So you want to buy farm land in South America – What are the options ?
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So you want to be a farmer in South America.
Investing in farmland can make for an intriguing alternative to the stock market. Farmland is safe historically and a great hedge against inflation and is an asset class that does not correlate with the normal stock market. As the world’s population continues to grow (9.15 billion estimates by 2050) and the global middle-class continues to emerge (with changing dietary habits toward more calories and meat), farmland is poised to become an even more intriguing alternative investment. Keep in mind 40% of the world’s population lives in Asia and they are not-self sufficient in vegetable oils ie soya.
Farmlands in Brazil and Argentina are some of the most fertile, productive and sought after in the world, but investors looking at the continent should be cautious. Brazil and Argentina both rank lower on various global property rights indexes and currently have laws that place certain limits on the foreign ownership (individuals and corporations) of farmland.
South American countries like Chile, Paraguay, Peru and Uruguay are much more foreign business-friendly and have better protection of property rights. However, Chile (is very mountainous) and Uruguay (is a small country) offer comparatively fewer farmland opportunities for investors than the much larger and farmland-rich Argentina, Brazil and Paraguay.
This looks promising but the only problem is…
You may now be asking yourself “This sounds great! I should be investing in farmland?!” The problem is that the average medium-sized retail investor has had few opportunities to participate in the gains to be made. Investment vehicles have been primarily limited to Wealthy Individuals, Family Offices, Private Funds, Sovereign Funds or larger corporations like Superannuation Funds.
What’s are the options?
Whilst there are not many direct investment options for smaller investors, there are a few publicly traded near pure-play farmland companies. Some of these companies are a bit more pure-play than others though:
Publicly Listed (would suit smaller investors )
Cresud (NASDAQ: CRESY) is a very large Argentina-based farm company with about 2.4 million acres of land in Argentina (66%), Brazil (19%), Paraguay (13%) and Bolivia (2%). The company is a farmer of soybeans (making up 56% of its crops), corn (20%) and single-digit percentages of sugarcane, sunflower, wheat and other grains. The company has livestock operations in beef cattle ranching, sheep herding and dairy cow milking. Cresud also has a 64.5% stake in the Argentina real estate developer in IRSA, which in turn owns about 30% of the Argentina bank Banco Hipotecario.
Notes: On paper, it looks perfect but as a past investor I can vouch that it is a poor choice for private investors with most of the benefits flowing to the management, not the shareholders
Adecagro (NYSE: AGRO) is based in Luxembourg, but owns about 725,000 acres across Brazil (66.6%), Argentina (32.2%) and Uruguay 1.2%). Much like fellow South American farmer Cresud, Adecagro is involved in the growth of various grain crops, sugarcane, cattle ranching and dairy cow milking. Adecagro also has business segments in coffee beans and cotton growing and ethanol fuel production.
Notes: Similar profile to Cresud but seems much better run. Soros was one of the original investors.
Private Farming Funds ( would suit medium to large investors )
Pros: Lower overhead costs, better margins due to a less bureaucratic management style, planned an exit.
Cons: Less liquidity than publicly traded funds.
Notes: Success or otherwise with these private funds are totally dependant on the Fund Managers skills. If you are putting substantial funds in these you should meet personally with the managers.
GTSA comes into contact with most of the important funds in the region due to the nature of the business. We sell large farms in all these regions. However, in our experience there are a number of smaller Feeder Funds ( they supply mature property hubs to larger funds ) that we could recommend.
Direct Farm Ownership:
Farms in the most productive areas of South America can be purchased and farmed directly or under management. GTSA can provide both services if need be.
Pros: Lower overhead costs, better margins due to less bureaucratic management styles,
Cons: Less liquidity than public or private funds. One farm in one region has no risk mitigation for fire, winds, frost or other regional hazards. No exit plan.
Notes: Personal ownership of farmland suits investors who will farm hands-on or have farms large enough to warrant professional management.
If these forms of investment are of interest contact us for more information.
Geoffrey McRae [email protected]
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