Feeding Growth

A consortium of Arab nations are pooling $2 billion for securing future food supplies. The yet-to-be-named holding company will take funds from Arab government donations and “buy listed and unlisted food companies in the Middle East and Africa,” the fund’s overseer — Arab Authority for Agricultural Investment and Development — told Reuters over the weekend. Thumbing through the details, it seems like a complicated system of money exchange and investment, but you get the idea… the Middle East is beginning to acknowledge that it can’t feed it’s booming growth – literally.

“We’ve eaten very well on this trip — plenty of fresh fruits and meats and cuisine from all over the world,” says Chris Mayer, who spent all of last week touring the United Arab Emirates for investment opportunities. “In fact, the UAE imports 85% of its food. It will need a lot more food to meet demand over time. Rising populations and increasing per capita consumption guarantee it. As net importers of food — and having scarce water and agricultural resources — this is particularly important to the Middle East.

“A similar story exists in India and China, also big markets with many mouths to feed. For these reasons, it’s hard not to like the fertilizer companies long term. In particular, the potash producers are in the catbird seat. Quality potash mines are hard-to-produce and hard-to-find assets.

“It’s telling that Mosaic, the No. 2 potash producer, reported a 91% drop in earnings last week and widely missed Wall Street’s expectations, but the stock barely moved. The worst news is baked in the prices of the fertilizer stocks… they should be a good place to be for the next several years.”

The Daily Reckoning