The Contrarian – food, shelter and clothing

Posted by Chad Wasilenkoff, CEO Fortress Paper

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WASILENKOFF

WASILENKOFF“Buy when there’s blood in the streets, even if the blood is your own.” – Baron Rothschild

This contradicts roots of basic human and animal nature, fight or flight.

Most of us think short term, smoke when we know it’s bad for us, eat junk food when we know we shouldn’t and make short term decisions on investing when we know there are long-term trends that are undeniable.

As far as I can see there are some strong arguments for macro trends that can’t be ignored… barring any material exogenous event. Populations are growing and people need more food, shelter, energy and clothing. Items that will be more valuable will be farmland, fertilizer, cheap energy, infrastructure and fibre to cloth these growing populations.

Economies in trouble, areas underserviced by infrastructure or job creation can offer opportunities for future growth and attractive government concessions or financing.

The Saudis just announced a renewable energy roadmap with plans to install 54 GW of renewable energy by 2032 including solar, wind, waste-to-energy and geothermal. The Saudis would end up being one of the largest green energy generators in the world. This irony is mindboggling.

Right now I am focussing on the long-term trend of increased future fibre needs;

  • Increase in personal income and middle classes in China and India are driving food and fibre consumption

Food 1

  • Food demand  is projected to grow by 12% from 2010 to 2015, 24% by 2020 and is expected to reach 43% by 2030

  • Today there are over 1 billion undernourished people

  • Global consumption of meat has been growing much more rapidly than the consumption of grains and seeds. As the demand for meat rises, the demand for grain and protein feeds used to produce meat grows exponentially.

Food 2

Food 3

Food 4

  • Production of natural fibers will remain constant or sink (Cotton for example has in the last sixty years fluctuated between 29 and 36 million hectares)

  • In the short term demand may be filled or exceeded, but long term Fiber requirements are projected to increase 20% by 2015, 40% by 2020 and 80% by 2030

  • Fiber consumption per capita has grown from 8.3 kg in 2000 to almost 12kg per capita per year in 2010

  • One third of the world’s population suffers from water shortage and is expected to grow to two thirds by 2025

  • Irrigated cotton grown in hot and dry environments requires 20-35 times more water than cellulose fibers

  • Some of the biggest environmental disasters were caused by “forcing” agriculture in less than idyllic locations. The Aral Sea in Kazakhstan formerly one of the four largest lakes in the world has mostly disappeared by using the water for irrigation over less than 20 years. Lake Chad is almost gone

Chad Wasilenkoff is the CEO of Fortress Paper, a TSX listed company with more than 700 employees in Europe and North America.