MIDAS STOCK TIPS: Take advantage of loans to fruit growers with Cordiant Global Agricultural Income set up to increase supply but keep costs down
British consumers nibble on more than 650 million avocados every year – almost two million a day. Most come from Peru and Chile, where the blueberries, grapes, oranges and tangerines on our supermarket shelves are also produced in batches.
Russia and Ukraine may be known as the breadbasket of Europe, but Latin America is the fruit bowl of the world. Blessed with warm climates and fertile land, the continent annually exports tons of fruits and vegetables, as well as coffee, sugar and crops like soy, corn and sorghum, which are important components of vegetable oil and animal feed.
As such, agriculture plays a crucial role in the Latin American economy and is expected to continue to do so for the foreseeable future. Fortunately, trade relations between Britain and South America have existed for centuries.
Healthy Profit: Cordiant Global Agricultural Income will allow investors to benefit from the bounty of Latin America and help farmers grow more with less
Cordiant Global Agricultural Income will allow investors to benefit from the bounty of Latin America and help farmers grow more with less. The group goes public early next month and is targeting a first-year dividend yield of 4 percent, rising to at least 6.5 percent by 2024. Share price growth should bring annual returns to at least 10 percent Flotation is worth a closer look.
Cordiant managers have been investing in Latin American agriculture for years, with a focus on Brazil, Mexico, Chile and Peru. During this time they have understood how the market works and where the opportunities lie.
They found that many farmers, even those with large properties and multimillion-dollar sales, are struggling to get the cash they need to expand. Historically, these large, established producers have relied on banks to fund their growth, but long-term credit has been scarce since the financial crisis.
This is where Cordiant steps in. The group lends money to farmers to help them become both more efficient and more sustainable.
The company intends to focus on farms with longstanding experience, generational know-how and vast tracts of land – some as large as Manchester.
With funds and advice from Cordiant, these farmers can develop clever drip irrigation techniques that can reduce water use by about 90 percent and nearly double yields per hectare. You can purchase kits to turn byproducts into energy, buy low-emission machines, and practice precision farming that uses technologies to increase yields in an environmentally responsible manner.
Loans range from $5 (£3.80) to $50 million, although most are around $25 million and take four to seven years to be repaid. Demand is significant, so Cordiant can afford to be very picky and refuse far more requests than it accepts.
With a team of about a dozen on the ground, Cordiant will also keep a close eye on creditors to make sure they’re putting their money to good use.
In addition, the group will only lend to farmers who have local end customers, from large retailers like Cargill in the US to supermarket chains like Sainsbury’s, Waitrose and Lidl.
Cordiant will start with eight loans worth more than $115 million, but managers have identified a nearly $1 billion pipeline so they should be able to lend out the proceeds from the float fairly quickly.
Global grain trade is almost entirely denominated in dollars, so Cordiant is offering its shares at $1 each and hopes to raise $300 million. Investors also receive one bonus share for every five shares purchased.
MIDAS JUDGMENT: Food prices were already skyrocketing before the war in Ukraine. Looking ahead, further increases seem inevitable. Cordiant Global Agricultural Income was formed to help farmers increase supply while keeping costs down. Over time, this should translate into more stable prices in stores. And in the shorter term, Cordiant offers investors exposure to the agricultural sector, generous dividends, and the prospect of steady stock growth. At $1, shares are a buy.
Traded on: main market Ticker: CAI Contact: cordiantagtrust.comor02081585829