One of my sister's friends works as an advisor and consultant in Russian agriculture (sets up deals, etc...). My sister introduced him to my blog couple of months ago and he has been a regular reader since. I got the chance to meet with him last week, and that got me thinking it might be interesting to try to facilitate some investment in Russian agriculture while I was in Moscow.
Russian farm land seems like a very attractive investment. While gold is also a great investment right now, it is a short term investment (something to hold over the next one or two years while the dollar's collapse plays out). In contrast, farm land is an income producing asset, which makes it a great long term investment.
Anyone interested in investing in Russian Agriculture can email me. Once I know what kind of interest there is, I can research more about the investment options available and find the answer to any questions/concerns.
The article below should give a general idea of the options for investing in Russian agriculture. Business New Europe reports about high demand for Russian agricultural land.
(emphasis mine) [my comment]
High demand for Russian agricultural land
Cushman & Wakefield
April 29, 2009
In spite of the current macroeconomic situation, we continue to see high demand for agricultural land in black earth regions of the Russian Federation, with foreign investment funds some of the most active of our clients.
Purchases are made not for speculative aims, but for creating quality agriculture enterprises. These funds' interest is supported by the fact that agricultural land pricing is traditionally denominated in rubles and the Russian currency's devaluation has made it particularly attractive for purchases made in major foreign currencies.
We have also noticed serious interest from a number of Russian and international investment funds in buying agricultural land for the purpose of creating investment instruments based on rental income. For this group of investors, having a stable tenant plays a major role. The tenant can participate in funding and receive a dividend income.
Of note is also the activity of Russian agriculture funds, which have already acquired and farm large agricultural land plots. Such companies are unfreezing their investment programmes and are beginning to acquire more agricultural land. Their investment is directed towards growing their portfolio.
Thaw in the land market
The Moscow Region's land market is the most attractive for buyers and is clearly beginning to segment. Land plots for cottage construction are no longer popular and our forecast is that demand for these land plots won't increase over 2009.
However, land plots for commercial use (retail, logistics etc.) remain attractive and demand for this type of land is gradually increasing. Potential buyers are also showing particular interest in land plots located up to 30 kilometres from the Moscow Ring Road. Land plots further away have lost their appeal and we forecast that demand for these won't increase in 2009 [Important point! Agricultural land more than 30 kilometres is trading at firesale prices due to financial crisis.].
Buyers are currently a clearly defined group of companies acquiring land plots for business development purposes. Among these are retail chains, logistics operators and industrial companies. We also see interest from Russian producers of goods. High levels of tax for imported goods and the ruble's devaluation have made imported goods too expensive for Russians consumers, so now is a good time for Russian companies to develop their production facilities. Among companies interested in purchasing land plots are food processing companies, furniture makers etc.
We find it interesting that many land plot buyers are ready to take definitive steps to acquire land due to the current low prices. In January and February, there was little activity on the land market. In March and April, however, buyers have been increasingly active in signing letters of intent and undertaking legal and technical due diligence. We expect that many land plot deals will be finalized in July-August. We are currently working on 12 deals for the purchase of land plots.
As far as regional markets go, we note that cities with populations of between 500,000 and 1m have lost their attractiveness for many buyers. However, cities with populations of over 1m remain popular. The only exception to this is the Central Federal District, where cities with populations of fewer than 1m continue to be attractive. Buyers of regional land plots are mostly retail chains. Prices have fallen by up to 40% in comparison to pre-crisis levels and are currently almost $1m per hectare for cities with populations of over 1m and less than $600,000 per hectare for cities with populations of under 1m.
My reaction: The article highlights some ideas for investing in Russian agriculture.
1) Investors seeking to make a major investment might be interested in starting their own fund for the purpose of creating a "quality agriculture enterprise".
2) Investors desiring a more stable/fixed source of income might be interested in funds buying agricultural land for the purpose of creating investment instruments based on rental income.
3) Investors who wish to make a smaller investment might be interested in the investment programs of existing Russian agriculture funds who are expanding their operations.
4) Additionally there is tons of Russian grains being sold at firesale prices. For those interested in agricultural commodities themselves, it might be interesting to buy and store this grain. As I distrust COMEX futures and other paper products sold by insolvent financial institution in non-transparent markets, I consider direct investments into the physical markets as the o nly viable way to purchase commodities.
Finally, below is a video from CNBC Asia which features Jim Rogers. Jim believes (and I agree) that Wall Street is headed for a difficult decade and tells us that farming is the future.