All Posts By

Wilfred Morren

Closing new rental agreements

April and May are the months to negotiate rental agreements. This year with the pleasant situation that prices for grains are on the highest level since several years. Most rental contracts are set in kg of soybeans per hectare. For example, crop fields where the rental price is 900 kg of soybean per hectare. A year ago, the price was 320 USD per ton and today the price is 557 USD per ton. That means a year ago 900 kg x 0,32 = 288 USD per hectare and this year 900 kg x 0.557 =  501 USD per hectare. A more than significant increase in rental income for landowners.

We can advise landowners on different ways to set up rental agreements in order to improve the return on investment.

Forestry work in operation

forestry management Uruguay

At one of the forestry plantations we supervise, the preparations have started. This farm is located in Lavalleja, near Villa Serrana. In March and April, we start preparing the land for plantation. The lines are cut where trees will be planted, subdivisions of the land are created, fences removed or placed and an internal road constructed. In September, the actual plantation will be carried out. That way we avoid potential damage due to frost in cold winter nights in July or August.

 

Forestry Project Approved

Permission was granted by local authorities to initiate a forestry project in Lavalleja. The land was purchased by a German investor who prefers to have this land converted to timberland. A project was designed where priority forestry soils are used to plant eucalyptus trees while respecting flora and fauna in his specific area.  During the design and approval procedure the land was grazed by cattle. The cattle will remain on this farm during most of the forestry project.

Maintenance and Improvement

Last week we made an inspection to a crop farm of one of our clients. This is a crop farm in Colonia Kennedy, Rio Negro. The area around the house was completely abandoned and covered with weeds and bushes. We asked the tenant to recover the area of 15 hectares and make it ready for cattle grazing. In order to do so he brought in a company that cut part of the existing trees to make wooden posts for the fences and boards for a new corral. The area had been without use during the last ten years. Now we were able to add 15 hectares for cattle grazing. This way we drastically improved the look and feel of the place, increase productivity at the farm and all this without spending any additional money of the investor. Clearly a win-win situation.

Pay day end of May

Pay day for several clients. End of May is typically the time for rental payments. Especially on row crop farms where harvests were concluded. Also because the fiscal years ends soon for farming enterprises in Uruguay. I don´t expect any problems with any of the tenants we found for our clients. However, 2020 is a year to soon forget with crop farmers barely reaching break-even.

New crop lease

farm lease Uruguay

For a Dutch client who bought a crop farm at the end of last year we negotiated a lease contract for one year. The rental price we agreed upon was significantly higher than the existing contract and this will be paid upfront.

After this first year, a longer term objective will be defined including repair of fences, house and improvement of land. Since the tenant is a nearby farmer he is in condition to make constant improvements to the land and installations. This tenant already cleaned the area around the house for his cattle grazing during our negotiations.

Price and liquidity are always important issues to take into consideration, but good agricultural practices as well.

We use the statistical information published by the Ministry as well as our market knowledge based on daily conversations with tenants.

The Ministry of Agriculture published statistical information about lease prices of land for agricultural use in 2019. This information is based on the registered 1477 lease contracts in this period. The statistics show the different values per region and per activity.

In 2019 there were less registered lease contracts, covering less area and a lower average rental price. The total value of all closed rental contracts adds up to 87 M USD with an average price per hectare of 107 USD.

The highest lease prices per hectare were paid in Colonia (168 USD), Rio Negro (146 USD) and Soriano (175 USD) where you find the best land for row cropping. The prices mentioned here are averahes per region oncluding different activities. The lowest lease prices were paid in Artigas and Rivera (68 USD per hectare).

The average price for livestock was 69 USD per hectare, for mixed farming 134 USD per hectare, in forestry 139 USD per hectare and for row cropping 194 USD per hectare. The prices mentioned here are averages per activity in different regions.

The Ministry of Agriculture also published a chart with prices per activity in each region. Upon request we can send you this chart.

 

 

Good Agricultural Practices

good agricultural practices

End of April we visited this crop farm in San José. Glad to see the soy beans were almost ready for harvesting. This crop farm was bought 7 years ago by a Dutch client. In 2013 we helped him find a tenant for row cropping for a period of 4 years. The last three years the land was rented out to a dairy farmer for cattle grazing. This gave soils the chance to recover and avoid erosion. This year was the first year the land owner could go back to row cropping. Land stewardship is about the integration of good agricultural practices. The dairy farmer, however, closed his operations after the rental agreement ended, but that´s a different story.

Financial administration in times of corona virus

Due to the corona quarantine and financial difficulties for many companies, local and national authorities in Uruguay decided to postpone payments of asset tax and primary school tax for landowners.

In the meantime, we make an effort to receive rental payments without delay. So far, none of the tenants we work with has requested delay of payment. Sufficient liquidity is one of the key elements we look at when deciding who to work with.

Harvest of grains and sales of cattle continues providing cash for operators in this sector.

Rental and Repair at Crop Farm

farm management Uruguay

For a Dutch client we negotiated a rental agreement of a crop farm in Rio Negro. The agreement includes repair of all external fences and internal roads. Besides that, weeds near the house will be cleared and land prepared for some cattle grazing. For that purpose the new tenant already seeded oats. For this landowner, it was also important to have soil samples each year before seeding and a commitment to maintain soils at the same level of nutrients. This was all included in the rental agreement.

Cattle vacination Foot and Mouth Disease

Each year from February 15 to March 15 all cattle in Uruguay needs to be vaccinated against Foot and Mouth Disease. This vacination is mandatory since the last outbreak in Uruguay in 2002. Last Friday we finished vaccintating at one of the farms where we manage cattle herds.