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Farmland Gold: 29,000 Acres Sells For $108 Million
Farmland Investor Letter A $108 million farmland purchase is unusual for its scale and reflects both the growing ranks of institutional investors aiming to boost their exposure to the buoyant agricultural real estate sector and a tight market in which few attractive properties are available for sale. UBS AgriVest Farmland Fund Inc., a Connecticut-based farm real estate fund has emerged as the winning bidder in two widely watched private land auctions in Texas and Wisconsin. The purchases are unusual for their scale and reflect both the growing ranks of institutional investors aiming to boost their exposure to the buoyant agricultural real estate sector and a tight market in which few attractive properties are available for sale. Through September, Midwest land values are up 13% from a year, according to a survey of agricultural bankers by the Federal Reserve Bank of Chicago. That pace is down from 14% and 22% annual gains in 2010 and 2011. Speaking at a conference hosted by the Chicago Fed last week, Murray Wise, founder of Westchester Group-a Champaign, Ill. farm asset manager now majority owned by New York retirement fund manager TIAA-CREF-speculated that as much as $10 billion in institutional capital is searching for a home in U.S. agricultural land. “Institutional investors are very frustrated at the moment,” says Mr. Wise. “They feel almost locked out of the Midwest marketplace as rent income yields continue to decline and the cash position of the operating farmer in most cases is too much for them to compete with.” Though farm rents are on the upswing, land prices are rising faster, pushing rent income yields from 5% in 2006-2007 to 3%-4% today. “Many institutional investors are having a hard time accepting a 4% cash-on-cash return, and in some cases less than 4%, when in fact they want 7% ideally,” says Mr. Wise. The tightening land market presents a growing hurdle for farm investment managers who are under pressure to put client cash to work. At mid-year, UBS AgriVest had $288.6 million of client funds awaiting investment in farmland. In a June meeting with the Alaska Retirement Management Board-which owns $640 million in U.S. farmland managed by UBS AgriVest and Hancock Agricultural Investment Group-James McCandless, president of UBS AgriVest, told Alaska officials he wouldn’t begin investing a September 2011 $100 million mandate from the Iowa Public Employees’ Retirement System until he had found property for $41.6 million of Alaska funds awaiting investment and $147 million queued up for the UBS AgriVest Farmland Fund. On November 13th, UBS AgriVest paid $67.5 million or about $6,922 per acre for 9,754 acres in southwest Wisconsin. The deal ranks among the biggest sales of Wisconsin cropland in recent memory and is unusual for the UBS fund since its average farm investment is $4.8 million. The purchase also marks UBS AgriVest’ s return to the Midwest after at least three years, while it sought more attractively priced farm properties in Georgia, Texas, Arizona, Idaho and Oregon. The fund acquired just one property in the first half of this year. Continue reading
New Report Examines Ag Wealth Effect On Farmland Values
What effect will the historical wealth effect in agriculture have on farm debt and leverage if farm incomes fall dramatically? Since 2009, wealth in the U.S. farm sector has surged along with booming farmland values. In the latest issue of the Main Street Economist , Omaha Branch Executive Jason Henderson and Nathan Kauffman, economist, explore the historical wealth effect in agriculture and what it could mean for farm debt and leverage if farm incomes fall dramatically. Similar to nonfarm households, farm enterprises historically have used wealth to support consumption and investments when income fades. During years of low income, instead of allowing investments to fall with profits, farmers tap their existing wealth to finance and maintain their capital investments near previous levels. Historically, the sharp accumulation of debt has preceded financial crises. Henderson and Kauffman point to the 1970s as the clearest example of the wealth effect in U.S. agriculture. A surge in U.S. exports in 1972 led to a doubling of U.S. crop prices and a spike in farm profits. Although farm profits quickly retreated, farmers accelerated their investments, and capital spending did not peak until 1979. In 2013, historically high farm incomes are projected to keep U.S. farm debt and leverage low. Yet, longer term projections suggest that farm incomes could fall dramatically in 2014. If agriculture’s historical wealth effect holds true, farm enterprises might use existing wealth to finance and smooth investment spending, sowing the seeds for another round of debt accumulation. The article is available at www.kansascityfed.org/publications/research/mse . Continue reading
Canergy selects Chemtex and Beta Renewables for its Cellulosic Ethanol Project in California
Canergy selects Chemtex for the development of their 25 million gallon a year cellulosic biofuels facility to be located in the Imperial Valley of California. Brawley, CA & Wilmington, NC & Tortona, Italy (PRWEB) April 30, 2013 Canergy, LLC, an advanced biofuels company based in California that is focused on the production of ultra-low carbon intensity ethanol from sustainable non-food energy crops, is pleased to announce that it has selected Chemtex, a leader in chemical engineering and renewable processes, and Beta Renewables, a global leader in cellulosic bio-fuels, for the development of their 25 million gallon a year cellulosic biofuels facility to be located in the Imperial Valley of California. Construction of the new facility is targeted to begin in Q1, 2014 pending successful completion of permitting and financial activities. The facility is expected to be operational in 2016. Tim Brummels, Canergy’s CEO, said, “We are excited to be moving this project forward. California is the country’s largest retail gasoline market and this first project’s biofuel will facilitate obligated parties compliance with California policy directives to reduce their carbon footprint through 2020. We have completed extensive research and have concluded that PROESA® Technology is both ready now and is the most advanced and competitive cellulosic platform in the marketplace today. We are also excited to have CHS Inc., a leading global energy, grains and foods company, working with us as a development partner in the project.” John Litterio, Director of Renewable Fuels Marketing for CHS, said, “CHS is a leading ethanol marketer with global trading offices in the United States, Brazil and Europe. Our financial strength, logistical expertise, risk management services and 30+ years of biofuels experience will help position Canergy to reach more markets with its ultra-low carbon intensity ethanol and achieve the best possible netbacks. We are proud to be the exclusive marketer for Canergy and to continue providing strong marketing connections for both first and second generation ethanol producers.” The Imperial Valley’s 450,000 acres of irrigated farmland is one of the most productive growing regions in the world. Tim Kelley, President/CEO of Imperial Valley Economic Development Corporation said, “I am glad to see that Canergy has decided to make a major investment in the Imperial Valley. This cellulosic facility will create over 100 full-time jobs and will have a major ripple effect on our agribusiness economy.” Beta Renewables’ PROESA® technology will be used to convert Canergy’s energy cane feedstock, bagasse and residual cane straw, to produce cost-competitive cellulosic ethanol. This technology is being used today at the world’s first commercial-scale cellulosic ethanol plant in Crescentino, Italy, which started operations in December 2012, and also will be used in a series of plants to be built by GranBio in Brazil. “Chemtex and Beta Renewables are pleased to have been selected by Canergy for their project. Large scale commercialization of cellulosic ethanol projects is taking off and this is an important project for California to support its drive towards lower carbon footprints,” said Guido Ghisolfi, President of Chemtex and the CEO of Beta Renewables. About Canergy, LLC Canergy is an advanced biofuels company based in California that is focused on the production of ultra-low carbon intensity ethanol from sustainable non-food energy crops and innovative cellulosic technology. This first facility in California will utilize energy cane, an EPA approved cellulosic pathway, as its primary feedstock, is targeted to be operational in 2016 and will assist California, through obligated parties, to meet both RFS2 and LCFS requirements. About CHS Inc. CHS Inc. is a leading global agribusiness owned by farmers, ranchers and cooperatives across the United States. Diversified in energy, grains and foods, CHS is committed to helping its customers, farmer-owners and other stakeholders grow their businesses through its domestic and global operations. CHS, a Fortune 100 company, supplies energy, crop nutrients, grain marketing services, livestock feed, food and food ingredients, along with business solutions including insurance, financial and risk management services. The company operates petroleum refineries/pipelines and manufactures, markets and distributes Cenex® brand refined fuels, lubricants, propane and renewable energy products. About Chemtex Chemtex is a global engineering and technology company wholly-owned by Italy’s Gruppo Mossi & Ghisolfi (“M&G”). Chemtex specializes in delivering value-added project solutions for its clients in the bio-fuels, renewable chemicals, energy, environmental, petrochemical, polymers and fibers industries. The company benefits from over 60 years of success in process development and commercializing hundreds of plants worldwide. Chemtex International Inc., its North American Headquarters, is located in Wilmington, N.C. Chemtex is a leader in chemical engineering and renewable processes. It has engineered and constructed the world’s first commercial-scale cellulosic ethanol facility in Crescentino, Italy for Beta Renewables producing cellulosic ethanol from locally sourced cellulosic biomass using its PROESA® Process. About Beta Renewables Beta Renewables is a leader in making non-food cellulosic biomass practical and cost-competitive for the production of advanced biofuels and bio-chemicals. Beta Renewables is a unique joint venture formed by Chemtex, TPG, TPG Biotech and Novozymes. Beta Renewables has developed the industry leading PROESA® Process and is currently operating the world’s first commercial-scale cellulosic ethanol facility in Crescentino, Italy. Beta Renewables’ PROESA® Process has also been selected by numerous leading green chemistry technology providers as the technology platform to produce cellulosic sugars for next generation bio-chemicals. Publicly announced collaborators include Amyris, Genomatica, Codexis and Gevo. Media relations contacts: Canergy LLC: Tim Brummels Telephone: +1-402.452.6795 tbrummels(at)canergyus(dot)com http://www.canergyus.com CHS, Inc: John Litterio Telephone 1+651-355-8518 john(dot)litterio(at)chsinc(dot)com http://www.chsinc.com Chemtex: Dennis Leong Telephone: +1 910 509 4407 dennis(dot)leong(at)chemtex(dot)com http://www.chemtex.com Beta Renewables: Michele Rubino Mobile: +1 617 230 6162 michele(dot)rubino(at)betarenewables(dot)com http://www.betarenewables.com Continue reading
