Russian farmland

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Nemesis
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Russian farmland

Like to discuss pros and cons of investing in Russian farmland.

Motivation: hectare about 350 USD (or 10 oz AG).

Stocks:
www.alpcotagro.com
http://www.blackearthfarming.com  (BLERF.PK)
 

Edited by admin on 11/08/2014 - 06:18
Daedalus Mugged
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Appreciate the narrow focus,

Appreciate the narrow focus, but it may be too narrow.  I think the 'farmland' and the "russian" should be separated. 

Generally bullish farmland, but not sure I would want to maintain a Russian focus.  Given the russian political environment, I think there is some political risk, probably not outright seizure, but some form of 'screw the furriner' and I mean something worse than the grain export ban of last year.  It is also notable that both of the companies linked have always had negative EBITDA.  Given the relative strength (compared to historical averages) of current grain pricing, if they aren't making money now, that is not encouraging.  Not a deep dive of diligence, but on first glance, I don't see these two as particularly attractive.  If they can't generate positive operating cash flow...they can't make that up on volume. 

Can anyone recommend a sub saharan africa or Latin American company similar to the ones Nemisis linked to above?  Preferably with positive operating cash flow?  I can appreciate tapping the capital markets to put more land under management, but it shouldn't be to pay for current operations.  

Philharmoniker
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Russian land

I purchased some land in Russia in 2007. My original intention was to flip it for a quick profit. That did not happen as the crisis came and there were no good offers. This year I am getting a few interested buyers, but now I am not so keen to sell giving all the current and future economic conditions. Actually, I am thinking to lend the land to farmers.

As far the political and economic conditions in Russia go- I mostly agree with the previous poster. However, I also see Russia is changing fast, so will see how it all transpires.

Nemesis
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Farming 2011 vs Silver Mining 2008

In 2008 the price of silver was below the mean production cost of silver. We know what happend to the stock prices of mining companies in the last three years.

If you take a look at the following presentation you can verify that the cost of production for grains is above their sales price:
http://www.trigonagri.com/upload/2011/Trigon_Agri_Corporate_Presentation_June2011.pdf

I would like to discuss the probability of two scenarios:
(1) price goes up
(2) price stays low => bankrupt of farming companies => grain output reduced
 

 

Nemesis
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Farmland prices: Russia vs Rest of world

to whom it may concern:
(full report: http://blackearthfarming.com/files/BEF%20Q1%20Report%202011.pdf)

Nemesis
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Harvest update: higher by 50% in tonnage terms

--snip---

Given the current outlook in the fields for the remaining key crops of sunflower, soya and corn, Trigon Agri expects the total 2011 gross harvest to be higher by 50% in tonnage terms than in 2010, while the total harvested area will be up by only 6% year-on-year. Meanwhile, the Group is on target to show the lowest production cost per hectare and per tonne, in its entire history.

--snap--

Full report from Trigon Agri: http://tinyurl.com/harvestupdate

Dimo784
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Gentlemen,  I'm from Bulgaria

Gentlemen, 

I'm from Bulgaria (farmland price just above Russia), if anybody needs information about land here, please let me know and I'll try to answer your questions.

Nemesis
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Trigon Agri: 1H 2011 Interim Report

----snip----

Highlights of 1H 2011  
• Total revenue, other income and fair value 
adjustments amounted to EUR 46,936 thousand (EUR 
36,889 thousand in 1H 2010).  
• Revenue amounted to EUR 7,113 thousand (EUR 
16,608 thousand in 1H 2010), Other income EUR 925 
thousand (EUR 3,030 thousand in 1H 2010) and fair 
value adjustments EUR 38,898 thousand (EUR 17,251 
thousand in 1H 2010).    
• Total operating expenses amounted to EUR 24,904 
thousand (EUR 33,302 thousand in 1H 2010).  
• EBITDA amounted to EUR 21,042 thousand (EUR 
2,026 thousand in 1H 2010). 
• The Net profit of the Group amounted to EUR 16,029
thousand (loss of EUR 3,240 thousand in 1H 2010).  
• The consolidated assets of the Group as of June 30, 
2011 amounted to EUR 210,606 thousand (EUR 
148,121 thousand at December 31, 2010).  
• Four-year bond issue in amount of SEK 350 million 
(EUR 38,152 thousand) successfully concluded with 
an annual interest rate of 11%. 
• The total expected gross harvest is 50% higher than 
last year while the total harvested area has increased 
only 6% year-on-year. 
• The management is reiterating its target of increasing 
the harvested area in 2012 up to 150 thousand 
hectares. 
 
---snap---
Nemesis
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Alpcot: Early Crops Harvest Report 2011

Jens Peter Aabyen, Managing Director, comments

“I am pleased to announce that we have achieved substantial increases in yields compared to last year’s results with 70 percent higher yield for winter wheat and 25 percent higher yield for winter rape. This is an achievement especially considering that some of the areas planted with winter wheat in both Kursk and in western Ukraine were planted on previously fallow land.  Milder weather conditions as well as considerable operational improvements over the last year have contributed to the better performance this year"

http://www.alpcotagro.com/rnsnews.aspx?releaseid=595770

Nemesis
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Black Earth: Report January- June 2011
--snip---
Dry Spell in Central Black Earth Region:
Limited rainfall results in disappointing initial crop yields as 45% of 2011 area has been harvested.
New operationally focused management team with key priorities outlined to lift future crop yield potential.
Nemesis
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Trigon Agri presentation worth your time

Sorry due to lack of time a very short post:
http://www.trigonagri.com/upload/2011/2011_09_20_Trigon_Agri_Corporate_Presentation.pdf

Please take the time to read it. Gives a sound overview about the big picture of farming.
Regards

Philharmoniker
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Re comment by Nemesis on the Russian land

Nemesis, thank you for the charts and the figures. Although, I should not be surprised by the cost of a Russian hectaire being very low, I am still. The Russians still have not grasped the value of the agricultural land. Perhaps, because they have a lot of it. There are pro's (can buy a lot of it for small money) and cons (it does not appreciate in price that fast), but as more and more people are waking up and seeing what real assets are, perhaps, the investment demand for the Russian land will increase. I certainly hope so!

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Trend analysis: population, meat consumption and arable land.

Hypothesis

In the charts below we see that the world population is growing. Consequently the arable land per capita is going to decrease. Due to better standard of living people are going to consume more meat. To produce one kg of meat we need up to 16 kg grains. If our hypothesis is true that in the future more people eat more meat, we can infer that demand for arable land has to increase.

Population and arable land

Charts taken from Trigon Agri presentation [1].


 

Meat vs Grain

Increased meat-eating has followed rising affluence in many parts of the world. China's levels doubled between 1990 and 2002. Back in 1961, the Chinese consumed a mere 3.6kg per person, while in 2002 they reached 52.4kg each; half of the world's pork is now consumed in China. [2]

It takes up to 16 pounds of grain to produce just 1 pound of meat, and even fish on fish farms must be fed up to 5 pounds of wild-caught fish to produce 1 pound of farmed fish flesh. [3]


-----------------------------

[1] http://www.trigonagri.com/upload/2011/2011_09_20_Trigon_Agri_Corporate_Presentation.pdf

[2] http://www.guardian.co.uk/environment/datablog/2009/sep/02/meat-consumption-per-capita-climate-change

[3] http://www.peta.org/issues/animals-used-for-food/meat-wastes-natural-resources.aspx

Nemesis
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Value of farmland continues to climb (U. S.)

----snip---

“We are now using more corn to make ethanol than ever before."

“There may be a bubble, and in all likelihood prices will come down,” he said. “But there’s an awful lot of cash chasing a very small amount of land available for sale, and that will keep prices stable.”

---snap--

http://www.springfieldnewssun.com/news/springfield-business-news/value-of-farmland-continues-to-climb-1266144.html

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Alpcot: livestock update

Jens Peter Aabyen, Managing Director of Alpcot Agro, comments:

“During the period, we have made significant advances in animal health, and mortality numbers are at an all-time low. The reproduction program is running at full steam and more than 300 heifers have been impregnated during the quarter. 

And perhaps most importantly, we are now well under way with replacing the old Simmental cows with high yielding Holstein cows, which will give significant increases on productivity per cow going forward.”

-----
http://www.alpcotagro.com/rnsnews.aspx?releaseid=607974

Nemesis
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Alpcot: Winter Planting Update 2011

Jens Peter Aabyen, Managing Director, comments

“I am satisfied to report that we have successfully completed the winter planting campaign despite difficult conditions and heavy rains in some regions. The planned cropped area of almost 103 000 hectares in 2012 equals an increase by about 11 percent compared to 2011. ”

-----
http://www.alpcotagro.com/rnsnews.aspx?releaseid=613513

Nemesis
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Alpcot: Late Crops Harvest Report 2011

---snip----
Alpcot Agro AB (“the Company”) has almost completed the harvest of sunflower, sugar beet and soya, with an average yield for sunflower of 2.3 tons per hectare. To date the Company has harvested about 257,000 tons gross weight of different crops.
---snap---

[1] http://www.alpcotagro.com/rnsnews.aspx?releaseid=618026

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Trigon Agri: Interview with President and CEO Ülo Adamson

http://www.trigonagri.com/

Nemesis
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black earth Q3

https://newsclient.omxgroup.com/cdsPublic/viewDisclosure.action?disclosureId=479857&messageId=586448

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Trigon Agri Results November 2011

Summary results November 2011

revenue: 70 Mio. EUR
expenses: 57 Mio. EUR
profit: 4 Mio. EUR

outlook: slow down expansion due to global uncertainty

----
http://www.trigonagri.com/upload/2011/2011_11_25_Trigon_Agri_Corporate_Presentation_9m_results.pdf

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Off Topic - Santa

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