Commodities Trade in the Atlantic Space

I have just returned from the Atlantic Dialogues conference 2014 that has been organized by the German Marshall Fund and the OCP Policy Center.

In terms of food security issues it was quite interesting that considerable know-how transfer is taking place between Brazil and Sub-Saharan Africa and that Morocco tries to position itself as fertilizer provider of choice to both agricultural regions. (On this issue also see my recent article in Third World Quarterly about Mining Strategies in the MENA).

The Atlantic Dialogues conference is in its third year now and adds a south-south dimension to the notion of Atlantic Space. This year a conference volume has been published that can be downloaded here.

This chart in my article about the transatlantic trade in agricultural and mineral commodities highlights some interesting facts.

The following conclusions can be drawn for the transatlantic trade in commodities:

  • Mineral fuels dominate the global trade of commodities, the Atlantic Space is no exception.
  • No country in the word is energy independent. There is a varied trade of refined products besides the trade in mineral fuels. Some crude oil exporters like Nigeria, Angola, Mexico, and Brazil are net importers of such refined products. Net importers of crude oil like the United States and the EU, on the other hand, are net exporters of refined petroleum products.
  • China has developed into a major importer of mineral fuels, oil seeds, ores, and precious metals from Africa, Latin America and the Caribbean, and North America. Yet despite this widely publicized rise of China, the Atlantic trade in commodities is still a dominant factor in global comparison.
  • The transatlantic trade ties in commodities are particularly close between North America and LAC, on the one hand and between Europe and Africa on the other hand. Trading relations between North America and Africa and between the EU and LAC are also substantial. The focus of this North-South trade is on mineral fuels, ores, precious metals, oil seeds, and tropical agricultural products like cocoa, coffee, and fruit. There is not only a lively trade of refined products from North America and the EU to Africa and LAC, but also between the two northern blocs of the Atlantic Space.
  • In comparison, South-South trading relations lag behind in the Atlantic Space. However, because of its underdeveloped agricultural potential, Africa is a major importer of cereals and sugars, which partly come from LAC, and Morocco has developed into a major supplier of fertilizers to Brazil.

Al-Dahra Land Deal in Egypt Declared Illegal

An Egyptian court has declared a 100,000 feddan (43,000ha) land acquisition by Abu Dhabi based Al-Dhara illegal.

The transaction happened in 2008 and Al-Dahra anticipated to invest $500 million in the southern Toshka Valley where land has been reclaimed from the desert and is supposed to be irrigated with water from the Nile, which is transported via canals to the project area.

Al-Dhara would lose its acquired land except for a paltry 100 feddans. Something similar happened to Saudi Arabia’s Kingdom Holding in 2011 when it lost most of its land in the Toshka Valley that it had acquired in 1998.

The ruling came after  an anti-corruption case against the former Egyptian Minister of Agriculture Yousef Wali. Wali was also Deputy Prime Minister and General Secretary of the ruling NDP before he was stripped of his official positions in 2004 already under another corruption charge. As a large landowner he used to be a driving force of the Mubarak’s regime drive at economic liberalization.

The Toshka valley project’s diversion of water from the actual Nile bassin is regarded critically by southern riparians like Ethiopia. The Egyptian government hopes to cultivate wheat in the valley as part of its current program for wheat self-sufficiency. However, the  salty soils and the hot climate are hardly suitable for wheat cultivation.

For Gulf countries the examples of Al-Dahra and Kingdom Holding show the risks of legal uncertainties and highlights the importance of fair and transparent deals. Reliance on backdoor deals with corrupt regime representatives can backfire.

The preference of Gulf countries for developed agro-markets like Australia or Argentina will likely be reinforced by these developments.

Increasing Gulf LATAM Ties

Interesting article in the FT about the increasing ties between the Gulf and Latin America. Agriculture ranks high beside investments in mining and other companies.

Al Gharrafa, a subsidiary of state owned Qatar Holding now holds about 10 percent of the shares of Adecoagra. The company has investments in Brazil, Argentina and Uruguay and Pampas Humedas, an affiliated company of US billionaire George Soros is a major shareholder.

Such investments are part of a larger trend. If Gulf countries actually put money on the table and not just announce investments it is rather in developed agro-markets and in partnership with experienced local partners. In contrast investments in risky developing countries like Sudan have not materialized in many cases.

As Brazil and other developed agro-exporters like Thailand or Ukraine have put limits on foreign land ownership to keep cash producing assets national, partnerships are also the vehicle of choice to participate in their farming operations.

Saudi Dairy Company Almarai Buys Argentine Firm

Saudi Arabia’s Almarai Co., the Gulf’s biggest dairy firm by market value, has acquired Argentine Fondomonte S.A. for $83 million.

Fondomonte has three farms totaling 12,306 hectares which focus on the production of corn and soy beans. Almarai is interested in securing feedstock for its dairy and poultry operations.

The deal is in line with recent trends: For real Gulf agro-investments rather take off in established food exporting countries like Brazil or Australia that have the infrastructure, the track record and the institutional set ups to actually deliver food supplies. Investments in developing countries like Sudan or Pakistan are more speculative in comparison and have been often rather announced than implemented.