Investing in Production Agriculture in Western Bahia

Stanley T. Stairs

Stairs Dillenbeck Finley

New York, NY

stairs@stairsdillenbeck.com

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Background• Commercial production agriculture is migrating

from the northern hemisphere to the southern hemisphere• Population pressure• Environmental concerns• Recreational pressure• High land costs (subsidies)• High production costs

• World demand for meat and grains is increasing• Agribusiness must meet the demand for

production of food and generation of energy

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Brazil• 62 million hectares under cultivation• An additional 90 million hectares of grazing land

are suitable for cultivation, plus raw cerrado land• By comparison, the U.S. has 131million hectares

under cultivation• Brazil is among the world leaders in agricultural

commodity production for export (soy beans, cotton, corn, coffee, sugar cane, papaya, beef, poultry)

• Brazil: investment grade; low inflation and moderate growth

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Requirements

• Land• Water• Labor• Management• Technology• Capital

• Equity• Bank loans• Seller financing• Collateralized crop loans

• Infrastructure• Ag Inputs and Equipment• Favorable Legal Regime

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The Value Proposition: Cerrado

• Increasing world demand for food and fiber (China and India)

• Less expensive and available farmland• Low cost production• Consistent land appreciation (developed vs.

undeveloped)• Cash discounts• GMO/Monsanto revolution favors large

producers• Portfolio diversification

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Why Western Bahia?• Topography• Water

• Rainfall (dryland farming)• Wells and rivers (irrigation)

• Infrastructure• Support facilities

• Commodities traders• Ag input suppliers• Equipment suppliers

• Reasonably priced and available farmland• Quality of land titles

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Principal Risks

• Traditional farming risks• Political and social risks

• Presidential and Congressional Elections in 2010• Environmentalists• M.S.T.• Tribal claims• Anticipated opinion of Federal General Counsel• Leftist political initiatives• Investment guidelines?• Political risk insurance

• Inadequate infrastructure• Land title risks (title insurance?)

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Corporate Agribusiness vs. Entrepreneurial Farmers

• Multigrain• Adecoagro• SLC• “Indiana Jones”• Howell Farms International

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“If food is becoming the new fuel, then Brazil will become the next Saudi Arabia.”

Roberto Rodrigues, former Agriculture Minister

“The future of commercial agriculture is in Brazil. You can either join us for the photo session or

wait to see the pictures when they are published in the history books.”

Roberto Rodrigues, former Agriculture Minister

Food for Thought