2006 Agland Investment Services Newsletter
Dear Clients and Friends,
Agland turns 30 this year! We at Agland have actively participated in the development of numerous new agribusinesses over the past thirty years. Our clients in the California wine industry, the fresh-cut salad industry, and the almond industry often had small beginnings, and many have shown tremendous growth. Of course, we now find investors looking for the next big agribusiness growth industry or a "Starbucks." Read on, and maybe you will find some hints.…
At Agland, we work hard to maintain balance in our activities. We bring a private sector perspective to public sector projects and practical, results-oriented solutions. We continue to assist our clients in the application of cutting-edge technologies to new initiatives, ranging from biofuel to precision vineyard crop management. These developments are discussed in more detail in this letter, along with updates on some of our multi-year international development projects.
The world is witnessing rapid growth in biofuel investment and production. The current and expected growth of the biofuel market will enable the creation of new, vertically integrated businesses that offer excellent prospects for high return on investment, significant job creation, and long-term regional economic development. Investors are learning that the profitability of a biofuel project has more to do with efficiency in crop production and handling than any other factor, given that feedstock comprises 70 to 85 percent of the cost of the biofuel. Agland's expertise can help investors design and implement biofuel projects that are profitable and sustainable at every stage of the production process.
At present, the lowest-cost sources of feedstock are sugar cane, palm, and jatropha; these crops are produced in tropical and sub-tropical regions of the world. It is our conclusion that, given the agricultural yields of the most productive biofuels feedstocks and the advantageous costs of land and labor, the most profitable locations for biofuel production are these tropical and sub-tropical areas.
Biofuels derived from tropical crops such as sugar cane and palm oil are far more cost-effective than biofuels from other feedstocks produced using currently available processing technologies. There are concerted research and pilot plant efforts to make "cellulosic" processes commercially viable to create biofuels from crops grown in temperate areas, such as wood or switchgrass. However, we believe that tropical biofuels will remain fully competitive with cellulosic biofuels. In fact, these proposed new "cellulosic" processes could be used to enhance the productivity of the feedstock produced in the tropics.
Agland and Biofuels:
Agland has developed a team of biofuel experts drawn from an international pool of professionals that can take projects from "farm to fuel." We have joined with the leading experts in the industry to develop integrated agricultural production and biofuel processing/marketing facilities.
Current Biofuel Projects:
Agland is building a portfolio of candidate projects that offers both short and long-term profitability, even if petroleum prices fall closer to their historic averages. To insure our ability to accurately and efficiently develop these projects, the Agland Investment Services team utilizes proprietary financial and engineering models to evaluate the economic and technical feasibility of proposed biofuel projects. Projects range from short-term studies to long-term management, advisory, and training assignments coupled with engineering design and implementation.
Nigeria: Integrated Sugarcane Plantation and Ethanol Plant Feasibility Study
Agland has been collaborating with the international consulting firm, Accenture, in the preparation of a comprehensive feasibility study and plans for three integrated sugar cane plantations and sugar/ethanol production plants in Nigeria; investment is expected to be over $300 million for each project. As part of this project, Agland has developed a detailed cost model for farm and plant-level biofuel production. The client is the Nigerian National Petroleum Corporation (NNPC).
Our team has also recently completed an assessment of ethanol projects in Belize. Agland is currently evaluating project opportunities in Mexico, Central America, South America, and Africa, employing diverse teams of international experts.
California: From Dairy Waste Effluent to Energy
Closer to home, Agland has been involved with the California dairy industry in developing methods to convert waste streams from milk and cheese production into energy while reducing the waste discharge…..as can happen, a problem becomes an opportunity.
Grape Networks, Inc.
Agland is a management and financial consultant to a new technology-based venture that is currently focused on the wine grape industry, but that will likely expand to a variety of crops. The company produces the "Climate Genie", which, through a series of wireless sensors located throughout a vineyard, provides web-based, real-time temperature, humidity, light, and soil moisture information to the vineyard manager. Two of the largest wine companies in California are using the service. The objective is to modify growing conditions to maximize the quality and price of the final product by better understanding grape quality factors (color, composition, flavor, etc.) and facilitating optimal growing conditions. Grapes were selected as a high-value crop where premium quality is the key to price. The company is currently in a rapid expansion mode.
International Agricultural Land Investments
This past year we have focused on investment opportunities in Turkey, working with several local investment banking institutions. Turkey is a very attractive site for low-cost production of high-quality horticultural crops. An attractive $10 million investment in an integrated livestock operation has been identified, and we are currently working on a profitable investment in nut crops. As global markets expand in terms of buying power and interest in a more diverse diet, opportunities arise to supply these emerging markets.
We have participated for several years in an informal group known as "Investors' Circle." The group is composed of several hundred investors ranging in interest from the financing of start-ups to providing expansion capital. The group is unique in that they seek investments that not only have a financial return, but also exhibit social and environmental benefits. The group has a particular interest in food and alternative energy companies, which is our area of expertise.
Venture Capital - Angel Roundtable
Agland was asked to become a member of a group of Silicon Valley venture capitalists that meet once a month to hear about new business opportunities and exchange information on projects and investments. This group gives Agland an interesting perspective on the angel and venture capital sector, which has always been a California specialty.
INTERNATIONAL FOOD AND AGRICULTURE DEVELOPMENT
A look at the list of countries where we have projects shows that we do not shy away from challenging and complex situations!
Colombia: Perishable Agricultural Products Inspection and Treatment Center
Last year saw the completion of a yearlong Feasibility Study for the Perishable Agricultural Products Inspection and Treatment Center. Agland conducted a feasibility study for the construction of a frozen and refrigerated collection, warehouse, processing, and marketing center in an agribusiness industrial park near the El Dorado Airport in Bogotá, Colombia. The project's objective is to serve as a catalyst for the expansion of new and existing fruit, vegetable, and cut-flower exports. The center will support small enterprise development, stimulate further fruit and vegetable production in the region, and increase the marketing capabilities of the regional producer group. It has been estimated that within 10 years of the completion of the cold storage facility, 1,000 additional hectares will be incorporated into horticulture plantations, between 12,000 new jobs will be created, and exports will grow from the current base of 28,196 annual tons to 180,323 annual tons, equivalent to approximately US$300 million in exports.
Macedonia: Quality and Agribusiness Assistance Program
Agland's work in Macedonia continues. We have concentrated on 1) increased exports, 2) improved quality control, and 3) investment and business development. Our focus on helping Macedonians develop sales in new markets has helped to increase exports substantially. Our training programs in HAACP and EurepGAP food safety regulations and agricultural practice guidelines have allowed a number of Macedonian firms to become certified, opening up new markets and business opportunities. New products developed by Agland food technology consultants have increased the sales of several companies. We have worked with Macedonian businesses to identify potential investors and bring investment into the sector. We recently completed a pre-feasibility study for a very profitable off-season greenhouse strawberry production business, and discussions with investors have been initiated.
Afghanistan: Grape Revitalization for Afghanistan Productivity and Empowerment
This summer Agland's involvement in the Grape Revitalization for Afghanistan Productivity and Empowerment (GRAPE) Project drew to a close after two very challenging and rewarding years. In this project Agland Investment Services partnered with Roots of Peace to design and implement a project for the revitalization of the Afghan grape and raisin industry after 25 years of war and general neglect. Agland worked to develop a sustainable export industry, identify qualified private-sector exporters to manage the export process, and guide, facilitate, and finance the production, marketing, and exportat process. The project involved more than 3,500 Afghan farmers and worked to create vertically-integrated production and marketing systems, thereby building the foundation for a sustainable export industry in a country that was once a global leader in grape and raisin production.
El Salvador: Productive Development Due Diligence Project
Agland conducted a due diligence evaluation for a proposed agricultural development project in the Northern Zone of El Salvador, co-sponsored by the Millennium Challenge Corporation (MCC) and the Government of El Salvador. Agland assessed the overall project strategy and design, carried out a detailed financial/economic evaluation, and provided specific recommendations for the improvement and implementation of a $100 million program.
Study Tour of Californian Water Management
Ministry of Agriculture, Forestry, and Water Economy of Macedonia
Participants were exposed to the latest advances in irrigation technology and water resource management. The objective of this weeklong Study Tour was to give participants an understanding of the institutional and organizational structure of Californian irrigation water management, general management of irrigation water enterprises, and irrigation infrastructures and technologies. The Study Tour was sponsored by the World Bank.
In 2007 we look forward to new projects in California, global development projects, and a heavy input of biofuel projects into the mix. A special thank you to the many specialized consultants who worked on these projects-many of you delivered far beyond initial plans and expectations! We always love to hear from you, so please write or call with your comments or ideas for joint projects.