Update from AGRA Middle East

Transcription

1 AGRO PULSE Issue 1.2, April 2013 Dear Colleagues, DMCC s efforts to develop Dubai s agro trade took a step forward this month with the creation of the Dubai Food Trade Group. This group came completely independently and has invited DMCC to host and support it. We are starting with a very simple but powerful agenda which is to recognise the potential to grow and develop this industry in Dubai. To do this I would like to invite all industry participants in Dubai to join this great initiative. I expect that in the coming months we will be able to announce exciting new initiatives aimed at improving efficiency in the agro industry we look forward to your suggestions and feedback! Sincerely, Franco Bosoni Director, DMCC Commodity Services Update from AGRA Middle East Food Insecurity in the GCC Forage Trade in the Gulf The GCC imports more than 85% of its food, with emirates like Abu Dhabi importing up to 94% of its food. The import value of food has gone up 18 times from US$ 2 billion in 2002 to US$ 36 billion in 2012, with a potential to reach US$ 89 billion in 2020 based on population growth, global economic stability and unfavourable climate trends. Furthermore, the availability of land and water is set to be halved by In the recently concluded Agra Middle East conference in Dubai, Nicholas Lodge, Managing Partner at Clarity, said, The UAE and Saudi Arabia use around five to six times the amount of water per capita compared to the UK. In addition to that, less than 1% of the total fresh water in the world is available to the region. Furthermore, in the GCC, 80% of the water is used for agriculture, which represents just 2% - 5% of the GDP for the entire region and only produces between 5% - 15% of their food requirements. From 2011 to 2016, the GCC has collectively agreed to invest US$ 100 billion in water desalination projects to increase water used for agriculture, among other things. This is in addition to other solutions such as purchasing land in African countries and providing farmers with the right technologies, infrastructure and inputs, so they can increase food security in the region. According to Business Monitor International (BMI), milk production in Saudi Arabia is expected to increase by 27% by 2016, reaching 2.4 million tonnes of livestock forage imports, if it maintains its current growth rate of dairy and meat production. Home to some of the most advanced dairy farms in the world including the largest vertically integrated dairy company, Almarai Saudi Arabia is a major exporter of dairy derivative products to neighbouring Gulf and Middle East countries. John Lawton, General Manager of the Agricultural Technology Company in Saudi Arabia, said: This export has led the Saudi government to insist that for every litre of milk exported from the Kingdom, an equivalent amount of one kilogram of livestock forage is imported. Already this has significantly increased the importation of alfalfa and other baled forages into Saudi, which has in turn released arable land for the production of other crops. In many ways, because water-intensive crops, including wheat and cereal grains are not encouraged in the long term, the focus has been shifted toward animal production, Lawton continued. This is why the dairy and poultry sectors in the Kingdom are booming. Abu Dhabi is the main import destination of forage in the UAE. In 2011, the total trade (import + export) of forage (Timothy and Alfalfa) in the UAE was 1.3 million tonnes at a value of US$ 452 million. In the same year, imports accounted for approximately 98% of the trade. The top trading countries of the UAE are USA, Spain, Italy, Egypt and Sudan. Of the two commodities, Alfalfa is the most sought after commodity because it has the most protein and an easily digestible fibre. In the UAE, Alfalfa accounted for approximately 98% of the forage trade value.

2 Agro Pulse Issue 1.2, April 2013 Dialogue with Brian Barriskill Supply Chain Director, Al Dahra Al Dahra is a leading player in the forages sector, importing almost 1.3 million metric tonnes of forage a year to supply the UAE market. Al Dahra has also moved into rice and wheat trading and on a smaller scale into date farming in the UAE and Namibia. We have recently invested in olive oil production in Morocco from where we hope to supply the European market in 5 years. Al Dahra s UAE expansion plans are also supported by our new project in the Mina Khalifa port to create a grains and forage hub so we can store products within the country. We are optimistically looking at completing the project in Q but no later than Q What is the biggest challenge for the Agro Sector today? The two main challenges are: 1) Fluctuating commodity prices because of the extreme global climatic conditions (for example floods and drought) which have a profound effect that leads governments to restrict exports e.g. Russia and in Argentina. This has played a huge role in prices going up and down as adverse situations happen unexpectedly. 2) With such market fluctuations speculators are buying and holding on to stocks in anticipation of higher prices and in such situations, demand is artificially increased and with this comes higher prices. At a GCC level, there is a concern with food security and agro commodities are the base raw material for the food line. This is why businesses like ours, in conjunction with the government, are securing their production overseas so they can take themselves out of the market and rely on their own production each year. This is part of their longterm business strategy, so that market volatility and market supply each year becomes less of a factor for our business operations. A GCC joint policy programme would be very helpful in preventing replication of so many policies and to control the price of agro commodities in the long term. What is the future of the animal feed industry? The animal feed market is healthy and will grow because of the population growth that is increasing the demand of food, especially from cattle. Animal feed has been overlooked for many years, but with the growth rate and change in the dietary requirements of China and the Middle Eastern countries; I believe the forage industry will remain buoyant. The feed industry will change in the coming 20 years from being an afterthought to becoming a key industry in the food supply chain. I also believe demand will out strip supply in the next 5 10 years. Are there any gaps in the forage industry that can be filled by the UAE? in the GCC because it is a business that never existed before. In addition, with the learnings the UAE has developed over the past years, it has put the country on the map as one of the leading suppliers in spite of not being a producing country and I see this as a unique opportunity for the country. The supply gap that exists in China can be filled by UAE companies. With the experience these companies have developed by supplying the UAE and GCC market, these companies are in a unique position in the global forage trade. What are your target countries for Alfalfa? Saudi Arabia and China are our focus countries for the Alfalfa sector. The Saudi market will grow because of their very strong dairy market. In addition, they are growing 80% of their forage themselves and facing a water challenge since forage requires very high water content. With Saudi beginning to realise that growing forage is not the best use of its water resource, we believe it will scale back on its production in the coming years and Al Dahra sees this as a huge opportunity in the next 10 years. China is an important market because the Chinese demographics are changing quite rapidly due to their growth in the last 25 years. This has lead to a much richer population with a change in dietary preferences, demanding more expensive meat and dairy products. Enhanced dairy productivity, to cater to this demand, can be met by increasing the quality of the animal forage feed. This needs to be done in China to increase the quality of dairy and meat products. There is an estimated 14 million dairy cattle in China, and each cattle needs about 10kg of forage a day for food, which results in a very lucrative market. Where does Al Dahra import its forage from? We import from the USA, Spain, Egypt, Pakistan, South Africa, France, Italy and Australia. We also re-export some of the import to neighbouring countries. If our clients are close to the producing country we will send it directly from the producing country. The UAE has really had an impact on the trade of forage in

3 Agro Pulse Issue 1.1, April 2013 Commodity Case Study: Tea Consumption Roughly three million tonnes of tea is consumed in the world per year. India leads with a consumption of 6.2 million tonnes of tea; followed by China, England and Japan. Despite the heavy domestic demand in China and India, they lag behind most countries in per capita consumption (0.8 kg each) due to their huge population base. Source: charhai.com The price of tea has witnessed a 4.67% CAGR in the last 10 years. Most recently the price of tea has fallen by 12% since January In Q1 2013, the average price of tea was US$ 319 per kilogramme, which was 6% less than the same period last year. The major increase in the supply of Kenyan tea production has contributed to the global drop of the price of tea. Source: idexmundi.com Tea production and processing on the rise in Kenya Production Tea culture is deeply rooted in China, also popularly known to be the birthplace of tea. It is still the leading producer of tea followed by India, Kenya, Sri Lanka and Turkey. Collectively these countries account for 75% of the tea produced which amounted to 4.52 million tonnes in Tea Producer s Forum Colombo, Sri Lanka, India, Kenya, Indonesia, Malawi and Rwanda have recently announced the formation of the International Tea Producer's Forum. These countries control a large stake in tea production. Sri Lankan Plantation Industries Minister, Mahinda Samarasinghe, said people had been trying to establish such a forum for 80 years. "In that context, what we have just achieved is a historic landmark in the tea industry." Source: BBC Price Source: Food and Agriculture Organisation Kenya is the third largest tea producing and exporting country in the world. The government has taken up new measures to add value to the tea value chain by issuing licenses for four new tea processing and packing factories to be built in Kericho, Bomet and Nakuru counties. Sicily Kariuki, the Managing Director of the Tea Board in Kenya said, The extra processing capacity will be available in the medium term. The four units that will be built are expected to take the official leaf processing capacity of 370m kg in 2012, to cover the 369m kg of production, to beyond the 399m kg record outputs. Kariuki, also believes the value addition will result in higher returns and with the new factories being built, value addition in Kenya will grow more than the current rate of 12%. With an increase in tea prices and favourable weather conditions, 84m kg of tea leaves were picked in the first two months in comparison to 55m kg a year earlier. High tea prices set to spur the increase in production in Sri Lanka Sri Lanka is the world's fourth largest producer of tea and the third top producer of tea in Asia. The tea industry is one of the country's main sources of foreign exchange and a significant source of income for labourers. Tea accounts for 12% of the GDP, generating approximately US$ 700 million annually. Data recently released from the Sri Lanka Tea Board showed the island s production of tea for the first two months of the year increased by 7% from 45.32m kg in In the first quarter of 2013 Sri Lankan tea prices increased by 20% (US$ a tonnes) from US$ a tonne in the previous year. With such high prices, Sri Lanka s tea fund is said to be approximately US$ 23.8 million. The Chairman of Sri Lanka s Tea Board, S.K.L. Obeyesekere, said We urge expeditious use of these monies intended for the promotion of Ceylon Teas in the international markets before teas fade away from the minds of consumers. Source: dailymirror.lk

4 Agro Pulse Issue 1.2, April 2013 Kenya to set up warehouse space in Dubai in 2014 In 2014, Kenya s export promotion council plans to set up a tea warehouse in Dubai in an effort to expand its market in the Asian and Eastern European countries. The new warehouse is intended to take advantage of the DTTC. We have to set up permanent distribution centres to ensure that we maintain the proximity to these markets. It will also serve to authenticate other Kenyan products like coffee in the Asian markets, said chairman Hudson Aluvanze. Besides helping with the country s search for new markets, the warehouse would help Kenya reinforce its presence in traditional tea markets in the region, namely Afghanistan and Pakistan. Up to 75% of Kenya s tea is bought by Pakistan, Egypt, Afghanistan, the UK and Sudan. Dubai Tea Trading Centre at a glance DMCC launched the Dubai Tea Trading Centre (DTTC) in 2005 to facilitate the expansion of the tea trade in accordance with international best practices. DTTC is a dedicated facility offering its members warehousing, blending and packaging solutions. Through this facility, DTTC allows international tea producers and merchants to hold stocks of tea to be readily available to meet the immediate requirements of importers in the Middle East and adjacent regions. This availability is beneficial for both exporters and purchasers, giving them the convenience of obtaining a variety of teas from multiple origins. The Middle East and adjacent regions account for approximately 25% of global tea imports and Dubai is already an important regional centre for tea value-addition and transhipment. Dubai s strategic geographical location between the world s major tea-producing and tea-consuming markets has positioned the emirate as the industry s international gateway for the tea trade. DTTC has expanded its range and reach to process teas from 13 producing countries, including Kenya, India, Sri Lanka, Indonesia, Malawi, Rwanda, Tanzania, Zimbabwe, Ethiopia, Vietnam, Nepal, China and Iran. In keeping with its mandate to further increase the tea trade in and through Dubai, the DTTC also facilitates sales with buyers in the GCC countries, Iran, Iraq, Jordan, Morocco, Pakistan, Afghanistan and the CIS countries and is in the process of expanding its services to other Middle East and European markets. Value Added Services Spread across 23,731 square metres in the Jebel Ali Free Zone, the dedicated DTTC facility offers services across the entire value chain of the tea industry, ranging from tea tasting, storage, blending, packaging, and office space for regional and international tea companies, as well as networking opportunities leading to increased trade. The DTTC ensures the ready availability of a variety of teas from multiple origins to meet the immediate requirements of importers in the Middle East and adjacent regions. Some of the services DTTC provide are: Teabag Packing: DTTC s temperature-controlled tea bag packaging facility has the capacity to pack a variety of tea bags, including both paper envelopes and service types. Loose Tea Packing: DTTC is able to pack from 50 grams to 1 kg of tea on Vertical Form Fill Seal Machines, for both crush, tear and curl teas, (CTC) as well as orthodox/leaf tea varieties. Larger sized packing is also carried out as per client s specific requirements. Blending: DTTC offers blending services through a 2 tonne blending drum system that can carry out blends of both CTC and orthodox/leaf teas. Tea Tasting and Evaluation: DTTC offers inhouse tea tasting and blending expertise to ensure that its members can develop the best product for their customers. The Centre has a centralised tea tasting room provided with tea tasting equipment and staff available to set up tastings. Storage Facilities (Warehousing): The DTTC warehouse has the capacity to store up to 5,000 metric tonnes of bulk teas at any given time. The Centre provides dedicated individual storage space as well as limited free storage to all its members. All consignments are palletised and stored within racks. Office lease: DTTC offers regional and international tea companies the option to lease space within its purpose-built premises. The units vary from approximately 250 square feet to 350 square feet, providing clients with the perfect space solution to their business requirements, as well as a unique clustering benefit of being located alongside other industry participants. Almas Tower Level 2 PO Box: Dubai U.A.E T F commodityservices@dmcc.ae

5 Agro Pulse Issue 1.1, April 2013 Invitation Dubai Food Trade Group Meeting Dubai s agro trade is currently a market of US$ 8 billion and growing. The Dubai Food Trade Group is a group of individuals and corporate who share a common passion for this dynamic industry and are at the heart of its growth. We invite you to our next meeting to help promote Dubai and the Dubai food trade globally. DATE: 7 July, 2013 VENUE: TBA, Al Ras Join us on LinkedIn ?gid= &mostPopular=&trk=tyah Follow us on Twitter - Like us on Facebook -