Asset Class Fundamentals.

Farmland and farming investments as an asset class have a unique set of characteristics:

• Long-term fundamentals: To meet the growing demand for food, supply must grow at 1.7% YOY while facing the challenges of limited arable land, degrading soils, climate change, and growing dependency on irrigation.Both demand and supply side factors pressure farmland values.
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• Resilient cash yields: Unlike gold, Farmland produces consistent annual returns from cash income (Eg: Land rents) and land appreciation with relatively low volatility providing attractive risk-adjusted returns.
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• Natural hedge against inflation: Historically farmland has been regarded as an effective inflation hedge thanks to its positive correlation with inflation.
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• Portfolio Diversification: farmland holds a low correlation to other traditional asset classes providing portfolio stability during volatile times.
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• Climate Action: farmland through climate-smart practices provides an unparalleled opportunity to fightclimate change, mitigate GHG emissions, promote biodiversity, and achieve various SDGs.

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Farmland in South America.

Farmland investments, including cropland, grassland, and timberland have consistently outperformed other asset classes over the last 20 years. Over the same period, returns of farmland investments in South American countries, such as Uruguay, have consistently outperformed those in the US.

The forces driving farmland prices, create attractive opportunities for investors in the region where prime farmland is worth a fraction of the cost of comparable farmland around the globe producing clear arbitrage opportunities with attractive risk-adjusted returns.

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A Thriving Agribusiness Sector.

Argentina, Brazil, Paraguay and Uruguay are key players in the global food markets ranking among the top world producers and exporters for crops such as soybeans, corn and wheat as well as beef among other.

The region`s soils and climate allow for producing more than one crop per year helping diversify risk into various crops as well as generating revenue more than once a year.

In addition, these countries have the lowest costs of production per ton of crop produced positioning these South American countries among the most competitive crop and beef producers in the world.

The competitive edge of the region's agricultural productivity has sparked a significant influx of investments into fostering a thriving agro-industry and expanding infrastructure.

Despite the ongoing expansion and enhancement of farmland development and productivity, there remains ample room for strategic investments in agribusiness.

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Pulp Wood Forestry Boom.

In addition to grains, oilseeds and beef, in the last 20 years, the region has witnessed the rising of its pulpwood and timber industry consolidating as the world's leading producer of short fiber.

The regions natural conditions favor fast-growing and high-quality timber with short harvest cycles and low production costs standing out as one of the best places to grow trees.

The thriving forestry sector has consolidated a strong local industrial demand with various state-of-the art-pulp mills and saw mills.

Polinizadores Web

Abstract

Interview to Martin Otero

March 2023

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Introduction

Martin Otero is founder and CEO of Bedrock and a farmer. Featuring extensive experience in the rural sector, he has founded his own company with a focus on enabling investments in sustainable, regenerative, and impact agriculture where various activities such as agriculture, livestock, forestry, and management of natural ecosystems are combined. Its team has been operating since 2005 and has the experience of having participated in the design and execution of strategies for more than 260,000 hectares in South America.

We share the interview that Martín gave to Polinizadores.com

What is regenerative agriculture?

It is definitely a very new term, very trendy, and with many and varied definitions. We do not define regenerative agriculture. We focus on the objective of regenerating the soil, and that single objective has opened up endless questions, teachings, and rethinking of everything we have been doing. Today we are very happy with the short and medium-term agronomic and economic results, but we firmly believe that the great gain is in the long-term resilience of agroecosystems. Little by little, studies are beginning to appear that validate that the greater the biodiversity, the better the management of nutrients, carbon, water, etc.

“We understood that Biodiversity was nothing other than the heart of regeneration.”

What are the actions in pursuit of sustainable agriculture?

On a global scale we see soils that have been mistreated for centuries, but, even so, nature gives us the possibility of regenerating them and generating new virtuous circles. In our region we have three great advantages: on the one hand, soils with less agricultural history than the old continent, on the other, about thirty years of massive management of agriculture without soil plowing or direct sowing and, lastly, but not least than the above, we have a very vibrant agricultural business community with a young and entrepreneurial mentality, which does not hesitate to reformulate its production models or reinvent itself.

We have drawn on the advice of the pioneers and the first is...go slowly, with clear objectives, believing in the fundamentals and taking firm steps without looking back after five minutes. The second is to see what tools we have on hand. Clearly, it is not going to be the same to travel the path with livestock than without livestock. We believe, and our experience validates it, that livestock greatly accelerates nutrient recycling processes. In the absence of livestock, we undoubtedly seek to incorporate carbon and nutrients through cover crops, in that sense, we try to make them as polyphytic as possible. Each plant with its function, whether it is incorporating nitrogen, generating biomass, producing a flower, or generating roots to explore the soil at different levels and improve infiltration.

We believe that monitoring biological activity within our landscapes is a good indicator of the health of our productive ecosystems. We have remapped the fields to identify landscapes and define specific restoration actions. We relaunched the results measurement policy (fundamentally focusing on soil health indicators) to be able to evaluate objective and concrete indicators over time. At the landscape level, by planting materials acquired from the Directorate of Aquatic Natural Resources of Uruguay, we have reincorporated native aquatic species. Also, in collaboration with UPM, we are measuring the health of aquatic ecosystems by monitoring amphibian activity in waterways and activating a program for the identification, georeferencing, and protection of threatened native cacti.

Achievements in the implementation of biodiversity refuges.

Although our migration towards regenerative agriculture began back in 2017, throughout this journey of rethinking we understood that Biodiversity was nothing other than the heart of regeneration. Without biodiversity, without life, we were not going to get far. That's when we came across Syngenta's “Multifunctional Landscapes” project and decided to make our fields and equipment available to the project so that together we could define actions and measure results. So we decided to look for very well-distributed points within the fields, fractions that otherwise had no other function today have a specific management and a clear function. They are connection points between agricultural, livestock, and forestry sectors and their function is to act as habitat and refuge mainly for pollinators. These areas also receive grazing with a super high density of livestock, very short and punctual, and in order to promote certain species (flowers) and accelerate the recirculation of nutrients, imitating a passing herd. We are a year and a little away from the implementation of the first actions on Multifunctional Landscapes and in that short period we have already noticed achievements. First of all, there is a goal and there is management. Many that were merely Gramin patches today are multispecies meadows, with valuable species that we have broadcast sown and other highly desired ones that have emerged surprisingly and naturally. On the other hand, in the first insect monitoring (carried out by Dr. Estela Santos - Faculty of Sciences - of the University of the Republic, Udelar) valuable species of rare native pollinators have been detected, we estimate that properly managing and preserving These spaces will generate the possibility of us talking about the persistent presence of native and no longer so rare pollinators.

Martín ended the interview by highlighting the current context, “clearly spring and summer 22/23 have been some of the hardest in recent times, with an accumulated drought and historic extreme temperatures for Uruguay.” He ended by validating the work done so far and the need to continue on the same path:

“We want to see how the Multifunctional Landscapes react when the rains return. Since we believe in fundamentals we have high expectations. "We are going to continue working, documenting, and analyzing the results of the monitoring."

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We are happy to announce that Bedrock has recently signed a technical collaboration agreement with Syngenta to establish biodiversity reserves on managed properties.

These natural and re-wilded habitats provide nesting and food resources for bees, pollinators, insects and wildlife. This reserves enhance overall biodiversity & providing important ecosystem services such as pollination and pest control improving crop yields while securing sustainable farming and environmental balance.

By including selected testing areas joining Syngenta's "Operation Pollinator" we intend to work jointly to measure the impact on pollinators, biodiversity and its contribution to the whole regenerative farming system.