Asia’s Mega Wealth Funds Move Into International Food And Agricultural Sectors
By Sally White / www.agriprods.com
The rumours turned out to be true – Asia’s mega wealth funds are advancing into the international food and agriculture sectors. Both China and Singapore have now made moves. Disenchantment with their Western financial investments, in major banks such as Morgan Stanley and Barclays and private equity giants such as Blackstone, are increasingly turning China to agricultural markets. Asia itself is now such a major consumer and producer this sector is an obvious bet. Prices for food companies and commodities are currently off the highs, creating better bargains. The Reuters/Jeffries CRB Index, a gauge of 19 raw materials and commodities, was last week at levels 46 per cent below July last year.
China Investment Corp (CIC) announced last week that it had paid S$850 million for a 15 per cent stake in Noble Group, the mega Hong Kong-based commodity trading, agriculture and processing group. Noble will sell S$850 million worth of new and existing shares to CIC at 8.1 per cent less than the last traded price. The price has risen by 112 per cent over the last six months on rumours of this stake-building, but closed down a few cents on Friday on profit-taking, at around S$2.48. Noble's strategy is to own all parts of commodity supply chains - from farm production to storage to shipping to marketing - all over the world. It currently has a presence in 40 countries. Noble will use the S$926 million (US$654 million) proceeds to expand investment in global agricultural commodities.
CIC had 87.4 per cent of its assets of US$297.5 billion in cash or equivalents last year, it said last month, and is now going to step up on its shopping sprees. The fund, set up two years ago, slowed spending in 2008 because of the global financial crisis. Singapore’s sovereign wealth fund – Temasek Holdings -is also shifting to commodity investments after its Western financial bets lost it a record 66 per cent in the year to end March. Temasek has agreed to buy 13.76 per cent of Singapore-based commodities supplier Olam International.
Down under, a Noble Group subsidiary or Louis Dreyfus & Cie SA were named as joint partners for Australian wheat exporter AWB, according to local market sources. TAWB said yesterday was in initial talks with a global commodities company for the sale of its Geneva-based unit and for a partnership in its trading business in Australia.
Meanwhile, battle continues over the main food market corporate action in London, the hostile £10 billion bid by Kraft Foods for Cadbury. Early last week Cadbury opted to appeal to the Takeover Panel to order Kraft to “put up or shut up” regarding its £10.2billion unsolicited approach. Then chief executive Todd Stitzer at Cadbury said on Friday he did not believe Kraft's offer for the company made strategic sense, as he tried to clarify remarks he made that drew scrutiny from Britain's Take-Over Panel. He said remarks had been misconstrued to imply a softening of his view about a deal. The two sides await a ruling from the Takeover Panel on the timing of Kraft Foods bid. Kraft was up US 26 cents at US$26.64 in late trading on Friday on the New York Stock Exchange. Cadbury closed up 0.7 per cent at 804p in London.
Also in London Tate & Lyle boosted its share price when it issued a trading update covering the interim figures to end September which it will announce in November. It promised a “solid” performance, better than the market was expecting, which took the shares to 415p, just a few pence under the year’s high.
China was also the main story last week in dairy markets, as Dutch agriculture bank Rabobank’s research team said it was in control of the global milk power trade and that farmers should not be over-optimistic that current price levels could be held. China was forced to import large volumes following its melamine taint scandal last year.
Rabobank said China had been the engine for the growth in international trade, having been responsible for three-quarters of its recent rise and for the 50 per cent rise in prices reported by New Zealand dairy exporter Fonterra over the last two months. The comments come amid a trade dispute between Beijing and Washington over exports of Chinese tyres, which investors fear may spread into farm commodity markets.
Cocoa prices struck fresh multi-month peaks this week on the prospect of lower output from Ivory Coast, which is the world's top producer. Prices later ran into profit-taking in New York. By Friday on LIFFE, London's futures exchange, the price of cocoa for delivery in December rose to £2,035 a tonne from £2,019 a week earlier. On the New York Board of Trade (NYBOT), the December cocoa contract slipped to US$3,079 a tonne from US$3,126.
Sugar futures fell on profit-taking after reaching 28-year highs earlier this month. By Friday on LIFFE, the price of a tonne of white sugar for delivery in December slid to £577 from £582 a week earlier. On NYBOT, the price of unrefined sugar for March fell to US 21.78 cents a pound from 23.67 cents.
Coffee futures drifted lower as many traders banked profits. By Friday on LIFFE, Robusta for delivery in November fell to US$1,404 a tonne from US$1,508 a week earlier. On the NYBOT, Arabica for December declined to US 129 cents a pound from 136.65 cents.
Malaysian rubber prices dropped due to quiet trading amid the Eid al-Fitr holiday, dealers said. On Friday, the Malaysian Rubber Board's benchmark SMR20 fell to 208.30 US cents per kilo, from 209.70 US cents last week.
Fertiliser markets continue depressed, with China and India still pushing for lower prices as the farmers’ buying strike continues internationally. Major producer Potash Corp of Saskatchewan cut its earnings guidance again, to US$3.35-3.75 a share, down US 25 cents. The shares rose by $1.21 to $94.30, but renewed worries later in the week took them back to US$89.
Gourmet Corner:
Date prices have moved sharply higher. Iranian pitted dates have been quoted at around £662 a metric tonne, £50 up from the year’s lows, because of high demand in the build up to Ramadan, which began earlier this year. Most of the dates have had to come from last year’s crops and before the beginning of the harvest, leaving world stocks low. Another source of price pressure is that leading producers, Egypt and Saudi Arabia, are exporting little because of rising local demand.
