Farmland Investments in Africa - Can They Be Both Profitable and Sustainable

As global stock markets delay wildly, individual investors, private equity funds and other mammoth institutions are increasingly looking to alternative investments to store account and stability to their portfolios.

Addicted the rapid scuttle - up in agricultural produce and food prices recently, farmland investments are becoming an increasingly attractive asset class. For both institutional and individual investors with long time horizons, agricultural land is an ideal method for diversifying beyond a portfolio of in truth stocks and bonds, whilst also providing a steady flash of good velvet income and offering estimable upside potential for chief gains due to the upping agricultural " super path " as coined by noted farmland and merchandise tycoon Jim Rogers.

In the UK for copy, over the last ten years, agricultural land has important roughly 13 per cent per year in the according to Investment Property Databank ( IPD ). The US and other Western countries have empitic companion farmland investment returns. Farmland prices have wherefore skyrocketed, drawing near as high as 17, 300 ( approximately $30, 000 ) per hectare in the northwest of England to take right one exemplar.

As a repercussion, investors are increasingly turning their interest in agricultural land investing to areas of the world where farmland prices are starting from a much lower base, thereby providing much greater upside potential. One area where this has been particularly prevalent is Africa, where hedge funds and other large institutions have been making large agricultural farmland investments. Hedge funds and private equity funds alone have purchased 148 million acres of farmland in just the last three years. Just to take one example, the UK ' s well known Guardian newspaper just outlined how major a full 5pc of African agricultural land had been purchased or leased by outside investors, and that more than 200m hectares ( 495m acres ) of land - roughly eight times the size of the UK - were sold or leased between 2000 and 2010.

Given the long history of colonial exploitation in Africa, there has been increasing resistance to what is perceived by many western Non - Governmental Organisations as well as Africans as a " foreign land grab. " Whilst some of these feelings may be based on old stereotypes rather than current conditions, there is no question that some abuses have occurred. Just to take one example, farmlandgrab. org just published an article arguing that a US firm was running roughshod over the local population in Cameroon with one of its agriculture investment.

It is undoubtedly true that frequently large institutional investors make deals directly with the central governments of African countries. Given the amount of corruption and generally poor governance that still exists in Africa, the investment capital frequently disappear into the pockets of corrupt local officials whilst local farmers are forcibly removed from their homes and lands.

By the same token, it is far from true that all foreign investments in African farmland are predatory and exploitive. Global consultancy McKinsey recently produced a report on the future of Africa which noted that the continent had over 25 per cent of the globe ' s arable land yet produced only ten per cent of agricultural output. McKinsey argued that up to $50bn / year of African agricultural farmland investment would be needed to bring the sector up to global standards and allow African agriculture to maximize its potential output.

One reason to consider outside investments in African farmland is that the amount arable land globally has been decreasing. As farmland continues to be lost to urbanization, transportation networks and real estate development, the world must try to feed more people on less farmland. Africa, however, holds approximately 60 % of the world ' s remaining uncultivated land that is suitable for farming, so looking at food security from a broader perspective, Africa has a an opportunity to feed both itself and the world in the coming decades.

Given the need for investment in African agriculture, there is no reason that foreign farmland investments on the continent cannot be structured as a win - win for both private investors and the host country populations. With the right guidelines and intentions, foreign investment in African farmland can be both ethical and profitable. The major issue is whether a set of basic principles for " win - win " farmland investment in Africa can be developed. Just as an example, we believe that the following principles can be used to evaluate the fairness of foreign farmland investment in Africa:

1. The investment was directed at completely unused land, and none of the local population has been removed from any of the land since it was not in use as a food source;

2. The farmland investment was negotiated directly with local villagers and tribal chiefs, so there was no chance for corruption at senior government levels;

3. Farmland investments in developing countries should not simply be premised on food security concerns by the foreign investors, who may want to simply ship the entire crop production back to their home countries;

4. The workforce should as much as possible be local hires who should be paid a fair wage well above the minimum for that country; and

5. Finally, foreign investors in African farmland should also have at least some kind of community re - investment programme in the host country.

Whilst these principles will not solve every concern of local African NGOs, they are at least a starting point for considering examining whether a farmland investment is structured as a win - win for both the investor and the local population, or if the investor is behaving in an inherently exploitative manner. One other interesting factor is that when farmland investment projects are structured such that retail investors can participate, we have seen that these types of individual investors demand that any project they are involved with be both ethical and profitable.

Investing in Agriculture Stocks May Be a Profitable Move

I mash earnings season. It ' s a great time to capitalize on the babble of the market. It also gives us an fortuity to profit by simply trading options. If you mind back in October I pointed out a trade. One of the solar companies was going to announce their earnings. Most of their competitors had announced record results driving the stocks significantly higher. We were right and people untrue money.

I see another trade like that footing up right now... but in a opposed industry.

Now, this trade isn ' t for the faint of heart. It ' s exposed. But the profits could be good as well. First a petite involvement.

We all know how well products have done over the last few months and years. To add fuel to the fire, China continues to drive demand for food - related goods. News of hoarding grains like rice and corn are also floating around.

Haphazard to report, everyone loves the agricultural merchandise.

As a eventuality, the companies providing products and services to the agricultural industry are thriving. Uncolored inspection at DuPont ( DD ). The company announced earnings Tuesday. The strength of their business was found in agriculture. First venue profits were up 26 %... all due to increasing demand for its seed products and agricultural chemicals.

Now the stock is down a bit, but that ' s because they indicated product sales were slow in other groups, namely automotive and construction.

Yet another signpost.

Monsanto ( MON ), the giant agricultural products supplier announced their earnings on April 2. They had previously raised guidance in March. So everyone knows the agricultural products industry is white hot. In the earnings announcement management highlighted expectations of a 58 % to 63 % earnings growth this year! When Monsanto earnings hit the tape the stock rallied.

Monsanto had traded as low as $105 on the day of the announcement. It hit $124 over the next few days... and continued higher.

So, what ' s next.

On April 24, Potash ( POT ) is going to announce earnings at 1: 00 pm eastern time. If you trade this stock just right, you might make some money.

Now for those of you who don ' t know, Potash is a very interesting company. They ' re the world ' s largest potash company. They ' re also the third largest phosphate producer and the second largest nitrogen producer in the world. All of these products are needed in the agricultural industry.

The company has been selling these agricultural products since 1953, and it looks like they ' re on track for a record year.

Some interesting news.

Just a few days ago Potash announced a significant price increase of their products to China. Prices went up more than $400 per ton on " red standard grade potash. " Now this isn ' t the first price increase for the company.

Nope. A few days earlier on April 9th, they raised rates for North America. And a few days prior to that, they raised prices in South East Asia and Latin America. Basically prices are up around the world.

Increasing prices is always difficult. You run the risk of customers either not buying your product or searching for a new supplier. What Potash basically said was " we don ' t care. "

Like the Godfather they made ' em an offer they couldn ' t refuse.

Now think about this for a moment. If you can push through a major price increase on your best customers, then you have substantial power in price negotiations. This means there ' s more demand than supply in the market place.

And since Potash controls the supply, they control the price.

So what does this all boil down to? I ' m trying to figure out if Potash is going to make their numbers on Thursday. Something tells me they will. I think not only will they make their numbers; they ' ll beat ' em.

But there ' s a risk.

Lots of people already see what we see. This big home run may already be priced into the stock. If that ' s the case, the stock might go nowhere on the news. It might even go down. And of course there ' s the wild card. You never know what management is going to say about future expectations. They could throw everyone a curveball and the stock might get destroyed.

I find it hard to believe that will happen.... but you never know.

The last time Potash announced earnings was back in January. The stock traded as low as $105. A few days later it had rallied to $144. Of course they announced record revenue, EBITDA, and profits.

So how can we profit this time around?

Buying calls on Potash is one way to profit if the stock jumps in value. I looked at the short term options. Right now, you can buy May calls on Potash with a strike of $210 for about $15 each. If you put on this trade, you ' d profit when the stock rallied above $225. That ' s a $28 point move in the stock.

I know what you ' re thinking, these options are expensive. They are. There ' s an advanced options trading technique that can lower your cost dramatically, but it also limits your profits. It ' s known as a Call Bull Spread.

First you buy a close to the money call option and at the same time sell a call option at a higher strike price. Your maximum profit would occur when the stock trades above the higher strike price. It ' s a way to potentially gather some profits, but remember, if the stock doesn ' t move in the right direction, you can lose your entire investment.

As with any option trade there are risks. Make sure you ' re comfortable with and fully understand the risks and rewards of every trade - before you buy a position.

No - till Farming - Making Agriculture A Profitable Business

Tilling is an ancient farming practice. Few decades before, scientists initiate that no - till farming can deliver better yields if done properly. The findings were astonishing to all as tilling farming was the tradition in most of the countries and widespread tilling was considered essential for better crop. Brand-new research studies have confirmed that no - tilling method certainly has extra edge over habitual farming method. It is confessed as zip - till farming also.

The proven benefits of this new farming style are: Less efforts, erosion control, better return, environment friendliness, reduction in green gases, improvement in living style and less input in terms fertilizers and water etc. Reports confirm that in between 1987 to 2008, zero - till method witnessed 74 times increase in social acceptance in only Latin America. This assessment was sufficient to judge the increasing trend of this method worldwide. The experience of 105 Million hectare farming land owners cant be wrong. According to a survey report, more than 49. 6 million hectare land was under zero - tilling farming.

As the popularity of this new farming method is increasing worldwide, we are getting the proof of more benefits. Improved water level; Reduced usage of heavy machinery; Time savings; Fuel savings; Reduction in labor cost; Reduction in air pollution; Better wildlife; Better soil filth and Reduced soil compaction etc are other significant benefits that come directly or indirectly in the pocket of farm owners. Soil loses much of its carbon content during tilling. It releases carbon dioxide gas in the atmosphere. Increased level of CO2 in atmosphere is associated with global warming.

Though the benefits have been realized and proved scientifically worldwide but even than many farm owners hitch in making a switch over to this new technique. Still, only 5 percent of world ' s cultivated cropland is under no - till farming. In African and Asian countries no - till farming is at the lowest level. The major reason for this drawback is the absence of adequate financial support to farmers. It is natural to doubt a relatively new method that apparently doesnt support traditional beliefs. As the governments too are concerned to increase agricultural yields, they encourage the farm owners to accept this new way of farming. Agriculture research centers offer complete help at all the fronts almost free of cost. Many farmers feel slight drop in very first crop after adopting no - till farming practice but soon difference comes back into the pockets in the form of multidimensional benefits.