Export ratios are one of the most important factors to consider when evaluating a farm’s potential for high returns.
The future looks bright for the lime industry.
A growing middle class in emerging nations, implementation of new farming technologies, and a shift towards health and international foods among consumers has sent global lime demand soaring. The trend is expected to continue in the coming years, with the global lime industry forecasted to grow at a CAGR of 3.4 percent by 2026.
With traditional top lime suppliers like Mexico and Brazil struggling to keep pace with rising demand, new exporters are fast emerging to fill the gaps in the market. Surpassing other up-and-coming suppliers like South Africa and Vietnam, Colombia, in particular, is emerging as one of the industry’s key players. The Andean nation is the world’s fastest-growing lime supplier, having boosted its exports by a staggering 449 percent in the last six years.
Considering the country’s welcoming investment environment, open economy, and abundant natural resources, Colombian lime farms represent a compelling opportunity for global investors. There are several factors to consider when evaluating a farm in terms of investment potential, from location and water sources to management team and farm history. But one of the most important factors is one that investors often overlook: the farm’s export ratio.
Why does export ratio matter?
Export ratio refers to the percentage of a farm’s product that is sold to global markets. When evaluating Colombian farms as potential investment opportunities, the export ratio is especially important because the commodity price of products sold internationally is dramatically higher than those sold domestically.
To illustrate this point, this is a comparison of the prices of key Colombian commodities sold domestically in Medellín with the prices of those same commodities sold at the Rungis Wholesale Market in Paris:
|Commodity||Medellín Wholesale Market||Paris Wholesale Market|
|Tahiti Lime||USD $0.71||USD $2.94|
|Mango||USD $1.71||USD $5.65|
|Hass Avocado||USD $1.18||USD $3.80|
|Melon||USD $1.00||USD $1.88|
As you can see, there is a significant premium paid for fruit exported abroad. Furthermore, there are more distributor opportunities for limes that are considered export qualities. Export-quality limes can be distributed at major supermarkets and big-box retailers like Walmart, Costco, and Trader Joe’s.
Farms that can consistently yield a higher ratio of export-quality commodities are the ones that stand to achieve the highest profit, but consistently high export quality can be difficult to find in agriculture. The good news is that the export quality ratio within Colombia’s agriculture sector has increased significantly in the past few years as the nation boosts its countryside development and enters new global markets.
What makes an export quality lime?
Let’s talk a little bit about what separates an export-quality Tahiti lime from limes that are considered unfit for international distribution. The farm must adhere to standards regarding quality conditions, storage, harvest protocol, packaging and distribution, acceptable defects, and maturity profile. These are some of the common standards:
Ripeness. Tahiti limes must have reached a certain degree of ripeness, where they are the proper color, and the juice content is at least 42 percent.
Quality conditions. Limes must be intact and free of bumps and scars and they should not be affected by decomposition or deterioration. The fruit must be pest-free and free of pest damage. The limes must also be free of signs of wilting or dehydration, cold or frost injuries, and odors. In addition, they should be in a state and quality where they can withstand transport and handling, and they must be able to arrive at the destination in good condition.
Harvest protocol. The process of harvesting and handling the limes must be carried out according to strict rules to ensure they arrive at their destination in a condition that can be sold to consumers. Facilities must be in a perfect state of cleanliness, and the staff must adhere to strict hygiene standards. In addition, employees involved in harvesting are required to receive extensive training on how to handle the fruit in a way that does not harm the product and ensures the limes meet export quality standards.
Storage. Limes must be stored at a specific temperature (8 – 12 degrees Celsius) and humidity level (85 – 90 percent), depending on how long they are stored. Limes can be in storage for a maximum of four to eight weeks.
Target market requirements. Different markets may have different requirements for products exported to their country. In Europe, one of the primary markets for lime distribution, citrus fruits are typically allowed to have certain types of wax. However, because of the increased use of limes with skin for cocktails, beer, and other drinks, more clients are requesting non-waxed limes.
Challenges of growing export-quality limes
Considering these stringent standards for export-quality limes, many farms struggle to produce them. Challenges to Colombian farms include operations that lack economies of scale, inadequate storage and distribution infrastructure, and a lack of consistency in supply and quality. In addition, most Colombian farms still struggle to establish market linkages and selling agreements with major retailers.
The Farmfolio Advantage
To address these challenges, Farmfolio has created a first-of-its-kind lime packhouse Valle Verde, with the capacity to sort, wash, and pack up to six containers per week for international markets. The packhouse’s advanced sorting machine takes five photos of each lime per second to evaluate size, color, and quality, all steps intended to maximize export quality distribution.
After purchasing and sorting limes from dozens of farms around Colombia, we leverage the data to determine which farms have the best fruit and farm managers. This enables us to pre-select the best farms for potential acquisition, and once we acquire a farm, our hand-picked farm management team often brings the export quality of the farm up another 10 to 15 percent. This turns good farms into even better farms, with export ratios in the 80 to 90 percent range.
Interested in learning more about owning your own lime farm producing export-quality limes? Check out our latest farm La Frontera, where individual parcels are available for direct ownership. With our LOTs model, we do all of the work and owners receive the returns. Learn more by clicking here.