Uruguay Farms Raise Record Funds After Land Prices Jump 11-Fold

  • Agriculture-related security issuances total $124 million
  • Issuers see opportunity before grain, soy bean prices recover

Uruguayan farm operators are raising a record amount of funds in the securities market after a boom in prices for the country’s farmland.

About $124 million of securities tied to agriculture have been issued this year, double last year’s total, after financial trust Fideicomiso Financiero Campos Sustentables sold $50 million in shares on Friday to buy farmland. Another agriculture trust is planning to raise as much as $100 million this year to purchase 10,000 hectares (24,700 acres) and install irrigation.

Historic pricing since 2000
Historic pricing since 2000

Farmland prices in Uruguay have continued climbing even as corn and soy have fallen by half since peaking in 2012. A hectare sold for an average of $3,934 in 2014, up 12 percent from the prior year and 10 times the level seen about a decade ago, according to government data. Agriculture accounted for more than half of Uruguay’s $10 billion in tradeable-goods exports last year. The country, about the size of Missouri, ranks among the top 10 global soy, rice and beef exporters.

"It’s a very interesting moment to buy land,” said Enrique Garbino, a director at Bearing Agro in Montevideo, which manages farmland in Uruguay and is backing Fideicomiso Financiero Tierras Irrigadas, the trust planning to raise $100 million. “In two to three years, commodities prices will change and that is going to have an immediate impact on land values."

Campos Sustentables plans to buy 10,000 hectares for about $4,000 per hectare during the next 18 months as it bets prices have hit a plateau, Leonardo Cristalli, chief executive officer of the Campos Sustentables trust administrator Okara Ltd., said at an investor presentation Sept. 11.

For pension funds, the largest institutional investors in Uruguay, so-called value-added projects that go beyond traditional farming methods are the most interesting, according to Juan Montero, who manages 54 billion pesos ($1.9 billion) at pension fund AFAP Sura in Montevideo. While potential swings in crop prices present a risk for investors, the underlying farmland will probably retain its value, he said.

"No one thinks land will be worth half what it is today," Montero said in an interview.

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