Hungry Planet - CLSA

Key takeaways from "Hungry Planet", CLSA Global Ag Primer, March 2011

Our agro analyst Di Shui summarizes CLSA's fertilizer team's 130pg primer on global agriculture, and sees (for a change) that the current food inflation as temporary and grain prices to normalize by 2014. (This is contrary to our view here that rising food prices are a long term structural issue).

Having said that, our US fertilizer team warns that it will take longer to rebuild global grain reserves today than in 2007/8. Two key differences being there was no significant harvest issue three years ago and a global financial crisis suppressed demand quickly.

Two price spikes over a short horizon means “major” rather than “incremental” agri reform.

Emerging agrarian economies are best poised to benefit from the next wave of the green revolution. With 41% of its domestic workforce in agriculture (2007), and the sector contributing 16% to GDP (2009), Indonesia is poised to benefit.

Key points from the report:
Food inflation is temporary; grain prices will fall to US$3 for corn and US$4.50 for wheat by 2014
Govts will encourage "major" rather than "incremental" agriculture reform due to politically sensitive nature of food prices
No shortage of farm land. Food production has grown at Cagr 2.1% vs land use growth of 0.2% as we get more efficient at growing food
Near term productivity gains to come from: increase fertilization / better seeds / chemicals (pesticides).
Longer term gain to come from: govt incentives / improved infrastructure / credit reform and capital mkt access