This important Land Commodities Asset Management AG (“Land Commodities”) legal notice should be reviewed carefully prior to reading the contents of this document.
The information in this document may contain material which could be interpreted by the relevant authorities in the country in which you are based, or of which you are a resident, as a financial promotion or an offer to purchase a controlled investment. Accordingly, the information in this document is only intended to be viewed by persons who fall outside the scope of any law that seeks to regulate financial promotions in the country of your residence or in the country in which this document is being read. If you are uncertain about your position under the laws of the country of which you are a resident or in which this document is being read then you should seek clarification by obtaining legal advice from a lawyer practicing in the country of your residence or in the country in which this document is being read. You must confirm that you are eligible to read the information contained in this document pursuant to all applicable laws within your country of residence or the country in which the document is being read.
There are certain legal and regulatory limitations that may apply to the information contained in this document and by reading it you are deemed to have read and understood this warning. In reading this document, you are expressly stating your believe that the information it contains falls outside the scope of any law that seeks to regulate financial promotions in the country in which you are reading the document or in which you are a resident and that by reading this document you will not contravene, or cause Land Commodities to contravene, any such law.
Although Land Commodities has used its best efforts in preparing this document, we make no representations or warranties with respect to the accuracy or completeness of its contents. Land Commodities specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. Land Commodities have no fiduciary duty to you, the reader of this document, unless expressly agreed, and assume no responsibility to advise on, and makes no representation as to the appropriateness or possible consequences of, any action you may take with respect to any information contained herein. Land Commodities shall not be held liable for any loss, loss of profit or any other damages, including but not limited to, special, incidental, consequential, or other damages.
This document may contain certain information that is forward looking and, by its nature, such forward-looking information is subject to important risks and uncertainties. The words “anticipate”, “expect”, “may”, “should”, “estimate”, ”project”, “outlook”, “forecast” or other similar words are used to identify such forward looking information. Those forward-looking statements herein made by Land Commodities, if any, are given as of the date they are expressed herein and reflect Land Commodities’ beliefs and assumptions based on information available at the time the statements were made (including, without limitation, that (i) the demand for agricultural commodities will continue to grow at a pace that is unlikely to be matched by growth in agricultural productivity, and (ii) investment demand for tangible assets such as agricultural commodities and farmland will continue to increase for the foreseeable future). Actual results or events may differ from those anticipated or predicted in these forward-looking statements, and the differences may be material. Factors which could cause actual results or events to differ materially from current expectations include, among other things: risks associated with the ownership and operation of farmland, including fluctuations in interest rates, rental rates and vacancy rates; general economic conditions; local real estate markets; supply and demand for farmland; competition for available farmland; weather; crop diseases; the price of grain and other agricultural commodities; changes in legislation and the regulatory environment; and international trade and global political conditions (for more information on risks, please see the Risk Factors section in the final pages of this document. Although it is believed that the expectations conveyed by the forward-looking information contained (if any) are reasonable based on information available at the date such statements were made, no assurance can be given as to future results or events and so readers are cautioned not to place undue reliance on any forward-looking information contained in this presentation (if any). All forward looking information, whether written or oral, are expressly qualified in their entirety by these cautionary statements. Land Commodities undertakes no obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise.
Neither this document nor any of its contents constitute an offer, recommendation, or solicitation to any person to enter into any transaction or adopt any hedging, trading or investment strategy, nor does it constitute any prediction of likely future movements in rates or prices or any representation that any such future movements will either exceed or not exceed those shown in any text or illustration herein. No information provided in this document in relation to any product or investment should be construed as advice on the suitability or otherwise of that product or investment to any person, such suitability depending on all the circumstances of the person concerned. Nothing contained in this document constitutes investment, legal, tax or any other advice nor is it to be relied on in making an investment or any other decision. You, the reader of this document, are to make your own independent judgment with respect to any matter contained herein and to seek your own independent professional advice where appropriate.
It is important to recognise that that farmland investment, like all investments, involves risk. Statistics cannot wholly express these risks. As such, in addition to quantitative risk analysis you should also assess risk qualitatively. Whilst Land Commodities Asset Management AG (“Land Commodities”) makes every effort to identify farmland pportunities for its clients where the risk per unit of return is minimised, any investor contemplating farmland ownership should carefully contemplate the risks involved. Also, if you have not already done so, please read carefully the Important Legal Notice at the front of this document.
Risks in farmland investing can be separated into two broad categories:
Both set of risks can be managed or mitigated but Land Commodities is able to add the most value for its clients by managing endogenous risks. Land Commodities differentiates itself from conventional agricultural land agents by the quality of its risk management processes in terms of asset selection and due diligence, manager / tenant selection and evaluation and post investment monitoring and reporting. However, despite using our best endeavours to minimise risks and maximise returns on behalf of our clients, certain risks will inevitably remain.
Prospective investors and their advisers should give careful consideration to the following risk factors in evaluating the merits and suitability of an investment in farmland. Under certain circumstances and with certain objectives in mind, farmland may be deemed an appropriate component of a diversified portfolio, although it should not be treated as a complete investment program in isolation. Farmland is suitable only for sophisticated investors who are able to properly understand and bear the risks of an investment. The following is a summary of some of the risks involved in farmland investing which should be carefully evaluated before making an investment in farmland, although the following is not intend as a complete description of all the possible risks which might apply to such an investment:
The market value of farmland investments and/or the income from them can go down as well as up. Farmland may be subject to pronounced or prolonged falls in value and you may get back less than the amount you invested. Past performance is not a guarantee of future performance, nor should it be used as a guide to future performance. Farmland investment may not be appropriate for all investors or investment objectives.
Commodities markets (including agricultural commodities and other commodities pertinent to dictating input prices) can be highly volatile and are influenced by numerous factors such as changing supply and demand relationships, government programs and policies, national and international politics, climate conditions, economic events and changes in interest rates. Due to the potentially significant effect of commodity price movements on input and output prices, movements in commodity prices may adversely affect farm incomes and farmland values. In addition, commodity markets can be cyclical in nature, meaning that a period of rising prices may be followed by a period of falling prices and vice versa.
There are a number of risks which may affect commercial farming operations, in any given year or growing season. These could include, but are not necessarily be limited to, freak weather conditions, such as floods, droughts, undesirable rainfall patterns (e.g. rainfall during harvesting of some grains can cause damage to crops), hail, frost or uncharacteristic cold spells, weeds, pests and diseases, fire, and the possibility of generally worsening conditions associated with climate change. Any of these factors individually or in combination, may have adverse consequences on farm incomes and/or values.
Emerging markets tend to be more volatile and illiquid than more mature markets and therefore farmland investment in these regions may be subject to a greater level of risk. Political risks and adverse economic circumstances are more likely to arise putting the value of farmland investment in these regions at greater risk. Additionally, the level of corruption and a lower level of reliability within the judicial system in these regions may have adverse consequences with respect to the enforcement of ownership and/or tenure rights.
Farmland investments may be illiquid under certain market conditions. There is no assurance that a liquid secondary market will exist for farmland at certain pricing points. As a consequence, under certain market conditions, investors may be required to accept a lower price than they might wish for in order to achieve a sale within a shorter time frame If this price were lower than the price at which the farmland was originally acquired, this could result in losses. In particular, this scenario may arise in markets where the supply of productive farmland is high relative to demand.
Farm incomes and/or values may be affected by actions of government or changes in governing regimes. Under extreme conditions, such as during a severe global food crisis, governments may impose legislation which adversely affects farm incomes and/or values (for example, export restriction or price controls). Equally, protectionist international trade policy may also have negative affects upon farm incomes and/or values in certain markets. Governments may impose more stringent environmental regulations upon the agricultural sector thus increasing compliance costs with possible negative consequences for farm incomes and/or values.
The value of tax benefits depends on individual circumstances and any favourable tax treatment may not be maintained if government legislation were to change in the jurisdiction in which the investor or the farmland is domiciled or if the domicile of the investor were to change.
Inflation or deflation may occur over the duration of your investment. If the returns on your investment are lower than the rate of inflation this would result in a reduction in the spending power of the funds realised upon the sale of your investment relative the spending power you might otherwise have achieved had you invested in alternative assets or simply held cash.
Because any investment in farmland is denominated in the currency of the country in which the farmland is located, an investment in farmland is subject to currency risk. This is especially true if the investor is domiciled in a country with a different currency to the currency in which the farmland investment is denominated. Such investors are subject to the risk that the value of the currency in which the farmland is denominated may change in relation to one or more alternative currencies. Among the factors that may affect currency values are trade balances, the level of short-term interest rates and other fiscal or monetary policy factors, differences in the relative values of similar assets in different currencies, long-term opportunities for investment, capital appreciation and political developments.
Where a farmland investment is not diversified across different farm operations, regions, crop types, business activities and/or managers, this lack of diversification may subject the investment to more rapid changes in value than would be the case if the farmland investment were more diversified.