Heads up Cowboys!

Agriculture, it’s a sector Mark and I are unashamedly bullish on. Government stupidity, central bank money printing, political over-reach and the fact that we all have to eat; these are things we are confident will continue!

Capitalizing on our thesis should be easy enough, however the biggest problem we’ve encountered is finding agricultural land worth buying. In most of the places we’ve looked, which includes Uruguay, Argentina, Chile, Thailand, Malaysia, Australia, New Zealand, southern Africa and just as many countries in between, we’ve determined that for the most part agricultural land is fully-valued or overpriced based on yield valuations.

Buying wheat, soybeans, coffee, sugar and a host of other agricultural commodities in the futures market has been our favoured way to play this trend. So far it seems to have been a decent enough strategy, with some pretty dramatic moves both up and down. But, we like to get our hands dirty.

Our personal specialty, for those new to our musings is in finding private equity opportunities in frontier markets. These are places where we believe we have a realistic crack at making multiples on our money. We run a small subscriber-supported service that scouts out deals for those that feel the same way. (Drop us a note if you want to know more)

To that end, Mark and I have been hunting for undervalued farmland in countries that won’t tax all our money away, and where farming can produce healthy returns on invested capital. Farming itself is a capital-intensive business, there is no need to make it more risky by buying agricultural land with sub 10% yields.

Without question land values have been an impediment. Another issue is title. I want to OWN my land without question.

In most of the above mentioned countries we’d be buying into farming which produces a negative real rate of return. Like property speculators in the early 2000’s we would be relying on the land values increasing, not the present or future cash flows from farming activities to produce adequate returns. That strategy is waaaaaay to risky for our money, thank you very much.

At our recently concluded Fiji Meet Up some higher ups from the Fijian government gave us a glimpse of things to come in Fiji’s agricultural sector. They also reviewed some important changes that have been made to attract foreign investors and those wishing to start a company in Fiji.

We didn’t have to wait too long.

The 2013 budget was released this week. Let me tell you, for a sleepy little country off the beaten path, this is PROGRESSIVE stuff! There are a number of attractive changes that have been made, namely surrounding the capital required to be brought into the country for developing and operating a business. The amount has been reduced from FJD $250,000 (about USD $160,000) to ZERO!

This means that you can walk right in and set up shop without burdensome capital requirements. In the agricultural sector, literally anything ag-based receives significant advantages. The government here are intent on ensuring Fiji decreases its reliance on imported food products, and they are actively taking steps to encourage investment in the sector.

Our partner Scott talked a little bit about Fijian ag opportunities recently in his post Profiting in Paradise. One standout that I think is very attractive is the dairy industry.

Let’s take a look at the fundamentals of domestic supply and demand. This will blow you away…

Fiji consumes 77 million litres of milk each year, with only a minuscule 10 million litres produced domestically. The balance is imported. This means that we have a domestic demand (always the best case scenario) of 67 million litres of milk annually.

All of the milk produced commercially in Fiji is ultra high temperature (UHT). This stuff comes un-refrigerated and has a shelf life of months. There is NO fresh milk in the country! (Note: This embarrassment exists in places like Chile and Uruguay as well.)

Dairy farmers, especially in places like New Zealand and Australia, should take a serious look at Fiji. You Kiwi’s are right on the doorstep, and you lead the world in high-quality dairy practices and production. This is a no-brainer guys!

I just looked at 400 acres of beautiful, rolling land that would be perfect for dairy farming. A fresh water river runs the length of the property (which the land has rights to), and it can be had for USD $1,000 per acre. That’s not a misprint. Until recently the land was used for beef farming (organic beef production is another easy one here) and previous to that it was a cotton plantation.

Fijian Farmland

Milking sheds, fencing, and internal farm roads would all need to be put in. These costs can be substantial in countries such as New Zealand or Australia, mainly due to high labour costs.

Here in Fiji a bulldozer for road building will set you back roughly USD $500 a day, and labour costs run about USD $1.30/hr. Timber for construction and fencing is cheap in Fiji. There is an abundance of timber, including some beautiful hardwoods, which is another sector worth a look, but I don’t want to get sidetracked.

Farming in Fiji is something the government really, really wants people to get involved with. The Fijian government will in certain instances (region-specific) provide a 20-year tax holiday for agriculture-related businesses.

I’d suggest looking at your own business and running the numbers on what it would have looked like if you didn’t pay tax for the last 20 years! It’s likely not easy to calculate what levels of growth could have been created with that additional capital, but suffice it to say it would likely have been substantial.

All plant and machinery required for your dairy operation can be brought into the country duty-free for the first 12 months of operations. The farmers amongst our readership will likely attest to how difficult it is to make a profit in farming, even in an industry where the fundamentals are currently strong. These advantages are worth noting.

Despite the duty-free advantages, the farm machinery alone will easily surpass the cost of those 400 acres I mention above. Return of capital normally takes many years in almost any farming operation, and anyone telling you otherwise is full of it. That being said, we have yet to find such a compelling setup for agriculture-based businesses anywhere else in the world.

In summary, agriculture in Fiji has the following benefits:

  • The supply/demand setup is very favourable;
  • Your business is tax-free for up to 20 years;
  • The land is unbelievably fertile and it’s cheap;
  • All equipment not sourced locally can be brought in duty-free;
  • The labour costs are extremely low;
  • Agricultural skills are severely lacking (both a blessing and a curse, as you’ll have to BE the expert).

Dairy farmers who are struggling to make a dime in their home territories should seriously consider looking at Fiji. We happen to have a couple of dairy farmers among our readership; we’ll be tapping them shortly for some ideas and feedback.

Later this week we’ll run a 2-part interview with Nate Storey, a pioneering young guy who has done some incredible stuff with vertical agriculture. Technology like Nate’s could just end up saving the world!

Meanwhile, if agriculture in Fiji sounds appealing to you drop us a line. We have plenty more ideas and we’re always looking for bright, honest, talented people to get involved with.

– Chris

“If I won the lottery I’d just keep farming until it was all gone.” – anonymous


This Post Has 13 Comments

  1. NC

    Interesting reading, as always.
    New tax incentives sound great. Lets hope its not reversed, it has happened in the past.
    I thought you could buy fresh milk from supermarkets but they are less popular. I think also the stats don’t take into consideration milk produced and consumed by households (presumably widespread in rural areas). Don’t know if this consumption is material.
    What about powdered milk? It may be imported and reconstituted (hence imports of milk is higher than the numbers indicate)

    1. Chris MacIntosh

      Great minds think alike NC. I spoke with an admittedly undiversified sampling of villages and it was astounding to me. NOBODY is using fresh milk.

      I’m told its too hard. Fijians like to leave for a week for a funeral…whatever. Any dairy farmer will tell you its just not possible to milk a cow after calving and then leave the poor thing for a week and return expecting it to keep producing as if nothing has happened.

      Reconstituted milk is a big seller here. It is incidentally included in the milk stats mentioned.

  2. NC

    Forgot to mention yields. I presume NZ cows produce at least 2-3 times more. I don’t know how easy, cheap and quick it is to introduce higher yielding cows in Fiji.

    1. Anonymous


      All good points as usual! We never said it would be easy, and no one can ensure that policy and tax codes won’t change. That happens in the first world countries as well, and will likely continue happening.

    2. Chris MacIntosh

      Good point. As far as I’m aware (from dairy farmer friends and family) NZ dairy is the best in the world so yes yields are very high. It is testament to the fact that technology is a game changer. NZ accounts for over one third of world supply. This from a tiny island nation of 4M people.

      I’m told it is a number of factors contributing to this. Everything from soil management which still blows my mind with the science in it, to breeding the right cows, to building a brand quality. R&D is huge. What I’m suggesting is that NZ experience in Fiji could make a lot of money.

      1. NC

        Actually yields from NZ cows are lower compared with EU/US cows for example. But herd sizes are much larger, and milk has higher fat content.
        NZ experience could be quite beneficial. NZ Farming Systems set up operations in Uruguay, they flew over Fiji to get there.
        Opportunities surely exist in Fiji, I wonder whether its starting with large scale farming or alternative approaches.

        1. Anonymous


          Unfortunately the NZ experiment didn’t work out too well in Uruguay. I think some of that may have been the Uruguayan farmers and the Kiwi consultants coming to loggerheads on the right and wrong way to do things…but who knows.

          In Fiji I have a feeling they would be a lot more receptive.

  3. matt

    NO fresh milk on fiji wow….. that’s amazing to me… that powdered milk /uht stuff is disgusting

    can’t wait for your other article

  4. Greg

    Hi guys,
    As a professional dairy farmer this post intrigued me. I have traveled around the globe visiting various dairy farm enterprises. They are all very time, labor, and capital intensive. And usually require well developed infrastructure. This opportunity would require serious capital (1 million plus) and boots on the ground for at least a year. That being said I would welcome any contact info you may have regarding land purchase and farming incentives (wish i could have been at the meet up).

    1. Chris MacIntosh


      You’re absolutely right I think. Farming, at least profitably on any scale is very capital intensive. Fiji has significant disadvantages with respect to developed infrastructure. That said it is easily one of the most interesting Ag plays I’ve come across and believe me its not for want of looking.

      PS. Wish you could have been at the meet up as well.

  5. marc

    Most riveting discussion. Thanks for the great info in each and every newsletter. But for adventurers like you, I’d be hard pressed to find stuff like the ones you put out.

    Speaking of your Fiji meet up, any chance of another one sometime next year?

    Many thanks and please keep up the excellent posts. They make my day brighter.

    1. Mark Wallace


      Thanks for the compliments, we appreciate it!

      We’re planning another Fiji Meet Up for June/July of 2013, unless the Mayans get us all first.



  6. Oliver

    Very interesting article indeed. I have 8 hectares if gracing land 500 metres from a chilling station. Need any assistance in Fiji

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