Latin America – India’s Agricultural Outsourcing Provider

Dave RamaswamyAllied Venture

dramaswamy@alliedventure.com

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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