When I last wrote about Adecoagro (NYSE:AGRO), I thought the company was in place to benefit from an improved political and economic situation in Argentina and its low-cost position in ethanol in Brazil, but I thought the valuation was less than compelling, and particularly next to Cosan (NYSE:CZZ) and SLC Agricola (OTCPK:SLCJY). Since that last article, Adecoagro shares have basically been flat while Cosan has soared, SLC Agricola has gone up a bit (around 16%), and another Argentine farming/farmland play, Cresud (NASDAQ:CRESY), has been quite strong.
At this point, I'm more bullish on Adecoagro again. While low global grain prices are a concern, prices have been quite healthy in the sugar and ethanol business. What's more, the company continues to periodically sell farmland well in excess of appraised value, and the economic reforms underway in Argentina make further appreciation a credible driver. With a fair value around $13.50 to $14.50, Adecoagro isn't shockingly cheap, but I think it is worth the elevated level of risk that goes with an emerging market commodity play.
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Adecoagro's Valuation Looks A Little Too Sour