Land investment in foreign “frontier” countries are generally higher risk than any other type of agricultural investment, but investors also have the chance to hit a home run.
Countries in Africa and the former Soviet Union are examples of frontier countries that are often called developing countries, explained Gary Thein, AFM, ARA, Thien Farm Management.
Investors can acquire land outright and operate it through some business arrangements including leasing it out to those within the country. Those leases can be really risky to those signing them, too.
“Back in 2008 when things really tumbled, we were in the Ukraine at the time and between May and November the acquisition price of assets dropped about four or five times from $700 to $800 per hectare to the point where some people would give you their leases if you would pay their last year’s rent,” explained Thein. “That happened in only a five-month period around September 2008. You had an entire country’s crops in the fields because the elevators couldn’t finance buying the grain to put it onto a ship to send it to the end user. Everything just stopped in that country.”
If more storage existed, Thein said, it could have helped the situation. But storage is limited in developing countries including the Ukraine; therefore, one of the first investments that land investors need to consider is grain storage.
Thein made his comments during the American Society of Farm Managers and Rural Appraisers annual meeting and “AgroNomics—Vision 2012” conference.