Spheric Research - Lets get down to food.
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A visit to India and Mangalore’s fishing industry 🇮🇳

Visiting India for the first time was a fascinating experience. I’m sure everyone has their own tales to tell, but let’s get down to food, and seafood.

Indian is about 90% vegetarian and even a trip to an Indian McDonalds tells that story: the franchise advertises a host of vegetarian style burgers that I didn’t get the time to try but would have loved to see how the national franchise makes vegetarian food exciting (something India absolutely excels at).

Chickpeas is the main source of protein and it’s normally found in the ubiquitous chola, essentially a mildly-spiced chickpea curry served with Indian bread. Dhal is ubiquitous. It’s even served as the one and only dish on Jet Airways domestic flights with tea, and surprisingly, a Kit Kat!

Over the next few days, I enjoyed eating a wide range of vegetarian dishes. This reminded me of a conversation I had last year with Simon Billing, who runs the Protein Challenge — an initiative by non-profit Forum for the Future. The challenge has the ambitious goal of making sure a growing world population has adequate access to protein by 2040. For the Forum for the Future, making vegetarian food every bit as appealing as dishes containing animal protein is as important as promoting novel protein sources, for example, and the forum has enlisted top chefs to help achieve this goal. Surely gathering some of these fantastic recipes from India will be a key part of that challenge.

Louis Dreyfus CEO Gonzalo Ramirez said earlier this year that texturized vegetable protein (TVG) could experience a second wave of growth with more sophisticated products targeted at this market rapidly expanding market. India could be a great market for this segment, he said. Proponents of the so-called plant-based alternative protein market, which has risen so sharply to prominence in the past year, offers Indians with rising incomes culinary alternatives without having the to eat meat. This would bypass the traditional trend of rising GDP resulting in more meat and fish consumption.

The small minority of Indians who like to eat meat — and they number significantly more than 100 million — are surprisingly indulgent. The issue of protein deficiency in India however is a massive topic. According a recent Times of India article, most of the country is protein deficient and most people don’t know what the ideal protein intake is. Cereal constitutes 60% of an average diet, and that means that the little protein in the diet is lacking in key amino acids such as methionine, crucial for growth and tissue repair.

As a long-time resident of a South American country, and traveling in tow with my MBA colleague Julio Zavaleta (a resident of Lima), we were expecting to take scenes in our stride. However, we were both shocked by the state of the urban homeless poor. It was significantly higher than Peru and starkly different to Chile. We also found worse traffic than Lima, much to our amusement.

Protein deficiency is slightly less of an issue in some coastal areas that are rich in fish stocks. India is most likely a massive consumer of fish in coastal areas. But the lack of cold storage in the country means most of that fish is consumed at knock-down prices ports and seaside towns. The Arabian Sea is richer in marine diversity than the Bay of Bengal to the east of the country. This would explain why the city of Chennai appears in the above-mentioned Times of India article is one of the most protein deficient in the country. A local delicacy in Mangalore, which I visited, is pomfret served as a Mangalorean curry with coconut. Absolutely delicious!

Mangalore is the hub of India’s fishmeal industry and indeed this stretch of southwest coast in the state of Karnataka (just south of Goa), is incredibly rich in sardines. That said, India’s overall shrimp industry is growing at an alarmingly fast rate and seemingly causing a local shortage of core ingredient fishmeal as I detailed for Undercurrent News, in both a news story and the feed innovation report.

India’s insatiable demand for fishmeal has led top suppliers such as Mukka Seafoods to source from Africa and Oman. You have to wonder that the entry of the feed industry’s big guns — Cargill, Thai Union, and Charoen Pokphand Foods (CPF) — might professionalize the supply chain and take the strain off local fishmeal supplies.

It’s of no surprise that India — weeks after my visit — announced a fisheries improvement project (FIP). Cargill doesn’t readily buy into a supply chain that could be purchasing sardines out of war torn Yemen, or from West Africa to be fed to Indian shrimp that end up on dinner plates in Oklahoma. My guess is that the government of Narendra Modi to announce formal fishing quotas in the not too distant future — like Peru does.

Right now, Thailand has absorbed all of the attention of the folks who look at  sustainability issues in south and southeast Asia. But a smart government will know that the spotlight will soon swing elsewhere in a region that needs to up its game in both the sustainability of wild capture fisheries and aquaculture practices.

Next week Spheric Research will blog from Shanghai. Look out for it!

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FT Commodities Summit in Buenos Aires 🇦🇷

This is my first blog post for Spheric Research. SR has just attended a Financial Times event on Argentina’s massive resource potential. I would define these resources as belonging to four main groups:
  • The country’s vast farming plains that yield enough grain and oilseed to feed dozens of countries
  • The massive shale oil and gas deposits of western Argentina centered around the so-called Vaca Muerta fields
  • The Argentine side of the Andes Mountains that probably hold several giant copper and gold deposits common to the Chilean side
  • And finally the renewable energy potential of Argentina, led by the wind-swept plains of Patagonia — the world’s windiest place, according to turbine manufacturer Vestas.
Here’s a summary of where Argentina’s at right now, politically and economically.
If you haven’t followed Argentina’s recent politics, businessman Mauricio Macri won the December 2015 presidential election and announced the country’s decision to re-integrate itself with the global economy following more than a decade of protectionist policies by Cristina Fernandez de Kirchner and her predecessor and late husband Nestor Kirchner.
Macri started off his presidency taking some tough decisions, removing a host of subsidies that propped up the incomes of poorer Argentines under Fernandez. Some wealthier Argentines benefited from the subsidies too, and have been no less vocal in expressing their disillusionment. The payback for voters was a pledge to open the floodgates to investment to unlock vast natural resources and create new jobs. Fernandez’s last years in office were marked by a gradual erosion among her core constituency of poor voters.
The key issue right now is: despite having received tens of billions of dollars of investment pledges from a host of major companies including Coca-Cola Inc, Dow Chemical Inc. and Royal Dutch Shell, the trickle-down effect to ordinary Argentines is not coming fast enough for Macri, who faces the prospect of the reemergence of Fernandez as a senator in the mid term elections this October.
“If she wins then the perception will be that populism is coming back,” Argentine economist Miguel Kiguel told the FT’s Latin American editor Jean Paul Rathbone. “If she loses, that will be the end of populism in Argentina.”
Seemingly unaware of this very high level conference taking place at the Four Seasons Hotel on the the main 9 de Julio avenue (that of BA’s beacon obelisk fame), hooded protestors armed with crowbars blocked traffic and stood off with police in an apparent stage setting process for the mid-term elections.
The economy surprisingly shed 50,000 jobs lost in April, giving fuel to Cristina’s reemergence as a senatorial candidate.
Jorge Correa, a director of HSBC in Argentina, was frank in his assessment that the continued presence of Fernandez in politics was holding the country back from receiving greater investment.
Despite the face that grain prices are not as high as they were under Kirchner rule, one of the biggest setbacks for Macri is the continued sluggishness in corn and soybean prices. Still faced with the prospect of paying back a massive debt load from previous governments, Macri has retained a 35% tax on soybeans with the backing of farmers to keep a fiscal balance. If Brazil continues to solve logistical bottlenecks by investing in highways from inland farming areas and ports, Argentina may have to reconsider the levy, according to Louis Dreyfus CEO Gonzalo Ramirez.
Therein lies the government’s other main challenge. Corporate taxes amount to about 50%, all but crippling investment for anything other than the country’s biggest exporters. Medium sized companies face considerable challenges in raising debt. The option of raising corporate dollar bonds is not an option for anything less than US$300m, and the domestic bond market has been muted since Fernandez nationalized Argentine pension funds in 2008 to make up for dwindling foreign reserves. That leaves bank credit as the only resource for SMEs. As HSBC’s Correa explained to SR after his speech, there are two main issues with that. One, Argentine SMEs face a considerable tax burden and are rarely profitable. Two, the cost of initiating coverage on a new company is considerable, making the cost of that due diligence excessive in most circumstances.
Before traveling, I was slightly puzzled that Argentina chose to send its transport minister Roberto Dietrich to the FT event, which listed an impressive list of CEOs including Louis Dreyfus’s global CEO Ramirez, and former Bunge CEO Raul Padilla. Dietrich, a tall, and erudite politician who looks more like soccer manager Pep Guardiola than your run-of-the-mill politician, answered a question on the mid term elections with an interesting analogy.
When asked about Macri’s chances, Dietrich referred to the government’s sizeable road building program. And in particular the hundreds of kilometers of ramshackle roads in greater Buenos Aires where several million lower middle class Argentines live. Residents in this area have lived for years with roads that are unusable on rainy days, stopping their kids from going to school. If these voters can sense real change under Macri, then they might be willing to chin the subsidy removals and validate the reforms in the mid terms, he said.
“There are millions of Argentines who are convinced that we are on the right path,” the minister said.