South America tops farmland investors’ wish-list

Published on Farmlandgrab, by Laura MacInnis, November 10, 2010.

GENEVA, Nov 9 (Reuters) – Farmers’ fields in Brazil and Argentina are among the most prized assets in a 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 to buy, lease and manage agricultural lands for profit … //

… EXPORT TAXES:

South America accounts for 59 percent of global exports of oilseeds, 11 percent of grains and 37 percent of meat, said Gonzalo Fernandez Castro of Lumix Capital, who invests in farming in Brazil, Paraguay, Argentina and Paraguay.

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 long-term appreciation of farm property.

“For most investors, agriculture is a very, very new asset class,” said Tim Hornibrook of Macquarie Agricultural Funds Management, who said it was typical for people to invest first in domestic farming markets to avoid more complex risks.

For NGP Global Adaptation Partners, Brazil, Paraguay and Uruguay are all attractive destinations and Argentina is under review following the death of former President Nestor Kirchner, a leftist political force who was due to run again in 2011.

“Argentina is extremely interesting,” Zenuk said. “It’s a great breadbasket to the world and it has a good infrastructure system. The problem is they have an export tax regime that they mess around with all the time.”

“You don’t want to be in an asset class where you are not able to market the material on a global basis,” Zenuk continued. “It does provide some difficulty in putting our money there, in a private equity sense.”

But Mark McLornan, the chief executive of Agro Terra, an Argentine farm investment firm which has logged 53 percent net returns in the last four years, said government controls were already factored into his business plans.

“A reduction in export taxes is money straight to my bottom line,” he said. McLornan said Argentina was also appealing as a farm investment destination because of its demographics.

While the average age of farmers in the U.S., European Union and Australia is around 60, in Argentina it is 40, meaning its farm labour force is robust and knowledgeable. “In Argentina it is a sector where people want to work,” he said. (full text).

Links:

Karuturi Global Eyes East African Markets for Crops Grown on Ethiopia Land, 12 November 2010;

Objectif terre, Novembre 9, 2010.

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