Money Harvest Episode 9: The Ag Investment Risk Matrix Part 2
In agriculture, assessing risk is a fundamental part of any responsible due diligence process. Agribusiness investments face many unique risks,...
This is where it all starts. These types of projects are typically mid-long-term, depending on the produce being grown. An investment within a startup growth project can range from 2-50 years. Cash flows are typically long-term and capital appreciation is high.
These types of projects are typically facility based. Properties are constructed or acquired. Theses projects are cash flow intensive and tend to generate income quickly.
These facilities take the finished products and package them for logistical shipping. Various types of equipment and labor are required, creating an opportunity to finance development and operation of these facilities. Depending on the product, packing can involve packaging processed goods in retail form or non-retail form. Packing facilities are typically located at the farm or at a processing facility.
The logistics of shipping products across the world can be complicated and expensive. Many growers are unwilling to take the risk of shipping containers across the world and many wholesalers would prefer to purchase products that have already cleared customs. This creates an opportunity to finance the transfer of produce from one country to the next.
The process of importing and exporting can be a huge challenge for those in the production business. Wholesalers and retailers typically do not want to purchase and pay for goods unless they are delivered and cleared into their own country. The risks of getting flagged for inspection and the length of long haul shipping routes can cause significant delays in cash flows to producers. The cash flow strain can limit their ability to continue production and create delays production schedules, thus creating the opportunity for short-term financing these producers. Farmfolio can provide short-term capital financing at favorable interest rates to investors and producers. Our advisory team evaluates the risks of each loan and ensures that investors are only working with quality producers and only financing secure routes with a low probability of being flagged for inspections.
This segment of the supply chain is divided into two categories: services and brands. Brands/products can be sold directly to consumers, although they are usually sold through a services company like a supermarket or restaurant. Marketing and brand awareness are critical to this phase.
Largely dominated by large brands, these opportunities are rare, and usually require a joint venture relationship of some kind. These are great opportunities to gain access to distribution of products. This is a great parlay into brand marketing and retail sales.
Opportunities for investment exist at all phases of the agricultural supply chain, and it is Farmfolio’s goal to seek them out. By cultivating an informed, disciplined approach to investment, we are able to locate and develop attractive, high-yield opportunities.
Every relationship that Farmfolio builds is based on interest alignment. By understanding the unique goals of our investors, we are able to identify opportunities that suit their needs. Farmfolio structures trust-based relationships with our investors, partners, growers, and all of our stakeholders, in order to create shared value and returns.
In agriculture, assessing risk is a fundamental part of any responsible due diligence process. Agribusiness investments face many unique risks,...