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June 19, 2008

South African fertilizer firm invests in jatropha cultivation research in Zambia

Noting the importance of biofuels in the changing agricultural landscape, the Omnia group has made an investment of some R29-million (US 3.6 million) into research on jatropha agronomics in Zambia.

Jatropha has been widely regarded as the ‘next-best-thing' for biodiesel production as it is resistant to drought and pests, and produces seeds containing up to about 40% oil.

"Its an exiting investment, and it is really just to better understand the yields that one can attain from the Jatropha tree," said Omnia CEO Rod Humphris.

He added that there was a fertiliser spin-off. "...if jatropha becomes a bigger crop in the southern African region, we would be well-placed to really understand the nutrients required for that and then, obviously there is the fertiliser sale which we would be able to achieve in improving the jatropha economics."

Omnia would continue to spend the necessary capital on research in this field on an ongoing basis.

The research was being conducted in Zambia for a number of reasons, and largely because it could not be done in South Africa, as the South African government has declared jatropha an invasive plant.

"The one advantage that Zambia has, being a land-locked country, [is that] import parity of fuel into Zambia certainly is more expensive than here in South Africa, and I think the driving force there to establish biofuel production is higher in Zambia than what it would be in South Africa," said Humphris.

The "golden age for agriculture" had arrived and would continue into the next decade, stated Humphris, adding that the global shortage of raw materials in the agricultural sector drove the group's fertiliser producing division's operating profit up 98%, to R311-million for the year ended March 2008.

The improvements in this division have come largely from price increases, and not from volume increases. Omnia felt the production volumes would remain fairly constant going forward, as there was not much room for increased volumes in the South African market as there was only so much fertiliser required. Volume growth would benefit export markets. "Although that could change overnight if South Africa became more bullish with biofuels," added Humphris.

"We have seen a complete shift in the agriculture sector over the last 12 months - suddenly the world appreciates agriculture," Humphris reiterated. Many of the factors driving the greater demand for raw materials were said to have taken place quite suddenly, particularly the emergence of biofuels.

Humphris explained that the agricultural landscape has fundamentally changed, and there were a number of reasons for the increasing food prices linked to agriculture. These were: the increasing amount of arable land being converted through urbanisation throughout the world; the increasing lack of water, also linked to the fact that more water was being channelled to cities; the resistance to full-scale implementation of genetically modified crops was also viewed as holding back yields from a technical point of view; insufficient research on regionalised crop yields was another factor; the change of diets, particularly in Asia, from staple grains to higher protein also played a major role.

Droughts in Australia, floods in Burma and snowstorms in China, believed to be linked to climate change, also significantly impacted food production, as did the production of biofuels, particularly in the US. The exponential increase in the world's population also placed strain on farmers to produce more.

Farmers had not had sufficient time to adapt to these new circumstances, which was clearly reflected in the soaring prices.

Humphris did, however, feel that all these factors presented "huge opportunities" for farmers in the world, as they could finally make a fair gain from their produce. He also added that with these changing factors world-wide, governments would need to take cognisance of lessons learnt, and re-work agricultural policies.

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