Duxton’s Agri Bits and Pieces – Vol. 362
Posted on: December 20th, 2017

 

QUOTE OF THE WEEK

This week’s quote of the week comes from Steven Ciobo, Australian Trade Minister, in an interview with TheAustralian.

Mr Ciobo is confident that the trade relationship between China and Australia remains strong, and continues to strengthen despite rumours over the Asian superpower’s influence in domestic politics.

The clean and green quality and reputation of Australian product, particularly the produce from fruit-fly free areas, is recognised and demanded by the Chinese market. The Australian states this is ‘clearing the way for new access for stone fruits and improved conditions for cherries, citrus and table grapes.’

 “These new protocols open the door to millions of dollars’ worth of Aussie exports”.

“China’s growing middle class and their appetite for Australia’s fresh clean and green produce is driving demand for our exports.”

WORLD’S LARGEST WATER DIVERSION PLAN WON’T QUENCH CHINA’S THIRSTIt’s China’s age-old dilemma: a tug of war between the farms that help feed the nation, and the soaring demands of industry and city-dwellers in the parched northern plains.

With an excess of rain in the south and not enough in the north, China’s solution is as simple as it was expensive: Build three massive aqueducts to divert the water for an estimated cost of more than 500 billion yuan ($76 billion).

The result is the world’s most ambitious water transfer program, the South-to-North Water Diversion project. Its middle channel — from the Danjiangkou reservoir to Beijing and Tianjin — was finished in 2014. Proposed in the time of Chairman Mao Zedong, it is a stunning engineering feat. Some 11 billion cubic meters of water has traversed the 1,432-km-long waterway, supplying factories, businesses and 53 million residents.

“As the country’s economy develops, industries are using more water,” said Huanguang Qiu, a professor with the School of Agricultural Economics and Rural Development at Renmin University. “And the competition will become even more fierce.”

The result is a revolution in the ways China uses, monitors and allots its most precious resource. Farms are changing crops and embracing technology to conserve irrigation, industries are being forced to clean up effluent, citizens are taking to social media to report offenders and the government is adapting a long-held food security policy to rely more on imports of water-hungry crops.

“We should make full use of international markets to increase supplies and should not worry too much over rising imports,” said Fang Yan, a researcher with China Institute for Rural Studies at Tsinghua University. She said the government has asked some wheat farmers to shift to water-saving crops.
Each ton of imported wheat saves China about 500 cubic meters of water and 0.4 acres of farmland, Fang said. The country is already the world’s largest importer of soybeans, but could buy more, as well as meat and dairy products, she said.

Still, in many cases there’s little incentive for farmers to save water. Agriculture uses 62 percent of China’s water, but crops have a relatively low marginal value. So the government bans the sale of agricultural water to industry, which pays 10 times the price, to ensure food supply.

To address this, the State Council in January 2016 began to reform the country’s agricultural water tariffs to encourage more efficient use. A national China Water Rights Exchange was set up in June 2016 and a water-rights trading system will follow. The government has set a cap for irrigation of 372 billion cubic meters by 2020.

BRINGING SPACE TECHNOLOGY TO WATER NEEDS IN CALIFORNIA VINEYARDS

ARS scientists are saving water in California’s vineyards by using satellite data and computer models to better manage water resources.

Computer models at the ARS Hydrology and Remote Sensoring Laboratory in Maryland are being fine tuned to help vineyard managers determine how much water to apply and when to apply it.

Winemakers want grapes of uniform quality, and that can be a challenge with vineyards that have different soils and climatic conditions across thousands of acres. Even a single vineyard can have a variety of irrigation needs.

The ARS model uses satellite measurements of land surface temperature in a unique way by separating out the vine canopy from the soil surface temperatures. This gives the model greater precision and enables researchers to better evaluate vine stress, says Kustas, an ARS hyrdrologist. With water supplies critical in California, the state’s nut and fruit orchard operators are more likely to benefit from these efforts.

CHART OF THE WEEKThis week’s chart of the week comes from Bloomberg’s Shipping Costs are Surging Globally, Squeezing Grain Traders which displays shipping costs as a % of grain prices. They are currently at their highest levels, 11%, in seven years. As the cost of moving dry-bulk commodity has surged since July, lifting the London-based Baltic Exchange’s main freight gauge to its highest in almost four years. The rally has been fired by China’s insatiable demand for coal and iron ore. This is bad news for agricultural traders.

 

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.