Monthly Update 27/12/2018: Preparing for the Road Ahead
Holiday Season and the Road Ahead for 2019
As you can imagine, when you tell your mother you’re moving to the country of Colombia to launch an agriculture startup, its followed by a supportive reply of “wow… that sounds interesting”, but the tone is more like, “Is that safe?” Well, my mother, who thankfully has supported everything I’ve ever done had the chance to hit the road with me to celebrate the holidays at each project this December.
We arrived at the pineapple farm mid-morning six days before Christmas and set out on the farm tour wagon. As we arrived to the back lots and started to walk the fields, I couldn’t help but remember the first time I set foot on this ground almost four years ago. It was the same kind of day, not a cloud in the sky and crystal clear views of the perfect rows of planted pineapples with a cascade of mountains in the background. I remember standing in one of the back fields with now PGP COO Paul Vergara and his mother Edna Vergara as they told me the history of the farm and their family business. Walking with Paul and Edna that day while listening to their story, planted a seed of aspiration to one day have a similar story to tell. As I walked the fields with my mother this past week, I realized that the seed planted some four years ago has now grown into my own story, which I now share with my family and will be part of our legacy.
PGP Year-end Tour
People often ask me what we do at Farmfolio… my response historically has been something about developing agriculture investment opportunities. However, I’ve recently realized that it’s not just an investment, it’s an experience. All of our partners, including my mother, are not just investors, we are the founders of these projects and we are ingrained into their history. In turn, they become a part of our history and the story of our lives. We hear the legends of people who “Got in Early” on growing companies. Those that are fortunate enough to be a part of these ventures usually don’t talk about the returns, they tell us how the company evolved and how they fit into the story. Each Farmfolio project launch is an opportunity to truly be in on the ground floor and to be a part of the story. It’s also an opportunity to make it part of your story and history. At Farmfolio, we are committed to enhancing the experience of investing in 2019. We hope that when you do come to visit for the first time, it feels like you have been there the whole time.
Now to the fun stuff, our celebration in Panama was kicked off with a luncheon featuring a gift and recognition ceremonies. Paul Vergara gave a great opening speech and talked about the importance of team effort. He reflected on a successful year of plantings but emphasized the importance of focus and efficiency going into the harvest and replanting of 2019. I am continuously impressed with Paul’s leadership ability and focus on details at PGP. The moral at the farm has never been higher and Paul’s words painted a picture of growth and opportunity for the team. The celebration continued with Edna and myself handing out gift baskets and hams as a reward for a successful year of plantings. As we headed out to the airport that afternoon it was all smiles as everyone is excited for what is to come in 2019.
After a brief stop at the office in Medellin for a holiday party with the corporate team, we took off for Monteria to celebrate with the Pietrasanta community. This year, Farmfolio hosted all 42 team members, plus another 72 spouses and children. After a slight delay on the way into the farm, we arrived and were greeted by 70 chanting children, who were all clapping and smiling ready for the event to start. Seeing all of those faces is something that I wish all of our partners could experience someday.
As I took to the microphone that sunny afternoon, I was greeted with wide eyes and anticipation. I began by telling the story of Farmfolio and the over 75 investors from 10 countries that have come together to make this project possible. I reflected on the transformation of the farm and highlighted how the local sentiment of coconut production has completely changed from “loco” to “can I buy some seeds?” I further saluted the hard work and dedication of the team but reminded everyone that this is only the beginning and we have to remain focused on the tasks at hand. We followed our message with a visit from Santa Claus himself and gifts for all children, many of whom we have watched grow up over these last 3 years.
As I drove out that day, I looked out over the sun-drenched coconut trees remembering the days when I dreamed of seeing this very site. Being a part of the Pietrasanta story and the legacy of this region has been a life-changing experience and I hope that each of our partners has the opportunity to visit this year to experience the energy of Pietrasanta.
Written by Oscar Baracaldo, Farmfolio’s Operations Manager
Year three is upon us here at Farmfolio and it comes heavy with promise. When Farmfolio first started it was an idea backed by few, but now it is an idea backed up by numerous investors, partners, advisors, and collaborators from diverse backgrounds and nationalities. This group of people has confided their money, time, and most importantly their trust in us.
Last year represented a big milestone for all of us here at Farmfolio, but the cost of DREAMING BIG is that of SEEING THE PLAN THROUGH. Thus, 2019 is a year of great expectations and it is our responsibility to see it through! The most important part of the work is the beginning, to have the urgency to lay the foundation for future success. The first quarter will be key to fleshing out a successful year. Doing so, we will continue building the foundation to meet this year’s objectives.
It is said that the right opportunities manifest in the right place and at the right time. I believe that is what Pietrasanta represents, THE RIGHT OPPORTUNITY AT THE RIGHT TIME. However, opportunities require us to act in order to reap the rewards. Therefore, we kick off the year in preparation for what is to come and ready to rise to the occasion!
The Burroteka Sawmill will be our focus during 2019 given that coconut plantation development process has come to an end and our first harvest will take place in 2020. In short, 2019 is the year of the teak and 2020 will be the year of the coconut!
Burroteka – Sustainable Sawmill
Sawmill Layout as of December 2018
Raw Material and Growers
Before 2018 came to an end, our team visited over 17,000 acres of teak plantations with the farthest plantations being located just three hours away from our mill site. Teak producers are excited about this opportunity as it represents savings of as much as 50% in freight compared to where they would usually have to dispatch their orders, the port of Cartagena. Burroteka represents a major logistical advantage for both producers and buyers, which is a true testament to our mission here at Farmfolio: “to efficiently connect stakeholders along the agribusiness value chain”.
Burroteka’s Quality Assurance Officer Adelbert Ludwig Lazat is finishing the development of score cards for each producer by assessing their reliability according to extraction access, forestry plan, and of course timber quality. Likewise, Mr. Ludwig will be polishing our Operations and Purchase Manuals in accordance with the goals that we have set out to achieve during 2019. As we approach the launch of the mill, we are confident that we will have only the best quality ready to enter the mill by our projected opening date in early March.
We’ve included a product storage hall of 300 m² that is adjacent to our kiln loading area and that will also connect to the unstacking and truck loading areas of the site.
1.Good Incoming Inspection
2. Round Wood Unload
3. Log Sorting Station (Future)
4. Round Wood Handling Machine
5. Log Yard
8. Aspiration Sawmill
9. Band Saw (Future)
10. Length Cutting Machine
11. Fork Lift
12. Sharpening & Tools
13. Temporary Storage Sawn Wood
14. Template Drying Kilns
15. Electric Control Room
16. Truck Platform Loading Area
17. Workshop (Future)
18. Petrol Station & Oil Station
19. Sticker Storage
20. Dry Wood Storage Hall
21. Loading Ramp
22. Storage Hall Decking (Future)
23. Office, Restrooms, Lunch Break Area & Lockers
24. Factory Spare Parts Storage
25. Firefighting Station (Future)
26. Coconut Plant
Equipment and structures that may be added in the future are colored in red. We consider that the log sorting line will be of great importance as it will have a direct impact on future yield and sawmill efficiency.
We will be onboarding staff no later than the second week of February and we plan to start manufacturing no later than the second week of March.
Burroteka Year-end Update
We’ve subdivided our objective to achieve $1.5M net income for Burroteka into three categories: Green Timber, Dried Timber, and Consumer Products. During the end of 2018, we were able to verify over $400 pricing per cubic meter of raw blocks, which goes well with our projections based on $380 per cubic meter.
We’ve also been building relationships with a wide array of customers through an expectation campaign and we expect to narrow down our green timber sales to four customers with orders of five containers totaling 25 cubic meters per month. Additionally, we have been nurturing relationships with potential manufacturer representatives, some of which we expect to onboard before the end of February.
Dried Wood is our strategy for increased margins and as so it will be our focus in the mid to long term. To this end, we are building our distribution channel throughout the southeastern United States as well as Boston, Germany, and what we think is a very interesting local upscale market thanks to local partners in Colombia. We will be visiting Bogota throughout January in order to arrange and nurture future orders right as the sawmill prepares to open its doors.
Simultaneously, we will continue building our distribution structure in Europe during the first two weeks of February in hopes to have initial visits from buyers by April. Off of these, we expect to conduct orders and articulate business by the end of the third quarter of the year. On the other hand, we expect to start processing orders for our US distribution network this summer. We expect to meet requirements and achieve compensation from $1,100 to $2,000 per cubic meter. Our objective will be to produce 30% of our total capacity during 2019 in dried pieces, which should average around 160 cubic meters per month throughout the year.
Finally, we will be running a pilot program by April in which we will be launching a small line of consumer and retail products that we hope will result in the incorporation of a workshop at the site, thus creating richer margins per cubic meter. Our research and work for the last six months bring us to the conclusion that we could potentially see prices reaching as much as $3,400 per cubic meter. If this initiative works, we would meet our goals with a more sustainable approach at hand.
Although each of the previous scenarios seems richer than the last, it is important to relay that as more transformation takes place, more raw materials will be required. For example, where a cubic meter of blocked wood represents a 50% waste factor, an end consumer product could equate in as much as 80% waste if not processed correctly, which is why having the right specifics from the beginning becomes key to utilizing the most out of every single log. Being constantly aware of this factor will directly result in a higher margin.
Panama Golden Pineapple
Written by Paul Vergara, Panama Golden Pineapple COO
The fun begins now!
We now have a full pineapple plantation. However, the real work begins now because we will be transitioning to various phases of production this year: planting the 2019 crop, harvesting seed for 2019, and packing fruit. Our work will include all these areas from now on. Once we achieve full sustainability of our seed production in the second semester of this year, we can truly be called a fully sustainable pineapple operation.
We completed our 2018 planting efforts last week and, as expected, we easily surpassed our goal of 46 effective hectares. Our planting area at the end of the year was 51 hectares, 11 % more than what we had planned. This additional area will yield more than 330,000 cases or 20,000 more pineapple cases (500,000 lbs more) than our original plan. The farm is subdivided into twelve lots with total areas listed on the table below. For easier reference please see the map below.
The total gross area prepared was 73.66 hectares and effective area planted is 51.46 hectares. This gives us a yield of 70% of land utilization, which is exactly what our goal was during the initial design for the plantation. From last years’ experience, we are evaluating some changes that we can implement to our lot designs for 2019, which will allow us to increase our land utilization higher.
The harvest of all these fruits begins in February and the graph below shows the cases per month that we plan to ship during 2019. Because planting schedule was heavily skewed towards the second part of the year, to take advantage of better pricing in these months, the initial part of the year will average around 17,000 cases per month and total 85,000 cases (53 containers). Meanwhile, the second half of the year will average 45,000 cases per month and total 244,000 cases (152 containers). The total amount expected for the year is 330,000 cases and close to 4.0 million kilograms of pineapple.
As we harvest, we pack and ship fruit. The process is seamless, fruit enters the pack-house and leaves daily either via ocean freight container or via air freight. We expect to ship around 200 containers of fruit in 2019. Thanks to the efforts we made during last year’s trade show visits, in which we developed new customers and strengthen existing customer relationships, we can happily announce that most of our first-semester fruit is already sold. This volume will be sold to customers in Europe, North America (West Coast) and Asia. Meanwhile, the second-semester fruit is currently being sold.
Seed production begins in late April, so we will need to purchase some seed during the first semester of the year in order to fulfill our 2019 planting schedule (50 hectares). During the second semester of this year, we will start generating our own seed and become self-sufficient, meaning that we will no longer have to purchase seed.
Our partner pack-house (VERBA ODREC) is ready for the challenge. In October 2019, we will be packing almost nine containers of pineapple per week. To successfully achieve this, upgrades and preparations are being made to the equipment and the packing facility in general.
As I said before, the real fun begins NOW!