Friday, August 6, 2010

International and Institutional Farmland Investing


To follow are articles concerning international farmland prices, investing, and global institutional investing.

To begin, is an article about the World Bank warning on farmland grabs.

Some companies currently working with selling international farmland are Hancock Agricultural Investment Group, Agrifirma, Emergent Asset Management Ltd., Agri Cura, Spearhead International, Westchester Group, African AgriLand Fund, TIAA-CREF, BrasilAgro, Cresud, Brown & Co., Blackrock, and insurance companies.

I have produced a concurrent U.S. domestic farmland thread, as well here.

World Bank warns on ‘farmland grab’

Investors in farmland are targeting countries with weak laws, buying arable land on the cheap and failing to deliver on promises of jobs and investments, according to the draft of a report by the World Bank. “Investor interest is focused on countries with weak land governance,” the draft said. Although deals promised jobs and infrastructure, “investors failed to follow through on their investments plans, in some cases after inflicting serious damage on the local resource base”.

In addition, “the level of formal payments required was low”, making speculation a key motive for purchases. “Payments for land are often waived ... and large investors often pay lower taxes than smallholders ... or none at all.”...Data on farmland deals is sketchy, mostly relying on local media reports. But the World Bank’s draft report said official data for a few countries showed large transfers, including 3.9m hectares in Sudan and 1.2m in Ethiopia between 2004 and 2009. The demand for farmland is unlikely to slow down due to higher commodity demand and prices.


Cash Crops: Buying Farmland for Income

6.19.2010 - Investors nervous about the stock market and in search of better returns than a money-market fund might consider plowing cash into farmland, say some financial planners. By acquiring and renting out high-quality acreage, investors can book a 3% to 5% annual return from rental income and, over time, might rack up an additional 5% or so per year in appreciation, says R. Dennis Moon, managing director of specialty asset management at U.S. Trust, a unit of Bank of America Corp.

Farmland investing doesn't come without risks, though. In order to smooth out price fluctuations, investors are advised to hold their property for at least five years. And if a farmer who's renting your land goes bust and you can't rent out the land again quickly, even the income proposition gets iffy....

Funds Enter Farmland

7/28/2010 - ...Farmland returns have a standard deviation of about 10% per year, whereas stocks are in the 20% to 25% range, adds Jeff Conrad of the Hancock Agricultural Investment Group, which has $1.3 billion in farmland under management and is on the way to 200,000 acres, mainly in the U.S. in permanent crops (see graph). "Yet farmland’s annual returns are comparable to the S&P 500," he says. "Many investors also like the fact that land is tangible."...The investment vehicles represented by managers interested in farmland come in many varieties. Susan Payne, founder of Emergent Asset Management Ltd., represents the firm’s African AgriLand Fund.....

At the other end of the spectrum, TIAA-CREF invests primarily in the U.S., followed by Australia and other English-speaking countries, and is partnering in South America in the interests of diversification. Some funds, such as TIAA-CREF, buy for the long term, while others flip the land. Global Land Opportunities. According to one fund manager, within the next 10 years, more than 60% of the global increase in grain production will come from newly opened areas globally....


County dirt's not cheap

Farmland prices are up in Essex County, especially in the sandy soils where land has increased more than $1,000 in the last year to $11,000 an acre. Not many farmers are selling which pushes up the demand and the price, said Henry Hotz, a Farm Credit Canada appraiser in Essex.

"There's lots of farmers out there looking to expand their operation and there isn't a lot of land for sale," Hotz said....Farmland values rose 3.3 per cent in Ontario and 3.6 per cent across Canada in the last half of 2009, says the most recent Farm Credit Canada report.

Land prices see strong rise despite lagging UK

...Interest in Scotland fell behind other parts of the country, but bare land prices rose 16 per cent for arable land - the average price now stands at £13,591 per hectare. For grassland farms the increase is 11 per cent, with the current average price of £6,178. Chartered surveyors expect farmland prices to continue rising over the next 12 months due to increased demand. However, it is the commercial farmland sector where they expect to see the sharpest price rises....

Inflation fears drive English land to record high

6/23/2010 - A quest for investments likely to keep their value if inflation soars has sent English farmland prices up by nearly 20% in a year to a record high, consultancy Knight Frank has said. The average price of English farmland hit £5,769 an acre in the April-to-June period after a rise of 6.9% in the quarter, the fastest since the spike in crop prices early 2008 sent farm prices soaring....

Strong Fundamentals for Farmland

5/6/2010 - ...North America captures some 26% of the $15 billion in institutional capital that is invested through private investment vehicles, he reports, second only to South America's 37%. Row crops represent 83%, protein and dairy, 13% and "other” 4%....

Middle East still keen to snap up foreign farmland

ALGIERS, April 28 (Reuters) – Middle Eastern countries, undeterred by low world wheat prices, plan a fresh wave of deals to lease farmland abroad, Arab agriculture officials said on Wednesday. Driven by high world cereals prices that peaked in 2008, farmland in developing countries has become a target, especially for Middle Eastern energy producers with large cash reserves but small areas of land suitable for cultivation. International grain prices have turned onto a downward trend because of a glut of supply — a change that makes it cheaper to import cereals and is likely reduce returns on investment from leasing farmland....

Chinese investment in Australian farms rises 10-fold

4/17/2010 - Chinese investments in Australian farms increased 10-fold in the past six months, real estate agents said, as Australia relaxed rules governing residential property purchasing and buyers see opportunities in agriculture. They were interested in large scale cattle farms, they were cashed up and see a financial opportunity in a secure investment environment, said Geoff Hickson, real estate manager at Landmark Operations Ltd. There has been a big increase from Chinese buyers in the past six months, showing ten-fold....

Australia - Queensland Government sells farmland

4/15/2010 - The Queensland Government has announced a radical shake-up of the state's agricultural colleges, following an extensive review. Primary Industry Minister Tim Mulherin says the number of sites will be increased from five to 14, and the new facilities will be paid for by the sell-off of much of the colleges' existing farmland. He says the sales of land and some infrastructure from the Australian Agricultural Colleges Corporation will raise $17 million....

Farmland values on rise (Saskatchewan)

4/13/2010 - Saskatchewan farmland values increased an average of 3.4 per cent during the second half of 2009, following gains of 3.4 and 8.8 per cent in the two previous six-month periods, according to Farm Credit Canada (FCC). Farmland values in the province have been rising since 2002 and increased by an average of 0.6 per cent per month during 2009, said FCC's farmland values report released Monday.....

Hungary elections to entrench land ownership curbs

4/8/2010 - Elections in Hungary look set to diminish further any hopes of a liberalisation of the country's land market, where tight regulations have depressed values to 10% of those in Denmark or Italy. Latest polls suggest that the centre right Fidesz party will gain a strong parliamentary majority in a general election on Sunday, ending eight years in opposition. Fidesz has pledged, in pre-election campaigning, to extend indefinitely a ban on foreigners buying Hungarian farmland, a curb allowed only as an interim measure by Brussels when the country acceded to the European Union six years ago....

Africa firms launch $408 mln farmland fund

3/25/2010 - Two South African asset management firms launched a 3 billion rand farmland investment fund on Wednesday that is expected to help boost agricultural development in Africa's biggest economy. The Futuregrowth Agri-Fund, launched by Old Mutual South Africa unit Futuregrowth Asset Management and UFF Asset Management, plans to tap institutional investors for the cash, which will be invested in farms in South Africa.

"Typically, the fund will purchase a farm, retain the workforce and appoint a professional operator with a strong marketing and distribution network," Erwin Bouland, Investment Manager at UFF Asset Management said in a statement. "Access to working capital will be sourced by the operator." South Africa has one of the continent's most developed agriculture sectors and is Africa's top maize producer as well as the third largest wheat grower....

Australian Farm sales take a dive with drought

01 Mar, 2010. THE volume of farm sales in NSW has fallen by over 30 per cent since its peak early last decade because of tighter finance, drought and the strong Australian dollar. The number of farms 250 hectares or larger that sold in the southern part of the state last year fell 38 per cent since peak levels in 2003, according to RPData figures compiled by Herron Todd White....

BlackRock launches global agriculture fund

2/12/2010 - BlackRock has launched a fund investing in agricultural chemicals, equipment and infrastructure, commodities and food, biofuels, crop sciences, farmland, and forestry. The BGF World Agriculture fund will invest globally and is not constrained by country, currency, market capitalisation, or sector restrictions. Richard Davis and Desmond Cheung, who work on the natural resources equity team, will manage the fund....

Canadian Farmland Rose 3.6% Last Half 2009

Spring 2010 - The average value of Canadian farmland increased 3.6 per cent during the last six months of 2009, following increases of 2.9 and 5.6 per cent in the two previous reporting periods. Farmland values remained the same or increased in each province. Manitoba experienced the highest average increase at 5.9 per cent.

Three provinces experienced similar average increases: Alberta (3.8), Saskatchewan (3.4) and Ontario (3.3). New Brunswick followed with an increase of 2.5 per cent, with Nova Scotia at 1.4 per cent and Quebec at 1.3 per cent. In British Columbia, Prince Edward Island and Newfoundland and Labrador, farmland values remained steady.

Investors fuel farmland cost spike

The price of farmland (UK) rebounded during the second half of 2009 as low interest rates caused investors to look for alternative homes for their cash, research has shown. The Royal Institution of Chartered Surveyors (RICS) said strong demand for farmland, combined with a shortage of supply, caused prices to rise during the six months to the end of December, after they fell slightly during the first half of the year...

Kingdom must have agriculture base, says Al-Rasheed

2/18/2010....He said Saudi Arabia should do everything possible to help rural masses that depend on agriculture. Water scarcity is one of the limiting factors to local food production. To overcome this the government should build dams to tap the renewable water so that small stake farmers in rural areas get water for irrigation. According to Al-Rasheed, the Kingdom gets six to eight million cubic meters of rainwater yearly. “Our strategy should be to make optimum use of whatever little rainwater we get,” he said here on the sidelines of the just-concluded Jeddah Economic Forum in which he was one of the panelists.

Al-Rasheed said the secret behind China’s success was its farm policy of the 1990s. It invested with small farmers and gave them a free hand. “That became the engine of growth for the country,” he said. He said agriculture is one of the most effective tools to promote growth and alleviate poverty. Therefore, Saudi Arabia must have a base of agriculture. “We must use the highly genetically modified seeds. We must heavily depend on the new technologies of the most optimum water management,” he said.

...After the food crisis of 2008, Saudi Arabia, like many other countries in the Middle East, went to countries in Asia and Africa to lease farmland. Al-Rasheed said instead of leasing the land Saudi Arabia should purchase it. According to him, there was a big difference between the two options. “When you buy a land you own it. It’s tradable.

...the World Bank whose lending to agricultural projects in 1980 was 25 percent of its budget. In 2000 the number went down to 10 percent. Moreover, the bank has lost almost half of its technical staff in the area of agriculture development. His list of neglect was long. Punjab region, the most fertile land shared by India and Pakistan, he said, has not seen development or investment in new farm technology for the last 30 years. Worse, the dams in the region have not been upgraded during the period. The Philippines has lost its rice production because of continued apathy. Thailand and Vietnam claimed to have enough food but they were exposed when the food riots erupted.

Investment in Ukraine Land Makes Sense

2/17/2010 ...Agricultural land in Ukraine is currently under-exploited. However, as the pressure for more food rises globally, more land in Ukraine is being farmed. Just a decade ago one million hectares were under crops. In 2009, Ukraine farmed 4.2 million hectares, a massive increase of 420%. Likewise, farms are getting bigger – the average farm size grew from just 28 hectares to 101 between 1999 and 2009. Reflecting this growth in agriculture are the production volumes from Ukraine land. These saw a year-on-year increase of 5% in January this year.

The rich and fertile soil found throughout Ukraine produces grains (corn, barley and wheat) and sunflower. Together with Argentina and Russia, Ukraine forms part of the so-called Sunflower Triangle. The increased quality of Ukraine sunflower crops plus a consistent export level of an average of 1.76 million tonnes over the last three years ensure that Ukraine is a leader in the sunflower industry.

But all this is just the tip of the iceberg. According to the US Department of Agriculture (USDA), Ukraine has huge potential in agriculture, a potential that will gradually be realised over the next ten years. The recent USDA ‘Agricultural Projections to 2019’ report finds that Ukraine along with Russia and Kazakhstan will become major agricultural players by 2020....Barley is also hugely important crop for Ukraine, which together with Russia, has an almost 50% share of the world’s barley trade. According to USDA, “Ukraine became the world’s largest barley exporter in 2009 and is projected to remain so throughout the projection period (2019...