Duxton’s Agri Bits and Pieces – Vol. 356
Posted on: October 30th, 2017

QUOTE OF THE WEEK

This week’s quote of the week comes from Iran’s Deputy Agriculture Minister, Hassan Rokni, on Iran’s ambitious plans to grab a bigger share of the global milk and dairy market.

“Iran exported 850,000 tons of dairy products in the last fiscal year. Exports of milk and related dairy products are projected to reach 1 million tons this year…with milk powder exports during the five months to August 22 showing the country had a monthly export average of 100,000 tons. “

FARM PROFITS MAY HALVE AFTER BREXIT, SAYS REPORT

The report, by the Agriculture and Horticulture Development Board (AHDB), says the “worst-case scenario” would cut average farm profits from £38,000 a year to just £15,000.

The analysis tries to model the effects of cheaper imported food, reduced subsidies and more expensive labour.
A spokesperson for the Department for Environment, Food and Rural Affairs said: “This report is based on hypothetical and highly unlikely scenarios that do not reflect the government’s negotiating position.”

The ADHB research looked at three possible outcomes of Brexit:

  1. “Business as usual”, with trade arrangement staying much the same and subsidies continuing. Average annual profits might rise to £41,000
  2. Reduced subsidies and tariff-free access to the UK for foreign producers. Average annual profits fall to £15,000
  3. A “cliff-edge” Brexit with trade based on WTO rules, and tariffs alongside a big cut in subsidies. Average annual profits fall to £20,000

“Under the three scenarios outlined in the report, changes in the UK’s trade relationships will impact farmers’ bottom line when the UK leaves the single market, whether or not a free trade agreement is negotiated with the EU,” said the Board.

Dairy and pig farmers may benefit from rising prices, the report says. On the other hand, significant exporters such as cereal producers and sheep farmers would suffer due to the increased cost of exporting products to the EU. And where businesses rely on migrant workers, higher employment costs due to more stringent immigration restrictions will also push up farmers’ costs dramatically, especially in horticulture.

THE FUTURE OF FARMING MAY BE BELOW THE SOIL

Think of urban farming and the images that may come to mind are community garden, vertical greenhouse or even a rooftop garden.

The farm Steven Dring operates in south London isn’t like that. In fact, it’s not even visible from street level. The operation is situated in an air raid shelter 100 feet underground that has been left vacant since World War II.

“It does seem completely counterintuitive to build a farm underneath the soil, but it’s actually one of the best environments to do it…

You’ve got that duvet of 100 feet of soil, which insulated the tunnel – it’s like someone’s built a greenhouse for us. You have LED lights and hydroponics, which have been around forever. We just put it all together and re-purpose an unloved space.”

The operation, called Growing Underground, is competitive with traditional farming because their model excludes many of the costs large agribusiness has to contend with. The start-up sells locally, meaning it doesn’t have to ship produce long distances. Another advantage is they don’t have to hear or cool the underground tunnel, which stays at steady temperatures because it’s so far under the earth.

“The one cost that we have consistently all year round is our energy cost, the cost for the LED lighting…our seeds cost the same, our water costs the same, our nutrients cost the same.:” says Dring. Hydroponic agriculture grows food without, soil suspending plants in water filled with nutriests. Because the water can be captured and reused, hydroponics uses only about one-third of the water consumed in traditional farming. That’s especially important these days because industrial-scale agriculture has severely depleted the soil in many places and caused other environmental harm.

CHART OF THE WEEK

This week’s chart of the week comes from Bloomberg’s France to Make Least Wine in 60 Years After Bad Weather Hits Grapes with wine volume expected to fall 19% (equivalent of 4.9 billion bottles), the Agriculture Ministry forecasts, the smallest vintage in 60 years after spring frost damaged vines at Bordeaux, while summer storms caused grape rot in Champagne.

 

 

 

JOKE OF THE WEEK

 

DISCLAIMER

This newsletter has been prepared by Duxton for circulation to its clients, who are accredited or institutional investors as defined in the Securities and Futures Act, Chapter 289 of Singapore and the Securities and Futures (Prescribed Specific Classes of Investors) Regulations (”Permitted Investors”), and is not intended for use by retail investors. The fund management industry in Singapore is regulated by the Monetary Authority of Singapore (”MAS”), and no person can act as a fund manager unless they are the holder of a capital markets services licence for fund management or are operating as a registered fund management company. Duxton Asset Management Pte Ltd holds a Capital Markets Services Licence to conduct the regulated activity of fund management for accredited and/or institutional investors.

This newsletter is for distribution only under such circumstances as may be permitted by applicable law. Nothing in this newsletter constitutes financial, investment, tax, legal or any other form of advice, recommendation or a representation that any investment strategy or recommendation contained herein is suitable or appropriate to a recipient’s individual circumstances, or otherwise constitutes a personal recommendation. In particular, nothing in this newsletter is intended to constitute financial advice under the Financial Advisers Act, Chapter 110 of Singapore. Duxton, its employees or its affiliates may from time to time hold, either directly or through the portfolios that it manages, an interest in some or all of the stocks or companies discussed in this newsletter. Where stock or company names are mentioned, it should not be construed that these are recommendations to buy or sell those stocks or companies. If you require investment advice please contact a regulated financial adviser.

This newsletter is published solely for general information purposes, does not constitute an advertisement and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments in any jurisdiction. No representation or warranty, either expressed or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein, nor is it intended to be a complete statement or summary of the markets or developments referred to in the newsletter.

This newsletter is not the basis for any contract to deal in any security or instrument, or for Duxton or their affiliates to enter into or arrange any type of transaction as a consequence of any information contained. Information from this newsletter must not be issued in any jurisdiction where prohibited by law and must not be used in any way that would be contrary to local law or regulation. Specifically, this newsletter is not directed at US persons.

To the fullest extent permitted by law, neither Duxton nor any of its affiliates, nor any of Duxton’s or any of its affiliates’ directors, employees or agents, accepts any liability for any loss or damage arising out of the use of all or any part of this newsletter.

Duxton specifically prohibits the redistribution of this material in whole or in part without the written permission of Duxton and Duxton accepts no liability whatsoever for the actions of third parties in this respect.

All third party data (such as Bloomberg) are copyrighted by and proprietary to the provider.