Tag Archives: political
Attractive Opportunities in Agriculture: Steve Yuzpe
THURSDAY, JUNE 27, 2013 Henry Bonner Attractive Opportunities in Agriculture: Steve Yuzpe Steve Yuzpe joined Sprott Resource Corp. in 2009 as Chief Financial Officer. Sprott Resource Corp., a publically-listed private equity firm, manages a portfolio of investments in the natural resources sector, including a large allocation to agriculture. “Food production is a very interesting area to be in right now, because the case for higher food prices around the world is very compelling. The need for food security, the effects of rising populations, water scarcity and climate change, and the need for inflation-protected assets all make the set-up for agriculture very compelling right now. There are opportunities in the sector that should offer strong risk-adjusted returns.” Despite its attractiveness, the ability to enter the agricultural sector is quite restricted to individual and retail investors, says Steve. On a relative basis, very few investment opportunities are publicly available. Those that can enter the space through private investments – such as large investment funds – have a definite advantage by having access to a significantly larger investment universe. “In addition to the typical long-term supply and demand trends, there are three agro-economic factors that underlie the bull case for agriculture. Firstly, the sector should provide an inflation-protected asset for investors concerned with currency devaluation occurring now. Inflation drives up the costs of all the raw materials involved in food production, processing, storage, transportation, etc. For example, food and energy are over 80% correlated. So if you believe that the prices of these commodities in general and energy specifically could rise, agriculture could provide you with an additional means of protecting against this risk.” “Another major factor is global climate change. Whether or not the change is man-made or a long-term natural cycle is irrelevant. Over the past two decades, average temperatures are rising and weather conditions have become increasingly volatile, which creates a lot of uncertainty around the productivity of existing farmland. This uncertainty can have a huge impact on crop prices, as evidenced by the devastating droughts in the U.S., Russia, and India in 2012. There seems to have been a dramatic weather event in major crop producing areas in each of the last five years.” Steve believes governments will continue to implement policies to secure inexpensive food for domestic populations in response to the political upheaval that high food prices can cause. “In 2010, the Russian government imposed export restrictions on wheat. Argentina did the same thing in late 2012 and early 2013, to secure the supply for their constituency.” Meanwhile, food supply is also threatened by the reduction of existing available farmland through pollution, urbanization, soil degradation, and water scarcity, says Steve. Putting new resources into production could be challenging and costly. “There is available arable land that isn’t producing in Brazil, Russia and Kazakhstan. Most of the land is either of marginal utility, or is located in remote regions, adding transportation to the cost of bringing production to market. In addition, it takes years to convert the land into arable farmland, with heavy input costs for pesticides, fertilizers, etc. So these types of projects aren’t about to bring down the price of food. In fact, they would only be economical in a global environment of food shortages, when it’s better to have high-priced food than no food.” “In agriculture, you have to take a long-term view. We believe that the global macro-economic picture is on our side in this area. Global populations will continue to grow; the amount of cultivatable farmland per person is being squeezed down. We believe that this create opportunities for our investment portfolio over the long term.” Steve Yuzpe has 15 years of experience with financial administration management in public and private corporations. Sprott Resource Corp .is a Canadian-based company, the primary purpose of which is to invest and operate natural resource projects. Through acquisitions, joint ventures and other investments,Sprott Resource Corp.seeks to provide its shareholders with exposure to the natural resource sector for the purposes of capital appreciation and real wealth preservation. Continue reading
Greek Markets Rattled By Political Disarray
http://www.ft.com/cms/s/0/7157a3f8-da54-11e2-a237-00144feab7de.html#ixzz2WqkGfnWs June 21, 2013 10:43 am Greek markets rattled by political disarray By Robin Wigglesworth Greek bond yields have climbed sharply as investors fret over domestic political uncertainty and an impasse between the country’s troika of official sector lenders. The benchmark 10-year bond yield of Greece rose 75 basis points to 11.6 per cent by late morning in London, while the Athens stock exchange index fell 2.9 per cent to its lowest level since early April. Greece’s small Democratic Left party could pull out of the government coalition headed by premier Antonis Samaras after the collapse of talks on resuming state television broadcasts. The abrupt shutdown of broadcaster ERT last week angered the Democratic Left’s members of parliament and caused consternation among Greece’s austerity-fatigued population. Mr Samaras said that he was determined to avoid early elections despite the row. Global markets have been rattled by the US Federal Reserve’s indication that it will start to reduce its bond-buying programme this year and end it in 2014, but most bond and stock markets regained some of their footing on Friday. In contrast, Greek bond yields have continued their ascent. Investor sentiment towards Greece is not helped by uncertainty over how to plug a funding gap in the country’s bailout programme. The FT reported on Thursday that the International Monetary Fund might suspend aid to Greece next month unless the eurozone stepped in. If the current review of the programme “is concluded by the end of July, as expected, no financing problems will arise because the programme is financed till end-July 2014”, Gerry Rice, an IMF spokesman, said in a statement. Mr Samaras’s New Democracy party and its Pasok ally jointly have 153 deputies, a slender majority in the 300-member parliament. But the departure of the Democratic Left would be a blow to a government that still has to impose deep public spending cuts and oversee a large privatisation programme. Greek bond yields have tumbled for much of the past year as hedge funds bet the debts will be spared in another overhaul of Athens’ debt burden – most likely after the German elections later this year. Continue reading
Backloading Is A Temporary Fix, The Emissions Trading Scheme Needs Bolder Reform
Policy Exchange’s Simon Moore makes the case for ambitious carbon market reform based on a demanding 2035 emissions cap By Simon Moore, Policy Exchange 19 Jun 2013 Later today the European Parliament’s Environment Committee will attempt to fix Europe’s flagship decarbonisation policy, the beleaguered Emissions Trading System. The proposal will see some permits (permission to emit a tonne of carbon) withdrawn temporarily from the carbon market. If this sounds familiar, it is because it tried exactly the same thing in April, only to be voted down by the full parliament. The committee has made a few tweaks, but the premise remains unchanged. Unfortunately, the premise is a political fudge masquerading as an important intervention. It tries to prop up the carbon price in the short term without addressing fundamental weaknesses of the current cap-and-trade system. The EU would be better served by turning its attention to fixing the long-term problems afflicting the ETS. If it fails to do so, then the backbone of Europe’s climate policy will remain fractured and Europe will have shown it is not serious about tackling climate change. Getting carbon pricing policy right is an important way to stop pumping more greenhouse gases into the atmosphere. The current scientific consensus argues for cuts in carbon emissions to mitigate risks from dangerous climate change. But many potential responses to climate change are expensive. Only a system that can identify the cheapest low carbon technologies can help keep those costs as low as possible. The ETS, which is designed to cap carbon emissions and then allow technologies to compete, should deliver such an outcome. Like all markets, it may lead to surprising and innovative outcomes. But it should find the cheapest way to a low carbon economy. As long it achieves the carbon cuts expected of it, does it matter whether it is achieved by better insulated homes, new nuclear power stations or wind turbines? And the cheaper the cost of decarbonisation, the more likely it is that the effort is politically sustainable and that other countries, notably the US and China, will follow Europe’s example. In a report we launched this morning, Policy Exchange calls on the EU to radically strengthen the ETS. That means setting an ambitious, carbon target that stretches out to 2035 giving investors clear, long-term direction. It also entails ditching the expensive renewable energy targets that have added unnecessary costs to European energy bills. Moreover, it means establishing a system that can respond to major changes in the economic, political or scientific circumstances. The slack under the current ETS cap has led to the current price having collapsed to €4/tonne, compared to about €20 just three years ago. The “business as usual” case used to set the cap turned out to be highly inaccurate in the wake of the financial crisis. Without any straightforward means of tightening the cap, Europe has resorted to the current highly politicised process for intervention. Recommendations stumble back and forth between the European Commission, Parliament and its committees. Each time it is lurches in a different direction, its political credibility is damaged. As a result, even coal, the most polluting of power sources, is having a mini-renaissance. Our report argues that an independent agency, modelled along the UK’s Committee on Climate Change is imperative if we are to avoid the current chaos. The body would make firm recommendations on when politicians should intervene (with politicians still making the final decisions). It should be set up with clearly defined rules and on a set timetable. Intervention would only be necessary if: macroeconomic circumstances changed significantly (as in the global financial crisis); if progress on an international deal failed (or was more ambitious than expected); or if the climate science changed. Crucially, such a body would not intervene just because the price was lower or higher than expected. If you want a market system, you have to trust the price signal. So long as emissions are being cut sufficiently, low prices should be celebrated. Such an agency would be better placed to navigate between the need to retain stability, giving longer-term investment signals and ensuring that decisions taken about its ambition keeps pace with world events. The EU is now contemplating a package of climate policies for 2030, with separate carbon reduction and renewables targets. The consultation, out only a few weeks ago, suggests a 40 per cent carbon reduction target and a 30 per cent renewable energy target. The Commission should be more ambitious on carbon and ditch the distraction of the renewable target. However, unless it fixes the ETS and trusts market processes to deliver the low carbon economy, all the political posturing in the world will not hide Europe’s empty words. Simon Moore is an environment and energy research fellow at Policy Exchange Continue reading
