Monthly Updates / February 13, 2018

Monthly Update 2/13/2018: PANAMA PINEAPPLE IN CHINA & THE COLOMBIAN TEAK ROAD

Dax Cooke“Crossing the Chasm” is a book that my serial-entrepreneur father used to reference on many occasions when I was a kid. As we enter the final weeks of 2018, I can’t help but think of those now old conversations. Reflecting on the concepts discussed, things like the life-cycles of product adoption. As it relates to Farmfolio, our market segment up to this point has been primarily early adopters, also referred to as visionaries. Those who see the potential and realize that every great company starts with an idea and believes the inventors will persevere regardless of the challenges that arise. Launched in an incubator nearly 4 years ago with nothing but an idea, our team has now put in motion something that has changed the way people look at agriculture. With 1557 acres developed, over $10,000,000 invested, sourced from 10 countries, and across 5 companies, our idea has become a great reality.

With a proven model and the support of over 250 early adopters, we approach the “Chasm”. What is it? It’s the transcendance to the pragmatist segment or those that require proof of concept before adoption. With multiple products ready for harvest and processing in 2019, our team couldn’t be more excited about the next chapter in the Farmfolio story. We have been working on many new exciting updates to our platform and our team, which we will be announcing in the coming months as we prepare for scale. For the early adopter partners out there, get ready for the all important “I told you so” conversations. For everyone else, be sure to jump into the waiting lists for our next wave of projects. Now on to business, all projects have great news to report, so enjoy this month’s edition.
Dax Cooke, Founder


Panama Awakens the Sleeping Giant, China


During the last two years, Panama and China have been discussing the possibility of signing a Free Trade Agreement as well as launching several other joint ventures. More recently, last week, Chinese President Xi Jinping concluded his first official visit to Panama, following President Varela’s visit to China’s Import Show in Shanghai in October of this year.
Panama Awakens the Sleeping Giant
Our team from Panama Golden Pineapple (PGP) was onsite in Shanghai to support Panama’s efforts and to showcase our project’s sweet produce to importers. Farmfolio’s own Paul Vergara even had the chance to talk with President Varela during the event about the new Free Trade Agreement and the reception of Panama’s exports has been overwhelming, especially for pineapple.
Our team from Panama Golden Pineapple
Chinese importers were lined up around the booth to get their first taste of the world’s sweetest pineapple. The event was highlighted by a meeting with the head of fresh distribution for China’s online retail giant Alibaba.

With this in mind, Alibaba has created a platform designed to connect retailers with direct sources of fruit in order to maximize margins on both ends of the supply chain. These are all great news for farm investors and operators.

Our team from Panama Golden Pineapple - Alibaba's VP
Also, Alibaba’s VP for Marketing reported that Chinese buyers are looking for premium products with new origins and story brands, as the country’s middle-class market has swelled to over 350 million consumers.

With this in mind, Alibaba has created a platform designed to connect retailers with direct sources of fruit in order to maximize margins on both ends of the supply chain. These are all great news for farm investors and operators.


PANAMA GOLDEN PINEAPPLE
Written by Thomas Connell, Head of Business Development
Thomas ConnellWow, what a year it has been! When I look back at all that’s been achieved, it gives me immense pride and validates all the hard work that every single member of the Farmfolio team has put into 2018.
Thomas Connell, Head of Business Development

 

Since the turn of the year, I have been in Berlin for the Fruit Logistica show in February, have had numerous trips to our farms in Panama and Colombia, visited Orlando for the PMA Fruit show, and attended various Agricultural and Timber expos in my hometown of London. On my last tally, I’ve racked up over 50,000 air miles this year, which is roughly the equivalent of flying around the globe twice. I get treated a little nicer these days at the Delta check-in desk.

This week, I’m spending some time at our Pineapple farm in La Chorrera, Panama, which brings back some great memories. I was first introduced to the Vergara family back in October 2017 at a conference in New Orleans, where Farmfolio was presenting Panama Golden Pineapple (PGP) to a number of investors for the first time.

Meeting Edna Vergara and her son Paul, I knew straight away that these guys were serious operators. They have been in the pineapple business for over 12 years, exporting fruit under the “La Dona” brand to many countries around the world. Therefore, they are well known and well-respected figures in the Panamanian agricultural sector, with Edna scooping agricultural person of the year back in 2007 for her pioneering contribution to the country’s pineapple industry.

There are many factors to consider prior to committing to any agricultural offering, such as the cost of land and climatic conditions. For me, however, having a good farm partner is top of the list. When you find one, they are gold and you have to keep hold of them.

As Head of investor relations, my mantra for this project was simple: raise $2.2 million in capital, in order to get 46 hectares of land into production. I achieved my objective and Paul and his team started the process of clearing, preparing, and developing in early January 2018.

From point of planting to harvest and sale, pineapples only take 12-13 months, which is very attractive for any investors seeking exposure to agriculture as an asset class. We are nearing the completion of our planting schedule with only a few more hectares to go. Our earliest plantings have flowered and are now in fruit, which ensures that we are on target for our first harvest and sale of fruit by mid-February.

Around 70% of everything we produce is destined for export to the European market. In fact, through existing customers and new ones that we have met at the various fruit shows this year, Farmfolio has already secured 80% of the sales for our entire production in 2019. More specifically, we focus on 4 key areas:

  • Sea container whole fruit – 50%
  • Premium airfreight – 10%
  • Pre-cut fruit – 15%
  • Niche retailer/distributors 25%

And that’s why I’m here. I’m here to learn the ropes of the fruit sale business. My role is simple. Find a home for the remaining 20% of production and develop new relations for our premium airfreight business. With me being based in Europe, we have a strategic edge over our competitors, as I can be anywhere within a few hours. However, there is a lot to learn and we’ve been putting in some serious hours over the last few days to bring me up to speed.

Pineapples are shipped and sold in 12.5 kg boxes, but not all pineapples are created equal and they come in various sizes. These are 5’s, 6’s, 7’s, 8’s, 9’s & 10’s. Simply put, it’s the number of pineapples you can put in a box to bring it up to the 12.5 kg mark.

Our operation is and has been GlobalGap certified for 12 years. All our lots are clearly marked with the number of plants, when they were planted, and what fertilizer applications have been made to it, amongst other things. This is vitally important when dealing with large-scale distributors and retailers, so if there were any problem in the shipping or receiving of goods, we can track and provide proof of providence to where an individual pineapple came from in the field.

We have a packhouse on site, so the fruit is harvested, washed, boxed, and refrigerated here at the farm. The box is marked with size data, the lot number, when it was packed, and all of this data goes on to a USB as well as a hard copy, both of which travel with the shipment. The pineapples remain in refrigerated containers throughout their transit and, once received, are checked to confirm quantity and quality.

Fruit could have been damaged either at harvest in the field, during packing, or in transit. If this is the case, the person receiving the goods will make a claim against you and request a reduction in the price agreed. As you might have guessed, not all fruit distributors are squeaky clean and employ a number of tactics to try and get that price down.

Therefore, growers, packers, processors, and distributors employ auditors and inspectors at the point of departure or of entry to inspect the quality of product and make sure that they comply with regulatory standards throughout the supply chain. In addition, I will be dealing with various credit agencies to ensure that we are working with credible customers and will be paid for the fruit we ship.

Like any business, it’s all about forming strong relationships with your customer base. Reliability and quality are equally as important as price when it comes to large-scale fruit distributors. They need to be sure that when they say fruit is on the shelf, it’s on the shelf. As a mid-sized business, Farmfolio works very closely with all its customers in order to forge strong and lasting relationships.

With key contacts in the US, Canada, and Europe already in place and with the recent trade deals struck between Panama and China, I am really excited about my new role working with Farmfolio. I am confident that, with all the hard work that we’ve put in thus far, I can develop and grow this side of the business further, while maintaining our high standards of quality and increasing the profitability of our operation

Panama - team photo

It’s been a great week and I’ve learned a lot here in Panama. Today, I leave for Colombia to tour our coconut plantation with a group of investors, so I’ll be racking up a few more air miles. To all those who believe in us, THANK YOU! Investors are the foundation of our success and we look forward to a long-lasting and fruitful relationship!


INTRODUCTION OF LA DONA FRUIT CO.

In addition to the closing of the GPII and PGP projects, Farmfolio also reached an agreement with the Vergara Family, to co-launch the “La Dona Fruit Co”. This brand will serve as the outlet for fruit marketing efforts on behalf of Farmfolio’s tropical farm developments. The team is thrilled to partner with such a great family and team.

The Edna Vergara story
The Edna Vergara story is the embodiment of what Farmfolio represents. Starting with a roadside stand in Panama and growing into a globally recognized brand with consumers in 15 countries sounds all too familiar us.

We look forward to rolling out the updated branding for the entity in early 2019 and will, of course, be marketing pineapple as the inaugural product followed by coconut and several others. This is a tremendous opportunity for Farmfolio products to be represented by strong roots and build upon an already iconic story.


PIETRASANTA
Written by Oscar Baracaldo, Operations Manager

Oscar BaracaldoWe have closed the second round of funding for our Colombian farming operation, Pietrasanta. The project encompasses 570 acres of organic coconut development and Colombia’s first certified coconut nursery. The project also includes 158 acres of high-quality hardwood teak and a sustainable sawmill operation.
Oscar Baracaldo, Head of Operations

Since launching in 2016, we at Farmfolio are very proud to have connected this unique opportunity to investors from all over the world. The Pietrasanta project brings together investors from the United States, Germany, Switzerland, Russia, China, Singapore, Australia, the Netherlands, New Zealand & Canada; expecting to yield average annual returns of 20.74% over a 20-year period.

The Pietrasanta location has proven to be very advantageous due to its distance from other types of plantations, which prevents it from becoming a target for pests that might be present in neighboring farms. Nevertheless, it is key to continue putting in place protocols anticipating any potential sanitary problems that could arise at the plantation as we approach the second year of plants settling into their new homes. We have also incorporated foliar analysis with pilot plants along the entire plantation to diagnose what our nutritional plan will be for 2019.

nutritional plan

A well balanced nutritional package will provide better fruit yields for years to come. We have also completed 80% of our drainage infrastructure, which only leaves some 20% to be completed by February when weather conditions will be more favorable.

Burroteka – Sustainable Sawmill

We have broken ground! We currently are bending steel and pouring concrete so that next year we can cut timber.

BURROTEKA is well underway and the team spirits could not be higher! Although the year is coming to an end, it is not time to slow down for the Farmfolio team as we are preparing the sawmill site and working to bring the ideal team together to start operating by March 2019. The highly anticipated sawmill will pioneer the first product line from the Pietrasanta company. Teak blocks, high-quality decking, and hardwood boards will be our bread and butter. However, we are now locked in development mode, testing innovative products with the objective of achieving maximum efficiency and getting premium prices that increase our margins.

The sawmill production line will have an output capacity of 60 cubic meters daily. Moreover, we expect to maintain an average 45% efficiency during 2019 to achieve a projected profit of around US$1,5M and will work to reach 60% efficiency by 2020 for a projected profit of around US$1,9M.

The product line will be divided into two main categories: green and dried. The distribution will initiate at 70% green and 30% dried with the goal of achieving an even distribution by 2022, though we believe this to be a conservative projection. Likewise, we will seek to increase dried product output in search for better pricing for our sawmill production.

As part of our timber supply program, we are securing purchase contracts from over 2,000 hectares of plantation teak in anticipation to any potential risk in the delivery of material in a timely manner, given that unfavorable weather conditions or other third party factors could adversely affect a producer’s ability to extract timber in a timely manner. To mitigate these risks, we initiated a scoring system to evaluate every hardwood source based on timber quality, reliability, and ease of extraction.

For this important task, we have added a new member to our team, Forestry Engineer Adalbert Ludwig Lazat. Mr. Ludwig Lazat has worked with hardwoods in tropical regions for over a decade and has also been on the buyer end of this business while working with timber distributors in his hometown of Hamburg, Germany. Mr. Ludwig Lazat will accompany us in quality control as well as R&D endeavors to make sure that we meet the highest quality standards, a process that starts with evaluating the material before it even arrives at our site.

We have spent the last few weeks visiting various plantations and, having crisscrossed dirt roads, rivers, and forests, we have successfully measured and assessed the raw hardwood that we will be working with during the coming months and years. Rest assured, we will continue reporting as we assess all of the plantations that are lined up for site visits during the coming weeks.

Similarly, we are pleased to announce that we will be finalizing the interview of candidates to lead the sawmill operation with the help of Mr. Ludwig Lazat, given that the operation’s equipment is almost ready to start cutting and drying the wood. The mill’s kilns are coming from Italy and the rest of the equipment will be coming from Slovenia. All of it is expected to be installed by the end of February, which is key because we want to start training the mill’s staff on how to utilize and maintain the supply line. Simultaneously, as the mill is staffed, we will also be looking to fill other important roles, including purchasing, logistics, and line supervisor.

In terms of market and export destinations, we will focus our efforts on the European and North American markets, where sustainably sourced solid wood is highly sought after. We will also be conducting business with Indian retailers due to the high consumption of teak products in this national market.


THE FARMFOLIO FOUNDATION
Written by Glenn Ojeda, Editor & of CSR
Glenn OjedaOn the social responsibility front, the Farmfolio Foundation has almost finalized all of its incorporation paperwork. Meanwhile, the team will be participating in its first informational and networking forum on December 12.
Glenn Ojeda, Editor & Head of CSR

 

The Sustainable Development Goals (SDG) Leadership Series Goal 9 Forum will explore the critical role of technology innovation and digital infrastructure can play in achieving the United Nations’ ambitious 2030 goals. This discussion will be held live online and will host participants from all over the world.

Please be on the lookout as the Farmfolio Foundation expects to send out informational brochures and fund-raising materials early in 2019.