Latin America – India’s Agricultural Outsourcing Provider
Dave RamaswamyAllied Venture
The South is the new North
Impact on Food Consumption?
2005 2025 2050
India 1130 1431 1613
Population projections(In millions)
Demand side –India will become a net food importer
Source: WorldwatchInstitute.
0 10 20 30 40 50
Bangladesh
Ethiopia & Eritrea
Nigeria
Mexico
Egypt
Iran
India
Grain imports in million tonsSource: WorldWatch Institute
1990 2030
Betting on billions of samosas eaten
Ninth
Eighth
Seventh
Sixth
Fifth
Fourth
Third
Second
First Billion
Number of years to add each billion (year)
All of Human History (1800)
130 (1930)
30 (1960)
15 (1975)
12 (1987)
12 (1999)
14 (2013)
14 (2027)
21 (2048)
Sources: First and second billion: Population Reference Bureau. Third through ninth billion: United Nations, World Population Prospects: The 2004 Revision (medium scenario), 2005.
World Population Growth, in Billions
India – Projected Supply/Demand Gap
Source: Surabhi Mittal, ICRIER
When Supply side is gloomy…
With Falling water tables in N. India
From pumping 4-6 hrs daily with free electricity
Water bomb ready to go off
…Especially in Punjab
Which produces
20% of India’s wheat,
11% of its rice, and
11% of its cotton,
from only 1.5% of its
geographical area.
We’ve seen this movie before in urban India
Scenario will move to rural India
AGRICULTURE
OUTSOURCING
6X size of India
with
Less than ½ the population
Latin America
Brazil
ArgentinaUruguay
Paraguay
Knowledge Generation
World Water Resources
versus
World Water Depletion
Source: World Mapper
PAR:
BRA:
URU:
ARG:
IND:
56k
45k
40k
21k
2k
Total Annual Renewable Water Resources(TARWR)Cu.MT/Year/Capita
Success Factors in LatAm
• ROI – 20 to 25% (annual based on 5yr avgs, leased farming)
• Cost - $200 to $2000/acre• Scale –• Sustainability –
www.alliedventure.com
Agriculture Value Chain - The Soybean Example in Uruguay
50,7%
37%
4,7%
7,2%
0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
60,0%
70,0%
80,0%
90,0%
100,0%
Total Cost of Production to farmer:
Includes seeds, fertilizers, agrochemicals, fuel, service providers (for planting, harvesting and spraying).
Includes management costs.
Farmer Profit before taxes:
Transport Costs (including transport’s profits).
Port & Elevator Costs (including their profits).
It is important to note that these percentages are based on averages prices and yields, but are dynamic from year to year:
• The production cost per hectare varies depending the yields per hectare.
• The price of Oil also affects production costs, transport and port costs.
Resting on a strong Foundation
85%
76%
61%
51%
44%
37%
30%
26%
25%
25%
22%
18%
15%
7%
6%
6%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Orange Juice
Soybean Oil
Poultry
Soybean
Sugar
Beef
Green Coffee
Lemon
Sunflowerseed
Sunfloweroil
Corn
Milk Powder
Pork
Wheat
Rice
Cotton
Mercosur (Brazil, Argentina, Uruguay, Paraguay)
share of world exports
Agribusiness in LatAm is like IT in India
Case Study: Olam
LatAm vs Africa
Brazil
Ethiopia
In Africa, risks of many ‘Singurs’ occuring
Population growth (in millions) - 2005 to 2050
2005 2025 2050
Argentina 39 46 51
Brazil 186 214 218
Uruguay 3 4 4
Paraguay 6 8 10
Ethiopia 75 120 174
Kenya 36 58 85
Tanzania 39 67 109
Madagascar 18 28 43
Mozambique 21 32 44
Senegal 57 91 133
Sudan 39 57 76
Source: UN Population Database
Also less water per capita compared to LatAm
TARWR/ m3/percapita/year
Argentina 20,940 Ethiopia 1,680
Brazil 45,470 Kenya 930
Uruguay 40,420 Tanzania 2,420
Paraguay 55,830 Madagascar 18,830
India 1,750 Mozambique 11,320
Sudan 1,880
Source: Aquastat
Latin America is an immediate opportunity
Buy/Lease Land Yes No (lease only)
Service Providers(planting/spraying etc.)
Yes No
Qualified Manpower Yes No
Political Risk(low populations, democracies, corruption etc.)
Low High
Tested high yield crop/seed varieties
Yes No
Latin America Africa
Almost “Free land” in Africa:Maintaing a gift elephant is not free
Note: Numbers based on median Latin American land conversion rates to convert raw land to agriculture ready land. Africa figures could be higher/
Other Latin American advantages
Agricultural Land in MERCOSUR (in ‘000 hectares)
Land area Agricultural area
Arable land and Permanent
crops
POTENTIAL
Argentina
273669 133350 33500 60,000
Brazil 845942 263500 66500 120,000
Paraguay 39730 20400 4400 8,000
Uruguay 17502 14683 1383 4,000
Total 1176843 431933 105783 192000
• There is space to double agricultural land in most Mercosur countries
• The world in the next 40 years will need 120 million more hectares (FAO Report)
Investment Opportunities
Contract Farming
Oilseed crushing
Biofuels
Palm Oil
Ethanol
Co-generation
Pulses
Food Processing
Best time to plant a tree…was 20 yrs ago
Second best time is now!
Recommendations
Consider a pilot contract farming project in Uruguay
Explore oilseed crushing investments
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http://induslatin.com
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