Investment funds around the world seeking farmland in response to food price hikes
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For decades, the world was often swimming in surplus food because farmers were so productive. But rising demand has caught up, and reserves have become so tight that global food markets are vulnerable to even minor shocks. Many analysts say that higher, more volatile prices may be here to stay.
The new dynamic reflects in part the rising demand for commodities in developing countries such as China, India and Russia. By 2050, the U.N. Food and Agricultural Organization projects that world food production will have to jump by 70 per cent. Much of that reflects growth in the world’s population, which is expected to increase to 9 billion people, a 50 per cent rise.
With agricultural commodity prices at multi-year highs, buying farmland is seen as a more direct way to cash in on valuable crops and to take advantage of the long-term appreciation of farm property. As a result, investment funds worldwide are pouring a lot of funds into agriculture this year to boost yields across the top producer nations as record-high food prices jolt markets and send buyers scurrying for supplies.
Since potentially higher returns are possible in emerging markets, where entry values are low or agricultural production is currently underperforming. Thus, farm areas in Eastern Europe, Africa and especially South America have become hotspots for farmland investing. These countries stand out as having the best potential for direct investment for those with a three-year investment horizon.
Farmers’ fields in South America are among the most prized assets in this new global market for agricultural land that has sprung up alongside soaring commodity prices. Private equity and fund managers at a farm investing conference in Geneva named South America a top place for farmland investments.
South America accounts for 59 per cent of global exports of oilseeds, 11 per cent of grains and 37 per cent of meat, said Gonzalo Fernandez Castro of Lumix Capital, who invests in farming in Brazil, Paraguay, Argentina and Paraguay. These counties stand out as having the best potential for direct investment for those with a three to the five-year investment horizon.
Brazil and Argentina – the world’s second- and third-largest soybean producers — are already on track for a second straight year of bumper production to feed rapidly growing demand led by Asian giants China and India. “The South American marketplace is really booming along right now,” said Mark Zenuk, managing director of the $3 billion NGP Global Adaptation Partners fund.
Black River Asset Management, part of the U.S. agri-business giant Cargill, controls 50,000 hectares of productive land in the region and is looking for more chances to strike big farmland and food production deals. “It’s a scale approach, for sure,” said Rich Hammill, managing director of Black River, which manages some $6 billion in assets.
South America is today worldwide considered a top place to buy, lease and manage agricultural lands for profit. Argentina stands out among the other countries for its blessed soil and weather conditions, an abundance of natural resources, great infrastructure and the unique possibility of acquiring a large extension of productive farmland. Indeed, few agricultural economies can compete with the yields obtained by the Argentine farmers, showing a very high return on investment compared with other major food export producing countries in the world; in most cases, above 6% yield.
Gateway to South America, an independent facilitating and advisory company committed to helping investors from around the world, have unique agriculture investment opportunities, including 82.000 hectares excellent for extensive cattle farming and fine agriculture; 43.000 hectares for olive, wine, fruits and bio-fuels with abundant water reserves, access to railway, airport and electricity; 18.000 hectares farm with 16.000 hectares in full cropping production of soy, corn, and wheat, located between 3 rivers and excellent internal infrastructure; over 400.000 hectares of the non-productive farm with proven potentialities and feasibilities studies for agriculture, cattle ranching, biofuels, renewable energies, mining and tourism; among others options and turnkey investment projects.
The window is fast closing on investment opportunities of a lifetime. For the simple reason that for the first time in recent history, Argentinian, Brazilian, Chilean and Uruguayan assets in US, UK Pounds and Euro terms offer incredible value. Why else would you see one of the worlds most savvy investors, George Soros amongst others investing so heavily in these countries agricultural sectors?
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, Uruguay and Chile, providing expert advice on property acquisition and investment tours.
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Post available in: English