tag:blogger.com,1999:blog-2335748440449035592.post1902131416165132141..comments2008-03-26T09:37:27.414-04:00TraderMarkhttp://www.blogger.com/profile/06241756200482130281noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-2335748440449035592.post-22019342590187446102008-03-26T09:37:00.000-04:002008-03-26T09:37:00.000-04:00raphael thanks for the translation<BR/><BR/>t,<BR/>really hard to find pure play water or wind plays. Most are rolled into much larger conglomerates. So no easy way to play as you say but the main takeaway is if water were priced according to supply/demand we'd be paying much higher prices and eventually market forces must come to bear so expect much higher prices in the future worldwide.<BR/><BR/>Color - I try to use red and green - I don't want a screen full of red since it's overpowering. I will usually throw in an orange or something if its something I want to really highlight over and above the other things.TraderMarkhttp://www.blogger.com/profile/06241756200482130281noreply@blogger.comtag:blogger.com,1999:blog-2335748440449035592.post-3850125324753809122008-03-26T02:12:00.000-04:002008-03-26T02:12:00.000-04:00hey mark,<BR/><BR/>i'm so totally with you on the water theory. its a long long term trend but with the population explosion, leading to more industrialization. the supply of fresh water in the world is shrinking. until the day where desalination becomes a viable alternative, water will be the new oil. i'm going to coin it now, aqua dollars!! i've been looking for a way to play this for awhile now and the best i can come up with is FLS, well there the only ones whose stock price is actually going up. but they are not really a pure water play.<BR/><BR/>also is there a method to the color madness of your posting? i think i missed the breakdown post on this. also did you ever stop to think that some of your readers might be color blind? ;)T-Raderhttp://www.blogger.com/profile/16892169651369153159noreply@blogger.comtag:blogger.com,1999:blog-2335748440449035592.post-38504210497347883572008-03-24T18:04:00.000-04:002008-03-24T18:04:00.000-04:00Below is an interview with Peter Brabeck CEO/Chairman of Nestle, which was published in the Sunday edition of the Swiss Newspaper NZZ. He has similar views about the world of shortage, especially with regards to water. Translated with Google, tried to get rid of the most heinous grammar mistakes. <BR/><BR/>NZZ am Sonntag: Nestle has just raised forecast for the current year, and announced sales increases of 7.4% , albeit the ever-rising commodity prices. How can you pass the higher prices on consumers without them buying less?<BR/><BR/>Peter Brabeck: As we improve the products we make them valuable, and we renovate them constantly. Thus we are able to raise prices. On average each year, we invent at least 20% of our existing products virtually new.<BR/><BR/>Does Nestlé also change the recipes? Does it replace more expensive raw materials with cheaper ones?<BR/><BR/>Certainly. This plays a large role in developing countries. A traditional milk powder product based on wheat is, at the high wheat prices of today, unaffordable for many in Africa. If we replace wheat with a local commodity such as rice, we can keep the price constant. The secret lies in the combination. An example: Today, we have a series of products for which we partially replace milk with other dairy products and thereby gain a more valuable milk powder nutrition-wise. We replace high-priced raw materials with cheaper ones, while renovating the products. Therefore, higher prices can be enforced.<BR/><BR/>In which direction does these products innovation go?<BR/><BR/>Internally, we have the 60:40 formula plus. We investigate all products continuously, whether they are preferred by 60% of our buyers against competing products. That is the yardstick. The plus means that the products nutrition-wise have to be more valuable than the other providers. Products that fail to achieve this will likely be abandoned in medium term. This happened for example with some of our pasta and tomato business.<BR/><BR/>How affect the financial markets today the prices of agricultural commodities?<BR/><BR/>Massively, and that is a big problem. The hedge funds are increasingly shifting from the financial markets into the commodities markets. Previously, we were able to estimate about how the harvest will go - and we were able to set appropriate prices. That is over. Important as the harvest is, now whether the Californian pension fund Calpers decides to get into the commodities market with $ 750 million is even more important, - because then all the other pension funds are doing the same thing, and a blow $ 5 billion in agricultural market. It's all very speculative.<BR/><BR/>Do you now study the behavior of pension fund managers?<BR/><BR/>Yes, we have to. With various commodities, we already see signs of a bubble, for example, coffee or cocoa, because the prices are far above the fundamentally justified price. Wheat, however, remains expensive.<BR/><BR/>How does Nestle respond to this? Longer supply contracts?<BR/><BR/>Three years ago, we have predicted that prices for raw materials would increase - which nobody believed us then, because we had 15 years of no increases before. Therefore, we were prepared better than others for the bull market of raw materials.<BR/><BR/>There are chocolate producers, which quasi employ their own farmers in the producer countries. Nestle as well?<BR/><BR/>We buy our milk mostly direct with the dairy producers. Overall, we have 600,000 farmers worldwide who work directly for us, 100,000 of them deliver cocoa and coffee beans. This can reduce speculation. But today, if you go to a coffee farmer in Costa Rica or San Salvador, he will sit on the top of the hill in a hut and show you on his computer, where the price of coffee are in New York. The farmers are happy today, which is also good for us. Behind every farmer are about six family members who may be our consumers in the future.<BR/><BR/>Do the massive increases in prices for agricultural commodities worry you?<BR/><BR/>From a global perspective very much so. The population will grow to 9 billion people at least. But we already have trouble to produce enough food for 6.5 billion today. This is due to the new eating habits and due to the production of biofuels.<BR/><BR/>Why are changing eating habits a problem?<BR/><BR/>Higher-income people can afford more meat. If out of 1.3 billion Chinese only 600 million change to rice with chicken or pork, it will boost the basic food needs by a lot. To produce one calorie of meat , we need about eight times more grain than for the production of a calorie vegetarian. Moreover, it needs ten times as much water. Hundreds of millions of people in recent times came out of poverty to a more comfortable life and suddenly gain access to industrial products. This development is good of course. I am unhappy about the boom of biofuels.<BR/><BR/>What is bad about it?<BR/><BR/>If the United States this year, uses 138 million tons of corn for biofuels, this amount is missing for the food production and it increases the fight for land. The result is that not only the price of corn is at new highs, but also those for soybean and wheat. Agricultural soil becomes a scarce resource. Similarly, water, which threatens us all. For 1 litre of bio-ethanol you need 4000 litres of water! Water is the greater problem than CO 2 emissions. Already, we tap not only renewable, but also the stocks of fossil water. These fossil inventories were like oil formed millions of years ago. This is not a problem for Switzerland, with its rain-based agriculture. But the big producers all irrigate their fields today artificial.<BR/><BR/>Where are the fossil water reserves?<BR/><BR/>In the south-west of the United States, India and China. In addition, there are large underground reserves in the Sahara. Therefore, Ghadhafi had a giant pipeline built to pump this water to the north of Libya and to irrigate the fields. The Mandara lakes, in the middle of the desert, drain rapidly. In India and China, the water level retreat by 1.5 meters per year. In the Indian Punjab you already have to drill 100 metres deep to find water.<BR/><BR/>What are the consequences?<BR/><BR/>These countries do no longer export more wheat, but must import grain because they run out of water. Saudi Arabia has announced two weeks ago, to no longer export wheat. Kazakhstan, a traditional granary, and Argentina want to restrict the export of wheat. The wheat price surged by 24% on these news in a single day.<BR/><BR/>Is the wheat trade kind of virtual water play?<BR/><BR/>That is correct. Therefore, it is irresponsible and morally unacceptable that huge subsidies are paid to make biofuel from foods. If 20% of the increased demand in oil is to be covered with biofuels, as is planned, then there's nothing more to eat. This is political madness.<BR/><BR/>Europe rejects genetic engineering - why?<BR/><BR/>Europe is not dependent because there is enough water in many places. But we can't look at the world from the alpine perspective. The few million Swiss and Austrians won't have a food problem. But the other 9 billion. Astonishingly, genetical engineering technology was first developed in Switzerland. It could have been a big economic pillar of the country. Today, the technology is in the hands of the Americans and the Chinese.<BR/><BR/>Bill Gates propagated organic farming in Africa instead of genetic engineering. Is he wrong?<BR/><BR/>I have never talked with him about this. I am a huge fan of organic food, I buy it all the time. The fact is, however, that we are not able to feed the world with bio-products. But for the farmers in Switzerland organic products are the right strategy because they get payed higher prices for them.<BR/><BR/>Nestle is one of the largest water sellers in the world. Do you profit if water is scarce?<BR/><BR/>We are world leaders in the water business, but use only 0.0009% of all water that is consumed. If you want to save water, you should drink more tap water and less cola, beer or wine. Because, to bottle 1 litre of water, we need 1.5 litres of water. To produce 1 liter of soft drinks it takes 3 to 4 litres and per litre of beer it takes even 6 to 7 liters of water.<BR/><BR/>What must first be changed?<BR/><BR/>The water needs a price. Only because it's nearly free, we can afford to use 4000 litres of water to produce 1 litre of biodiesel.<BR/><BR/>Isn't water a human right?<BR/><BR/>Yes - 5 liters, which I need to stay alive, and 20 liters, for hygiene. Water to fill the pool is not a human right. South Africa gives each family 6000 litres per person per month for free; beyond that you have to pay for it. However, a Spanish farmer or golf course operator pays only 2% of the actual cost of water, which is why they waste it so carelessly.Raphaelhttp://www.blogger.com/profile/17700528779966019064noreply@blogger.com