

"This would change my whole life," said Martin, a high school graduate. "I came to this country with the goal of studying and getting ahead. But you really can't do it without a work permit, a Social Security number and a drivers' license."

Despite the possibilities, workers and advocates say farmworkers and others who are out of school could face significant hurdles when applying: a lack of information about the program, limited English skills, little access to legal advice and limited access to adult school to fulfill the program's education requirement.

The Deferred Action for Childhood Arrivals does not grant legal residency or a path to citizenship.

More than half of the 1 million young illegal immigrants eligible for the program are in the labor force, mostly working in low-wage industries — holding either a high school degree or GED, or lacking a degree altogether, an analysis by the Migration Policy Institute shows.

Agriculture could be one of the most affected. Two-thirds of farmworkers are foreign-born Mexicans, the majority without legal status, and many are young — more than half are under the age of 31, according to the National Agricultural Workers Survey. Data from the survey shows that at least 54,000 farmworkers could qualify for the program.

Jaime Hernandez, 23, who picks strawberries in the Santa Maria area for $8 per hour, found out about the program from a friend and is hoping to apply.

Hernandez, who crossed the Arizona desert with his parents at age 11, dropped out of high school in Madera, Calif., to work in the fields and help his family make ends meet. He recently finished a GED course, but never took the diploma exam, because his 10-hour workdays didn't leave him time. He now plans to sign up for the test.

If he is granted a work permit, he plans to get a better-paying job, and go back to school to become a lawyer or a radio engineer.

"I'm afraid, I don't have the money to pay for a lawyer, and I don't know if I am guaranteed acceptance or if I will be rejected," Hernandez said. "But still, it's worth it ... I'm not giving up."

Organizations helping eligible applicants say many workers don't know they may be eligible.

"Working people in the fields, many don't understand the program," said Ramiro Medrano, an adviser with the Pajaro Valley Unified School District near Watsonville, which is holding an information session about the program Sunday. "Most call about their kids. When I ask them, 'How old are you?' it turns out the parents could qualify."

The UFW Foundation has also been holding information sessions and phone meetings with farmworker union locals to spread the word.

For eligible workers who have never filled out an application and speak little English, applying for Deferred Action is intimidating, said the group's Richard Gorman. "Our hope is that once they have papers, once you take away the fear of deportation, that will encourage workers to stand up for themselves and for others in their own workplaces, to form a union or complain to their boss when there is a problem."

Some farmers are worried the program could cut into their workforce. One group of growers, the Nisei Farmers League, is discouraging farmworkers from applying, worried workers or their families could be deported once their addresses are given to the federal government.

Another worry: Because the application for work authorization asks for all previously used Social Security numbers, the information could lead the government to track down agricultural employers who hired the illegal workers and subject them to audits or sanctions, said the league's president, Manuel Cunha.

"There is no safe haven at the end of the day," Cunha said.

Federal immigration officials have said they won't use information from the applications for immigration enforcement against workers. Officials declined to comment on whether information provided by applicants would be used to prosecute or audit employers.

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Access to water key for food security: FAO chief

Global food security starts with ensuring access to water, the head of the Food and Agriculture Organisation (FAO) said at the beginning of World Water Week Monday.

"There is no food security without water security," said FAO director-general Jose Graziano Da Silva in Sweden, which is hosting the annual event organised by the Stockholm International Water Institute (SIWI).

With crop growing hampered by the effects of pollution and climate change, agriculture must become "more efficient and fairer", he said, adding that nations all over the world need to "produce more with less" and manage water resources well.

The conference, whose theme is water and food security, also heard from Swedish Cooperation Minister Gunilla Carlsson who urged the business world to find fresh ideas and new partners to help improve food security.

"The need for innovation and collaboration with corporations and small businesses are significant," she said.

"Increasingly, business is looking for innovative models building on local ideas and demand, rather than adapting products and distribution processes that were conceived for US or European markets."

Da Silva also called on the private sector to develop agriculture in a responsible manner in emerging countries.

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Analysis: Brazil's economy to get welcome boost from farm sector

By Reese Ewing

After a tough first quarter, Brazilian farmers are injecting life back into a stagnant economy at a time when manufacturers and consumers are retrenching.

Agriculture has long been known as the green anchor of Brazil's economy, now the world's sixth-largest. One of the world's breadbaskets, Brazil is a major producer of soybeans, corn, sugar, coffee, oranges and beef, and has invested heavily in the past decade to keep up with surging global demand.

But the agricultural sector kicked off 2012 on the wrong foot, adding to the woes of an economy that has been struggling for the past year. Agricultural output contracted 8.5 percent in the first quarter, hit by a drought in the grains belt, a poor sugar cane crop and tight credit markets.

The slump in Brazil's farm belt, however, was short-lived. The agricultural sector, which accounts for nearly 30 percent of Brazil's gross domestic product, is expected to be a bright spot when GDP data for the second quarter is released on Friday.

And the trend is expected to continue well into next year, as Brazilian farmers reap the benefits of record prices for soybeans, corn and beef, helping to fill a void in global supply after a crushing drought in the United States.

"The outlook for grains is super positive and soy is going to lead it," said Jose Hausknecht, a director at MB Agro, a local consulting firm that tracks the agricultural sector. "It will start to show up in the second quarter."

That's good news for multinational commodities traders like Bunge Ltd (BG.N), Cargill CARG.UL, Louis Dreyfus LOUDR.UL, ADM (ADM.N) and Noble Group (NOBG.SI), which all rely on business in Brazil for their revenue. The same holds for farm machinery makers John Deere (DE.N) and AGCO (AGCO.N).

To be sure, Brazil's economy faces many hurdles that may be too big for the farm sector to overcome alone. Big industry, including automotive and manufacturing, is a key part of the economy and is not expected to recover soon. And consumer confidence has started to fall as have federal tax revenues.

Even in commodities, some sectors are dragging. Big miners such as Vale (VALE5.SA) have been battered by weaker prices for iron ore, copper, nickel and aluminum. And poultry and pork producers are cutting production due to high feed prices.

SOYBEANS TO LEAD

Elsewhere in the farm sector, the prospects shine.

Despite last year's drought, Brazil still brought in a record crop of 166 million tonnes of grain that started peaking in March, which will support economic growth. This coincided with a weakening of the Brazilian real, which makes dollar-linked exports worth more in local currency terms.

"The second quarter numbers will surprise everyone," Agriculture Minister Jorge Mendes Ribeiro Filho said after meeting with President Dilma Rousseff last week.

In reais, soybean futures prices jumped 28 percent from March through June. Soy exports, Brazil's biggest farm export earner, are up 11 percent in the second quarter, despite a 12 percent drop in last year's harvest.

The trend for increased exports looks set to continue in the wake of the drought over the U.S. soy and corn crops.

China's commodity imports continue to defy expectations of a major slowdown. The latest tranche of trade data paints a strong picture, Barclay's Research said. China, Brazil's main trade partner, imported 318 percent more corn and 10 percent more soy in the past quarter.

"China's food imports going forward are likely to result in a soft commodities super cycle," said Bo Zhaung, a China-based economist for research analysts Trusted Sources, who recently visited Brazil.

Brazilian farmers also planted a record corn crop this year, harvesting 72 million tonnes, above the 66-million-tonne soy crop for the first time in a decade.

Corn exports are up 111 percent from last year from April through June, the trade ministry said. Corn futures prices in local currency terms were little changed in the quarter but are up 38 percent since June.

Going forward, the scenario looks exceptional for grains, as local soybean producers gear up for one of the most expressive leaps in planting in decades, in response to record prices caused by the U.S. drought.

Brazil's crushing industry association Abiove expects the soy industry to export a record 37.5 million tonnes of soy from the crop that will start planting in September, up from 30.5 million in exports from this crop. And revenues from exports are expected to rocket to $30 billion from $22.6 billion.

May-June rains improved the outlook for next year's sugar cane crush, which should near the record 560 million tonne center-south crop of 2010/11.

And local beef producers, who are less at the mercy of global grains prices because Brazil's 200-million-head herd is largely grass-fed, are looking at a "Christmas Year for beef" sales, said Luis Ricardo Luz, operations director at one of Brazil's big meat packers Minerva (BEEF3.SA).

INFRASTRUCTURE HURDLES

Record crops will mean stress on Brazil's dilapidated infrastructure, however. Ports, roads and railways have been the Achilles heel of the country on which the world is increasingly depending for its raw commodities.

Roberto Messenberg, an economist at Ipea, a government think tank, said strong food prices would fuel a revival in Brazilian agriculture but warned that structural change and infrastructure investments were still essential for sustainable growth.

"Recovery in agroindustry, due to climate shocks, is temporary and doesn't mean a medium-term investment trend," Messenberg said.

President Rousseff is trying to tackle Brazil's infrastructure deficiencies with a $66 billion investment plan that will grant concessions to private companies to overhaul and expand the country's roads and railways. A similar plan for airports and seaports is also in the pipeline.

But government officials acknowledge that the projects will take years to be completed.

(Editing by Todd Benson and Tim Dobbyn)

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Sharad Pawar suggests alternate crops for Punjab and Haryana

Depleting water table and worsening soil health in key food grain growers Punjab and Haryana have prompted agriculture minister Sharad Pawar to explore possibilities of introducing alternative crops such as pulses, oilseeds, fodder crops and horticultural crops in these states.

"Pawar will hold a meeting with the state governments in the third week of September to consider various aspects relating to the proposed crop substitution including suitability of different alternative crops and their impact of water and soil resources, cost of production, and marketing and processing of the alternative crops," said an official.

The decision was taken at parliamentary consultative committee meeting which also discussed raising agricultural production and productivity in eastern India by harnessing the ample water resource available there and injecting new technologies.

Pawar said that that due to various interventions the rice production in Bihar and Jharkhand had more than doubled last year over the previous year.

"Except for Odisha and Assam, which were affected by flood/drought, rice production has increased in all the States where this programme is being implemented. A record production of 55.3 million tonne of rice has been achieved by the eastern region out of total rice production of 104.32 million tonne during 2011-12," he said.

The government has already launched a programme named 'Bringing Green Revolution to Eastern India' in 2010-11 in eastern region of the country to raise agricultural production with an allocation of Rs. 400 crore for the first two years. It has now increased the outlay to Rs 1000 crore for the current financial year.

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Argentine mission promotes agriculture

JOINT projects to stimulate interest in agriculture careers are among the possible fruits of a visit last week by Argentinian university chiefs.

Like Australia, Argentina was big in livestock but underdone in the supply of agriculture graduates, according to the University of New England's Victor Minichiello, local organiser of the mission.

"People's understanding of a twenty first century agriculture career is often not up to date,'' Professor Minichiello said.

The visit also looked at opportunities for collaboration in IT and medical training.

The Argentinian institutions involved were the Universidad de Quilmes, Universidad Nacional del Litoral and Universidad Nacional del Sur.

Aside from UNE, the Australian institutions taking part were the universities of Sydney, Western Sydney, Newcastle, Melbourne, La Trobe, Swinburne, CSIRO and Victoria University.

Professor Minichiello said one possible project would be to connect schools and universities in both countries to promote careers in agriculture.

Another possibility was collaboration on global courseware in fields such as occupational therapy where language studies in English or Spanish could add another dimension.

Original Article Here

China to check implementation of agriculture law

China's top legislature will start a new wave of inspections on the implementation ofits Law on Agriculture inSeptember.

Five inspection teams, organized by the Standing Committee of the National People's Congress(NPC), will be sent to10 provincial regions including Shanxi, Inner Mongolia and Yunnan,according to a meeting of the NPC StandingCommittee held on Sunday.

Local legislatures of other provinces and regions were also ordered to check the enforcementof the law.

Wu Bangguo, chairman of the NPC Standing Committee, said in a written comment that theinspections are aimed athelping find out the prominent issues that hamper China's rural reformand development and providing suggestions topromote the agricultural modernization.

The inspections, the eighth since 2003, will focus on five major areas including thedevelopment of modernagriculture, grain safety and the protection of farmland.

Uyunqimg, vice chairperson of the NPC Standing Committee, said at the meeting that it isfundamentally important topromote better implementation of the law as it provides firm legalsafeguard for the development of agriculture andthe improvement of living standards in ruralareas.

However, China are facing a series of challenges in rural development, including weak grainproductivity, lack of along-term system for raising the farmers' income, and shortage offarmland and water resources, said Uyunqimg.

She urged all teams to finish the inspection task with high quality and ensure effectiveimplementation of the law.

Original Article Here