We made a fortune with Cresud – let’s double up on Latin American agriculture
Not a bad way to spend the weekend. It was all research though – I am in Guatemala, home of Zacapa: the best rum.
Of course, my job isn’t that good. I’m not an international rum taster. I’m here writing a report on the Guatemalan economy. And, fortunately for me, one of Guatemala’s major products is finely-distilled rum.
That’s the point of today’s article: Latin America is the Saudi Arabia of agriculture, and, with the world’s population exploding, the canny investor can make some good money.
There’s tasty profits to be had
Sometimes investors can get blinded by statistics. The numbers can hide the truth. But in this case the stats say it all.
We all know the world’s population is growing exponentially, and therefore food demand will increase. The big question is: who will supply it?
According to the Inter-American Institute for Cooperation on Agriculture (IICA), Latin America has 42% of the world’s agricultural ‘spare capacity’.
Now I take ‘exact’ projections like this with a pinch of salt. But if you look at a world map, it’s clear that this scenario is not far off. Latin America has less than 10% of the world’s population, but almost 30% of the world’s freshwater supply and 30% of the globe’s spare farmland.
Latin America is about to take off
Latin America has always been one of the world’s breadbaskets – none of the statistics above are new, but now it’s suddenly become a great time to invest.
There is a range of factors. To be honest, I could stretch this out into three articles but I will keep it short.
Europe: Latin American countries, from Ecuador to Central America, have fresh Free Trade Agreements with the EU. Agriculture will be the biggest winner.
USA: As I mentioned last month, Latin America can now count the world’s biggest economy as its main agro-market.
Demographics: Mexico, Guatemala and the rest of Latin America are going through a birth-boom. As a result, production costs are falling.
We’ve done well – but there could be more to come
We’ve been playing this opportunity through Cresud (Nasdaq: CRESY), the Argentine agricultural and urban real estate landowner. Since I first tipped the stock, it’s up 70%. But I’m not going to rest on my success – I think there’s still much to be gained from this theme.
However, when it comes to investing, the most important thing is price. Suffice to say, nowadays, Cresud is not the cheapest way to buy into Latin agriculture. Thankfully, I’ve found another great company that suits our purposes.
Let me introduce you to our new find, Brazilian agricultural company Brasilagro Companhia Brasileira de Propriedades Agrícolas (AGRO3.SA).
And luckily, right now, I believe we’ve got a great buying opportunity.
Why you should buy Latin America now
The world’s import bill – ie, the price of traded ‘soft commodities’ – is at a five-year low. That’s backed up by the United Nations Food and Agriculture Organisation (FAO), which said its monthly food price index is at its lowest since 2010.
So now is a great time to invest in the Latin American agricultural sector.