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Sketch: there's gold in them thar' fields

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Another day, another dollar.

Now why stop at $1? There is serious money to be made investing in agriculture, if delegates at the sector's annual investment jamboree in London are to be believed.

Eight per cent – you know, the kind of returns to be expected from plain vanilla equity funds - is for wimps.

Rodney Lake, an analyst for a US university fund, raised the bar to 10% in a bad year.

Others believe they are onto something even better.

Vote of confidence

"Stick up your hands, those of you who are expecting returns of more than 10%," Mr Lake, from George Washington University's investment office, asked the audience.

Roughly half of the audience waved a limb.

"How many are expecting more than 15%."

Not many delegates capitulated.

"How about 20%." Two arms remained aloft, from where could see. Mr Lake blanched a shade.

Big hitters?

He had been trumped, can reveal, by Pampa Management, an Argentine-based fund which doesn't get out of its hammock for less than 30% and the Netherland's Biogreen Oil.

Their strategy? Fund managers don't get rich giving away trade secrets. (Far better to get free press.) But Pampa appears to have lucrative links in South American agriculture, and a cheap solution to Russia's grain storage squeeze.

Biogreen is a champion of jatropha. Just like D1 Oils, the pioneer of the scrubland oilseed, whose shares have definitely recorded a notable return. To earth. Once traded at 284p, they now change hands for less than 5p.

Here's to second mover advantage.

How to go broke

Indeed, the conference wasn't just about making money. It was about how to avoid losing it too.

First tip – get the right staff on board.

"The success of any agriculture business is down to the people," Mark McLornan, founder of Agro Terra, said. So goodbye eight-percenters.

Second, steer clear of Ukraine. "You can go broke taking over land for nothing," Mr Lake said, advice that seemed to ring a chord with many delegates. Fields may come easy, but contractors turn up late. And farm supplies may never arrive at all, if the rumours are to be believed.

Trading risks

A third tip is to avoid setting up a trading desk. To dismiss the hype that the big trading houses, the Cargills and so on, earn fortunes dealing.

"The trading companies make very little money trading, but they take a huge amount of risk," said Peter Hannen, a veteran of Merrill Lynch, Philbro, sugar, oil, gold and, now, private equity.

There is the - apparently significant - threat of traders keeping contacts, rather than employers, happy by buying high from producers and selling low to clients.

There is the danger that contracts will be ditched if prices move the wrong way, evaporating trading house profits.

No kidding

So where do the likes of Louis Dreyfus make their money? Mr Hannen could not - or would not - say.

But it seems a fair bet they are not dabbling too heavily into to Mr Hannen's own niche – goats. Organic ones, at that.

Besides raising sheep in Bolivia, Mr Hannen's MG Global Investment fund owns Australia's largest organic goat concern. (No kidding.)

"This is arid land. You buy it at $10 an acre. Stock it right. And you can have a few thousand head of goats with one person employed."

So the formula for tidy margins is - don't follow the herd, get into goats. Um. You know what I mean.


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