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obal Fund Exchange is a global

set management business

hich invests across all areas of 

e New Energy Revolution.

this issue:

Opportunities in Agriculture

Global Water Scarcity

Saudi Arabian Renewable Energy

European Off-shore Wind

‘Big Oil’ Capex Spending

New Rare Earth Mining Initiatives

ur  investment focus :Clean Energy

Water

Agriculture

Traditional Energy

Natural Resources

Carbon & Emissions

Systematic Trading

Hedge Strategies

arn more:

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Energy Newslette

SPOTLIGHT ON: OPPORTUNITY IN AGRICULTURE

Does more volatility mean more investment opportunity

in global agriculture? by Lauralouise Duffy

For many years, we have been studying and actively investing in global

agriculture, which as of late has been extremely volatile. The question on man

investors’ minds is will this increased volatility translate into attractiv

investment opportunity?

The Agriculture Commodity Markets Research Outlook 2011 from Raboban

highlights seven key themes influencing global agricultural commodities in 201

We feel this information is important for all investors in this space:

1. Tightening inventory levels for many agricultural products, with stocks-to-us

levels similar to what was seen during the 2007-2008 food crisis period.

2. Supply limitations may result as 2011 production increases are used to buiup reduced stock levels that were depleted over the past year.

3. Emerging markets have recovered faster than the developed world from th

global economic crisis, and demand for agricultural products has risen in turn.

4. Chinese demand for commodities is now a driving force in the glob

agricultural sector. Demand is particularly high for soybeans, sugar, cotton an

corn. “China has played a key role in transforming the global soybean markets

explains Rabobank’s Luke Chandler. “China now accounts for 60 per cent of glob

soybean imports, in addition to approximately 20 per cent of world trade

soybean.

5. Heightened political risk amid tightening food supplies are a top priority fo

governments around the world. This has resulted in increased governme

participation in the agricultural markets.

6. Fundamentals are only part of the story, analysts say, with the influence

external macro factors becoming more and more important. The projecte

increase in energy prices over the coming year will also affect commodity prices.

7. Sustained heightened volatility is likely here to stay, the report concludes. W

are constantly scrutinizing market news and data to uncover trends an

opportunities in this important investment sector.

212 570 7970

obalfundexchange.com

GLOBAL FUND EXCHANGE LTDInvesting in the Future of Ener

February 2011

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azilian Agricultural “Revolution” Can

ovide a Model for the World

the world grapples with the challenge of how to feed an

mated 9 billion people by 2050, many point to Brazil asexample of a nation that has experienced a near

aculous transformation of its agricultural sector.

zil has shifted from a net importer of food to a powerful

ce comparable to the “big five” food exporters (U.S.,

nada, Australia, Argentina and the E.U.). It is also the

rld’s first tropical agricultural giant.

ween 1996 and 2006, the total value of the Brazil’s

ps rose 365% from 23 billion reais (US$ 13.7 billion) to

8 billion reais (US$ 64.5 billion.) Overtaking Australia as

world’s largest exporter of beef, Brazil’s exports have

reased tenfold in a decade. It is also the largest exporterpoultry, sugar cane and ethanol, and now accounts for

e-third of world soybean exports. Remarkably, Brazil’s

beans are farmed on a mere 6% of the country’s total

ble land.

vernment subsidies have not played a major role in this

icultural transformation. In fact, federal agricultural

pport in Brazil is comparatively less than other major

icultural exporters. According to OECD data, state

pport accounted for 5.7% of total farm income in Brazil

ring 2005-07, comparing with 12% in the U.S., 26% for

OECD average and 29% in the E.U.at then is Brazil’s secret? Heavy investment in

icultural science research and technology development.

presa Brasileira de Pesquisa Agropecuária, or the

zilian Agricultural Research Corporation, was set up by

state in the 1970s and since then has become the

bal leader in tropical agricultural research. The company

made advances in optimizing the soil composition of 

cerrado region, improving grass varieties and modifying

beans for tropical growing environments.

e end result of this research has been an agricultural

plosion in the cerrado region, which supplies 70% of zilian exports and has been called “the new Midwest.”

Supply/Demand Disruptions Cause Food

Prices to Soar

World food prices rose to a record in January on higher dai

sugar and cereal costs and are likely to remain elevated, t

United Nations said in

a recent report.

in 2010 as drought and floods damaged crops from Russia

Argentina.

“The new figures clearly show that the upward pressure

world food prices is not abating,” Abdolreza Abbassian, sen

economist at the FAO, said in a statement. “These high pric

are likely to persist in the months to come.”

Corn prices – and with them, the price of meat – are set

explode if the latest import estimates from China are corre

China, the world’s second-largest corn consumer, probably w

quintuple imports of the grain in the next five years as dema

increases for livestock feed, according to the U.S. Gra

Council. Last year, Beijing recorded its largest imports of co

since its disastrous crop of 1995-96. But this year could s

further record purchases. The US Grain Council report

recently that it estimates Chinese imports as high as 9MM to

in 2011-2012, up from only 1.3MM tons in 2010-2011.With the cost of corn critical for the entire supply chain, hi

corn prices lead to higher prices for poultry, pork, lamb a

beef, emerging countries that are already suffering from hi

inflation could be facing a more intense shock of agflation th

previously thought.

Sugar cane plantations in Australia, the third-largest export

suffered severe damage after Tropical Cyclone Yasi cut throu

an area accounting for a third of output, helping send futur

prices to a 30-year high.

 

GRICULTURE NEWS

An index of 55 food

commodities climbed3.4% from December

to January 2011, the

seventh straight

increase according to

the UN’s Food and

Agriculture

Organization (FAO).

Among the five food

categories, dairy

prices led advanceswith a rise of 6.2%.

Food commodities

extended gains last

month after jumping

Source: UN FAO

Farming in the cerrado region of Brazil

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the Middle East:

ter scarcity in the Gulf region is a serious and growing

oblem, according to the United Arab Emirates National

ergency and Crisis Management Authority.

demand increases, said Director General Mohammed

alfan al-Rumaithi, the UAE may need to make harsh choices

ween using water for direct human consumption vs.

icultural irrigation.

ars can erupt because of water,” he warned. “Using

undwater for agriculture is risky. If it doesn’t harm us, it

harm other generations.”

e UAE is one of the highest per capita water consumers in

world. Abu Dhabi on average uses 550 liters of water per

son per day, compared with the global average of 180-200

rs.

shwater reserves in the UAE are expected to dwindle

hin the next five decades, leaving the Emirate dependent

groundwater extraction and desalination.

e UAE, along with many neighboring Middle Eastern

ions, is investing in farmland on other continents such as

ca, both as a means to secure future food supplies as well

reduce domestic water usage.

e suffer from a shortage of water and we should think

out solutions to preserve it rather than using it for

iculture,” Mr. Rumaithi told the Federal National Council

ing a discussion of food and water security.

t October, Abu Dhabi laid the groundwork for the world’s

gest underground reservoir, which would hold 26 million

bic feet of desalinated water, enough to meet rationed

mand for 90 days in the case of an emergency.

WATER NEWS – GLOBAL WATER SCARCITY

In the American Southwest:

Researchers at Scripps Institution of Oceanography at UC S

Diego have warned that Lake Mead, a key water resource

the region, could be dry by 2021 as a result of growing wat

demand and the unpredictable effects of climate chang

Should water levels in Lake Mead or Lake Powell fall, t

Southwest will be entirely reliant on the Colorado River

potentially dangerous dependency, considering the rece

periods of sustained drought in the region.

Southern California’s Imperial Valley, which produces abo

80% of winter vegetables in the United States, is also faci

water threats. Farmers in the Imperial Valley irrigate th

farms from water diverted from the Colorado River. Howev

water from the Colorado is under heavy demand from risi

urban and suburban centers throughout the area, from t

bright lights of Las Vegas to sprawling communities in Arizon

Water levels in the Colorado River have been declining fyears, yet water demand is ever-increasing, leading to wh

we believe is an unsustainable situation going forward.

In China:

To address lingering drought in the grain-producing regions i

the North, the Chinese government has announced  over $

billion in spending measures to divert water, build emergenc

wells and construct new irrigation infrastructure.

Official data shows nearly 2.57 million people and 2.79 millio

livestock have suffered from shortages of drinking water as aresult of the droughts, which are the worst in over 60 years.

The UN’s Food and Agriculture Organization (FAO) has issued

warnings on the potentially devastating impact on the winte

wheat crop.  “The ongoing drought is potentially a very ser

problem,” the agency warned. These grave water concerns

have prompted China to invest a further $608 billion in wat

conservation projects. According to a central policy docume

known as the No 1 document, China will proceed with effort

to promote conservation and sustainable use of water.

Over the next decade, China will invest 4 trillion yuan (US$ 6

billion) into water projects, says Chen Xiwen, director of toffice for the Communist Party of China (CPC) Cent

Committee’s Leading Group on Rural Work.

China aims to double its average annual spending on wat

conservation over the next 10 years. It will assist the wa

sector in securing loans and raising private investment

water conservation efforts.

“Floods and drought in recent years have exposed weakness

in water conservancy infrastructures,” the document sa

Last year, Southwest and Northern China experienced seve

droughts, and other regions across the nation dealt with ma

flooding and mud-rock flows.

rce: International Water Management Institute

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udi Arabia Looks to Renewable Energy

spite possessing vast oil reserves, Saudi Arabia is

covering that increasing domestic energy demand has had

effect on its oil exports. The nation has embarked on a

ategic plan to explore the use of renewable and nuclear

ergy to meet growing demand.

e have started to take the required steps to utilize several

ergy sources locally, in particular solar and nuclear

ergy,” said Saudi Oil Minister Ali al-Naimi.

e demand for electricity is steadily increasing it was 40awatts in 2010, and is expected to reach 120 gigawatts in

32,” remarked Hashem Yamani, the director of the King

dullah City for Atomic and Renewable Energy, to

rnalists at a recent conference in Riyadh.

multaneously, he added, “local demand for oil, which is

rently about 3.2 million barrels per day, could rise to eight

lion barrels per day by 2028.”

increase of this magnitude may limit Saudi Arabia’s

pabilities to export to the rest of the world and would be

obstacle for future development.

hat is why we are determined to transform a country

pendent solely on oil to different sources of energy

clear and renewables,” Mr.Yamani said.

er the next decade, the Kingdom will spend $80 billion to

rease its power generation capacity and its energy

nsmission network.

ENEWABLE ENERGY NEWS Emerging Economies to Drive Primary

Energy Growth : BP Energy Outlook

Although new energy regulatory policies and the deployme

of clean technologies may help slow global carbon emissio

BP nevertheless predicts total emissions in 2030 will be 27

higher than today in its Energy Outlook 2030 statistical repo

BP also predicts over the next two decades emerg

economies will drive a 40% growth in primary energy use.

A whopping 93% of new energy growth will come froemerging economies as Chinese oil consumption grows by

million barrels a day (mbpd). By 2030, Chinese consumpti

will likely reach 17.5mbpd, bringing it ahead of the Unit

States as the world’s largest consumer of oil.

BP suggests the global energy mix will change as the wo

adds production capacity in order to meet new deman

Although fossil fuels contributed 83% to consumption grow

between 1990-2010, BP expects this contribution to fall

64% between 2010-2030. In addition, oil’s share of total fos

fuel usage is expected to decline gradually as use of natu

gas increases. Despite the recent spike in coal use as a resof voracious demand from China and India, BP expects t

growth trend will reverse somewhat by 2030.

At the same time, BP predicts the use of renewable energ

nuclear power and hydropower will increase over the next

years. Taken together, non-fossil fuel energy will for the fi

time make the largest contribution to all new energy usag

from 5% today to potentially 18% by 2030.

Offshore Wind Power Booming in Europe

Europe is currently the world’s fastest moving market

offshore wind technology, says the European Wind EnerAssociation (EWEA), a Brussels-based agency with over

member countries. According to its year end data, 20

marked a 51% increase in European offshore wind installatio

In total, €2.6 billion was invested in 308 new offshore turbin

representing 883MW of new power capacity.

As part of the EWEA, the United Kingdom leads the glob

market in offshore wind. In Europe, the UK is followed

Denmark, the Netherlands, Belgium, Sweden and Germany.

Possessing 25% of the region’s offshore wind resourc

Scotland could grow to become Europe’s largest offshore wi

center. Gamesa is reportedly setting up its offshore wi

headquarters in Scotland, confirming the area’s grow

attractiveness to the industry.

With potentially 1,000 to 1,500MW of newly installed capac

coming online in 2011, Europe will need new g

infrastructure. Ten countries on the Northern coast ha

joined forces to develop a high-voltage DC current “supergr

to link offshore wind farms to the central grid, but the proje

is currently in early stages of planning.

In contrast the United States, which is still in administrat

struggles to develop its first offshore wind farm off tMassachusetts coast, Europe is at the forefront of this growi

industry.

of The King Abdullah City for Nuclear and Renewable Energy

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Leaked Cables Highlight Fears of Saudi “Pea

Oil”

Confidential cables published by WikiLeaks suggest that th

U.S. is worried about declining production capabilities an

the stated oil reserves of Saudi Arabia, the world’s larges

producer of oil.

The cables were written between 2007-2009, including th

time of global oil price peaks in 2008.

One exchange warned that Saudi Aramco, the state o

production company, no longer possessed the ability t

influence global prices by raising oil output.

“A series of major project delays and accidents over the las

couple of years is evidence that Saudi Aramco is having trun harder to stay in place – to replace the decline in existin

production,” one of the cables read.

Another cable warned Saudi Aramco may have overstated it

recoverable reserves by as much as 40%, or approximatel

300 billion barrels.

Dr. Saded al-Husseini, a former exploration engineer an

board member of Aramco, said based on current productio

rates, Saudi Arabia would likely reach the “peak oil” inflectio

point – where new production cannot sufficiently make u

declining older fields – in around 17 years. By that time

peak oil for the world as a whole will have already come an

gone.

The content of these classified cables is in contradiction t

other recent statements from Saudi Aramco executives

many of which have boasted that levels of oil production i

Saudi Arabia can be maintained for a century, as opposed to

the 17 years suggested by Dr. al-Husseini.

 

RADITIONAL ENERGY NEWS

g Oil Capex Spending Could Top 2008

ecords

oking to increase production and take advantage of high

prices, analysts expect significant new capital investments

m the ‘Big Oil’ companies in 2011.

ending from the world’s top publicly traded oil companies;

onMobil, Chevron, ConocoPhillips, Royal Dutch Shell, BPd Total; may reach record levels in 2011, says ING oil and

analyst Jason Kenney, potentially reaching $128.54bn, a

0bn+ increase from 2010 spending levels. This amount

ld top the record $127bn spent by Big Oil in 2008.

shore drilling exploration will be a high priority as oil

jors seek to broaden their resources and plan for the

ure. “In 2014, about 63% of the majors’ new source

duction is forecast to come from the offshore – shallow

ter and deepwater,” notes Rebecca Fitz of consulting

up PFC Energy.

wever, the consequences of the BP oil spill are being felt

oughout the industry. Ramifications from the spill will

ompt companies to pay more attention to safety and

ulatory compliance procedures during offshore

ploration and production. Associated costs, especially in

rth America, are predicted to rise as a result.

l Breaks $100 on Middle East Fears

itical turmoil in the Middle East has pushed oil prices over

01 a barrel, its highest level in over two years and an

portant psychological marker for the market. The

mediate worry for many investors is whether revolts in

ypt and Tunisia will intensify instability among the more

nificant oil exporters, such as Saudi Arabia.

hough analysts clearly see a fear factor in the market, the

ernational Energy Agency (IEA) has attempted to alleviate

rs of another oil price spike. The IEA has highlighted

tain fundamental differences between today’s situation

d the situation in July 2008, when oil reached an all-time

h of $146 a barrel.

one, global oil stocks are also nearing 10 year highs anduld be sufficient to cover approximately 61 days of 

ward oil demand. Current spare tanker capacity is also

ficient enough to deal with any potential disruptions to

pply routes.

vertheless, we have witnessed the volatile political

uation in the Middle East translate into volatility in the

rketplace, and expect this will continue as the conflicts

sist. As a result, we are keeping a close eye on all

itical developments in the region, especially those related

oil production, refinement and transportation.

Oil pipeline Source: Adam Lee

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SOURCES

We regularly gather information from the following reputable sources, including but not limited to:

Bloomberg New Energy Finance RenewableEnergyWorld.com

Financial Times EnergyandCapital.com

Forbes.com: Energy News The Wall Street Journal

Green. – The New York Times Streetwise Reports: The Energy Report

New Energy World Network Thomson Reuters

Scientific American REChargeNews.com

SustainableBusiness.com Climate Change Business Journal

U.S. Energy Information Administration (EIA) Commodity Futures Trading Commission

GLOBAL FUND EXCHANGE LTD.

ATURAL RESOURCES NEWSNew Mining & Technology Plans to Counter China’s

Dominance of Rare Earths

The world’s growing appetite for clean energy technology, advanced

batteries, electric vehicles and various high-tech devices has prompted an

increase in demand for rare earth materials.

China dominates this market with over 90% of all global supplies, with the

United States, Japan and South Korea almost entirely dependent.  Chinaindicated it will reduce exports of these crucial elements, sparking a panic

amongst clean tech and battery manufacturers worldwide.

mpanies around the world are seeking new rare earth mining regions, and Mongolia has been drawing significant attention.

some estimates, Mongolian deposits of rare earths may rival that of China. A recent joint venture between Green Technolog

utions and Rare Earth Exporters of Mongolia has been struck to transport Mongolian supplies over land to the Russian seapo

Vladivostok, thereby by-passing Chinese ports entirely.

vernments in the United States, Canada and Australia have begun to look into mining their own rare earth reserves for fear o

hortage once China restricts its exports.  The United States government views rare earth supplies as an important factor in

ergy security, and the Department of Energy recently released a Critical Materials Strategy examining ways to secure supplie

future demand.

e Obama administration has also “fast-tracked” permitting to reopen Molycorp’s rare earth mine near Mountain Pass,

ifornia to boost U.S. domestic supplies.  It is clear that securing supply chains of these important elements is essential for

ure development of the clean energy industry in the United States, and around the world.

re earth elements on the periodic table