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FEBRUARY 2011 |www.opp.org.uk


INVESTMENT ALTERNATIVES Farmland | 39


a default or if the product provider ceases trading. It’s important to avoid the situation where an investor is left holding a small and relatively worthless parcel of land in a far-off country. An independent agent would act on behalf of all of the investors to sell all of the available land and use the proceeds to repay investors. • Checking that the crops are insured. An insurance backed investment would be too good to be true, but the crops should be insured so that investors’ returns can still be paid in the event of disease or storm damage for example.


Key conclusions • Farmland is a good way for agents to diversify their product offering without being seen to stray too far from their core business model. • Farmland provides similar commission levels to overseas property projects. • Farmland has a great backstory to help agents position it with consumers. • As an alternative investment that is not correlated with more commonly held assets, farmland helps consumers diversify their wealth. • Quality farmland products are structured to provide consumers with secure and predictable returns.


Large Scale Investment in Farmland


Here is a sample of some recent world news events, all of which refer to the increased demand for farmland from large scale investors:


• A World Bank Report in September 2010 notes that “45m hectares worth of large scale farmland deals were an- nounced” in 2009, compared with annual average expansion of agricultural land of less than 4m hectares before 2008. Jürgen Voegele, director of agriculture at the World Bank, says in the report that “given commodity price volatility, growing human and environmental pressures, and worries about food security”, interest in farmland is rising and “The demand for land has been enormous.”


• In December 2009, Dixon Boardman, chief executive of Optima, a New York fund-of-funds business, announced plans for a $100 million fund to invest in American farmland. In the same month, the London-based Agro-Ecological Investment Management announced that it is raising $60 million to buy land in New Zealand.


• In March 2010 a study by NCB Capital noted that Saudi Arabia and the United Arab Emirates together now hold 2.8m hectares of agricultural land, primarily in Sudan, Pakistan, Turkey and Indonesia to safeguard sources of wheat, rice, soya beans, corn and alfalfa.


• In July 2010 Agrifirma Brazil announced its intention to list on the Hong Kong stock exchange after receiving the backing of Hong Kong tycoons. The business plan is to increase its land bank from 60,000 to 100,000 hectares of land in Brazil and sell the produce of the land to China.


• In November 2010 Sojitz Corp., a Japanese trading company, announced that is will start producing soybeans and other crops in Argentina for export to Asia to take advantage of rising demand.


• In November 2010 Abu Dhabi announced that it is to make a bold foray into commodities with the establishment of a government-owned trading house aimed at securing food supplies for the import-dependent nation.


• In November 2010 Russia announced that it may need to start importing grain after a heat wave a drought had destroyed more then one third of its crop. Russia was the world’s third biggest wheat exporter in 2009.


• Others already established in this market include Deutsche Bank (pig breeding and chicken farming in China) and Russia’s Renaissance Capital, with 100,000 hectares of farmland in the Ukraine.


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