Gulf states including the UAE suffered when international food prices spiked to record levels in 2008, forcing up their import bills. They have since sought to lease and buy farmland in developing nations in efforts to improve security of food supplies.

“It is extremely important for the UAE to start encouraging local and global production of food,” said Alaa El-Din Moussa, a senior economic researcher at Abu Dhabi’s Department of Economic Development (DED).

“It’s no longer a matter of having money, because in the future if there is a huge shortage of food, securing supplies even if you have money will get harder,” he told Reuters on the sidelines of an industry event in Abu Dhabi.

The DED recently conducted a study based on 102 commodities and found that areas of weakness included fruits, where the country has zero per cent self-sufficiency, vegetables with 14 per cent, sugar with 33 per cent and cereals 40 per cent.

Farming in the desert Gulf region is a challenge due to extreme heat, limited water supplies and high soil salinity. Despite the obstacles, the UAE and a number of Gulf states are investing in technology to help secure food supplies domestically.

“I know that due to limited water supply and heat, the UAE will never be able to produce water-intensive crops like wheat and rice, but at least they can try to increase the fruit and vegetable supply,” said Moussa.

Last year, the UAE’s Ministry of Economy announced a plan to build a three-month food stockpile to cushion against any supply disruptions.

“But the majority of the food for the stockpiling is coming from imports, when the focus really should be to find ways to increase food production,” said Moussa.

Farms need to increase output by 70 per cent by 2050, when global population is expected to rise to nine billion from the current 6.7 billion, according to the United Nations’ food and agriculture agency.

“I suggest the UAE needs to open up an agriculture bank that would give loans to farmers here at low interest rates, which would encourage them in growing food locally instead of just trading for a faster profit,” said Moussa.

———

“Itisextremely

importantfortheUAEtostartencouraginglocalandglobalproductionoffood.”

– ALAA EL-DIN MOUSSA

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The Gulf is one of the world’s biggest food-importing regions. It stepped up efforts to buy and lease farmland in developing nations to secure food supplies after global commodity prices rose to record levels in 2007-08.

Gulf investors initially targeted Sudan, Iraq, Pakistan and Thailand, among others.

“If you have a look at the countries that have so far been targeted you’ll find that all of them have a degree of political risk,” said Sudhakar Tomar, managing director of Dubai-based Hakan Agro DMCC, one of the largest food-trading companies in the Gulf region.

“But there are other options that are commercially attractive, ethically justifiable and legally more secure.”

Hassad Food, owned by Qatar’s sovereign wealth fund, formed a Sydney-based subsidiary in December, Hassad Australia, to buy farmland for wheat and livestock production.

It plans to have the capacity to produce 150,000 sheep and 50 tonnes of wheat per year, the company said.

Last year Pharos Miro Agriculture Fund, a joint venture between UAEbased Pharos Financial Group and Miro Holdings International, was launched and aims to develop farmland in eastern Europe.

Last month, U. K.-based Swire Group went to the Gulf in search of a buyer for its agricultural business in Australia, Clyde Agriculture.

“We came to the Gulf region because we noticed that there’s an interest in not only agriculture investment but also in locations that are more sustainable in the long term and are already developed,” said John McKillop, managing director of Clyde Agriculture.

The company owns 165,000 hectares of farmland in eastern Australia, McKillop said.

While land in developed countries is more expensive, the cost of building infrastructure in developing countries can quickly make cheap land look pricey, analysts said.

“Many people think that land in Africa is cheap but it’s not because you have to invest in infrastructure which is not there so costs around $1,500-$2,000 per hectare,” said Miro chief executive Oliver Barnes.

Foreign land acquisitions have provoked opposition from some sectors and from farmers in developing nations.

Buying land in countries that can barely feed themselves and exporting produce from it has exposed investors to popular unrest and political disapproval in their target countries in the developing world.

Pakistan and Iraq are in the process of finalizing laws that would govern long-term foreign land leases. Both countries have conditions where investors have to share a percentage of the produce with the local market.

Changes in legislation combined with political upheaval in target countries have made farmland in the developing world less of a magnet for Gulf cash.

“Investing in developing countries was attractive in the beginning, but we just came to a point where laws and governments are changing overnight and it was just not a secure option,” said a UAE-based investor who spoke on condition of anonymity.

Bunge Seeks Investors For Brazil Land Fund

Global agribusiness and food company Bunge Ltd. is gauging investor interest for the launch of an investment fund that would buy land in Brazil to take advantage of demand for sugar and sugar-based ethanol, the company’s chief financial officer said May 19.

The offering would build on Bunge’s expanding presence in the sugar industry in Brazil and is one of many new investment vehicles by a range of companies and investment groups that are funnelling capital into global agriculture.

“We’ve been out in the market gauging investor appetite,” said Bunge chief financial officer Jacqualyn Fouse. “Depending on that appetite we’ll figure out what the size of it might be and when it could actually get kicked off. It is a pretty active project but it is not up and running yet.”

Fouse said investor interest in farmland ownership appeared to be growing, and Bunge was aiming to draw more than $100 million in investor dollars to its land fund.

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Food prices have risen sharply over the past year, prompting governments and private sector firms in the Middle East to look into ways of securing supplies, as most of the food in the region is imported.

“We have signed a long-term lease contract with the government to lease 700,000 (hectares) in the south of Morocco and we will be investing 30 million euros (US$44.63 million),” said Abderrahim Harra, managing director of Tiris Euro Arab (TEA), an investment firm based in Abu Dhabi, capital of the United Arab Emirates.

The land is located near the southwestern town of Guelmim and crops including citrus and olives will be grown, Nagi Al Musaabi, CEO of TEA, told Reuters on the sidelines of an investment conference here.

“The produce will be exported to the Middle East and Europe,” he added, declining to give further details on the start date of the project.

In order to attract foreign investments into the agricultural sector the Moroccan government is willing to be very flexible with its terms on the farmland deals, Ahmed Al-Houti, head of the Regional Investment Centre for Investment in the kingdom’s central region of Tadla Azilal, said.

“The investors can keep 100 per cent of the produce and export it, all we are asking for is for them to invest in our sector and create employment for our people,” he said on the sidelines of the investment conference.

The Tadla Azilal region known for its fertile soil has around 500,000 hectares to offer to Gulf investors wishing to secure food supplies, Al Houti said.

“Around 190,000 hectares of this land are already irrigated but the rest is not so additional investments have to be made.”

Gulf countries, mainly reliant on food imports, have increased efforts over the last year to buy or lease land in developing nations to secure food supplies.

So far foreign investors have acquired some 15 million to 20 million hectares (37 million to 49 million acres) of farmland in developing countries since 2006, according to the International Food Policy Research Institute.

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“Already we have received a lot of interest from the UAE to invest in Ukraine’s agriculture sector, and we are offering all kinds of projects such as leasing of 100,000 hectares of land to the creation of animal farms with 3,000 cows.”

AUnited Arab Emirates delegation plans to visit Ukraine to look at opportunities to lease farmland for food security, Ukraine President Viktor Yushchenko told Reuters.

Gulf countries, mainly reliant on food imports, have increased efforts over the last year to buy or lease land in developing nations to secure food supplies.

“I have agreed with the president of the UAE that an official delegation will be coming to Ukraine in two weeks’ time to look at opportunities of investing in the agriculture sector,” Viktor Yushchenko told Reuters during a visit to UAE capital Abu Dhabi the week of Nov. 16.

He did not say how much land the UAE was seeking.

Around 40 per cent of the world’s fertile black soil areas are in Ukraine, and foreign investment is needed to develop the sector, Yushchenko said.

Ukraine’s Agriculture Minister Yuri Melnyk said the UAE delegation would be shown opportunities for growing crops such as wheat, barley, maize and sunflower oil.

“Already we have received a lot of interest from the UAE to invest in Ukraine’s agriculture sector, and we are offering all kinds of projects such as leasing of 100,000 hectares of land to the creation of animal farms with 3,000 cows,” he added.

Food prices have risen sharply over the past year, prompting government and private sector firms in the Middle East to look into ways of securing supplies, as most of the food in the region is imported.

A joint venture between Pharos Financial Group, a fund management firm based in Dubai, and Miro Holdings International recently said they planned to launch a US$350-million fund by the end of the year, and aim to acquire 50,000 hectares of land in Romania.

In October, Qatar’s Hassad Food said it was eyeing a stake in Russia’s grain-processing firm PAVA.

Yushchenko also said that to strengthen diplomatic ties between the two countries and boost economic activities the UAE had agreed to open an embassy in Ukraine by next year.

“There was a gap in the relations, so with the opening of the embassy during the first half of the year we will have closer ties with the UAE,” he said.

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Gulf countries, mainly reliant on food imports, have increased efforts over the last year to buy or lease land in developing nations to secure food supplies.

The fund is a joint venture between Pharos Financial Group, a fund management firm based in Dubai and London-based Miro Holdings International, which specializes in agriculture assets management.

“The fund will be launched by the end of the year and will be marketed next week in the Gulf and Europe,” Peter Halloran, chief executive of Pharos Financial Group told Reuters in a telephone interview.

The fund will target land acquisitions in Eastern Europe, the CIS region and Africa, Oliver Barnes, chief executive of Miro said. “We have a team out in Romania right now that is looking at areas of land that we could potentially develop… we are looking at acquiring an area of around 50,000 hectares there.”

Romania now offers foreign investors the right to own land, said Barnes, adding that neighbouring Moldova is also close to granting foreign investors the same rights.

“Much of the land there is not producing to its full potential because of lack of capital and technology… we can easily raise production of a hectare from two tonnes of wheat to five,” said Barnes.

Crops from Eastern Europe will be mainly sold to the Middle East while from land acquired in Africa the crops will be sold domestically, Barnes said.

Food prices have risen sharply over the past year, prompting government and private sector firms in the Middle East to look into ways of securing supplies, as the majority of the food in the region is imported.

“The rising population in the region and the increased need to secure food supplies has backed the launch of this fund as agriculture is now viewed as a strategic asset,” said Pharos’ Halloran.

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Traders have been urging managers of the Dubai Gold and Commodities Exchange to list pulses – such as peas, beans, lentils and chickpeas – since 2005, said Sudhakar Tomar, managing director of Hakan Agro DMCC, one of the leading food commodities trading company in the Gulf region.

“I think with the current uncertain economic climate the exchange is wary of introducing new products to the listings, but right now producing animal protein has become very costly and we have to encourage the alternatives,” Tomar said in an interview.

“Producing animal protein requires a lot of energy and at this time we have to look at ways to cut back on all these extra costs, so shifting to consuming pulses is a solution,” he said, adding that about 14 kilograms of yellow corn are needed to produce just one kilogram of chicken.

Some 60 million tonnes of pulses are produced every year globally, but only a sixth of that amount is listed on futures exchanges – and when a commodity is not listed it tends to be marginalized, Tomar said.

“The cheapest animal protein is chicken which is $1,200 per tonne, while the cheapest pulse, which is yellow peas, is only one-fifth of that price,” he added.

But pulses are not yet a popular dinner choice in the Gulf region.

Total food imports to the region were $12 billion last year and some 75 per cent of that was animal protein, Tomar said.

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