Structural change in commodity markets: private financial sector investment in agriculture

Organisation de Coopération et de Développement Économiques
Organisation for Economic Co-operation and Development
English text only
Working Party on Agricultural Policies and Markets

14-16 November 2011
This document is presented to the 55th Session of the Working Party on Agricultural Policies and Markets FOR
DISCUSSION, under item 10d)i) of the draft agenda.
Contact person: Wayne Jones (e-mail: [email protected])


1. The six case studies compiled in this report illustrate the wide range of approaches and focus that private funds are adopting (legal structure, geography, agricultural production and operating strategies) to invest in farmland in different parts of the world. They provide examples of different approaches in terms of:

• legal structure
− land banks (funds)
− publicly-listed farmland trusts
− partnerships
− joint-stock companies
− private limited liability corporations

• geographic focus
− South America
− Sub-Saharan Africa
− Eastern Europe

• agricultural production
− row crops(oilseeds, corn, wheat, feed grains and rice)
− animal production(dairy, swine and beef cattle)
− fruits and vegetables, and

• operating Strategy
− integrated farmland ownership and management
− management of farmland leases and crop production
− management capabilities delivered in-house
− operational capabilities out-sourced to third parties

2. The six case studies include:

• Agrica Limited – a limited liability corporation developing rice production and milling in Tanzania;

• Calyx Agro – a farmland fund operating owned and leased farmland to product major row crops (soybeans, corn and wheat) in Argentina and Brazil;

• Cazanave y Associados – a manager of 220 000 ha of land in Argentina leased from more than 250 land owners with two divisions: farmland leasing and grain origination;

• Jantzen Development - a privately-held company focused on consolidating and developing farmland in countries located in the eastern region of the EU, with 17 000 ha under management (owned and leased) with operations currently located in the Czech Republic, Slovakia and Romania producing rapeseed, wheat and maize.

• NFD Agro Ltda. - a farmland fund manager which aspires to become a leading player in agribusiness applying a unique sustainable model that “unlocks value” in under-developed regions of South America beginning in Paraguay; and

• Quifel Natural Resources - a privately-held fund that has been investing and operating in the natural resources and renewable energy sectors since 2007 in Brazil, Mozambique, Zambia and Sierra Leone.

3. While representative, these six case studies do not cover the complete range of approaches which fund managers are deploying with varying degrees of success to allocate institutional and private capital to work in order to develop farmland into a productive investment asset. The adage that “one size fits all” does not apply in this context.

4. The fund managers attracted to this sector include sophisticated executives who have worked for multinational trading companies, food conglomerates, international financial institutions and management consultancies with substantial experience managing large organizations and developing new businesses around the world along with entrepreneurs who have direct operational experience either in their home market or as an expatriate manager. These funds are attracting managers with expertise in key functions such as finance, risk management and fund raising as well as local managers who are responsible for managing the investment projects that these funds have established.

5. These case studies also illustrate diversity in terms of the sources of capital which fund this type of investment activity, ranging from sovereign wealth funds (Norway) to pension funds, university endowments and private family offices and individual wealthy investors. While all sources of capital are seeking market rate returns on their investment, their motivations and the risk profile and investment time horizon they are willing to accept varies by category of investor.

6. The potential returns offered by each of the funds highlighted in these cases studies also differ according to real operational risk (based on geography and types of agricultural production) and market’s perception of those risks. In many case, the funds have either recently raised capital and are deploying it in the field or are in the mid-term of their investment cycle and are just beginning to generate cash returns on their activities. On a generalized basis one can assume that a majority of these funds seek to provide their investors with annualized cash-on-cash returns ranging from 10-15%. Depending on the geographic location and type of activity being financed, that range can be higher or lower.

7. Each of the funds highlighted is emblematic of a larger trend which is occurring in agriculture on a global basis; the deployment of institutional capital in the agricultural sector which had attracted investment capital. This development is resulting in the transfer of best practices between regions (Brazil to sub-Saharan Africa) which should ensure the adoption of efficient and sustainable farming practices, increase the volume and improve the quality of crops available for both domestic and export markets (to generate hard currency) and enhance the skill set and employment opportunities for many in the local populations. Each of the funds is also actively promoting the participation of local small stakeholders within the value chain to provide them with access to destination markets for their production which previously had been unattainable and providing opportunities for local entrepreneurs to offer products and services to a developing agricultural sector.

8. Finally, it should be noted that these case studies were developed using company and public information. HighQuest Partners cannot vouch for much of the information contained in these case studies as it was not part of the contract to undertake on site due diligence.

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A later version dated April 2012 was presented at a World Bank conference:
  •   OECD
  • 17 October 2011
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