On August 9, we signed two rental agreements for a Dutch investor who owns two crop farms in San José, Uruguay. He decided to invest in 2013 when the price for soy was 600 USD per ton and the price for good quality cropland 8.000 USD per hectare. These prices are now 300 USD per ton and 5.500 USD per hectare. His short-term return on investment is less attractive, but these values will recover. The rental agreements are for 3 years and payment upfront in US dollar. Fully guaranteed with the money already on his account. Cattle grazing agreement will be done with a nearby cattle farmer with a separate contract that ends at the same time as the crop contracts.
Cow control in Flores was required for the mandatory annual declaration on July 31. Animals registered on different DICOSE, which is the mandatory registration number for owner of livestock, had to be separated and categorized in order to carry out a full control of the herd and improve cattle management at this farm. It is crucial to control and manage timing of births in the fields as you prefer not to have too many births in the mid of winter. It is preferable to have calves early Spring. This also makes it possible to sell calves better timed and organized.
On July 10 an 11-year rental agreement was signed to plant Eucalyptus Smithii trees at a farm in Lavalleja. Annual payment upfront as a guarantee for the German landowner. We will further investigate the possibilities to generate benefits for this investor as a result of forestry carbon credits. In addition, we will also lease out the part for grazing of cows in a 6 year contract with the option of 5 year renewal. During 8 months it will not be possible to have cows in between the newly planted trees. Repair and maintenance is part of the rental agreement.
Early June we received a request to help a US investor change his farm administration. He owns two crop farms in Colonia, Uruguay. For five years, he had hired staff to operate the farms on his behalf. The outcome was disappointing for him and he ended up wiring additional money on a yearly basis. We suggested several changes to guarantee revenues from lease contract and reduce expenses. We worked on getting him the leases with upfront payment for his farms and replace the service providers involved.
Responsible agricultural investments are not yet widely accepted or promoted in South America, but agricultural investors targeting assets in the region should understand the consumer-driven demand for sustainable production, and there are some successful projects in South America where landowners and farm operators have joined forces to set up these kinds operations on the ground.
We worked on an agricultural project in central Uruguay where a landholding agricultural company achieved triple certification for its entire 2,500 hectare farm business, acquired in 2015, and converted from a cattle operation to a mixed operation in which the main element is cropping. Read this article to learn more.
On May 22 we signed a rental contract for two crop farms in Flores and San José, Uruguay on behalf of a US investor. The rental agreements are for 4 years and payment upfront in US dollar. Fully guaranteed. Cattle grazing agreement will be done with a nearby cattle farmer on one farm and at the other farm we will manage it on his behalf. That allows us to also keep an eye on houses, machinery etc. Starting winter crops with wheat and then later a short cycle soy bean in January.