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.
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.
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.
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.
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.
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.
For a German client with a 1,000 acre farm in Lavalleja we carried out the repair of external fences, internal gates, corral and a basic loading station at the entrance. The farm will be exploited for forestry and cattle raising. A long-term forestry rent is the main source of income. Cattle raising is a secondary activity, but important nevertheless. For that reason, we offered to organize and supervise these works. Now that these works are finished, the farm is in conditions for a cattle-grazing contract. Also important for protection of the trees to be planted.
Beef prices in Uruguay are currently at a record high. Today we sold 61 calves weighing 182 kg on average for 467 USD per animal. After the summer we´ll sell another 50 calves. The US landowner has row cropping as main activity, but cattle raising is a succesfull side activity. Cattle raising in Uruguay is a good business. #uruguay #cattle #business
In recent months we supported a US landowner in Uruguay to sell his agri-equipment. He had decided to change his business model from self-operating to a lease of the crop land and continue with cattle farming. All his equipment for cropping was sold in three months time. Most equipment was 5 years old. Different brands, but mostly John Deere.
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.