I am currently living in Moscow and have launched a fund to invest in Russian Black Earth farmland.
The idea behind the fund is simple: there is a lack of safe investments in agriculture, especially in Russia. Regia Fund aims to channel as much money as possible directly into some of the most undervalued agricultural land on Earth.
Please email me or Charles Bausman if you're interested.
Below is a quick Q&A; about setting up this fund.
While gold and silver are great investment right now, they are 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.
1) Right now the world is underinvested in commodities and overinvested in debt, especially US debt. Once the dollar and the quadrillion derivative market collapse, the pendulum will swing the other way. Arable land will benefit from the desperate stampede into hard assets spurred by hyperinflation.
2) Global food inventories are critically low. Right now, the world has enough food in storage to feed the planet for about 55 days, which is the lowest food stores in 37 years.
3) When China is forced to revalue the yuan, 1.3 billion people (approximately one-fifth of the world's population) are suddenly going to enjoy much greater purchasing power. When this happens, they will use their new wealth to start eating more food and switch to a diet consisting of more meat. This is going to create a tremendous demand for all food products. I want to set up an investment in agriculture before this surge in demand.
4) The world is running out of fresh water. There are three main reasons behind this:
A) As the world's population grows, increasing demand for water is creating strains on reservoirs around the globe.
B) The levels of aquifers (underground pools of water (like oil)) are dropping across the Earth because of overuse. For example, farmers in India have to pump water from over two hundred feet below the ground to continue growing their crops. This is not sustainable.
C) Glaciers are drying up, and major rivers are becoming seasonal. For example, the Himalayas are predicted to have melted by 2035.
5) Fisheries are collapsing throughout the world, which increases the importance of land-based farming.
6) The world's population continues to grow, which of course increases demand for food commodities. Global demand for food is expected to rise 110 percent over the next 40 years.
Russia arguably is the best place in the world to invest in agriculture right now because of a combination of large quantity of cheap assets, ample water supply, political stability, rapidly improving infrastructure, and extremely productive black-earth farmland (the richest soil in the world). Other reasons making Russia an attractive place to buy agricultural land:
1) Russia doesn't have the vulnerabilities of present in most developed nations. Russia doesn't have an overdeveloped financial sector like the US, the UK, Japan, and most of Europe. The Ruble isn't a major reserve currency. Russia isn't faced with financing the retirement of a large, rapidly-growing elderly population (ie: baby boomers) like most industrial nations, especially Japan. Russian farmers don't use the futures market (and won't be hurt by its collapse). Etc...
2) Russia, along with China, stands to come out of this crisis as one of the "winners", as it is going to benefit tremendously from the worldwide portfolio shift away from US debt and towards commodities. Russia has, by a good margin, the most untapped sources commodities of any country on Earth:
A) large areas of undeveloped agricultural land, with huge amounts of fresh water (no irrigation needs or water shortages).
B) Large forested areas (lumber)
C) 25% of known world natural gas supplies.
D) Large deposits of Metals (iron, nickel, zinc, copper, aluminum...)
E) Undeveloped proven gold reserves
F) Undeveloped proven oil reserves
As investors flee the dollar's devaluation and the derivative market's collapse, a flood of capital will pour into Russia to develop this sources of raw material (fear of investing in the US will far exceed any fears of investing in Russia by this point).
3) A highly exaggerated anti-Russian bias in the western media has scared away many Western investors, making Russian assets more attractive. In fact, western investors in Russia have earned very high returns exactly because of this bias, which keeps capital away and gives higher returns to the capital that does come in.
4) Because of subsidies, land in West is overpriced compared to developing world (Land in Russian is selling for less than one tenth the price it goes for in the US and Europe). When skyrocketing commodities increase farming's profitable and Western governments run into budget problems as the dollar collapse, these subsidies are likely to be reduced, negating some of the benefit of owning agricultural land in those countries.
5) Russian agricultural land is enormously underpriced, even compared to countries without generous government subsidies. Compared the Average price of land in the
Average price of land:
A) US = $10,000 per ha (subsidized)
B) Europe = $20,000 per ha (subsidized)
C) Argentina and Brazil = $5000 per ha (not subsidized)
D) Russia = $500 - $1000 per ha (not subsidized)
6) The Russian government is eager for western investment in its agriculture sector and has policies to subsidize and promote investment there. Unlike in the West, these subsidies are not at risk of disappearing.
7) Russia was the first nation to officially call for a new international reserve currency to replace the dollar. As such, they have likely better prepared themselves for the dollar's collapses than most other nations.
8) Russia is very politically stable, unlike the Ukraine, and many African countries
From a personal point of view, setting up an investment in Russian agriculture makes sense. I have travelled to Moscow several times, and I have local contacts with whom I have been discussing investing in Russian agriculture.
We are rapidly approaching the end game in this financial crisis. Things on Wall Street and in Washington will likely fall apart this summer. The main reasons behind this timeframe can be found in the major entry below:
*******Gold Manipulation OFFICIALLY CONFIRMED*******
*****2010 Food Crisis for Dummies*****
*****Worst Harvest Season Ever Seen*****
Gold Market Reaching The Breaking Point
Why start a fund?
A direct investment via a fund is the best way I can recommend to invest in Russian agriculture.
1) Window of opportunity. If I took the time and did the work to research which public companies might be the best to invest in, by the time I published my findings it could be too late to get in at an attractive price.
2) Direct exposure. The advantage of investing via a fund is that you know your money is going directly into agricultural land and you stand to make all the profits from the appreciation of that land. In contrast, by buying a potentially overvalued stock, you could miss out one much of this profit.
3) Leverage. When investing directly you can borrow from Russian banks at government subsidized rates an amount equal to the amount you are investing. That is a great deal for the investor. You don't get this investing in the big companies. They tend to usually already have a full credit line.
4) Benefiting from future round financing at higher valuations. Early round investors benefit from less expensive future financing.
5) Price. As a general rule, you can buy agricultural assets much cheaper when buying directly rather than buying stock of public companies.
6) Lack of options. There are two public companies one can currently invest in. One of them, Black Earth Farming, has had serious management problems which they have not fixed yet.
Who else is involved in running Regia Fund?
I am working with Charles Bausman and Rich Selby to acquire Russian farmland.
Charles is a Russia-based American with experience in Russian agribusiness. Charles Bausman also has great deal of experience (18 years) in working in Russia and speaks fluent Russian. Charles will identify, do due diligence on, and acquire properties, and then be responsible for setting up efficient management on the properties. He has already identified a number of properties for potential acquisition, and he is also a director of the fund.
I encourage you to contact him directly with any question about Russian agriculture or Regia Russia Agro Investment Ltd. Charles also has extensive experience in fund management and should be able to answer all your questions.
Rich is a well known veteran in international agribusiness. with 22 year experience, who has been working in Russia for the last 16 years and has a deep experience in large-scale agriculture operations in Russia. He is currently on leave in Des Moines, Iowa, during which he will be meeting with investors in various locations around the US.
Rich also owns and operates a private corporate security consulting company specializing in Russia and has worked with various large western corporate clients in Russia on security and dispute resolution issues. Regia Fund couldn't hope to find a better person to insure the safety of its Russian investments.
(See end of entry for complete bios of regia fund team)
Amazing opportunity to acquire Black Earth farmland
Right now is a once in a life time opportunity to invest in agriculture. It will be decades before the world sees farmland as undervalued as it is in Russia today. However, once gold/food shortages are revealed to the world this summer, the situation will quickly change as panicked investors flee into hard assets around the globe.
For anyone considering investing in agriculture, now is the time to act.
1) There are some incredibly attractive opportunities available right now to acquire black earth farmland at firesale prices (below $600 per hectare), some of which we know won't last much longer. Investments in Regia will immediately be used to secure land at rock bottom prices.
2) Agricultural commodities are going to start rallying going into the summer on tightening supply (See *****2010 Food Crisis for Dummies*****), which will start driving up farmland prices.
3) With gold manipulation OFFICIALLY CONFIRMED, the collapse of the London paper gold market and the dollar is imminent. Owning hard assets outside the US financial system will become very attractive, and this will also start pushing up the price of farmland.
Again, please email me or Charles Bausman if you're interested.
Pictures From Visiting Russian Farmland
The pictures below were taken when I was visiting Russian farmland on September 2, 2009.
Russia's improving infrastructure
Black earth farmland for sale
20,000 rubles per hector ($650 per Hectare)
Visiting apple orchard
(truck full of apples in background)
No water problems
Huge fields of black earth
See more pictures from January visit of farmland in Tambov region.
The Richest Soil In The World
Nova Online explains Black Earth.
The Black Earth, or chernozem (???????? from the Russian words for "black soil," chernaia zemlia), region is a belt of extremely rich and fertile soil stretching from the Moldova and the Western Ukraine eastward, narrowing as it goes further east into Siberia, before coming to an end near Irkutsk. This is some of the richest soil in the world.
The chernozem contains a very high percentage of humus, anywhere up to about fifteen percent, and also important organic minerals such as phosphorus and ammonia. The depth of the chernozem has been measured at anywhere from forty to two hundred and fifty inches, but is usually about a foot deep. Because it very fertile and does not require any fertilizer, it is considered some of the best soil in the world for growing grains. The "black earth" region of Ukraine extends throughout about two-thirds of the country.
For centuries the Black Earth region was mainly steppe, open grasslands with no real agricultural being carried out. The problem was that the upper level of the soil was so thoroughly entangled with roots, that it proved impossible to cultivate with wooden ploughs. Only when steel-tipped ploughs were introduced in the early nineteenth century did agriculture become important. With more improved machinery and efficient cultivation techniques, the Black Earth region really emerged as the bread-basket of Russia at about the turn of the twentieth century. The region proved to be enormously important to the industrialization of Russia that was carried out by Sergei Witte because Russia could now export wheat to make money to invest in its industrial development. During the collectivization and industrialization of the Soviet Union as part of Stalin's first five-year-plan, the Black Earth region again bankrolled industrial development in the country by exporting wheat from the Soviet Union, but this time widespread famine resulted throughout the region as not enough wheat was saved for domestic consumption.
Map of Russian Black Earth Region
Regia Fund Team
Charles Bausman , CEO and Director
Cofounder. 18 year Russia experience. Last 2 years in Russian agribusiness. Hands-on experience in acquiring Russian agricultural land, building agribusiness management teams, and evaluating Russian agribusiness companies. Strong understanding of how to finance agribusiness projects.
Prior to Regia director of Mesed Agro, a large 50,000 ha cropping company in the Central Black Earth Region. Ongoing work with several large agriculture investment firms in Russia identifying and acquiring properties. Extensive experience in all aspects of agricultural asset valuation, acquisition, title, due diligence. Based in heart of Russian farmland region with deep local knowledge and contacts. Proven ability to retain excellent local personnel.
Previous experience includes building a successful airfreight and mailorder company, running Ozon.ru, Russia's largest ecommerce retailer, hedge fund investments in Russia and asset management. Strong network in Russian business, finance, and government. Proven ability to build and manage strong Russian management. Experienced in corporate finance, private equity, and financial markets.
Age 45. US citizen. Hometown: Greenwich, Connecticut, USA. Finance MBA, Columbia University. Location: Tambov, Russia. Foreign languages: Russian , German (both fluent). Married, 2 children.
Eric deCarbonnel, Managing Director
Cofounder. Founder of MarketSkeptics.com a highly successful and widely read economics blog that has tracked the current financial crisis since September of 2008. MarketSkeptics has a global readership and has received 2.4 million page hits since its inception. It provides research, analysis and comment regarding the economy and current financial events. Eric also publishes major articles on other leading internet financial analysis sites. Prior to founding MarketSkeptics in the spring of 2008 auditor at McGladrey & Pullen LLP, a major Certified Public Accounting firm located in Stamford, Connecticut, USA. For data on readership of Marketskeptics, please visit the statistics section at the bottom of the home page at http://www.marketskeptics.com/
Age 28. US citizen. Hometown: Darien , Connecticut, USA and Geneva, Switzerland. Eric attended Cornell University and has a BA in accounting from Fairfield University, Connecticut, USA. Location: Moscow and Tambov, Russia. Foreign languages: French and Spanish (fluent), Russian (learning)
Rich Selby, COO
Well known veteran in international agribusiness. 22 year experience, 16 of which in Russia. Most recently, Mr. Selby has been managing a 200 000 acre 200,000 (80,000 ha) grain and oi lseed cropping operation in the Ukraine. Previously, financial advisor to SAKHO, the largest Russian cropping company with 400,000 ha in production. General manager agroscience division of Dow Chemical Company, Moscow, Russia. VP at Compressor Controls Corp, a multinational oil and gas controls company. Regional VP for agribusiness division of AES, a Fortune 500 global power company. Special Attache for Agricultural and Environmental Issues, US Embassy, Belarus. Comanaged the operations of ACDIVOCA, a U.S. government-sponsored overseas agribusiness program with extensive operations in Eastern Europe.
Strong experience in cropping operations, including large scale organic farming. Strong experience in financing agribusiness projects in Russia.
Organic farming experience: Currently cropping consultant to Lehi Roller Mills, one of the largest organically certified mills in the US. In 2006 founder, New Century Organics, Boulder Colorado, which identifies land that can be converted to organic and assists owners in organic certification. 2002 board advisor to NAPI, a Navajo owned 27,000 acre organic complex near Farmington, New Mexico.
Mr. Selby also owns and operates a private corporate security consulting company specializing in Russia and has worked with various large western corporate clients in Russia on security and dispute resolution issues.
45 years old, US citizen. Hometown, Des Moines, Iowa. BA in Russian and business administration from University of Iowa. Completed graduate studies in agricultural economics at Iowa State University. Location Des Moines (current), and Tambov (upon commencement of operations). Foreign languages: Russian (fluent). Married, 2 children.