Jan

13

Almost Dirt Cheap…

January 13, 2013 | By Tekoa Da Silva

    Agricultural Produce, Brazil

    (click to enlarge)

    As of 1/13/2013, $9.00 USD purchases you the following organic agricultural products from the state of Espirito Santo, Brazil:

    Oranges – 6 lbs.
    Bananas – 3.5 lbs.
    Green Peppers – 2.2 lbs.
    Apples – 1 lb.
    Potatoes – 2.2 lbs.
    Tomatoes – 2.2 lbs.
    Onions – 2.2 lbs.
    Carrots – 9 lbs.
    -1 Head of Lettuce
    -1 Bundle, Scallions
    -1 Bundle Watercress
    -1 Handful Red Chili Peppers

    Total: Roughly 30 lbs. of Basic Fruits & Vegetables.

    What do these low prices mean from an investment standpoint? Here’s what Doug Casey had to say on the matter of Brazilian Agricultural in this month’s Casey Report.

    Said Doug:

    “In the last five years, land prices in Argentina, Uruguay, Paraguay and southern Brazil have risen 15 to 20% per annum. That’s mostly because, of course, grain prices have exploded…I’m disinclined to invest in farmland for the grains…I’m much more interested in specialty products, like grapes, olives and other fruits. And cattle.”

    “Over the short term, global demand for agricultural commodities is likely to increase because, despite the downturn in world economic growth, world population is still going up…[However]the main driver for agriculture, in the long run, won’t be rising populations but rising standards of living.”

    “A major argument by Brazil promoters is that it’s become the world’s food storehouse, and it’s going to grow from here. Unlike many of their arguments, I think this makes some sense. But it’s not a good enough reason to invest there anytime soon.”

    I’ll have to agree with Doug. 15 years ago when I visited Brazil for the first time, real estate (outside of the major cities) was mostly a cash market, with families and neighbors trading land lots and buildings amongst themselves. But when I touched down in 2011, I was shocked at the economic growth. Brazil is at least waist-deep into the “age of consumer credit”, the waters of which are rising quickly.

    Although food prices appear dirt cheap when observed from a Western perspective, in local terms they are mildly cheap at best. Before the decline of the dollar in the last decade (and corresponding rise in the Brazilian real & commodity prices) that list of 30 lbs. of produce could be had for under $4.00 USD.

    However in dollar terms, they’ll most likely never be this cheap again.

    Thoughts are welcomed. 

    Best,
    Tekoa Da Silva
    Bull Market Thinking

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