Investor Relations

Business environment 2010

Business environment

Global trends

Yara is directly or indirectly influenced by major global trends, impacting on global markets and driving demand for both mineral fertilizer and industrial products.

Population growth increases food requirements. By 2050, world population is estimated to reach about 9.1 billion, driving demand for Yara’s crop nutrients and agronomic solutions.

Economic growth stimulates changes of diets. Increased food consumption, especially of meat, raises the demand for grain and for Yara’s mineral fertilizers.

World urbanization affects diets, food systems and living conditions. By 2050, the world will be 70 percent urbanized, strengthening the market for Yara’s environmental solutions.

Global gaps

Global trends, especially population growth and dietary changes, reveal critical global gaps, particularly between the future demand for food and available resources for agricultural production.

Especially, there is a critical yield gap – between actual and potential yield. Feeding more people at higher consumption levels by 2050 requires an increase in world food production of 70 percent. To satisfy anticipated demand for food, fiber and fuel from agriculture, total output has to double. However, yield growth is currently declining in developed countries.

In light of the impacts of global warming, feeding the future world population is a momentous challenge. A business-as-usual approach fails to close global gaps and resolve global challenges. Agriculture and agribusiness have to work closely with the public sector for increased efficiency through the value chain is necessary, improving agricultural productivity through sustainable intensification.

Agricultural policies

Political attention to agriculture has grown manifestly over the past few years. Following the 2008 food crisis, agricultural productivity has become part of the global agenda, also closely connected to climate change challenges. Yara has taken an active part in this process, arguing the case of agricultural productivity as a way to increase food security and at the same time reduce global warming.

At the World Economic Forum annual meeting in Davos, Switzerland, in 2011, agriculture was a key topic. The "New Vision for Agriculture" initiative, backed by 17 global companies, including Yara, was presented, addressing challenges connected to global food security and agricultural sustainability. It presented a 20/20/20 ambition: increasing food production by 20 percent, while cutting GHG emissions by 20 percent, and reducing rural poverty by 20 percent – per decade.

Agriculture has become an issue at international climate conferences, including COP 16 in Cancún, Mexico, in 2010. Here, another roadmap, "'Climate-Smart' Agriculture," was presented by the FAO, supported by the World Bank. It outlines actions linking agriculture-related investments and policies with the transition to climate-smart growth, increasing productivity and farm incomes. The roadmap was the outcome of the Global Conference on Agriculture, Food Security and Climate Change in The Hague, Netherlands, in which Yara took part, presenting its concept of Climate-Compatible Agricultural Growth, targeted particularly at Africa.

A common feature in a number of initiatives and interventions in 2010, championed by Yara for several years, was the focus on increased food production through improved agricultural productivity, combining the closely interlinked issues of food and climate – calling for increased investments in agriculture in general and in innovation in particular. These arguments are supported by a 2011 report from the UK Government Office for Science, "The Future of Food and Farming," which advocates a sustainable improvement of productivity, based on existing knowledge and “substantial innovation.”

In a January 2011 statement, the Secretary-General of the OECD argued that surging food and commodity prices are undermining efforts to tackle global poverty and hunger and threaten world economic growth, calling for stronger discipline on the use of trade restrictions on both exports and imports. At its 2010 summit in Seoul, Korea, the G20 economic development group resolved to develop proposals to better manage and mitigate risks of food price volatility without distorting market behavior. Key methods of achieving food security, in particular combating commodity price volatility and promoting food production through improved productivity, are priorities to be addressed at the 2011 summit in Paris, France.

Environmental policies

Political attention to climate change has grown significantly over several years. With international attention to environmental issues prominent for three decades, policies to reduce global warming have now become paramount. In recent years, climate change has also been linked with food security – and agricultural production.

World agriculture is responsible for about a third of all greenhouse gas emissions, when land use change is included; i.e. CO2 emissions from deforestation, largely driven by extension of farmland. Increasingly, agriculture is considered a part of the solution as much as a problem. Soil carbon sequestration is considered an effective, and perhaps the most cost-effective, way to reduce CO2 concentration in the atmosphere. And the fertilizer industry, which accounts for about 1.5 percent of GHG emissions, has a major role to play by helping to increase yields, reducing emissions and by reducing the need for land conversion, saving forests and biodiversity.

Another policy aspect deals with emissions deriving from the use of fossil fuels in transportation, especially road transport: partly CO2, which drives climate change, partly NOx, which is a health hazard, in addition to affecting the environment negatively. In both cases, legislation to reduce emissions is enforced in several markets, aimed to achieve ambitious reduction goals. Stricter legislation provides opportunities for Yara’s industrial products and environmental solutions.

Yara has pioneered an acclaimed N2O catalyst technology, greatly reducing emissions from fertilizer production. Furthermore, Yara offers NOx abatement solutions for vehicles and industrial plants. Regulations aimed at curtailing emissions have been in place for several years, primarily in Europe, and many countries are following suit, including the USA and the growth economies of Brazil, Russia, India and China (BRIC).

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