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  • US warns of food vs fuel wars

    Larry Pope, chief executive of Smithfield Foods, the largest US pork processor, warned delegates of a wave of “real food inflation” just at the time central banks were under pressure to cut interest rates.

    “I think we need to tell the American consumer that [prices] are going up,” he said. “We’re seeing cost increases that we’ve never seen in our business.”

    The comments highlighted one of the conference’s main concerns – that rising agricultural prices have reached a stage at which the impact will be felt not only on fresh food but will also filter through the supply chain and raise the cost of processed food.

    Tom Knutzen, chief executive of Danisco, one of the world’s largest ingredients companies, said rising vegetable oil costs made it more expensive to produce preservatives, colourings and flavourings.

    “Our products are based on vegetable oil. “Our input cost has gone up so we are increasing prices,” he said in an interview in Brussels. He added that preservatives, colourings and flavourings made up only 1-2 per cent of the cost of food but there would be a ripple effect as they were present in almost all the food sold worldwide.

    US agriculture officials forecast that food inflation will rise this year at an annual rate of 3-4 per cent, warning that the risks were skewed to the upside. Last year, food inflation rose 4 per cent, the highest annual rate since 1990.

    Joseph Glauber, the USDA’s chief economist, said in an interview that until now some companies had absorbed the rise in commodities prices, but that trend was about to change.

    He said that wheat prices had previously moved from $3 to $5 a bushel without significant pain for consumers. “But now the wheat price has jumped to nearly $20 a bushel. These large increases will show up [in consumer prices].”

    Some people hope a slowdown in the US or global economy would push down agricultural commodities prices. But Mr Glauber said that would have a limited impact on agriculture commodities prices. “I am more concerned about higher prices than lower prices.”

    However, Simon Johnson, chief economist at the International Monetary Fund, said in an interview that for most agricultural commodities and metal markets the global slowdown would push prices down.

    “The commodities market believes in the decoupling of developing countries’ growth,” Mr Johnson said. “The IMF does not believe in decoupling to that extent.”

    But even if commodities prices do slow down, other forces could still push consumer prices higher, food industry executives said.

    Companies until now have moderated consumer price increases thanks to large inventories and financial hedges in the commodities market futures. But during the course of this year those mitigating factors would vanish, executives said.

    “The final result will be higher prices,” Mr Lapp said. The global economy is “at the beginning of a period in which consumer will face higher food prices”.

    Additional reporting by Andy Bounds in Brussels

    Copyright The Financial Times Limited 2008

  • UN rations food aid

    WFP officials hope the cuts can be avoided, but warned that the agency’s budget requirements were rising by several million dollars a week because of climbing food prices.

    The WFP crisis talks come as the body sees the emergence of a “new area of hunger” in developing countries where even middle-class, urban people are being “priced out of the food market” because of rising food prices.

    The warning suggests that the price jump in agricultural commodities – such as wheat, corn, rice and soyabeans – is having a wider impact than thought, hitting countries that have previously largely escaped hunger.

    “We are seeing a new face of hunger in which people are being priced out of the food market,” said Ms Sheeran.

    Hunger is now “affecting a wide range of countries”, she said, pointing to Indonesia, Yemen and Mexico. “Situations that were previously not urgent – they are now.”

    The main focus of the WFP to date has been to provide aid in areas where food was unavailable. But the programme now faces having to help countries where the price of food, rather than shortages, is the problem.

    Ms Sheeran said that in response to rising food costs, families in developing countries were moving in some cases from three meals a day to just one, or dropping a diverse diet to rely on one staple food.

    In response to increasing food prices, Egypt has widened its food rationing system for the first time in two decades while Pakistan has reintroduced a ration card system that was abandoned in the mid-1980s.

    Countries such as China and Russia are imposing price controls while others, such as Argentina and Vietnam, are enforcing foreign sales taxes or export bans. Importing countries are lowering their tariffs.

    Food prices are rising on a mix of strong demand from developing countries; a rising global population; more frequent floods and droughts caused by climate change; and the biofuel industry’s appetite for grains, analysts say. Soyabean prices on Friday hit an all-time high of $14.22 a bushel while corn prices jumped to a fresh 12-year high of $5.25 a bushel.

    The price of rice and wheat has doubled in the past year while freight costs have also increased sharply on the back of rising fuel prices.

    The world’s poor countries will have to pay 35 per cent more for their cereals imports, taking the total cost to a record $33.1bn (in the year to July 2008, even as their food purchases fall 2 per cent, according to the UN’s Food and Agriculture Organisation.

    The US Department of Agriculture warned this week that high agricultural commodities prices would continue for at least the next two to three years.

    Copyright The Financial Times Limited 2008

  • China and Iran in gas deal

    TEHRAN, Feb 27 (Reuters) – The signing of a contract with China National Offshore Oil Corp (CNOOC) to develop Iran’s northern Pars gas field has been postponed to the "near future", an Iranian official said on Wednesday.

    The deal was first announced in late 2006 but signing it has been delayed in the past. An Oil Ministry news report said on Tuesday the deal was worth $16 billion, lower than the $20 billion previously reported.

    "The contract signing has been postponed to the near future. The reason why it was postponed today was because (Oil Minister Gholamhossein) Nozari could not take part," a spokesman for Pars Oil and Gas Company, told Reuters. He did not elaborate.

    The deal is to be signed between CNOOC, which leads China’s fledgling LNG industry, and Pars Oil and Gas Company. CNOOC is the parent of Hong Kong and New York-listed CNOOC Ltd.

    Iran plans to export the northern Pars production in the form of liquefied natural gas (LNG).

    Northern Pars field contains 80 trillion cubic feet of gas and said each phase of development could have the capacity to produce 1.2 billion cubic feet per day, the Oil Ministry’s news Web site previously reported.

    China has in recent years expanded commercial ties with the Islamic Republic and has been reluctant to impose tough economic sanctions on Iran, China’s third-largest supplier of oil.

    China’s Sinopec Group, parent of Sinopec Corp. , signed a deal in December to develop Iran’s huge Yadavaran oilfield.

    Iran has the world’s second-biggest crude reserves after Saudi Arabia and the second-largest gas reserves behind Russia. Although a major oil exporter, the OPEC member has been slow to expand gas exports because of sanctions and has no LNG plants. (Reporting by Hashem Kalantari; editing by James Jukwey)

  • Off grid solutions for remote poor

    Planners and policy makers have long pondered how best to supply light and power to remote areas of developing countries, where some 1.6 billion people — about a quarter of the world’s population — still live without electricity. The usual solution is to build out centralized power systems, or extend the grid. But such capital-intensive projects present huge challenges for poorer nations, even when foreign aid is involved. On top of servicing debt, "you have to have a system where people pay their bills. You need functional governments," says Russell Sturm, leader of the Sustainable Energy Team at International Finance Corp., the World Bank’s private-sector lending arm.

    New approaches are gaining favor that are inexpensive, safe and don’t rely on big utilities or their grids. Aid agencies, nonprofits, environmentalists and start-ups all are involved in initiatives to promote "off-grid" power-generation using renewable resources and other environmentally friendly technology.

    The United Nations Development Program, for one, is implementing 153 renewable-energy projects around the world with funding totaling some $556 million. The program has awarded $18 million in small grants of up to $50,000 to communities operating about 820 small-scale renewable energy projects. These include solar-powered water desalination in Mauritius; wind energy for water pumping in Egypt; and micro-hydroelectric plants, harnessing the energy of nearby rivers, to electrify homes and schools in the Dominican Republic.

    Elsewhere, Western environmental groups are helping to create off-grid homes, often with electricity
    generated by solar panels or wind turbines.

    Private companies, meanwhile, are interested in the Third World as a potential market for inexpensive, energy-efficient appliances such as solar-powered lights and hand-crank radios. Some are teaming up with nonprofits and government agencies to get their products in the hands of consumers. Cosmos Ignite, for example, charges $40 for its solar-powered MightyLights, which is more cash than most poor Indians usually have on hand. A several-month supply of kerosene would cost about the same, though, and Cosmos Ignite says its lights last for years. That’s why nonprofit microlenders and Indian government agencies are stepping in to help with such purchases.

    In the Philippines, the U.S. Agency for International Development has spearheaded a drive since 2001 to use solar cells and micro-hydro power to electrify hundreds of remote rural communities on the conflict-wracked island of Mindanao. So far, the Alliance for Mindanao Off-grid Renewable Energy, or AMORE, has electrified 413 villages, 320 community centers, 145 schools, and installed 319 streetlights. USAID says the group plans to light up 520 villages by 2009.

    Fighting between Philippine forces and Muslim militant groups, including the Al Qaeda-linked Abu Sayyaf, for years stymied government efforts to expand the island’s electric grid to large areas. At the same time, the widespread darkness gave the militants more room in which to maneuver.

    "Kerosene was hard to get, so the villages weren’t lighted at night," says Calista Downey, the officer of USAID’s Philippine desk. "Abu Sayyaf and other rebel groups moved about in the darkness. Lighted areas were always safer."

    Electricity also has given the local economy a big shot in the arm. Fishermen now have a few more hours of light in which to mend their nets. Markets stay open longer. Children have more light to do their homework. And security has improved. "Perhaps more important than having light, when the villages see their life improving, they’re less likely to give refuge to insurgents," Ms. Downey says.

    AMORE, which comprises USAID, the Philippine government, the Atlanta-based power company Mirant Corp., and local authorities, trains locals to operate the power-generating systems. The locals decide who gets to use the power.

    Initiatives such as AMORE are getting a boost from the big advances now under way in the production of solar-, wind- and hydro-power technology. "The prices for [solar-energy’s] photovoltaic cells and wind turbines keep coming down," says Gordon Weynand, a USAID expert on renewable energy who is based in Washington, D.C.

    That’s also the case with LED technology. While LED products still cost more to produce than conventional lighting, they last longer, produce more light and use very little energy. Long used in automobile rear-window, brake lights, and in the infrared beams of television remote controls, LEDs now are so powerful they can be used to create ambient lighting for a whole room, like the lights Cosmos Ignite makes.

    Mr. Scott, who now lives in London, and who teamed up with Indian entrepreneur Amir Chugh to form Cosmos Ignite, says the company’s MightyLight LED lamp is now three to four times brighter than it was four years ago. "Most other lighting technologies are static, but LEDs will continue to improve," he says. That’s made a big difference to his business model. "We can now offer more light for the same wattage," he says.

    In addition to running on solar power, LEDs can be recharged using hand cranks or pedal power. Freeplay Energy PLC, a London-based company, pioneered a radio operated with a hand crank that has sold well throughout Africa, and it is now applying the same technology to a range of LED lights for the poor.

    There are many small, high-tech start-ups working on the technology, says Mr. Sturm of the World Bank’s IFC. "Refugees from the dot-com bust," he calls them.

    Some of the biggest names in the lighting business are getting interested in this market, too, such as Philips Electronics NV of the Netherlands. In 2005, Philips launched a pilot project in India aimed at bringing affordable, energy-efficient lighting to the poor, using rechargeable, portable lanterns and hand-cranked LED flashlights. Company spokeswoman Santa van der Laarse adds that Philips expects the falling cost of producing LEDs to make such products increasingly affordable for Third World customers over the next few years.

    The IFC is interested in this market as well. It sees its mission as helping to disseminate such products in the developing world by educating consumers and helping the companies stitch together supply chains. Last year it unveiled its Lighting Africa initiative, a plan to help provide inexpensive, safe and clean lighting to 250 million people in sub-Saharan Africa by 2030. As part of that initiative, it launched a competition to design low-cost, environmentally friendly lighting products tailored to the local market: Some 500 lighting companies, suppliers and distributors have expressed an interest, Mr. Sturm says, including big names like Philips, and smaller operators like Cosmos Ignite, too.

    The biggest enemy of off-grid technologies, meanwhile, could be their rapid success. Rising demand is leading to serious shortages of equipment. "It’s rare that you can get photovoltaic cells off the shelf, and on wind turbines you’re sometimes looking at a year’s wait," says USAID’s Mr. Weynand. "It affects all thedonors. You have to get in the queue like everyone else."

    Originally published in The Wall Street Journal , 11 February 2008

  • Seed bank securing plants for future

    Australia’s contribution is so significant because it is home to over 20,000 species, about 10 per cent of the world’s total, and contains one in seven globally-threatened species.

    The 1000th Australian sample was the rare Acacia Pubescens, known as downy or hairy-stemmed wattle, a plant native to western Sydney which has been threatened by the city’s expansion since World War II.

    The scientists do not take just one seed from the Acacia Pubescens and other plants like it.
    The average is 32,000 seeds per collection.

    They are dried and frozen and stored in a nuclear-proof vault bigger than a football pitch 200m beneath the Sussex countryside, 50 km south of London.

    The acacia samples will join seeds from 23,000 other species collected so far from 126 countries in the project administered by the Royal Botanic Gardens at Kew.

    "We don’t just lock the door and forget about them," Dr Smith said.

    "We test them regularly for viability. Some seeds could last for thousands of years, but others aren’t so fortunate."

    Among the less robust are many of Australia’s rainforest plants.

    "Nearly 2000 of our rainforest species have seeds that are sensitive to drying out," said Dr Tim Entwistle, executive director of Sydney’s Botanic Gardens Trust, which now has one-third of NSW flora in its seed bank.

    "We will have to examine other ways of preserving them, such as cryo-storage."

    Like other banks, investors in the Millennium Seed Bank might sometimes make withdrawals.

    The Sussex vault, for example, contains six extinct species from Africa which can be reintroduced.
    Dr Smith said land use remained the biggest threat to the diversity of plants.

    "Clearing of natural vegetation accounts for 20 per cent of carbon emissions – more than the world’s transport emissions – yet we still do it," he said.

    "It’s a political problem – it’s something we could stop tomorrow.

    "I think a moratorium on deforestation is something the next climate change convention may well look for."

    Dr Entwistle said plants affected every aspect of life.

    "The air we breathe, the clothes we wear, the food we eat, the furniture we sit on, there’s no part of your life unaffected by plants," he said.

    "Each one is a Mona Lisa, a unique product of evolution that has taken effectively 3.8 billion years to produce, and if you lose it you may not get it back again.

    "Human beings have been here such a short time, and it’s very courageous tinkering we are involved in.

    "We don’t yet understand what uses we may have for many plants.

    "Why cut off our options?

    Dr Smith is also on a drive for funding to resource the next decade of his seed project to 2020.
    He is, in effect, looking for seed money, with long term growth assured.

  • Green Woolies to change fridges, lights

    ALL new Woolworths supermarkets will conform to stringent environmental standards and most old stores will be upgraded after the success of the company’s pioneer "green supermarket" in Rouse Hill, Sydney.

    Chronic leaking of potent greenhouse gas from supermarket fridges, as well as high energy consumption, led to the changes, Woolworths has confirmed.

    The Natural Refrigerants Transition Board, which has received government funding to examine ways of reducing greenhouse emissions from refrigerants, estimated that leaks from fridges in Woolworths stores nationally would be equivalent to the annual emissions of 240,000 cars.

    Other supermarket chains had similar leakage levels, the board said, but these could be greatly reduced by switching gases.

    Keeping produce cool accounts for 48 per cent of Woolworths’ total carbon emissions, lighting for 21 per cent and air-conditioning 19 per cent, the company said.

    Changes included in new supermarkets will include "cascade" cooling systems for fridges, in which some of the most harmful gases are replaced by the safer carbon dioxide, while better fans and lights would be installed.

    Ben Cubby