AGRO PULSE

Issue 1.1

Dear Colleagues,

It is with great pleasure that we bring you the first Agro newsletter, the latest initiative from the DMCC Commodity
Services team in bringing relevant market news to the Agro community we support in Dubai. The growth and
importance of Agro commodities trading in Dubai is highlighted by the large dependence on food imports in the Gulf
region. This newsletter is intended for those involved in the agro commodities trade wishing to learn and stay
informed about the developments of the local industry. We aim to bring you the latest developments and new
perspectives on Dubais agricultural sector; we hope you enjoy the content and look forward to your feedback.

Sincerely,

Franco Bosoni
Director, DMCC Commodity Services

The UAEs Agro Sector at a glance

UAE Top 5 Agro commodities Produced in the UAE - 2011
900000
During the recent Gulf Food Conference, Shaikha
800000 Production (Int $1000)
Lubna Al Qassimi, UAE Minister of Foreign Trade,
700000 Production (MT)
said The UAE has become a major global hub for
rice, coffee and tea trading, due to its strong 600000
connectivity. She went on to add, About 90% of 500000
the Gulfs food demand is met with imports as 400000
agriculture is restricted due to climatic conditions
300000
and land use restrictions.
200000
A report published by Alpen Capital highlights that 100000
agriculture contributes only 0.9% of the UAEs
0
GDP and only 1% of the UAE land is available for Dates Indigenous Tomatoes Indigenous Indigenous
agriculture in comparison to the UK which uses Camel Meat Chicken Meat Goat Meat
24% of the its land for agriculture. Commodity Source: FAO

Food consumption in the UAE has been growing
at the rate of 12% per year and, within this, the
demand for food staples has increased by 30%,
according to the Ministry of Economy. The
increase is a result of the population growth, influx
of tourists, recovery of the economy and its
prominent position as a re-export hub. Source: Alpen
Capital
In an effort to improve food security, the UAE
government has invested in sustainable food
security projects in the region and abroad
especially in Vietnam, Cambodia, Egypt, Pakistan,
Romania, Sudan and the Americas to safeguard
supplies and against market price fluctuations.
Another strategy that has been used by GCC
countries is stockpiling to build reserves of food;
which requires effective management as well as
appropriate storage facilities.
Farmers in the UAE have also been incentivised to cultivate up
to 81,000 hectares of land; top agro production is highlighted in
the above graph.
The UAE re-exports nearly 50% of imported food products to
other GCC countries as well as Russia, India, Pakistan and
East Africa. According to the Economist Intelligence Unit, in
2010, the UAEs imports totalled US$3.6 billion. This figure is
estimated to rise to US$5.5 billion in 2015 and US$8.4 billion in
2020.
The UAE is one of the biggest re-exporters of rice. In 2010, the
UAE re-exported a total of US$520.8 million, which accounted
for approximately 90% of the worlds re-exports.
According to Dubai Exports, 85.7% of the UAEs re-exported
rice goes to Western Asia. The other markets include Oman,
Nigeria, Zimbabwe, US, Mozambique, Madagascar, Sri Lanka,
South Africa, Zambia, Uganda, Rwanda, Mauritania and
Ethiopia. Source: agrifeeds.org
Agro Pulse Issue 1.1

Tea Price
The price of tea is expected to
remain stable for 2013 and not
reach the highs of 2012
according to an anonymous UK
trader who spoke to The Public
Ledger. The trader also
highlighted if production doesnt
pick up in 2013 from 2012, the
increase in the growth of
population in India and China
would lead to a gap of 100m kg
in tea. However if production in
Kenya picks up this year, the
gap will be closed.

Dubai Softs: This sector represents 37% of Dubais

Dubai has become a value-addition hub and sourcing centre for a
number of Agro commodities. As of 2011, the trade (import and
(Re-export) of the Agro sector was approximately US$6.8 billion,
which was 11% more than the 2010 trade:
Type of Sector Commodities
Softs Coffee, cocoa, sugar, tea
Grains Wheat, corn/maize, barley,
oats, rice
Edible Nuts Almonds, cashew kernels,
desiccated coconut,
pistachios, walnuts
Oilseeds, Oils Soya beans, soya oil,
and Fats sunflower seed, sunflower
seed oil, cottonseed oil,
sesame seed, maize/corn oil,
palm oil, castor oil, olive oil
Pulses Lentils, peas, chickpeas
(Legumes)
Herbs and Pepper, ginger, cumin seed,
Spices
nutmeg, cloves, coriander
total agro commodities trade. Sugar makes up
almost 70% of the Softs category, with tea
making up 29%.
Grains: In 2011, the trade value of grains made
up almost 36% of trade in the agro sector in
2011 Dubai and this accounts for approximately 90%
Value of trade of the grains re-exported to the GCC and Middle
US$2.3 billion East region, with rice accounting for the largest
US$2.1 billion share of re-export.
US$690 million Edible Nuts: The edible nuts category
accounted for almost 12.4% of the agro trade in
Dubai. Almonds represent the highest value
US$525 million
edible nut, making up almost half of the total
trade value within this category.
Oilseeds, Oils and Fats: In 2011 oilseeds, oils
and fats made up less than 9% of Agro trade;
representing approximately US$513 million in
US$473 million
value in 2011; 63% up from 2010.
US$209 million
Pulses: In 2011, lentils were the highest trading
commodity by value in the pulses section,
accounting for almost 73% of the trade in this
segment.

Herbs and Spices in 2011 herbs and spices

accounted for approximately 4% of total agro
trade with pepper as the largest commodity
within the sector with US$111 million trade
value.

For more trade figures please visit:

http://www.dmcc.ae/jltauthority/diamond/industry
-statistics-diamond/
Agro Pulse
Sudhakar Tomar is the Managing Director of Hakan Agro DMCC; the UAEs largest agro-commodities trading
organisation with offices, factories, distribution hubs and farming operations in 30 countries. Hakan Agro is strongly
committed towards making affordable food available to all. On the Corporate Social Responsibility front Hakan Agro
management serves in honorary executive positions of CICILS which is the UN affiliated non profit International
Pulses Trade and Industry Confederation.
What are the biggest challenges for the Agro Sector?
The key challenges in the Agro sector are bridging the
gap between the demand and supply of food and
affordability of transportation and storage. This is in
addition to more specific issues such as the concerns
with liquidity of the futures markets, stability of oil prices,
trade flows and barriers. Erratic weather patterns,
domestic food production and the distribution policies of
major producers to rise above political rhetoric and align
to an internationally accepted commodities 'sharing'
model are yet other issues. At the grassroots level
adoption of farming methods to improve yields,
availability of cheap and diverse crop insurance policies
and enhanced flow of supply side information are
constant challenges.
What are the ongoing concerns for this sector in the
region?
The Middle East & North Africa region makes up only 5%
of the worlds population, yet it consumes more than 20%
of the worlds grain exports. Imports have increased from
30 million tonnes of grain in 1990 to nearly 70 million
tonnes in 2011. Now, imported grain accounts for nearly
60% of regional grain consumption. With very limited
water and arable land and production stagnating, grain
imports are likely to continue rising. Thus far, grain
imports have filled the widening gap between production
and consumption but population growth alone will raise
grain demand in the Middle East to 200 million tonnes by
2050, which is equal to 66% of the worlds current grain
exports. Increased meat consumption would take
demand up even higher.
Issue 1.1
From a trade finance and business perspective this
unique situation will throw open the challenges and
unprecedented opportunities to growers, exporters,
importers, processors and all the components of the
Middle Easts food supply chain. Agriculture growth in
the region will come from both consumption and
production. Prosperity, increased living standards, and
post Arab Spring restructuring of economies will
continue to drive both.
Despite the global uncertainty, has agro
commodities kept their appeal?
In 2012 the overall poor performance of the commodities
index was offset by bull markets in agricultural
commodities and precious metals. The long-term outlook
for the food sector remains very attractive given the
growing structural imbalance between supply and
demand for food products and the nature of food and
agri-business, which is recession resilient and inelastic.
This is why we see lots of dollars chasing direct or
indirect investment opportunities in the agri-sector.
What can you tell us about the Agro sector that we
dont know?
In 2050, as per FAO estimates, we should raise overall
food production by some 70%. Production in the
developing countries would need to go up or they will
have to import 100% more than what they do now. We
need to grow additional three billion tonnes of cereals by
2050, up from todays nearly 2.1 billion tons. We are
therefore faced with multiple challenges that require
immediate investment in agriculture infrastructure in
MENA, Asia and Africa.
Agro Pulse Issue 1.1

Commodity Case Study: Sugar In contrast, sugar consumption in many developed

countries is expected to show little or no growth; driven
The sugar trade in Dubai is of substantial value, by slowing population growth and dietary shifts as a
accounting for US$1.6 billion of trade in 2011, which is result of increasing health awareness.
approximately 25% of the total agro trade in Dubai. With
the largest stand alone sugar refinery in the world Al
Khaleej Sugar Dubai imported 1.4 million tonnes of Changing Trade Flows
sugar in 2011 and exported more than half of that. The
The ethanol mandate passed in EU member states
top trading countries in 2011 were Brazil, India and
outlines that 10% of transport energy is to be obtained
Thailand, accounting for over 95% of the volume of
from renewable sources by 2020. As a result of this
sugar that is imported into Dubai, with Brazil enjoying
mandate the EU is no longer a large exporter of white
the largest share due to long-term contracts with Al
sugar but now a large importer of raw sugar for refining
Khaleej. The top countries sugar is exported to are
and sale in the local market. However white sugar is
within the Middle East and Africa region, with Iraq
expected to bounce back over the coming years as
accounting for 38% of the sugar that is exported.
large refineries in the Middle East and Africa are being
built and are gaining prominence.

Production Brazil is expected to continue to dominate as a leading

The top sugar producers worldwide are Brazil, India and
Thailand; with Brazil as the price setter.
World production of sugar is expected to increase by
50mt by 2020-21 to reach over 209mt. The bulk of the
additional production will come from developing
countries and the burden of growth will still remain with
Brazil. India, the second largest producer, is expected
to boost production to 32mt on average per year.
Thailand is expected to retain its third position with
investment projects in the pipeline to increase
production to 8.7mt by 2020-21. The more developed
economies are expected to experience stagnant or low
growth.
Mt r.s.e.
250
200
150
100
50
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
exporter of sugar as it forecasted to account for over
55% of global trade and over 63% of additional sugar
exports by 2020.
China is expected to become the largest importer of
sugar exceeding imports of the EU, US and the
Russian Federation as a result of rapid economic
growth and urbanisation.
Source: OECD and FAO Secretariats. Link:
http://www.oecd.org/site/oecd-faoagriculturaloutlook/48184295.pdf
Sugar Prices
World sugar prices declined from historical highs in
2010, but remain on an elevated plateau and are
Production
Consumption expected to average higher in real terms by 2020-21
compared with the past decade. The FAO Sugar Price
Index averaged 259 points in February, down 8.6
points (three percent) from January. Prices have
declined for the fourth consecutive month, due to a
relatively large world production surplus.

Source: OECD and FAO Secretariats. Link:

http://www.oecd.org/site/oecd-faoagriculturaloutlook/48184295.pdf

Consumption
FAO has forecasted consumption to grow at 2.2% p.a.
to 2020-21 but down from 2.6% per annum of the
previous 10 years. Developing countries will continue to
experience strong growth in sugar consumption
because of growing income and population.

Almas Tower Level 2 PO Box: 48800 Dubai U.A.E T. +971 4 433 67 11 F. +971 4 375 18 96 commodityservices@dmcc.ae