Time to invest in Brazilian agriculture

Food has become a strategic success factor to survive and prosper in the modern world. According to World Economic Forum , demand for food will increase on 70% by 2050, with gradual shift of customer preferences to meat, organic, nutritious food. This fact is a real challenge for human race, considering land and water resources are limited, maldistributed and shrinking . Expected in 2011 wheat deficit of 54 million tons , caused by limited supply and constantly growing demand is one of good illustrations for the above mentioned. As a result, farmland investment nowadays, as never before, has become one of the most attractive business models from various points of view: • Reasonable level of risk, • Investment is secured with land, • Demand for food is unlimited.

South America nowadays is considered a top place to buy, lease and manage agricultural lands for profit. The region accounts for 59% of global exports of oil seeds, 11% of grains and 37% of meat; with Argentina, Brazil, Chile and Uruguay being among the top 10 food exporters[1]. As the biggest country in South America, Brazil offers unlimited opportunities in agriculture, having  more spare farmland (see map below) and renewable water than any other country, or over 250 m hectares out of 300m hectares[2]of arable land and as much renewable water as the whole of Asia.

Such abundance of natural resources creates opportunities for:
  • Creation of sustainable agricultural communities, as the major alternative to traditional agriculture, which, despite declared successes in productivity, poses a treat to quality and availability of food resources.
  • People willing to maintain healthy, peaceful and sustainable lifestyle.

Purchased farmland may have multiple uses, including food and medicinal plant cultivation, research and experimentation, recreation for inhabitants as well as for the wider public, nutrient recycling, production of natural materials and biodiversity. Permaculture principles may guide the design of the farmland usage to eliminate the need for chemical fertilization and pest control, and ensure that each of the components of this ecological and agricultural network are both feeding, and being fed by other components. High attractiveness of such investment can be increased adding value to farmland, rather than holding plot and waiting when its price goes up to desired level: • Setting-up gardens according to principles of permaculture; • Create opportunities for community members to communicate, sell and buy, entertain: build infrastructure (roads, public places), provide energy supply (water, wind and solar generators) and transportation. Yet, waiting strategy also works, because FARMLAND PRICES GROW ALL OVER THE WORLD. THEY JUST DO NOT MAKE IT NO MORE!

It is actually diminishing at alarming pace  – topsoil erosion, pollution (e.g. Fukushima), natural disasters such as flooding, draughts….and world population is steadily growing. Strong fundamentals support a potential in agri-business: http://www.economicsfanatic.com/2012/03/case-for-long-term-investment-in.html If oil prices explode for whatevewer reason, multiple predictable and also Black Swan possibilities here, we have to redefine agriculture totally – mostly to go back to decentralized microfarming, permaculture etc.

For successful investing, it is of paramount importance to recognize trends at their early stages.  You can find several samples of „smart money“  actively investing in agricultural land (Jim Rogers, Georg Soros, Doug Casey etc.). World Trends (according to prominent forecasters such as Gerald Celente at al.): –        farmland price growth across the globe –         rise of organic farming, increased interest in sustainable  living etc. –         trend of emigrating from EU and from the USA because of increasingly deteriorating economy and emerging oppressive totalitarism (Doug Casey, ). –        affluent Europeans and Americans are adding a 2nd residence in developing countries. Recently Hollywood mogul James Cameron bought 2,600 acresof farmland; moving to  New Zealand. In Iowa, the state with the highest gains in the Midwest, the average price of farmland grew a record 32 percent last year to $6,700 an acre, according to a study released last week by Iowa State University. This month a land auction in the northwest corner of the state shattered records when one farm sold for $20,000 an acre, prompting another round of warnings of a real estate bubble. http://timiacono.com/index.php/2012/01/03/the-farmland-boom-in-iowa/ http://www.nytimes.com/2011/12/31/us/in-iowa-farmland-expands-as-crop-prices-soar.html?pagewanted=2&_r=1&partner=rss&emc=rss?  http://www.off-grid.net/2012/02/28/farmland-prices-rocket-in-america/ http://www.commodityonline.com/news/agricultural-commodities-to-turn-bullish-on-india-china-farmland-race-46095-3-46096.html

We believe that worldwide trends support similar growth in Brazil. Chinese investments into Brazilian farmlands have just started. Where in Brazil ? In Santa Catarina.  In Iowa, farmland prices have risen up to $6700 an acre – this  is $18090  hectar. In Brazil, farmland price is roughly $7000 per hectare. What makes Brazilian land so desirable – we do know about good climate and fertile soil but there is something much more important ?-  most lands which can be purchased in selected region do have  the most valuable resource  for agriculture – WATER – on the property!  How Come? The Santa Catarina region sits on a SECOND LARGEST AQUIFIER IN THE WORLD. Here are some samples of beginning trends: http://www.cityfarmer.info/2012/01/15/university-of-massachusetts-amherst-creates-12000-square-foot-food-garden/  http://www.off-grid.net/2012/01/20/off-grid-homes-lure-americans-to-new-zealand/

To summarize, competitive advantages of investment in Brazilian agriculture are as follows:

• Secure and profitable land investment;

• Affordable investment into high-end locations in attractive country (if best practices applied) ;

• Opportunity to produce, eat and sell own organic food;

• Opportunity to maintain healthy and peaceful lifestyle.