Pricing Agribusiness Risk

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World Agriculture Report – A Growth Story For Africa

West Africa has some 8 million hectares already planted in oil palm and another 1 million hectares have been identified for development; the region has the potential to once again become a globally important producer region for the commodity, just as it was in the early first half of the 20th Century, if only it can be replanted with suitable high yielding cultivars of the palm adapted to remain healthy and productive in a West African setting.

We have identified at least $6bn of pledged investment for West African oil palm assets, with Asian palm operators amongst the most significant foreign investors. This development is strongly supported by local administrations, but the region has a turbulent history characterised by recent bloody civil wars in several countries; sovereign risk is high. GDP growth in Sub-Saharan Africa has run at some 4%-5% pa for the past 5 years fuelling rapid growth of the Continent’s middle classes. Not surprisingly African consumption of the commodity is also on the rise, both as a food product and as a biofuels feedstock.

For regional capital markets, as for regional economies, a developing oil palm sector has the potential to provide a cornerstone for growth. Already finance has been provided by investors in London, India, Toronto, Paris, Belgium and Singapore; as the oil palm industry comes home to West Africa. Investors and lenders are being presented with opportunities to arbitrage institutional and corporate capital against West African risk; on offer is the opportunity to participate in the development of a second great oil palm producing region supported by a rapidly growing domestic market and relatively cheap transit costs to the markets of Europe which consume 15% of the commodity annually.

Click to download: World Agriculture Report – A Growth Story For Africa