It probably didn't get much attention during the week, but I noticed an interesting F-1 filing during the week. Adecoagro filed to go public, and I'd suggest anybody with an interest in the farming industry, or a desire to invest in farming operations, take a look. It's a long read, though, so I can't hope to give more than a high-level view.
Who And What It Is
Adecoagro is active in farming, cattle, dairy, sugar, and ethanol in Argentina, Brazil, and Uruguay. The company controls 287K acres, spread over 21 farms in Argentina, 15 in Brazil, and 2 in Uruguay. In addition, the company has 3 rice processing facilities, a 47K+ liter dairy operation, 2 coffee processing plants, 7 grain conditioning/storage facilities, and 2 sugar and ethanol mills in Brazil with 5.2M ton crush capacity.
A bit less than half of the company's land is suitable for crop farming, while about one-third of it is used in cattle-raising. Not surprising for a South American ag company, soybeans make up more than half of Adecoagro's crop production.
Also worth mentioning is that George Soros (or rather, a company owned and controlled by him) owns about one-third of the company.
How It's Doing
Okay, that's the quick summary of what they are. How is Adecoagro doing? A quick read of the F-1 suggests that the company might be going public more to cash in on the buzz over agriculture (and the lack of investable plays) than to exploit solid financials. The company's free cash flow production has been lousy for a years now, and the company's crop yields have been very dicey – while the company has seen a good rebound through the first nine months, 2009 and 2008 were terrible. At least the company's balance sheet is in decent shape – for an ag company, the debt-equity ratio of about two-thirds isn't bad.
All in all, Adecoagro is a company I'm going to try to pay attention to going forward. I haven't dug into the numbers enough yet, but I suspect there is ample room for better financial performance, particularly given the disappointing yields of 2009 and 2008. What's more, it will be a publicly-traded ag company easily bought and sold in the U.S. and that is quite rare.
A Shopping List
On a global basis, there are ample publicly-traded ag companies. In Latin America, there Marfrig, BrasilAgro, Cresud (Nasdaq: CRESY), SLC Agricola, and San Martinho. Of those, only Cresud is listed in the U.S., though some of these ADRs have decent volume (like Marfrig) and trading in countries like Brazil is getting easier and easier.
Of course, there other options around the world as well. China Agri-Industries, China Yurun, Mengniu, Zhongpin (Nasdaq: HOGS), Astra Agro Lestar, Golden Agri-Resources, and Indofood Agri are all worth at least a look, and there are more than a half-dozen palm oil companies of notable size. And then there are Viterra and Canada's Alliance Grain Traders – both of which are perhaps a little easier for U.S. investors to follow.
Whew... a long list to be sure, but I figure anybody who shares my near-obsessive interest in farmland investments might find it to be useful. But it's interesting to me how relatively few options there are that are listed on U.S. exchanges – beyond Bunge (NYSE: BG) and ADM (NYSE: ADM), you pretty much have to look at second-level plays like fertilizer companies (like Potash (NYSE: POT)) or seed companies (like Monsanto (NYSE: MON)).
Maybe Wait For A Pullback?
Given the big spike in food prices, and the rampant media attention that has gone with it, food is a hot space now. Consequently, investors should not expect to find all that many bargains in the space. Companies like Zhongpin and Mengniu have interesting long-term prospects, and companies like Alliance Grain would be interesting on pullbacks, but there are a lot of valuations in the space today that probably won't be sustainable. That leaves investors looking at riskier plays like Monsanto if they want bargains.
Given the big spike in food prices, and the rampant media attention that has gone with it, food is a hot space now. Consequently, investors should not expect to find all that many bargains in the space. Companies like Zhongpin and Mengniu have interesting long-term prospects, and companies like Alliance Grain would be interesting on pullbacks, but there are a lot of valuations in the space today that probably won't be sustainable. That leaves investors looking at riskier plays like Monsanto if they want bargains.
So, if you share my interest in the food and ag sector, I strongly suggest looking up Adecoagro's F-1 on Edgar. It's a good read and even if you aren't interested in the company, it can be a good resource for those wanting to learn more about the sector and South American farming in particular.
Disclosure – I own shares of Monsanto
Update - Forgot to mention ... Adecoagro is looking to raise about $400M in its IPO and will trade under the symbol "AGRO".
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