August 26th, 2019

Q1 Update – Fruit and Timber Open for Business

Dax CookeWhat a quarter. We have been moving so fast last month feels like last year, which is what I like most about writing these updates. They allow us to reflect on our progress and reset the compass for the next leg of the journey to ensure we stay on course.

 

Making our annual voyage to Fruit Logistica is one of my favorite times of the year. This year was all about the Pine! Shoes shined and hair gelled, I hit the Messe floor with Tom, Oscar, Peter, and Paul.

Our first priority this year was finalizing contracts with our customers as we prepared to hit the market in February. Starting conversations early is an important part of the process of marketing fruit, especially in European markets. This is a business that is highly focused on quality and logistical capability. Luckily, PGP has both, which propelled us to quickly close four new clients, which are projected to purchase over 150,000 cases during the next 12 months.
Another important part of the show was our meeting with Panama’s agriculture minister. Minister Eduardo Enrique Carles really helped us better understand the China market status and when we can expect first shipments to be permitted. He also confirmed the commitments to the government export incentive program. Our experience this year grew exponentially. With product ready to sell and a year of foundation building, we had a new swagger about us. The peak of the event for me was the last day. We had some of our own pineapple brought into the event hall and we were handing out samples to new customers, one of which had a Michelin chef preparing small plates. Without hesitation, I asked the gentlemen to cut up some pineapple and give me his feedback. Well, his reaction told me everything I needed to know…we have the best pineapple on earth!

La Dona Pineapple Sampling Fruit LOGISTICA 2019

During the week, our team also launched the much-anticipated expansion of Panama Golden Pineapple, LP. This marks Farmfolio’s 4th offering to date. The initial reception was overwhelming, with nearly 60% of the 700 new units reserved within the first week! We are almost fully reserved and anticipate closing the offering in mid-April. If you are still considering this project, time is of the essence.
Next stop, Paris and the Rungis market. After a couple days off, Thomas Connell and I rendezvoused to meet buyers at France’s largest physical market. Things start early at Rungis—we arrived at about 5:30 AM to see the action unfold.

The property is a massive 230 hectares of nothing but stalls of wholesalers and food storage facilities. 100% of the space is owned by the French government and leased to vendors for 2-year periods. Not open to the public, Tom and I were special invites of new customers from the show in Berlin. We received a full tour of the facility and had the chance to speak with several wholesalers about their requirements and their pricing for pineapple. France’s demand for quality produce makes it a prime target for PGP. We solidified interest from several new buyers, who will be visiting the pineapple farm in late February. Overall, a very successful visit to France; we are really excited to enter the French markets.


PGP Update
Written by Paul Vergara, PGP’s COO

We continue harvesting the 2019 crop and are already planting the 2020 crop. The first containers of the 2019 crop left our farm on February 12. These containers have already arrived in Europe, and customer feedback has been very positive.

 

Harvested areas are transitioning into seed development areas for the 2020 crop and new areas are being planted. Below is a summary of the sales we have accomplished through week 10 of the year (March 10th). These numbers are in line with our forecast export numbers.

Sales Summary: Feb 12- March 7

Containers Sale YTD $77,544.80
Air Shipment Sale YTD $15,028.62
Grand Total Sales YTD $ $92,573.42
Grand Total Budget YTD $ $91,019.50
  Cases YTD 11,423
  Average Price $8.10

 Panama Pineapple Investment – March Update with Dax Cooke

Like last year, our goal for 2020 plantings is to exceed 46 hectares and reach 51 effective hectares planted during 2019. As we transition from seed development into land preparation, we also expect to plant the majority of this 2020 crop during the second half of the season (June–November). This year we begin planting with our own seed crop. We expect to become self-sufficient by November of 2020, reducing the amount of seed purchased this year and allowing us to control seed health and sizing. These characteristics are important to develop consistent quality as we continue the project.
PGP Overview Video


Burroteka Update
Written by Oscar Baracaldo, Farmfolio’s Head of Operations

Monitoring the critical path of the development of our Burroteka sawmill during the last six months has been an enriching experience. By utilizing a set of simple transformation stages, we are building a forestry and timber business that truly develops from a seed to a high-quality product with better margins.

 

There are five components that we have monitored throughout the course of the project: wood sourcing, infrastructure, equipment, human resources, and partnerships.

Sourcing

We’ve successfully located over 7,000 ha of high quality timber and we have secured relationships that give us access to over 900 ha of high quality teak in the region. This equates to over five years of raw material for the mill (running at 100% capacity). However, it is important to point out that our projections are based on 40% efficiency during years 1–2 and 60% efficiency from year 3 onward.

Infrastructure

As the project started during early 2018, we located three hectares of land under rural zoning. We developed a plan to make these hectares ground zero for our vertical integration endeavors. We achieved a purchase option agreement (dependent on the successful acquisition of agroindustrial zoning). The zoning came through, allowing transformation facilities 200 m from the main road—“Ruta del Mar”—which is the highway that leads to the main ports in the country of Colombia

During the months of July and August, we worked with the local planning office towards approval of our designs for the mill. We received approval in September 2018 and secured a contractor contract. In addition, we hired an independent audit company to keep an eye on materials used and the daily schedule going forward, ensuring the quality of the structures to be built. The goal was to open our doors by the middle of March.

As we stand, the main road warehouse, perimeter and substation structures are complete. We’re finishing the office building by the end of March and drying kiln structures during the month of April.

Equipment

Our equipment was ordered during the month of October with the expectation to receive equipment during the month of February 2019. We’ve received most of the equipment to date, including drying kilns and the equipment needed to saw blocks and boards.

The local equipment provider Eurosierras is working cohesively with our team as we navigate delays on transfer tables and a sharpening machine for the circular blades in our line. We expect the delayed equipment to arrive at our facility by the end of April. Eurosierras will be offloading some of the existing transfer tables in the country of Colombia, aiding our agenda as we are starting training with the equipment that has already been delivered to the mill.

Human Resources

An important new addition to our Colombian team is Lilliana Osorio, our human resources assistant. Lilliana joined our team in February, charged with the task of filling open roles at the Burroteka sawmill, including plant supervisor, equipment and vehicle operators, admin staff, and GM. The resulting work has been a team effort. The interview process involved three stages, including a security filter performed on key personnel that measures psychological and physiological aspects key to their positive performance in our new venture.

As you may have learned in our previous updates, we are excited to report that we have welcomed Adelbert Ludwig Lazat to the Burroteka team. Mr. Ludwig, whom we met in early 2018, is a professional with over 12 years of experience in the timber transformation industry. He holds a Master of Science degree in Wood Science from the University of Hamburg.

We have spent the last two quarters further developing our relationship with Adelbert and have concluded that he is the right fit to lead Burroteka as the company’s GM in Colombia. Adelbert will lead the team at the mill starting next week with the expectation of 50% operational capacity by May and the achievement of 100% operational capacity during the summer.

Adelbert Ludwig Report

The sawmill is getting ready to start its duties. Machines were successfully delivered last week, and now the installation process will follow. First, machines need to be positioned and fixed on the ground. Then they need to be wired, and finally, interconnected. After that, the training of the operators will start. We will start at first with the head saw, then continue with the subordinated saws. Intensive training will be fundamental for a proper and efficient use of the machinery and will facilitate a high-grade qualitative output.

The first training will start this week. At first, we will conduct theoretical basics, about both the machines and timber characteristics. We will particularly focus on the machines’ behavior during the milling process. Later on, once we start the training on the operation of the drying chambers, we will focus on the actual properties of wood that matter while the lumber is being dried inside the kiln. Every training will be split into two parts: a first training which enables the operator to start working and a second training which will be realized some weeks after the first. The goal here will be optimizing the use of the machinery.

In this sense, let’s get started!

Partnerships

A key aspect of our work prior to launching Burroteka has been the development of key partnerships. Top amongst those are sales, port services, and relations with local, private and public officials. During the course of the last six months, we have caught the attention of various individuals and entities that have found our mission synergetic with theirs. We’ve been working with local forestry operators to source timber (successfully securing the raw material as stated above). During our time in Berlin, we connected with Anibal Ochoa, the head of the Cartagena port, which will be servicing our exports through the Manga terminal.

We were very impressed as we conducted a visit to the port with the help of Mr. Ochoa’s team on the ground. There, they thoroughly explained the export process and the documentation required—important information as we are ready to begin exports in the coming weeks. We are happy to report that Burroteka already holds an exporter license and the token documents required to export our products outside the country of Colombia. During our trip to Cartagena, we also met with individuals who will serve as manufacturer representatives and that together hold export business worth more than 30 containers a month in orders. This is enough demand to cover our sales for 2019 in green timber alone. We will continue to increase our finished and dried products during the next quarter as we plan to achieve better margins.

In addition to the partnerships mentioned above, our venture has been well received by the local, private official organizations, specifically the mayor’s office in Monteria which has aided our endeavors. The sawmill will provide steady jobs under one of the mayor’s strongest campaigns, which is to make Monteria known as “agropolis”—an endeavor that put agriculture and agroindustry on the top of the official’s agenda. Furthermore, this coalition with Burroteka has yielded fruit in the form of symbiotic partnerships with local industry that will use sawdust produced by the mill to power biomass plants (the oily composition of teak sawdust has proven to provide higher combustion levels than formerly used materials). This is just one example of how subproducts that could be deemed as waste will become income streams for the sawmill.

During the final closure or completion phase, my emphasis as a project manager is on releasing the final deliverables, handing over project documentation to the business, terminating supplier contracts, releasing project resources, and communicating the closure of the project to all stakeholders. From this point forward, the company will be led by Mr. Ludwig as the authority figure. Our future support will be primarily market-related. On that note, we will be touring India and Europe by the end of the month, our goal being to continue nurturing relationships that allow us to gain higher margins. We expect our more finished products to take shape closer to the summer, during which time we will most likely be campaigning the US.


Fruit Sales Update
Written by Thomas Connell – Head of Investment Relations

It’s not all Rock n’ Roll you know…

It’s Friday afternoon in Madrid and my 3:50 back to London has been delayed—take a seat people and await further instructions. I do a lot of traveling on behalf of Farmfolio, so I’m used to the odd knock here or there.

 

Since the turn of the year, I’ve been in Rotterdam, Berlin, Paris, Barcelona, and Madrid. If you’re waiting to hear about the La Sagrada Família, Reichstag Building, or the Eiffel Tower, this is not a travel blog. In fact, I did not see any of those landmarks during my time abroad. I’m here for one reason and one reason only: to sell La Dona Pineapple of Panama.

Things kicked off in early February, with Paul Vergara from Panama and myself going to Rotterdam. It was cold. Not being used to the sub-zero temperatures, Paul was in shock, but still managed to crack a smile.

I was really excited to see things from the perspective of the distributors. What happens to the fruit when it leaves our farm in Panama? Where and how is it stored? Who buys it? How does it all work?

We had four meetings lined up with existing customers. These are large-scale distributors, and the operations are impressive. Huge warehouses, fleets of trucks to transport fruit (not just in Holland, but throughout Europe), and large sales teams, with a Rolodex of wholesalers, retailers, and caterers to call on to breakdown everything from the large containers of fruit we send to smaller orders. It was a real insight into the workings of the supply chain.

Orders had already been agreed upon, and it was a big week for us as it coincided with our very first harvest from the farm. The fruit we were sending was high in coloration, with lower acidity and higher sugar content. This is a very specialized form of farming, and we have an advantage over large-scale pineapple producers as we can spend the time needed in the field in order to deliver a superior product

When shipping fruit via sea container, it’s a 14-day trip from Panama to Rotterdam. A container holds 20 pallets of fruit. Each pallet has 80 boxes, with a box weighing approximately 12.5 kg (27 lb). Everything is logged and samples are taken prior to shipping.

Similarly, when the fruit is received, samples are taken on that end as well.

As you can see from the images, the fruit arrived in exactly the same form it left the farm, and our customers are very happy with the quality of our product. These are ongoing relationships. Containers of fruit are shipped weekly from now till the end of the year.

From Rotterdam, we were off to Berlin to attend Fruit Logistica. This 3-day event is the largest of the year for the fresh fruit and vegetable industry, with over 75,000 attendees passing through Messe Hall, Berlin each day.

We were joined by the rest of the team from Farmfolio and some special guests—Peter and Karen, investors who had visited the farm in December and made the short trip from their home in France to see the goings-on at the show in Germany. For us, it’s an opportunity to showcase La Dona pineapple and forge new relationships with buyers throughout Europe.

From Germany, I hightailed it over to the two main wholesale markets of Spain: MercaBarna in Barcelona and Merca Madrid. Although Holland is probably the single most important market for fruit distribution in Europe, countries in the Mediterranean have a stronger connection with food and markets are more prevalent there than in Northern Europe.

I was amazed to see the number of vendors in these markets offering air-shipped pineapple. This is not a cheap product—it sells at wholesale markets for anywhere between €2.70–€3.20 per kilo. You would think such a premium product and price would limit the market to a small number of vendors shifting small volumes of fruit. However, I came across 30-40 vendors, many of whom were moving 20-40 pallets per week. During peak seasons, such as Christmas, they are moving between 60-80 pallets per week or more.

You can see that air-shipped pineapple is shipped in different boxes than that of fruit sent by sea container. The fruit is boxed vertically as opposed to horizontally in order to protect the crown of the fruit. There are direct flights from Panama to Madrid, Frankfurt, Paris, Munich, and Amsterdam, so fruit can be harvested from our field on Thursday and arrive in the markets of Europe to be sold the very next day.

So what does all of this mean for us and investors? At 180 hectares in size, and with a current net production area of 50 hectares (increasing to 66 hectares), our farm is relatively small in comparison to large-scale producers. We average 4-5 containers of fruit produced and shipped per week. This allows us to focus on more premium markets that our competitors dismiss because they are not willing to put in the extra work or don’t have the additional resources it takes to produce this type of fruit.

With all of our orders already secured, I have been focusing on increasing our share in the premium markets. When we put our original projections together, we based projections on a sales price of $6.25 per box as an average. We have surpassed this due to the higher coloration fruit we’ve been shipping.

In addition, our original projections anticipated 20% of production would go to the airfreight business, which is approximately 29 pallets per week. Now that we know the market is there, we estimate we can increase to 30-40% of production to airfreight. Remember, this wholesales for €2.70–€3.20 per kilo in the markets. With shipping rates of approximately €1.30 and a wholesaler markup of 10-15%, this puts us right in the territory we need of $0.90-$1 per kilo to the grower.

The next stop for me is a trip to South Korea in mid-May for a large trade show. If you head west of Panama via sea, South Korea is one of the first countries you will hit. It’s an important market for us, as shipping times out of Panama are quicker than those of neighboring Latin countries. I am sure I’ll encounter the odd delay at the airport along the way, but hey, it’s all part of the excitement of air travel!


Pietrasanta Update
Written by Jessica Valencia

Work performed during the first quarter of 2019
In the nursery, work includes daily irrigation, weed control in bagging plants, and periodic applications to control mites. We are also moving forward with the propagation plan of nectariferous (nectar producing) plants and neem trees that will be transplanted in the rainy season.

The nectariferous plants attract a great deal of beneficial insects because they provide shelter and energy. Maintaining these plants around our main coconut crop enhances the biodiversity of the crop and helps regulate insect pests, as many of the varied insects attracted to these plants are predators or parasitoids of the main pests that attack the crop.

Crop Maintenance

The first round of silvering was carried out throughout the plantation. Over time, a layer of vegetable matter builds up within drainage canals which prevents them from operating properly. That layer is currently being removed from the canals in order to allow excess water to properly evacuate when the rains begin.

The Viudas Reservoir was cleaned and the aquatic plants removed from the canal were applied to the coconut trees of the Centro America lot. This maintains the humidity of the plants and provides them with needed nutrients.

In the Barcelona lot, the plants are being irrigated daily to reduce tree mortality, as the plants will otherwise not reach a good degree of adaptation before the beginning of the drought period.

The application of Stimplex (foliar fertilizer that acts as a stomatal regulator for the control of the dehydration of the plants, increasing their drought tolerance) was started in lots El Principio and Vista Hermosa.

Irrigation System

Three pumping huts were connected to the reservoirs which will supply the plantation’s water. Four pumps of 60 horsepower are distributed throughout the huts.

A channel was also built, crossing part of the Vista Hermosa lot, which will allow the Viudas Reservoir to fill more quickly during the rainy season by channeling the waters that descend from the hill.

The irrigation system installation team has been dedicated to washing the Centro America batch. Thankfully, pump #1 was enabled to run tests and pieces were replaced anywhere that leakage was found. El Principio and Vista Hermosa lots were both irrigated with water from the Las Viudas Dam (booth # 3).

Electrical Connection

The last section of the electrical network of the February 10th farmhouse was finished up to the Hacienda Providencia, including trimming any interfering trees. Installation of three-phase power in the farm allows for correct functioning of the irrigation system.

Phytosanitary Control

Phytosanitary and drought mortality censuses have been carried out, as have controls of the tornado beetle (Strategus oleus), such as eradicating the proliferation niches of this insect. These controls have decreased their incidence in the dry season.

In El Principio and Vista Hermosa lots, some plants are overturned as the dry season weakens root systems and tilts them. Treating these plants involves weekly watering with a tank car and a drench application of the Stimplex fertilizer to stimulate the formation of new roots.

With the health team, we have implemented a mapping system which allows reviewing and updating the status of the entire plantation, row by row and plant to plant. This team is dedicated to updating the mapping with daily information collected in the field. They are also identifying pest niches and collecting organic material to produce compost.

Planting 2019

A team of four workers is felling trees within fields to prepare the land for new planting. They make use of good timber and eliminate what is unusable so the field can be prepared for planting with harrow and chisel.

Drains

Our greatest need is staking and building drains in the presence of a surveyor in the Centro America lot. Once completed, we will continue in the Barcelona lot and the lot for planting this year.

Livestock

Cattle activities include maintaining pastures, fences, and corals, and recovering meadows. We also installed an elevated tank to supply drinking water to livestock troughs. Throughout March we will continue maintaining crops (weed control, phytosanitary census, control of the small bulldog (Strategus aloeus), cleaning drainage channels, etc).

Planning for the second quarter, our priority is replanting plants and filling spaces within the established lots in order to optimize space and increase plant density. We want to get as close as possible to the goal of 180 plants/ha.

Physical mapping and periodic census taking to inform the re-plant schedule will continue from April 1. The lots El Principio and Vista Hermosa are the most developed—these plants have surpassed the acclimatization stage of young plants—and will be prepared for the beginning of the rains at the end of April and early May.

Of equal importance, with the start of the rains in the second quarter we are reactivating the nutrition plan, which consists of site-specific edaphic and foliar applications of organic fertilizer in several cycles. A vermiculture project is also underway with a first trial of three beds. The goal is to take full advantage of the organic waste from the farm for the manufacture of fertilizers.

The rainy season brings with it additional pressure from weeds and pests. We are focused on containing pests like the tornado beetle and foliage-eating caterpillars of the lepidoptera order by employing beneficial insects, trapping systems, and inoculations of fungi in the pests’ reproductive niches.

Please stay tuned and reach out to us if you have any questions or ideas!

Sincerely the Farmfolio Team,

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