Agricultural investments on a hot run in Brazil

Investinbrazil.biz | 1 Jun 2010

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Agricultural investments on a hot run in Brazil with large scale acreage acquisitions giving high capital and operating returns

El Tejar, an Argentinean based farming company with over 2.75 million acres under cultivation, increased its plantings to more than one million acres this season in Mato Grosso, Brazil. The company, in its quest for agricultural investment expansion in South America, increased its presence in Brazil from a meager 22,000 acres in 2005/2006 to the current one million, according to the company’s CEO.

The company’s CEO announced this at a gathering of mutual and pension fund managers, and other New York investors at the Ag Investing conference.  The company had amassed capital for its investment in large farmlands with an infusion of additional capital from London and New York. Its main shareholder, Altima Partners has invested $830 million in Agricultural projects such as El Tejar’s and a separate British farm company that specializes in plot leasing for small scale land owners in Poland and other Eastern European countries.

In their bid for expansion and increased plantation scale investments in farming, other competitors are carrying out similar investments with Agribusiness with another agricultural players, Bunge, announcing this week that it’s currently weighing investor interest in an investment fund of about $100 million for buying land in Brazil. Agribusiness Bunge already has a sugarcane farm in the country that is expected to begin operations in June.

However, the top leader, Brookfield, part of an asset management firm estimated with over $100 billion of assets under management, runs over 370,000 acres of Brazilian Agricultural land and is one of the biggest sugarcane suppliers to Brazil’s ethanol industry. Further competition will come from another company, BrasilAgro that claims to have acquired 435,000 acres of farmland in additional investment and close to 125,000 already in production. Brazilian farm companies are in a race of investments with every major company making new acquisitions and major capital investments. In just one public stock offering, more than $500 million was raised for Brazilian farm acquisitions.

The drive behind this mega investments in the Brazilian Agricultural industry is the knowledge that food demand world wide will double by 2050 with about 125 to 200 million new acreage acquisitions needed for cultivation to satisfy this demand, analysts said. The need for new investments is thus urgent to fuel the world and feed it in the next few decades. A steady capital appreciation and economies of scale has made Brazil an alluring destination for agricultural investment. Brazilian cropland in most leading edge states went up at 11% to 20% yearly since 2001 when tabulated in Brazilian Reals, not counting operating returns at around 4 to 6% per annum.

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