Ecuador Ag Potential


Here is another reason to look at Ecuador agricultural land.

Ecuador farms make sense.  Farm prices are rising around the world and many are no longer affordable in the USA and Canada.

A recent Wall Street Journal article points out that land prices in key U.S. farm states continued to soar.

Prices of nonirrigated farmland in a seven-state stretch of the Midwest and West rose 26%, compared with a year earlier according to the Federal Reserve Bank of Kansas City .

Some of the best corn-growing land in the U.S. is still selling for more than $10,000 an acre and drawing buyers to auctions, despite the drought that has stunted crops and created uncertainty about the coming harvest.

Farmland prices nationwide had already nearly doubled in the past five years, as high prices for corn and other crops pushed up farmers’ incomes and fueled competition with institutional investors in land auctions across the Farm Belt.
Ecuador farming ranges from big to small.

potato farmers

Potato farming family near Otavalo.

potato farmers

Dairy for organic cheese outside Cotacachi.

There is an unimaginable variety in Ecuador agriculture.

llama farmers

Llamas for wool.

Ecuador corn

Corn is everywhere… huge farms and small concerns like this family nearby.

There is almost every type of vegetable… nut and fruit.

ecuador fruit

Ecuador food market.

Amazing varieties of flowers.

ecuador-flowers

Ecuador tropical flowers.

A good case study for a specific and large Ecuador agri operation is the farming operation set up by Young Living Essential oils.

ecuador-farms

After creating a marketing system for the oils and farming in the USA, Gary and his wife…

ecuador-farms

moved to Ecuador… began a large farming operation as well as…

ecuador-farms

production.

Yet Ecuador agricultural prices are still low… especially on the coast.  But don’t count on this lasting forever. The Chinese are on their way.

A February 1, 2012 Washington Post article entitled “China plants bitter seeds in South American farmland – Culture clash seen with wave of investments by Kelly Hearn says:  Few were surprised when Venezuela announced a deal with China last week to restore 1.4 million acres of unproductive farmland across the oil-rich but impoverished South American nation.

China increasingly is buying farmland and agricultural companies in South America to feed its ever-growing population, currently estimated to be 1.34 billion.
The most important aspect of China’s agricultural investment in Latin America is that “it is a part of the increasing physical footprint of the People’s Republic of China that is just beginning to occur,” said Evan Ellis, an assistant professor at National Defense University in Washington.

Central to China’s rising agricultural-industrial complex are soybeans from Brazil and Argentina, millions of tons of which the Chinese are importing to feed cows and pigs to meet a growing demand for meat.

From 2005 to 2011, China’s soybean demand nearly doubled to more than 70 million tons per year, while domestic production declined 10 percent to 14 million tons, according to SinoLatin Capital, a Shanghai-based investment firm focused on transactions between Latin America and China.

China is working to close that deficit by infusing cash into Latin American economies in exchange for allowing Chinese government-owned companies to set up shop and extract basic food goods:

• The Chongqing Grain Group has agreed to build an industrial complex for soybean processing in Brazil’s Bahia state, where it reportedly plans to invest up to $2.4 billion.

• The Hong Kong-based company Noble Group is steering $237 million to a similar project in Brazil’s Mato Grosso region.

• China’s Sanhe Hopeful Grain & Oil announced plans in April to put $7.5 billion into soybean processing facilities in the state of Goias in exchange for an annual supply of 6 million tons of the legumes from Brazil, a deal that reportedly includes building a railroad to move products out of the facility.

Mr. Ellis notes that the Chinese agricultural giant Helionjiang Beidahuang, the China National Agricultural Development Group Corp. and Chongqing Grain Group have made clear their intention to buy Brazilian land in coming years.

In Argentina last year, Beidahuang inked a deal with the provincial government of Rio Negro to help develop more than 800,000 acres of farmland and upgrade a port in exchange for soybean exports over the next 20 years.

New $799 Ecuador Coastal Farm and Home Tour

Jean Marie Butterlin began conducting four wheel drive agricultural tours last year.  Many readers wanted to attend this tour but also wanted to take real estate tours to see residential real estate.  So, Jean Marie came up with a great solution… any delegate on an ag expedition can attend a coastal real estate tour (normally $499) free.

Let me explain more about the agricultural expedition first then you can read about the coastal tours.

Here’s the note that Jean Marie recently sent re his tours.

Ecuador Agriculture Business Summary

A- Introduction :

We were all taught that Investing is all about relationship between risk and reward.

But the most important point is, that we are always looking FIRST for the return of THE money (safety) before SECOND the return ON the money (yield).

When investing, we are ask ourselves these 3 questions :

–       How safe is the asset and how much does it yield ?

–       How liquid is the asset we are buying i.e. how quickly can we sell it for cash ?

–       What happens if the USD drops or goes up ?  (Ecuador is a dollarized country.)

We have been studying the Ecuadorian agriculture business for some time now and have found out good opportunities for making some nice returns.  Right now we are investing our money in Ecuadorian land as we have in the past invested in Ecuadorian real estate esp. in Bahia, which is the cheapest coast in the world.

We have assembled a team of experts in agriculture i.e. agri-engineers, business management, sales and marketing, accounting, legal areas, but most importantly we have setup a network of locals in many parts of Manabi, whom we call « spotters », that help us find the available properties at the best possible price.  These spotters live within the community and know the history, owner of each property.   They help us to sort out the deed issues and we get the also all the info:   good, bad, i.e. potential problems with water, neighbors, etc.

Our team allows us to minimize the risks associated with agri-business from knowing all about potential pest problems in an area to the date of last drought or flooding etc.

When buying an asset class, one has to ask also, how desirable that asset will be in the foreseable future.  Mankind just passed the 7 billion mark and arable land is decreasing every year.  China is buying all over the world big tracks of land to secure enough food production for their own people.  More and more land is allocated to making biofuel, which is one of the areas we are working also in Manabi.

Ecuador has still one of the best and cheapest land available in all South America.

What I have found in Ecuador is a nice RISK/REWARD combination:

–       land will never go down in price like housing has done in the past; no bubble yet

–       Ecuador law is pro-foreign ownership

–       land is still cheap : $500/hectare to $5,000/hectare depending on water availability.

–       Good labor : qualified and cheap

–       on site management by Ecuadorian experts supervised by a team of business people that have experience in managing businesses.

B- Profit potential in Ecuador Agriculture:

How much can you expect to make in an Ecuador agri business ?

It depends on 3 factors :

–       price of the land

–       combination of crops

–       quality of management

We have our own team of experts  that work for us. These experts have their own farms and teach at agri-engineers schools.  For example, one of them was born in Israel (Israel knows how to grow food in the desert…) and has managed a 15,000 acre cacao farm in Ecuador.  He now manages his own farms….

Here are the 2 big questions we are always being asked : If the agri-business is so good, why are not more people getting into it and why are most Ecuadorian farmers so poor?

The answer to Question 1 is simple : It is not easy to find good available property, with deeds etc…. as Ecuadorians hold to their properties and do not sell easily. That is why I have setup a network of locals that roam the countryside where they live and where they are respected.

The answer to Question 2 is a bit more complex but has a lot to do with access to funding for poor Ecuadorian farmers, as well as business education of these farmers and mostly the famous « middlemen », that are one of the problems of Ecuadorian agriculture.

There are also a lot of rich Ecuadorian farmers….. and they are making a lot of money even by US standards.

When we talk about management :

•We choose to bring crops to the market at the ideal time of the year when prices are at the highest= timing of the planting.

•We choose crops where there is less competition and lots of demand.

•We choose crops that are ideal for the soil, water and sun.

•We choose crops that have clients ready to purchase before we plant.

•We choose crops that are least disease prone.

•We choose crops that are not too labor intensive.

•We choose crops that have big potential in the future.

•We select a combination of crops for each finca that will maximize income/cash flow and minimize risks.

•We think « outside the box » = Innovation!

C – Cash Flow Management:

In our development strategy, we aim to maximize regular cash flow i.e. combining on specific one fram short cycle crops like plantain or passion fruit and longer cycle crops like balsawood or cacao. This enables to minimize capital outlay to acquisition costs and first year production costs ; income from short term crops will pay for cost of longer cycle crops.

D – Management Package:

We offer a management package that we provide to our clients, who know nothing about agri-business.  It is all based on shared net revenues.

The client invests in a farm that he owns outright himself; minimum is $100,000 in order to have a nice size farm and operating cash flow.

E – Our Vision:

•Chemical free agriculture :

We only use organic and sustainable agriculture.  Organic pest control is a lot cheaper and healthier of course, the key being the ability to monetize the « organic » side of the business.

•Help the local economy and local communities in Ecuador.

F – FAQ:

Why are not more people investing in Ecuador agriculture ?

a) Ecuadorian campesinos are not business people.  They are not entrepreneurs as they often lack basic skills outside their trade and they do not have easy access to cheap crédit to finance their production costs.  They often prefer a low income lifestyle than high stress work….

b) A lot of Ecuadorian farms are highly successful when run by smart educated people.

c) The big investors are just finding out about how cheap and how fertile Ecaudor land is.

What is the rate of return on the investment ?

On a 10 year average,  a good managed farm can produce between 20 and 30% return.  Cash flow is generated at the end of each crop cycle. This takes into account 2 bad years of production every 10 years, due to unpredictable weather pattern like a strong el niño.

What are you providing?

We provide the following services:

– Selection of the land: with pros and cons

– Selection of the crops for maximum cash flow and lowest risks

– Management of the farm including sales of the crops

What is our business model?

We only make money when our Client/Partner makes money. We take a percentage of gross sales payable only when money is received from the crop buyer.

Jean Marie

Ecuador Agricultural Real Estate Tour

For current Ecuador Agricultural Real Estate information send me a note at gary@garyascott.com

Screen shot 2012-07-25 at 12.29.30 PM

Ecuador coffee farm entrance.

The original owner spent two years searching for the perfect location to duplicate the exact terrain, altitude and growing conditions of the most successful coffee farms of Boquete, Panama and Columbia.

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Terrain and coffee plants.

After walking with an altimeter in hand and talking to reclusive indigenous farmers, this region was discovered with all the perfect conditions to cultivate exceptional Arabica coffee trees.

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Owners house with roof terrace.

This is a micro climate, blessed with abundant rainfall, in clean mountain air, bounded by a clear trout filled year around rushing river, protected from extremes of wind and large temperature fluctuations,  perfect for growing coffee.

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Open drying patio.

It has 11 hectares planted (manageable for a single owner), with approximately 50,000 Arabica, varietal Caturra (self pollinating) coffee trees which  are perfectly distributed over a hillside interspersed with a variety of fruit trees for shade.

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Oranges grown to protect coffee trees.

No problem selling this crop for top dollar due to its proven high quality.  The coffee sales last year grossed $70,000 so after $25,000 expenses, $45,000 was the net income.

Screen shot 2012-07-25 at 12.29.47 PM

Coffee beans.

As well, an experimental 1 hectare of Geisha varietal.  Geisha is considered to be one of the finest coffees in the world and garnered the highest auction record in coffee history, fetching $170 per pound in 2010.  The first harvest of this varietal is expected in about 2 years.

Screen shot 2012-07-25 at 12.30.11 PM

Coffee plants grown in greenhouse on farm.

This Andean  location provides an ideal environment for coffee growing without damaging the unique habitat of many species of birds.   Arabica coffee trees are a major source of oxygen production.  Each hectare produces 86 pounds of oxygen per day which is 50% of rain forest habitat.  Ecuador is a biologically diverse country with an abundance of birds, amphibians, reptiles and butterflies.  Inca Mountain Coffee Farm is ecologically in harmony with its environment.

The Arabica coffee trees are 6 years old, providing remarkable yields, allowing for continuous flowering and two annual harvests (major harvest Feb-Jun and minor harvest Oct-Nov).

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Covered drying patio.

In the yearly Golden Cup competition, coffee from this farm was a finalist in 2011.

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Seasonal worker harvesting coffee.

Owner’s house – 900 sq/ft, 2 bed, 1 bath, with lots of marble, built in cabinets in both bedrooms and upper roof porch

Caretaker’s house – divided into multiple rooms with bathroom

Land line phone installed and operational

110 and 220 volt electric lines

Equipment:  2 coffee bean pulpers with 2 water tanks, 2 weed whackers, misc. tools, scale for weighing coffee bags

1 large uncovered drying patio and 1 covered drying patio

2 full time highly experienced workers – monthly payroll is $650 (plus more during harvest for seasonal workers)

Average yearly expenses:  $25,000 (all payroll, fertilizer, harvesting expenses, utilities, taxes)

Screen shot 2012-07-25 at 12.31.01 PM

This clean mountain river that runs year around with trout.  Also, access to mountain water for farm irrigation, though it is rarely needed.

Farm is fenced along road.

You can set the date for your own tour.

The Ecuador farm tour fee is $799 for single or  $999 couple.

Case Study #3:   This third case study shows an American who has created a   large Ecuador agri operation. This is the farming operation set up by Young Living Essential oils.

ecuador-farms

After creating a marketing system for the oils and farming in the USA, Gary and his wife…

ecuador-farms

moved to Ecuador… began a large farming operation as well as…

ecuador-farms

there own processing and a health spa.

Ecuador is a perfect place for many types of agriculture… large and small.  Find your farm in the safe and efficient way on an Ecuador Agricultural Tour.

For efficiency and logistics this tour is strictly limited to 15 people… 4 persons per four wheel drive vehicle.

You can set the date for your own tour.

The Ecuador farm tour fee is $799 for single or  $999 couple.

 

“China plants bitter seeds in South American farmland



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