Mon, May 2, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Opalesque Radio

Investing in Farmland
Radio Feature 95: Sona Blessing in conversation with Stuart Donald
 
Thursday, April 03, 2014

radio Insights from Stuart Donald, head of agriculture, GMO Renewable Resources, LLC, (GMORR). GMORR is the forest and farmland investment arm of Grantham, Mayo, Van Otterloo & Co. LLC, (GMO), which has USD116 billion in assets under management as of 31.12. 2013.
  • Why invest in farmland?

    It is a real asset that combines solid fundamentals: there is a growing demand for food, energy and fibre, with a potential for inflation hedging. Farmlands have maintained their value over long time horizons. By providing yield in the form of marketable commodities, the value of the yield is protected from local currency devaluation.

    Farmland fundamentals are driven by positive demand forces (growing populations and incomes globally) vs. a fixed supply of land. According to the Food and Agriculture Organization of the United Nations (UNFAO) there are 1.5 billion hectares of arable land. It estimates that by 2050 world food production will need to increase by 60 percent - for the most part, from land that is already being cultivated. Besides when you invest in farmland, and to a certain extent, you can be in control of your own destiny. An investment in farmland could provide an annual income stream coupled with potential capital appreciation opportunities. You could make money by growing and selling that crop - but the way you manage that process also can influence the capital appreciation of land.



  • What is your investment approach?

    It is important to identify farmlands at prices reflecting their biological yield and the productive capacity of the land. By employing such a value-oriented approach, we seek to invest in attractively-priced farmland where productivity can be improved and returns enhanced through the addition of capital, optimising the mix of activities on the farm and achieving scale. Carefully managed land-based assets can also be a good fit for investors committed to responsible investing.



  • How does GMORR define farmland investments?

    Farmland investments are investments in the land, the crops and livestock that are on the land. They are not investments in commodity-traders or in companies such as John Deer or Syngenta that provide services or products to the agro-industry. Institutional investments tend to be focused around three different areas of agriculture:

    • - Row crops (corn and soya bean are the most common ones in the U.S.) wheat, cotton.
    • - Permanent crops - nut and citrus (especially in the State of California, New Zealand, Australia, South Africa).
    • - Livestock - in the dairy - beef, sheep, dairy farming (especially in New Zealand).


  • How do you make money from investing in farmlands and what are your sources of return?

    GMORR targets investments in both row and permanent cropland, as well as in livestock. The focus is on agricultural properties in lower-risk geographies where commercial agriculture is well-developed and good title, high-quality management, and adequate infrastructure are available. As we invest in agriculture globally, we leverage our timber operations and long-standing relationships with property managers and other local service providers in each region.

    Properties are either leased to local farmers for a stable cash rent, directly operated where GMORR assumes yield and price risk, or some combination of approaches where both GMORR and the operator share in upside and downside potential. Because of our long experience in timber investing, we believe we can find value in mixed use properties by optimising land use between timber and agricultural operations. As in our timber operations, we are opportunistic buyers and sellers.



  • Where are you seeing investment opportunities?

    In the U.S. (excluding the Corn Belt), South America, Australia and New Zealand.




Radio Link
  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Hedge funds see $14.3bn outflows in Q1, CTAs and multi-strategy lead net inflows[more]

    Komfie Manalo, Opalesque Asia: The hedge fund industry saw net outflows of investor capital in the first quarter of the year, totaling $14.3bn, data from Preqin showed. This continues from the $8.9bn overall net outflows that funds recorded in Q4

  2. Third Point calls Q1 "catastrophic" for hedge funds[more]

    Bailey McCann, Opalesque New York: The first quarter of this year was rocky for hedge funds based on aggregate performance from the industry, but now we are beginning to hear what the managers thought of it as quarterly letters make their way to investors. Dan Loeb, CEO of New York-based $17 bill

  3. Asia - Stabilization of China's capital outflows may hinge on Janet Yellen, Fink says China to do well this year as bubble threat postponed, Chinese hedge fund to invest in India’s infrastructure[more]

    Stabilization of China's capital outflows may hinge on Janet Yellen From Bloomberg.com: Whether China’s recent stabilization of its currency and capital outflows continues -- or downside pressure reignites -- may hinge in large part on Janet Yellen. If the Federal Reserve chair sticks to

  4. …And Finally - After all, judges are human too[more]

    From Newsoftheweird.com: In March, one District of Columbia government administrative law judge was charged with misdemeanor assault on another. Judge Sharon Goodie said she wanted to give Judge Joan Davenport some files, but Davenport, in her office, would not answer the door. Goodie said once the

  5. Comment - Unmasking the men behind Zero Hedge, Wall Street's renegade blog[more]

    From Bloomberg.com: Colin Lokey, also known as "Tyler Durden," is breaking the first rule of Fight Club: You do not talk about Fight Club. He’s also breaking the second rule of Fight Club. (See the first rule.) After more than a year writing for the financial website Zero Hedge under the n