Union Agriculture Group (UGA)

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The Uruguayan Union Agriculture Group (UGA) may have got its timing wrong in buying El Tejars farm assets in Uruguay it seems in hindsight. The seller was El Tejar who was one of the largest rural players in South America and took the opportunity to sell all its Uruguay farms ( 67,000 ha ) as it thought the market had peaked to its larger competitor UGA.

UGA can now boost around 172,000 ha in total. However the idea of then UGA creating an initial public offering (IPO ) with the combined acreage has become unstuck at this time due to a general perception that Uruguay land prices do not deserve a market premium. There is a general belief that a bubble has been created by Hedge Funds buying land in Uruguay without the skills to manage them effectively. (these are not the same Vulture Funds that are causing Argentina to default.). Uruguay farm types are very different to others in the region in that they tend to have mixed soil types within small areas meaning that it is more complicated to farm than say Argentina or Paraguay. ie a 1000 ha farm might be 40% pastoral and 60% cropping where Paraguay it could be 20% pastoral and 80% cropping. 

Farms sales have slowed in Uruguay due to a stand off of buyers and sellers on price expectations. Something has to give. Unless China starts growing again soon I am fairly sure which side it will be.

 

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