Agriculture in South america vs Africa - Comparison on key parameters


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A few slides comparing potential for agriculture in Latin America (esp Mercosur countries - Brazil, Argentina, Uruguay, Paraguay) vs. Africa (esp East Africa from Ethiopia/Sudan down to Mozambique) - Latin America is an immediate opportunity with less sociopolitical risk, more water availability per capita better infrastructure in silos, freight and storage while Africa is an opportunity that will take 10 to 20 years to play out.

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  • Will feed more people in next 40 years then all of history
  • We can’t ignore politics; how many farmers and people living from farming activities, and what are their perceptions is very important. The bigger the electoral base is in farming and rural areas, the more sensitive will the ‘foreign land-holder issue’ become. The bigger the small farmer electoral base is, higher is the probability of agriculture-related populist measures – like land appropriation/African Singurs coming further down the road. And Africa with population growth, rural populatin is projected to increase in the coming decades
  • Agriculture is a water-based business. Agriculture activity is also the biggest water consumer in the world. Agricultural activities affect water sources, either because of its use, or when uncontrolled, through contamination, etc. The lowest the access to water the population has today, the bigger the problems will be in the future as large-scale agriculture expands. Note that Uruguay, Argentina, Brazil and Paraguay have these good indicators currently, after already being agriculture powerhouses; for most African countries these indicators are their starting points and will decrease; also due to climate change. Africa is expected to be the worst hit from climate change
  • Growing population adds ‘pressure’ to the different scenarios. Depending on starting point (hectares per capita, poverty, % of rural population, access to water, etc.), growing population might affect today’s sustainability of a policy or a project. Large-scale agriculture displaces high concentrations of rural population out of the fields, unless governments have clear and executable plans to manage this, high population growths might become time-bombs for agriculture investors.
  • Agriculture in South america vs Africa - Comparison on key parameters

    1. 1. Demand side – India will become a net importer of food and grains 215m Source: WorldwatchInstitute.
    2. 2. India – Projected Supply/Demand Gap Source: Surabhi Mittal, ICRIER
    3. 3. The Water Perspective We must always keep in mind that agriculture is a water based business. Without this scarce resource there is no agriculture at all. Water availability is key to this business. Projected global water consumption is tightly related to producing grains and food in general. So, what is the current and projected water situations both in Africa and South America? See UNEP/GRID Arendal Maps and Graphics Library. 2009. Trends in global water use by sector.
    4. 4. The Water Perspective Source: International Water Management Institute analysis done for the Comprehensive Assessment of Water Management in Agriculture using the Waterism model; chapter 2. See UNEP/GRID Arendal Maps and Graphics Library, Areas of physical and economic water scarcity,
    5. 5. Operational Revenues: Crop Yields Anatomy of a successful case: Argentina Taking yields to full internationally competitive standards, require important local R&D efforts. As seen on the graph to the right (above), about 100 varieties are registered per year (in one decade that means more than 1000 varieties). Each tackle very specific issues not only at country level but at region level (212 of these ‘varieties’ are soybean). We can also see the importance of local R&D in this process; on average about 60% of registration are originated from local R&D. Another interesting aspect to note is that the international push really started during the 90’s, when the Argentinean agriculture scenario started growing at impressive rates and so there was an interesting market for international players. It’s difficult to visualize the top leading international seed and R&D players really committing resources in the amounts required to produce agro leaps in Africa, until the market is really attractive, their sense of security for their patents is strong, etc. International players will probably do something, as it will look nice in their marketing materials and ‘social responsibility’ claims, but without the local knowledge and scientific capabilities, growth in yields will be very slow. A typical seed project in South America takes between 7 to 10 years to become commercial, and this is starting with the infrastructure, resources, scientists, long-time experience, extensive knowledge base and germplasm banks, etc. all in place. In many African countries, this process is starting from scratch. We are probably looking at a 15 to 20 year lag. With international cooperation and cross country agreements, maybe it can be shortened to a 10 - 15 year, not much more than that.
    6. 6. Conclusions on Crop Yields <ul><li>Large scale agriculture as a business requires much more than just “good land” and “water / rain” availability. These are necessary conditions, but not even close to enough. </li></ul><ul><li>Reaching international competitive yields in Africa will take at least 10 to 15 years of serious R&D and important volumes of investments. </li></ul><ul><li>Simply importing seeds doesn’t make the cut as we have seen based on successful experiences in South America. </li></ul><ul><li>For the purpose of this report and given the above, when we say ‘South America’, we are referring to Argentina, Brazil, Paraguay and Uruguay . </li></ul><ul><li>For the purpose of this report and given the considerations above, when we say ‘Africa’ we are referring to Angola, Congo, Ethiopia, Kenya, Madagascar, Mozambique, Sudan, Tanzania, Zambia and Zimbabwe . There are some other countries in Africa promoting this method, but given their land extensions and potential or lack of information, they have not been considered; nevertheless, the conclusions might well apply for all of them. </li></ul>
    7. 7. News Releases from Top Agriculture Seed Providers Syngenta and Embrapa establish multi-crop partnership to advance solutions for Brazilian growers. Collaboration between Syngenta and IAC (Sao, Paulo - Brazil) accelerates sugar cane Research and Development activities. Syngenta receives approval for new corn technologies in Argentina Syngenta to develop high-sugar-content technology in cane, Sao Paulo - Syngenta Latin America. Syngenta receives approval for new corn technologies in Brazil Syngenta to acquire Monsanto’s hybrid sunflower seeds activities - further strengthening its leading sunflower business position in Europe and Latin America. Syngenta Licenses Chromatin Gene Stacking Technology for Sugar cane (“which will give the a leading position in Brazil”) Syngenta acquires Argentine seeds company SPS April 28, 2010 Feb 08, 2010 Dec 22, 2009 Dec 16, 2009 Nov 13, 2009 Syngenta CEO expresses commitment to bringing technology and agronomic knowledge to African farmers. Aug 25, 2009 Aug 06, 2009 Jun 26, 2009 Nov 10, 2008 Source: Syngenta Global Media Releases: May 31, 2010 10:25 (GMT-3) <ul><li>9 out a total of 50 press releases talk about South America (concrete actions and achievements). </li></ul><ul><li>1 press release talks about Africa (a forward looking statement). </li></ul>
    8. 8. The Social Perspective Political and Freedom Index 2009 0-2 Free Countries 2-5 Relative Freedom 5-7 No Freedom
    9. 9. The Social Perspective
    10. 10. The Social Perspective
    11. 11. The Social Perspective Contract and Title Survival Risk Map <ul><li>Our company developed this map to asses title and lease contact security based on the following assumptions: </li></ul><ul><li>Very few contracts, especially with governments, survive long periods (20+ years) in emerging markets (statement generally valid both for Africa and South America). </li></ul><ul><li>The chances of survival increase when these contracts are in areas that are not highly sensitive to the general electoral base – vote bank of the country. </li></ul><ul><li>The higher the amount of population that lives in rural areas as farmers, the more sensitive is the ‘land issue’, as it applies to foreigners, and higher are the chances that it will be used by politicians, extremists or power groups to seek political benefits and nullify existing contracts. </li></ul><ul><li>The lower the perceived legitimacy of the government, the higher the threat to titles, contracts and laws that were originated by that government. </li></ul>Relative good protection by laws and the judicial system Somewhat protected by laws and the judicial system Low to very low protection by laws and the judicial system % of Rural Population Political Stability Index And if things go wrong? : About the Map:
    12. 12. The Land Ownership Risk Map and some Emblematic Cases: Africa vs South America ZIMBABWE: 70% Rural Population Low development indexes High Political instability = Almost all farms owned by “white” people have been confiscated since 2000. MADAGASCAR: 75% Rural Population Medium Political instability Daewoo announced a big farmland lease agreement at the end of 2008. = Immediate scandal and popular uprising, the deal was terminated. PARAGUAY: 40% Rural Population Low development indexes Medium Political instability President Lugo won election, among electoral campaign proposals was an important land reform. = A law (not very radical) on this topic has been presented but has been stopped in parliament given that his party hasn’t got majority in congress. ARGENTINA I: 8% Rural Population Relative good development index High political instability in 2001 (big economic crisis, government was out-thrown by social up-rise, 5 different presidents in 20 months.) = Not once throughout the turmoil the topic of big farms or foreign investors in land appeared. ARGENTINA II: The government needing additional funds, planned to increase taxes on some crops to farmers, the strategy to sell its project was talking about large land tenants, big groups in farming, etc. = Not only the bill was stopped in parliament, but there were public demonstrations in urban areas supporting the farmers.
    13. 13. Risk of ‘African Singurs’ – from rural population displaced from large-scale agriculture
    14. 14. In Africa, risk of ‘Singurs’ from population growth; favorable/cheap land leases are usually granted by governments with little political legitimacy; so risk of being overturned later Source: UN Population Database Population growth (in millions) 2005 2025 2050 2005 2025 2050 Argentina 39 46 51 Ethiopia 75 120 174 Brazil 186 214 218 Kenya 36 58 85 Uruguay 3 4 4 Tanzania 39 67 109 Paraguay 6 8 10 Madagascar 18 28 43 Mozambique 21 32 44 Senegal 57 91 133 Sudan 39 57 76
    15. 15. Population density (population per sq. km) Source: UN Population Database Year 2005 2025 2050 Argentina 14 17 18 Brazil 22 27 30 Uruguay 19 20 21 Paraguay 15 20 24 India 345 440 504 Ethiopia 68 109 157 Kenya 62 99 147 Tanzania 41 71 116 Madagascar Mozambique 26 39 55 Sudan 15 23 30
    16. 16. Some other Indicators that might affect the initial ‘equilibrium’ in the future
    17. 17. Some other Indicators that might affect the initial ‘equilibrium’ in the future
    18. 18. South America vs Africa Brazil Ethiopia
    19. 19. Also less water per capita in Africa compared to South America Source: UN Aquastat TARWR/ m3/percapita/year Argentina 20,940 Ethiopia 1,680 Brazil 45,470 Kenya 930 Uruguay 40,420 Tanzania 2,420 Paraguay 55,830 Madagascar 18,830 India 1,750 Mozambique 11,320 Sudan 1,880
    20. 20. South America is an immediate opportunity South America Africa Buy/Lease Land Yes No (lease only) Service Providers (planting/spraying etc.) Yes No Qualified Manpower Yes No Political Risk (low populations, democracies, corruption etc.) Low High Tested high yield crop/seed varieties Yes No
    21. 21. Regarding Almost “Free land” in Africa: Maintaing a gift elephant is not free Note: Numbers based on median Latin American land conversion rates to convert raw land to agriculture ready land. Africa figures could be higher/ Making improvements on leased land is like putting in new brakes, clutch and tyres on a rental car
    22. 22. Other South American advantages for Indian investors
    23. 26. We are at your service!