South American Fund Buys Up More Farmland in a Bet on Food Inflation

(Bloomberg) -- One of Uruguay’s top agricultural investors is stepping up its exposure to the sector, betting that a multiyear agricultural commodity uptrend will boost farm revenues and property prices.

A financial trust sponsored by Agropecuaria del Litoral raised $100 million this week to buy farmland in the South American country, a major producer of beef, milk, rice and soybeans.

Global crop and livestock prices have eased of late, but are still near multiyear highs as recovering economies spur food demand at a time of global shipping disruptions. Uruguay is cashing in on the boom with beef and forestry exports up 55% and 45%, respectively, this year. Agropecuaria del Litoral sees prices continuing to rise, with land values typically following commodities.

“This is a good moment for investors who think long term to accumulate high-quality farmland,” Chief Executive Officer Ignacio Baglietto said in an interview. “Agriculture commodity cycles generally last 10 years on average.”

Baglietto’s company, which bought 5% of the issuance, plans to buy and manage on behalf of the trust almost 12,000 hectares (29,700 acres) for farming, ranching and forestry. The firm already manages 15,000 hectares, including about 6,000 owned by its first trust that raised $50 million in 2018.

Land prices in Uruguay soared from $413 a hectare in 2001 to a $3,900-plus in 2014 thanks to rapid Chinese growth and a flood of Argentine money. Average prices in the first half of this year are below the peak, but the most productive plots fetch more than $6,000 a hectare.

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