By Jeff Opdyke, Editor of The Sovereign Individual
Dear Sovereign Investor ,
El futuro está in la tierra – The future is in the land.
That’s a bumper sticker I have in my office that I picked up during a trip to Uruguay in 2011. My friend Sebastian, a prominent farm manger, told me that if “You have land, you always have a way to make money. You get to feed the world. And the world is very hungry.”
He is, of course, right. I’ve written much about the increased demands on the food supply that an emerging middle class is creating, and I will have a great deal more to say in coming months about the coming food crisis to which few are paying attention. We’re now in an agricultural super-bull market, one that will last for decades.
Yet even as the world is set to add another billion hungry mouths, our planet is losing 75 million acres of farmland annually through urbanization, industrialization or degradation. That’s the equivalent of erasing Arizona from the world’s land supply every year.
That’s why speculators and hedge funds are hopscotching across the U.S. farm-belt these days, grabbing tracts of land to profit from the rising demand for food.
But even better opportunities exist beyond America. Like, for instance, a patch of Earth that has some of the most productive farm and cattle lands on the planet. It’s a place where we can own an asset of true substance and, in a world of near-zero yield, generate additional income. And if the U.S. ever goes pear-shaped, it gives us a place to call home in one of the most-livable countries in the world.
An Overlooked Agricultural Giant
Though it’s tiny in size, Uruguay is an ag juggernaut.
With a billion more mouths to feed by 2025, the South American country wedged like an arrowhead between Brazil and Argentina will play a key role. It’s one of the best-suited countries in the world for agriculture – well irrigated by abundant rainfall and plentiful rivers and plopped atop one of the world’s largest aquifers – and it’s ramping up its crop capacity. It recently crossed one million hectares of cropland for the first time – and it’s continuing to grow.
During a daylong drive through the country’s southeastern farmlands, I saw food crops coming out of the ground everywhere … rice, corn and especially soy.
Over the last year, Uruguayan ranch land is up between 12% and 15%. And as a hard asset, that land is an inflation hedge that grows more valuable over time – even if it stays fallow.
The land also acts as a security blanket for those of us worried about America’s direction. If our country continues down its current path toward wholesale wealth-redistribution, you’ll find owning land in a very stable, off-the-radar South American enclave is worth the investment.
Finding and buying land in Uruguay is easy, even for Americans. There are no restrictions on land purchases by foreigners and no currency controls. Best of all, Uruguay has one of the most transparent land markets in the world, so it’s not like going into a foreign country and hoping the locals don’t take advantage of you.
Uruguay has mapped the entire country and classified each parcel in terms of productivity — what the Uruguayans call the CONEAT system. Plug a property’s identification number into a special website and you can see the various types of soil contained within each property, how productive those soils are and the average productivity value, displayed as an index number, for the entire parcel.
That index number correlates to land value. So you know that, by and large, the land is worth what the index says it’s worth, regardless if you’re Uruguayan, Brazilian or American.
Additional Return From Your Land
Of course, if you want your land to generate additional profits instead of just sitting idle, you can generate income by leasing the land out to farmers – and it’s not like you have to live in Uruguay to manage that process. The country has a highly developed agricultural-leasing system in place. It’s quite easy, for instance, to find and hire a farm manager like Sebastian to manage the day-to-day operations. The firm Sebastian runs currently tends to about 25,000 acres of farm and cattle land for absentee owners.
Farm managers do all the heavy lifting, from making sure the crop selection is appropriate to managing the harvest and getting the crops to market.
After fees, you can expect an annual return on investment of between 6% and 8%.
A Future in Your Land
I’m not the only one who understands what a changing world means for agriculture. Just last week, investing legend Jim Rogers, who I’ve known for years and who I’ve visited with at his apartment in Singapore, sees farming as the key bright spot in the global investment market: “There are a few parts of the world economy that are going to boom over the next few years – agriculture is one of them.“
For a unique opportunity to generate income from the needs of a hungry world, or simply to own land with sovereign-lifestyle opportunities, Uruguay is the place to consider.
Until next time, stay Sovereign …
Jeff D. Opdyke