Flow of investment dollars to farms seen growing

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Reuters | Tuesday June 23 2009

By Carey Gillam

NEW YORK, June 22 (Reuters) - A French investment firm is buying up struggling South American cattle ranches, while a Canadian investor group sees Saskatchewan wheat fields as a road to riches.

From Kansas to Kenya, investment opportunities in a range of global farm-related ventures are increasingly drawing capital to what many players and analysts see as the early days of a burgeoning bull market in agriculture.

"There is a very broad group of investors who are not satisfied with the traditional allocations that they've had, be they stock, bonds, index funds whatever," said Milbank Tweed Hadley & MCcCloy partner in global finance Eric Silverman, a participant in a "Global AgInvesting" conference being held in New York Monday and Tuesday. "People are looking for ... opportunities that will hopefully be better."

About 200 representatives of banks, foundations, asset management firms, private equity players and others were attending the conference, which highlighted investment possibilities, potential pitfalls and partnerships seen in farmland, crops, and agricultural infrastructure.

The sentiment was overwhelmingly optimistic, with attendees reporting an increasing flow of capital, high single-digit to mid-teen returns and a projected growth trajectory of at least 10 years or more.

Fund managers said farming is appealing to many investors now because it provides a hedge against inflation and is not correlated with financial assets.

"People are obsessed with real assets now. They want things they can touch," said Olivier Combastet, of Paris-based Pergam Finance, which has $1 billion in assets and two years ago formed Campos Orientales, a fund that buys farmland in Argentina and Uruguay.

The strategy is to convert the land from a focus on cattle to production of barley, corn, soy and other crops, increasing the value of the asset more than 50 percent over a five-year term, Combastet said in an interview on the sidelines of the conference.

The fund has raised $120 million thus far and is aiming to add another $50 million to its funding this year, Combastet said.

A new entry into the market is AMERRA Capital, formed in February through a joint venture of the M.D. Sass investment management firm and the Macquarie Group banking and financial services firm.

AMERRA has raised $55 million with a "soft circle" around another $70 to $75 million in just the last three months, with the aim of raising $250 million total this year, said principal and co-founder Craig Tashjian. The firm is targeting debt instrument investments in agricultural producing, processing and marketing companies in the Americas.

Tashjian, who previously was a managing director for Societe Generale, said banks are still holding tight to capital, spooked by an economic downturn.

But he and other agriculture investors said farm-oriented investments face strong fundamentals, notably heightened concerns about food security in the face of a growing world population, and the need for more arable land and improved technology, making agriculture an attractive alternative investment that can yield returns averaging 10 to 15 percent or more.

AMERRA initially is looking at dealings in the United States, Mexico, and South America, with interests in sugar, coffee, cocoa, corn, edible oils and other crops. The company is also eyeing infrastructure projects, including storage and transportation deals in Texas and Louisiana.

"I see this as certainly an extraordinary time," said Tashjian.

For Calgary, Alberta-based Agcapita, the opportunity lies in western Canada in fields of wheat and canola where land prices have been climbing. The firm has a portfolio of about $100 million.

"We don't expect for ag to a bull market forever. This is still early," said Agcapita partner Stephen Johnson. "But these are long-term sustainable trends." (Reporting by Carey Gillam; Editing by Gary Hill)
Original source: Reuters
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