What are farm syndicates and how do they operate?
Farm syndicates are a business model that offers investors the possibility of buying shares or part ownership to take part in a rural productive initiative, whether this is an agricultural project or a horticultural one. It consists of several investors with similar interests seeking to obtain benefits through rural activities without the need to settle in a rural area or be experts in these activities.
This exciting and successful model is widely extended in New Zealand. Myfarm.com is the most visual face of this type of investment there. New Zealand has a very high level of foreign investment, which finds this form of investment in agriculture attractive, as do the locals. Why in New Zealand? Because some of this country’s features are ideal for this type of business: it is a relatively small country, well-organized, agriculturally is very profitable, and it is where investors can have absolute control and profound knowledge of the areas and crops they invest in. The system is based on the motto Together, We Achieve More.
The procedure of these projects is well established. The farm is managed by a skilled professional administration company that oversees the daily operation of the business. Shareholders, who haven’t necessarily been to the land or even live in the same country, invest a certain amount of money in the farm syndicate and receive benefits from the venture in either the form of early dividends or capital repayments when a project is sold.
Farm syndicates in New Zealand sell their products to large companies and/or co-operatives. In most cases, these large companies can process and sell the produce to the final consumer. This is to say the farm not only has the workforce and the manager with the technical knowledge and equipment required for production, but it also has a consistent and reliable buyer of its final products.
This successful business model allows agricultural experts, farmers, and anyone interested to participate in these profitable collective ventures. In New Zealand, the minimum investment to participate in a farm syndicate is around $50,000. Profit has the potential to be extraordinary. Also, depending on the country’s macroeconomic situation and the world, the product’s prices can increase considerably. Other advantages this model offers are the possibility of investing in land, the real economy, and improving food quality overall.
The invested amount and the profit will depend on the location of the farm, how sophisticated the crop or breeding is, and the quality of the produce. For example, investors are advised to consider variables such as the closeness between the farm and a growing city or town and the flexibility and resilience of the land in severe storms or natural disasters. The quality of the land and the infrastructure available will also influence the price of the share being purchased.
When farm syndicates began, the technology of the communications available, more specifically, the Internet, wasn’t as sophisticated as it is today. This means that today, thanks to the endless possibilities that wireless connections offer, shareholders receive regular reports on how the farm in which they are investing is progressing, interact with other investors and communicate with the project managers.
Also, thanks to recent developments, today it is possible to access large amounts of water for irrigation, which until 20 years ago would have been unthinkable. Basically, technological progress has only improved the system of farm syndicates considerably.
Farm syndicates in South America?
Gateway to South America is currently exploring the possibility of introducing farm syndicates in the Americas, more specifically in the Southern Cone, where the quality of land is excellent, modern technology is available, and the economy is growing. Our co-partners have the tools to carry out these ambitious projects, such as agricultural experts and connections with investors worldwide. Please do not hesitate to contact us if you have any questions.
Warning: not all farm syndicates are equal. There have been some spectacular failures, such as the huge dairy farm syndicate Chilterra now in administration in Southern Chile. The main problem was the original foreign shareholders lost control over the major shareholder, who drove the operation into failure. This could have easily been avoided if the original documentation had allowed smaller shareholders a way to exit in a controlled way. Still, they were locked in and unable to exit. It was not the only one to fail in the region; it will not be the last.
On the other hand, some very successful ones have been controlled and run by New Zealanders, like Manuka in Southern Chile.
Contact the Gateway to South America team to learn about the best investment opportunities in the region. The company is a benchmark for foreign investors wishing to invest in Argentina, Brazil, Chile, Paraguay, Peru, and Uruguay, providing expert advice on property acquisition and disposal.