Transcript Navigating risks for global food security

Navigating risks for global
food security
Juerg Trueb, Head of Environmental and Commodity Markets
Palm Beach Strategic Forum, 7-8 April 2014
Navigating risks for global
food security
Juerg Trueb, Head of Environmental and Commodity Markets
Palm Beach Strategic Forum, 7-8 April 2014
Are we ready to face the food security challenge;
or how can business help?
 900 million people suffer hunger, 98% thereof in Asia
and Sub-Saharan Africa
 1 in 8 people in emerging markets suffer from
hunger/malnutrition
 74% increase in global food prices since 2005 has made
food unaffordable for many
 15% of US households suffered from food insecurity in
2010; food insecurity is a not just an emerging market
issue
 60% increase in world agricultural production by 2050
needed demand (population growth, shift of diet)
Palm Beach Strategic Forum | Juerg Trueb | 7-8 April 2014
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Increase productivity through shift from
subsistence to commercial farming
Demand-side drivers
Supply-side factors

Population
growth

Loss and waste
of food

Changing food
preferences

Urbanization

Trade and
government
policies (e.g.
subsidies, trade
restrictions)

Natural
resource
constraints
(water, land)

Climate change,
natural
disasters

Government
policies (e.g.
biofuel)

Industry effort: New Vision of Agriculture

Increase productivity
Insurance sector:

Commodity
prices
Risk management as a pre-requisite for
access to production credits
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Impact of climate change on agricultural
production - Recent examples of weather impact
2009 Argentina – Drought – Soybeans – 35% Crop Shortfall
2010 Russia – Drought – Grains – 40% Crop Shortfall
2010 Australia –Floods (E), Drought (W) – Grains –
40% Crop Shortfall
2011 Mexico – Drought – Corn – 30~40% Crop
Shortfall
2012 USA – Drought (MW) – Corn, Soybeans – 20%
Crop Shortfall
2012 Brazil – Drought (N.E.) – Corn, Cotton, Sugar Cane
~40% Crop Shortfall
 20% of sown area destroyed;
40% production (relative to
2009) lost; USD 1.4 billion
direct losses; corporate farmers
defaulted on production loans;
Medvedev extended USD 1.3
billion in credit
 Russia banned grain exports
triggering export restrictions
elsewhere
 Grain handlers (domestic &
international) stopped
operations; importers faced
force majeure;
processors ran at reduced
capacities
 Record food prices in
2010/2011 adding millions to
the ~870 million already
starving from hunger
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Worldwide agricultural insurance premiums
USA & Canada
USD 10,7 bn
(55,0%)
Europe
USD 3,9 bn
(20,1%)
Africa
USD 0.09 bn (0,5%)
Latin America
US$ 0.87 bn
(4,0%)
Asia
US$ 3,8 bn
(19,5%)
Australia & NZ
US$ 0.2 bn (0,9%)
Low insurance penetration in
low/middle income countries
with large agricultural
production (BRICS1) and
emerging markets)
1) Brazil,
Russia, India, China, South Africa
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Client and product focus (marked red)
Client universe
Insurable Interest
Governments
Input supplier
Distributor
• Banks
• Insurers
Farmer > 10'000 ha
Storage/Trader
Food Processor
Exporter
• Credit repayment
• Product added value1)
• Credit repayment
• Product added value
• Production guarantee
• Quality guarantee
• Revenue guarantee (volume & price)
• Revenue guarantee (throughput & margin)
• Quality guarantee
• Revenue
margin)
guarantee (throughput & crushing
• Raw material cost (volume & price)
• Quality guarantee
Financial Institutions:
• Credit risk protection
• Reinsurance
Governments:
• Fiscal balance
• Social
balance
1) By bundling insurance with goods and services of input providers
Palm Beach Strategic Forum | Juerg Trueb | 7-8 April 2014
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Palm Beach Strategic Forum | Juerg Trueb | 7-8 April 2014
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