Seeking Alpha: Leveraged To Changes In Argentina, Cresud Can Still Outperform

"You have attributed conditions to villainy that simply result from stupidity" (Robert Heinlein, Logic of Empire)

It is hard to imagine that Christina and Nestor Kirchner could have run Argentina's economy deeper into the ground if they tried, but the reality is that nationalization, protectionism, regulation, currency controls, and other ill-considered economic policies have seriously damaged Argentina's economy. And yet, I think there's an argument to be made that Cresud (NASDAQ:CRESY) can still make sense in an aggressive portfolio.

Cresud should benefit from a change in government later this year, particularly if various candidates follow through on their pledge to rebuild the economy in part around agriculture and pursue ag-friendlier policies (including reducing or eliminating export tariffs). If Argentina's economy does improve, I would expect Cresud to also benefit from a catch-up trade in the value of Argentina's farmland (which should be worth more than it is, given its relative productivity and access to transportation infrastructure). Last and not least, Cresud may be poised to benefit from a bottoming of the ag cycle. All of that said, a lot can still go wrong within Argentina and Cresud's sizable stake in IRSA (NYSE:IRS) means this is not just a pure ag play.

Follow this link for the full article:
Leveraged To Changes In Argentina, Cresud Can Still Outperform

Seeking Alpha: Cresud Finally Trading On Some Of Its Potential

Sometimes a little extra attention can make all the difference. I don't want to suggest that Morgan Stanley's bullish initiation of coverage on Cresud (NASDAQ:CRESY) is the only reason the shares have done so well since April, but it can't hurt to have a major sell-side firm beating the drum on an undervalued company. Cresud is still facing plenty of challenges, not the least of which are weak crop prices and a weak Argentine economy, but it seems as though investors are finally a little more willing to give some credit to the underlying potential value of this company's large Latin American agricultural land portfolio.

Read more here:
Cresud Finally Trading On Some Of Its Potential

Seeking Alpha: Weak Crop Prices Weigh On SLC Agricola

Weak crop prices are music to the ears of BRF SA (NYSE:BRFS) shareholders, but quite another matter for companies like SLC Agricola (OTCPK:SLCJY) and Brasilagro (NYSE:LND). Although the majority of SLC Agricola's value stems from buying undeveloped land and turning it into much more valuable developed land, weak prices are nevertheless bad for near-term sentiment and results. Without the leverage to sugar and ethanol of Adecoagro (NYSE:AGRO) and the leverage to Argentina of Cresud (NASDAQ:CRESY) (and to some extent Adecoagro), SLC Agricola has been left behind this year but still offers some appealing value for the future.

Read the full article here:
Weak Crop Prices Weigh On SLC Agricola

Seeking Alpha: Poor Yields Sap SLC Agricola

Three out of four will have to do. My Alpha-Rich calls to buy South American ag companies Adecoagro (AGRO) and Cresud (CRESY) have both worked out well, with performance well ahead of the S&P 500, and my relative bearishness on BrasilAgro (LND) has likewise worked out with a share price decline of 10%. SLC Agricola (OTCPK:SLCJY) is the exception and the stock that has not performed as I had thought it should. While the 8% return from my call has basically matched the performance of the Bovespa, it lags the performance of the S&P 500 and the performance of the Brazilian-listed shares (SLCE3.SA), which have risen about 18%.

Blaming currency moves and/or skittishness about land values in Brazil is fine to a point, and I do think that the disappointing cotton harvest played a significant role. Management isn't really changing much about their operating philosophy, though the company's decision to lease land instead of buy it does give some reason for pause. I do believe that SLC Agricola remains one of the best-run ag companies in the market and I continue to believe that the shares are undervalued at these levels.

Please continue here:
Poor Yields Sap SLC Agricola

Seeking Alpha: Better Times, Worse Times For Cresud

I'm pretty happy with the calls I made on South American agriculture companies back in July of this year. As I discussed yesterday, Adecoagro (AGRO) is up nearly 20% from my Alpha-Rich call, while BrasilAgro (LND), my least favorite of the four, is down more than 10%. SLC Agricola (OTCPK:SLCJY) has been something of a disappointment, up only about 5%, but my high-risk/high-reward call Cresud (CRESY) laps the field with a better than 40% return from my initial recommendation.

Cresud is in a tricky spot. On one hand, the end may well be in sight for the Kirchner brand of Peronism and that should be good for Argentina's economy. On the other hand, Argentina's economic history generally suggests that a change in government is more of a distinction without a difference. Elsewhere, I believe Cresud's land values are likely understated and that the company is unlikely to see the same bad weather that has hurt yields in recent yields, but farming is inherently unpredictable and the problems in Argentina are restricting the company's growth and value-creation potential.

On balance, Cresud is still undervalued. Its undervaluation is roughly on par with that of Adecoagro, and choosing between the two seems to me to be more a matter of whether you prefer larger upside or smaller downside.

Read more here:
Better Times, Worse Times For Cresud

Seeking Alpha: Cresud Is Confounding, But Trading Much Too Far Below Fair Value

Having given overviews of South American agricultural companies SLC Agricola (SLCJY.PK), Adecoagro (AGRO), and BrasilAgro (LND), I close the tour with Argentina's Cresud (CRESY). I'd like to say that I left the best for last, and maybe I have, but I think it's closer to the mark to say that I've left the most confounding one for last.

Make no mistake, Cresud has a lot of worthwhile assets, including productive farmland in four South American countries, a controlling stake in a significant Argentine real estate developer, and a major stake in BrasilAgro. At the same time, though, Argentina is going through another bout of significant political and economic turbulence, and I don't think anybody can say that means for agricultural exports out of Argentina, land values within the country, and/or the company's ability to pay cash dividends to foreign shareholders.

Assuming that nothing dramatic changes regarding the operating framework for the company in Argentina (and Brazil) and that land values stay strong, Cresud could well be the cheapest of the four companies I've surveyed. At a minimum, it's definitely the most diverse collection of assets.

Please read the full article here:
Cresud Is Confounding, But Trading Much Too Far Below Fair Value

Seeking Alpha: BrasilAgro Has Valuable Land, But An Uncertain Model

As I work my way through the South American ag giants, I now turn my attention to BrasilAgro (LND). BrasilAgro has done a pretty remarkable job of getting "potentially" arable land under cultivation, having nearly doubled its land under cultivation since 2010 and nearly quadrupled it since 2008. Moreover, management appears pretty smart about putting that land to best use, adjusting the planting of soy, corn, sugarcane, and cotton in response to market conditions.

All of this sounds great, but for the sizable stake that Argentina's Cresud (CRESY) and other foreign investors hold in the company. Brazilian law is stacked against the acquisition of land by foreigners, and that would seem to limit BrasilAgro's ability to further expand its land development operations. Though I do believe BrasilAgro's land is worth quite a lot, I have serious concerns about the long-term model and the company's virtual "pure play" vulnerability to Brazilian land values. With those risks, I'd prefer the potential offered by other South American ag companies like SLC Agricola (SLCJY.PK) and Adecoagro (AGRO), and perhaps Cresud as well.

To read more, please continue here:
BrasilAgro Has Valuable Land, But An Uncertain Model

Seeking Alpha: SLC Agricola - Come For The Crops, Stay For The Land

It isn't easy running a farm nor, by extension, a farming business. Couple that with extensive year-to-year volatility, and that may well be why there are no publicly-traded U.S. farming companies - forcing investors to make do with input companies like Mosaic (MOS), DuPont (DD), and Deere (DE) or crop/commodity-specific ETFs. That's really too bad, though, because for all of the year-to-year risk and volatility in farming, the long-term potential of land value appreciation can be considerable.

That makes Brazil an interesting opportunity. Unlike the U.S., there are multiple publicly-traded farm operators in Brazil, including Adecoagro (AGRO), Brasilagro (LND), Cresud (CRESY) (which is technically an Argentine company, but gets 70% of its EBITDA from Brazil). Last and by no means least is today's subject SLC Agricola (SLCJY.PK) - one of the largest, most productive, and most interesting agricultural companies in South America. While investing in agriculture and land development is by no means for the weak-hearted, and this is a very illiquid stock at present, the potential in these shares may be worth the risk to some investors.

Please follow this link for the full article:
SLC Agricola - Come For The Crops, Stay For The Land

Investopedia: The Market May Be Overestimating Adecoagro's Risks

Brazilian agriculture and ethanol company Adecoagro (NYSE:AGRO) has not had a good run as a public company. Not only is the stock down more than 30% from its January 2011 debut, the stock has noticeably lagged its Brazilian small-cap peers. Some of this can be chalked up to the unpredictable results of the company's farming operations, but worries about currency and the Argentine government have certainly done the company no favors. While this remains a risky investment prospect, bold investors may want to consider this name given its large apparent discount to fair value.

Please continue here:
http://www.investopedia.com/stock-analysis/040213/market-may-be-overestimating-adecoagros-risks-agro-cresy-dd-de.aspx

Investopedia: The Investment Case For Cresud

Individual investors who don't count themselves among those wealthy enough to be so-called "qualified investors" have pretty limited options for playing the growth potential in agricultural commodities. Certainly there are now more commodity-specific ETFs than ever before, and investors can choose from among funds like Teucrium Corn (Nasdaq:CORN), the iPath DJ-UBS Livestock ETF (ARCA:COW) or more diversified options, like the Market Vectors Agribusiness ETF (ARCA:MOO).

Beyond that, though, it gets more difficult. There are a respectable number of fertilizer, seed, equipment and agribusiness stocks out there, like Potash (NYSE:POT), Tyson (NYSE:TSN) and Archer Daniels Midland (NYSE:ADM), but what about land? Farmland has been one of the best-performing asset categories in recent years, but there are almost no investment options for the individual investor. Argentina's Cresud (Nadsaq:CRESY) is one of the few exceptions. (For related reading, see 22 Ways To Fight Rising Food Prices.)

Please read more here:
http://stocks.investopedia.com/stock-analysis/2011/The-Investment-Case-For-Cresud-CRESY-AGRO-IRS-ADM1221.aspx

Investopedia: How Green Are The Acres At Adecoagro?

It feels like a little bit of the bloom is off the rose that is farmland. About a year ago, farmland was one of the most talked-about investment options, and investors scoured the markets for names like Cresud (Nasdaq:CRESY), Bunge (NYSE:BG) and Syngenta (NYSE:SYT) to find some exposure to the market. While investors no longer have quite the same enthusiasm for these names, patient investors may want to come back around to Adecoagro (NYSE:AGRO). Agriculture is a tough, low-margin business, but short of putting together the considerable capital it takes to buy farmland, Adecoagro may be the next best thing for playing the increasing scarcity of arable land. 

An Ok Third Quarter  
Variabilities in yields, pricing, forex and futures contracts make this company's quarter-to-quarter performance absurdly volatile, so a longer-term perspective is arguably best. Nevertheless, revenue rose 31% from last year, powered by 46% growth from farming operations and 24% growth from other activities, like sugar and ethanol processing.

Follow this link for more:
http://stocks.investopedia.com/stock-analysis/2011/How-Green-Are-The-Acres-At-Adecoagro-AGRO-CRESY-BG-SYT-ADM-TSN-SLE1121.aspx

Check Out Adecoagro

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.

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".