Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
Investments by institutions in
primary agriculture in Russia,
Ukraine and Kazakhstan
IAN LUYT
Finance, Food and Farmland C...
OVERVIEW
1. Context and Estimates
2. Motives & Methods
3. Performance to date
4. Issues & Trends
o Data based on study: “E...
3
Map: www.russiamap.org
Investor focus on Black Earth regions
& Northern Kazakhstan
Russia, Ukraine, Kazakhstan hold 12.6% global
arable land & ~70% within CEE/ CIS
4
Indicator
Russia
Ukraine
Kazakhstan
TOT...
Combined 5.5% of Global Agricultural GDP (2011)
5
Indicator
Russia
Ukraine
Kazakhstan
TOTAL
EU
GDP (US$ bln) $1,858 $165 $...
CONTEXT TO LAND RIGHTS & TENURE
• Most farmland owned by individuals in small lots
• Most farmland privately owned
• Owner...
Investment drivers follow global trends
• Two early drivers:
– Farmland appreciation
– Operating profits
– Outcomes signif...
Investments by funds & institutions
Estimated ~$25 bln globally
REGION
Number
of funds
Share of
funds
Investment
(US$ bln)...
Foreign-led investments in CEE & CIS since 2006
9
REGION
Estimated
investment
(US$ bln)
Land
under
control
(mln ha)
% of a...
FINANCING STRUCTURES
• Predominant structure is private investment company
• Growth funded through public listings
• Few i...
INVESTOR PROFILES
• Predominance of European institutions
• Largest private equity investor is US-based
• Most are financi...
Most large farmland firms are local
Rank Company Country
Hectares
under control
1 Ivolga Kazakhstan/ Russia ~1.3 mln
2 Ali...
Performance insights
7 listed ‘pure-play’ farmland companies reviewed
13
COMPANY Location Listing
Date
Listed
Land Bank
(h...
14
Underperformance as asset class – but a few stars
0
50
100
150
200
250
300
350
Jun-07 Feb-08 Oct-08 Jun-09 Feb-10 Oct-1...
CIS farmland companies have also
underperformed global benchmarks
15
Data source: Foyil Securities - Share prices as at 31...
FACTORS IMPACTING FUTURE INVESTMENTS
• Country risk perceptions
• Ability to manage volatility/ risks
– Climatic (crop ins...
INVESTMENT TRENDS
• Existing investors: consolidation/ optimization
• Only 3 funds set up since ‘08 crisis
• Limited appet...
Thank You
18
IAN LUYT
NOViROST Limited
ian.luyt@novirost.com
www.novirost.com
Upcoming SlideShare
Loading in …5
×

Investments by institutions in primary agriculture in Russia, Ukraine and Kazakhstan

446 views

Published on

Investments by institutions in primary agriculture (farmland) in Russia, Ukraine and Kazakhstan. Presentation to Finance, Food and Farmland Conference, The Hague, 25 January 2014. Ian Luyt. www.novirost.com

Published in: Food
  • I think you need a perfect and 100% unique academic essays papers have a look once this site i hope you will get valuable papers, ⇒ www.WritePaper.info ⇐
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here
  • Be the first to like this

Investments by institutions in primary agriculture in Russia, Ukraine and Kazakhstan

  1. 1. Investments by institutions in primary agriculture in Russia, Ukraine and Kazakhstan IAN LUYT Finance, Food and Farmland Conference The Hague, 25 January 2014 International Institute of Social Studies (ISS) & Centre for the Study of Transition and Development (CESTRAD)
  2. 2. OVERVIEW 1. Context and Estimates 2. Motives & Methods 3. Performance to date 4. Issues & Trends o Data based on study: “Emerging investment trends in primary agriculture: A review of equity funds and other foreign-led investments in the CEE and CIS region (2013)” www.eastagri.com (download from www.novirost.com) 2
  3. 3. 3 Map: www.russiamap.org Investor focus on Black Earth regions & Northern Kazakhstan
  4. 4. Russia, Ukraine, Kazakhstan hold 12.6% global arable land & ~70% within CEE/ CIS 4 Indicator Russia Ukraine Kazakhstan TOTAL TOTAL LAND 1,709.8 60.4 272.5 2,042.7 AGRICULTURAL LAND 196.3 41.3 90.2 327.8 Agric Land % of Total Land 11.5% 68.4% 33.1% 16.1% ARABLE LAND 120.7 32.5 24.0 177.2 Arable Land % of Agric Land 62% 79% 27% 54.1% Data sources: National Statistics Agencies, EastAgri (2013). Global arable land taken as ~1.4 billion hectares (FAOSTAT 2011)
  5. 5. Combined 5.5% of Global Agricultural GDP (2011) 5 Indicator Russia Ukraine Kazakhstan TOTAL EU GDP (US$ bln) $1,858 $165 $188 $3,898 $16,566 Agric % of GDP 4.5% 10.5% 5.2% 5.9% 1.8% Agric GDP (US$ bln) $83.6 $17.4 $9.8 $230.5 $298.2 Sources: World Bank (2011), National Statistics Agencies, Eurostat (2011) Global agricultural GDP taken as US$ 4.194 trillion, or 4% of global GDP ( IMF 2011) (World Bank estimates 2.81% of global GDP (2011))
  6. 6. CONTEXT TO LAND RIGHTS & TENURE • Most farmland owned by individuals in small lots • Most farmland privately owned • Ownership highly fragmented • Land title generally defined and documented • Limits to foreign ownership 6 COUNTRY Basis of Reform Tenure by foreigners allowed Russia Land Shares Freehold through local company Ukraine Land Shares Leasehold through local company Kazakhstan Land Shares Freehold through local company Other CEE Restitution EU citizens and local company
  7. 7. Investment drivers follow global trends • Two early drivers: – Farmland appreciation – Operating profits – Outcomes significantly different • Underpinned by super cycle of higher commodities prices: – Growing world population – Growing middle class consumption – Diversion of crops into biofuels 7 • Other institutional drivers: – Hedge against inflation – Diversification - uncorrelated to broader markets • Region-specific drivers: – Land consolidation attracts premium – Large farms offer efficiencies of scale – Subsidies and tax concessions limited impact in CIS
  8. 8. Investments by funds & institutions Estimated ~$25 bln globally REGION Number of funds Share of funds Investment (US$ bln) Share of total investment North America/ Latin America/ Australia/ New Zealand 38 64.4% $20.5 bln 82.7% CEE/ CIS* 17 28.8% $2.9 bln 11.7% Africa 4 6.8% $1.4 bln 5.6% TOTAL 59 100% $24.8bln 100% 8 Data source: EBRD/ FAO study 2013 (updated). * Breakdown: CIS: ~$2.0bln; CEE:~$900mln
  9. 9. Foreign-led investments in CEE & CIS since 2006 9 REGION Estimated investment (US$ bln) Land under control (mln ha) % of agri land % of arable land CIS * ~$5.0 3.2 0.9% 1.8% CEE ** ~$3.0 1.0 1.3% 1.9% TOTAL ~$8.0 4.2 1.0% 1.8% * CIS group comprises Russia, Ukraine, Belarus, Kazakhstan Agricultural land: 336.7 million hectares Arable land: 182.7 million hectares ** CEE group comprises Poland, Romania, Bulgaria, Croatia, Serbia, Turkey Agricultural land: 79.9 million hectares Arable land: 50.4 million hectares Source: EBRD/ FAO study 2013. Data includes investments by private equity funds and other private and institutional investors Estimated ~$8.0 bln invested in ~4.2 mln ha
  10. 10. FINANCING STRUCTURES • Predominant structure is private investment company • Growth funded through public listings • Few investments through private equity funds • Other investment structures – Open-end private equity funds – Real estate investment trusts (REITs) • IFIs recent entrant (both equity & debt) 10
  11. 11. INVESTOR PROFILES • Predominance of European institutions • Largest private equity investor is US-based • Most are financial investors • Few global strategic & commodity trading houses – Vertical integration: Sucden (sugar), Olam (milk), Poldanor (pigs) – However, recent investment by Cargill in Ukrlandfarming • Sovereign investors – Recent acquisition of CFG 11
  12. 12. Most large farmland firms are local Rank Company Country Hectares under control 1 Ivolga Kazakhstan/ Russia ~1.3 mln 2 Alibi-Agro Kazakhstan ~1.0 mln 3 Kazastykexport Kazakhstan ~1.0 mln 4 NCH Ukraine/ Russia 762,000 5 Ukrlandfarming Ukraine 670,000 6 Prodimex Russia 570,000 7 Vamin Russia 468,000 8 AK Bars Russia 466,000 9 Rosagro Russia 450,000 10 Razgulay Russia 412,000 15 Black Earth Farming Russia 308,000 12 Source: Novirost research/ company data where available
  13. 13. Performance insights 7 listed ‘pure-play’ farmland companies reviewed 13 COMPANY Location Listing Date Listed Land Bank (hectares) Market Cap (US$ mln) Share price performance since IPO AGROGENERATION Ukraine Paris May 2010 50,000 $73.5 -10% AGROTON Ukraine Frankfurt Nov 2010 171,000 $63.1 -65% ALPCOT AGRO Russia Ukraine Stockholm Oct 2009 281,300 $101.7 -63% BLACK EARTH FARMING Russia Stockholm Dec 2007 318,000 $286.5 -76% CONTINENTAL FARMING GROUP Ukraine Poland London & Dublin June 2011 23,700 $64.7 +4% INDUSTRIAL MILK COMPANY Ukraine Warsaw May 2011 82,700 $159.1 +9% TRIGON AGRI Russia Ukraine Stockholm May 2007 172,000 $100.8 -50% TOTAL 1,098,700 $849.4 Sources: Bloomberg; London Stock Exchange. Market capitalization as at 22 December 2012 Share price analysis: Foyil Securities (share prices as at 19 November 2012)
  14. 14. 14 Underperformance as asset class – but a few stars 0 50 100 150 200 250 300 350 Jun-07 Feb-08 Oct-08 Jun-09 Feb-10 Oct-10 Jun-11 Feb-12 Oct-12 Comparativepriceindex IMC CFG Trigon Agri AgroGeneration Agroton Alpcot Agro BEF Sources: Foyil Securities (data analysis), Bloomberg. Share prices as at November 9, 2012. At Nov 2012, only 2 shares above index level Share prices indexed at June 2011 - date of latest IPO (CFG) Key lesson: Strategic management as critical as operational management
  15. 15. CIS farmland companies have also underperformed global benchmarks 15 Data source: Foyil Securities - Share prices as at 31 December 2012 0 500 1000 1500 2000 2500 31-Jul-07 31-Dec-07 31-M ay-08 31-Oct-08 31-M ar-09 31-Aug-09 31-Jan-10 30-Jun-10 30-Nov-10 30-Apr-11 30-Sep-11 29-Feb-12 31-Jul-12 31-Dec-12 CIS Farmland Index Rogers Int'l Agri Index DAX Agri Index S&P GSCI Agri Index + CIS Farmland Index tracks the share price performance of 10 listed farmland companies in CEE and the CIS + Rogers International Commodities Index - Agriculture Sub-Index is based on 22 commodity futures contracts + DAX Global Agribusiness Index tracks the performance of 40 leading agricultural companies + S&P GSCI Agriculture & Livestock Index tracks soft commodities price movements Share prices indexed to value 1000 at July 2007
  16. 16. FACTORS IMPACTING FUTURE INVESTMENTS • Country risk perceptions • Ability to manage volatility/ risks – Climatic (crop insurance) – Market (hedging options) – Skills development • Malcolm Gladwell’s ‘10,000 hours’? – R&D (private/ state roles) • Availability of investable opportunities – Lack of ‘institutional quality managers’ • Performance to date unconvincing – Large scale model must be shown as consistently profitable 16
  17. 17. INVESTMENT TRENDS • Existing investors: consolidation/ optimization • Only 3 funds set up since ‘08 crisis • Limited appetite for farmland? – Aquila survey: only “11.4% to increase exposure over next 5 years” • New classes of investors – new dynamic? – Sovereign Investors – Saudi acquisition of CFG (March 2013) – Global Traders - Cargill investment in Ukrlandfarming (Dec 2013) – IFIs – EBRD in Kazexportastyk; IFC (maybe) in IMC • Investments more niche-focused – VTB’s irrigated farming in Russia • CIS holds most institutional-scale potential 17
  18. 18. Thank You 18 IAN LUYT NOViROST Limited ian.luyt@novirost.com www.novirost.com

×