InvestIdeas

Whole Foods (Nasdaq: WFM) is a major buyer and financer of vertically farmed produce. Its Local Producer Loan Program has lent tens of millions of dollars to local farming projects. And for the last few years, many of those projects have been urban and indoors.

Then there’s Scotts Miracle-Gro (NYSE: SMG), perhaps the nation’s most prominent gardening supply company. Almost 10% of Scotts’ revenue comes from its hydroponic equipment division. That has given the company an important stake in two investing trends: marijuana production and vertical farming.

In 2000, China imported 10 million tonnes of soya beans. Today, imports have risen to 80 million tonnes – about 40 per cent of the world’s soya trade – and by 2025 it is expected to be 106 million.

In the process, soya has overtaken maize, wheat and rice as the world’s most traded food commodity.

As the share of the world’s population with insufficient food supply has fallen from 52 per cent in 1965 to 3 per cent in 2005, most gains have come not through improved food production at home and self-sufficiency, but through increased trade; nearly 1 billion people worldwide now rely on international trade to meet their food needs.

The world’s two most crucial choke points are not an immediate source of stress – the Panama Canal and the Malacca Strait.

This in part explains Chinese efforts to build a second channel linking the Atlantic and the Pacific through Nicaragua, and its funding of the Kra Canal linking the South China Sea with the Indian Ocean across Thailand.

Three choke points concentrate on linking the Indian Ocean to the Mediterranean – the Suez Canal, Bab-al Mandab and the Strait of Hormuz.

The Chatham House team is just as concerned about inland and coastal choke points – the most important of which sit in the southern US, the “Cerrado” region in the south of Brazil and around the Black Sea. Apparently, these three account for 53 per cent of global exports of wheat, rice, maize and soya beans.

Inland waterways converging on the Mississippi carry about 60 per cent of US exports of the four crops (which account for 13 per cent of worldwide exports) to the sea, primarily to the Gulf Coast ports like Baton Rouge and New Orleans.

In Brazil, four ports on the southeastern coastline are responsible for nearly a quarter of global soya bean exports.

About 60 per cent of Russian and Ukrainian wheat exports (12 per cent of the global total, and growing fast) depend on rail to reach the Black Sea, then go onwards through the Turkish Straits past Istanbul and into the Mediterranean.

Fertiliser costs soared this year amid rising demand and lower supply, as record natural gas and coal prices triggered output cuts in the energy-intensive fertiliser sector.

Urea surged more than 200% this year, while diammonium phosphate (DAP) prices have nearly doubled.

European, North American and North Asian farmers all need to step up purchases ahead of spring planting, while key producers China, Russia and Egypt have curbed exports to ensure domestic supplies.