My Favorite Agricultural Investment Play
A couple of weeks ago I wrote to tell you about a new agriculture investment opportunity in Panama that has my attention—mango plantations. The interest in this offer since has been so great that we’ve had trouble keeping up with readers’ inquiries and questions. We’ve decided to schedule a webinar next week so we can address the most frequently asked questions about this opportunity live and with help from those involved with the plantation.
Mark your calendar: Our “Everything You Need To Know To Profit From Mangos In Panama” will take place on Thursday, Feb. 27, at 2:00 p.m. U.S. Eastern Standard Time (to see what time that is where you are, you can go here).
The most frequently asked question we’ve had to date about this mango investment has been to do with Panamanian taxes. The very good news is that, as an investor in this plantation, you wouldn’t owe any.
The simple underlying explanation is that no agricultural investment of less than US$250,000 is taxable in Panama. The cost of the minimum, single-hectare investment in this case is US$33,500, meaning all revenue derived as a result would be tax-free in Panama.
While earning tax-free cash flow and profits in Panama is a great advantage, it’s not alone reason enough to make this investment, of course.
Why would you want to invest in a mango plantation in Panama?
Mangos are the most eaten tree fruit in the world, and they’re enjoying growing markets in Europe and the United States. In Panama, mangos are everywhere—in grocery stores in the produce section, but also on the dried fruit shelf, in the freezer section as popsicles and ice cream, on the juice shelves, and even at the checkout line, where you can pick up a packet of mango-flavored gum.
Del Monte has a plant here in Panama, along with other big international juice companies, and Panama doesn’t produce enough mangoes to supply them all. These factories have to import a majority of the fruit they need. This is the initial target market for the mango plantation I’m talking about. In fact, the developers met yesterday with executives from Del Monte to discuss being part of their supply chain.
Mangos are a tropical tree, meaning Panama’s climate is ideal for producing excellent yields with proper management. Anyone can plant a few trees in a field and grow mangos, but, if you put thought and planning into the type of land you buy, the spacing of the trees, and the type of trees you plant, you can enjoy exceptional yields.
The plantation manager in this case is planting a hybrid mango that provides a high volume of flesh and a thicker skin to protect better naturally against pests. This mango variety, in fact, is so resistant to pests that the developer believes he won’t need to use pesticides and is applying to have the plantations certified as organic. If he is successful in this, the value of these crops could increase significantly.
Leading this certification process is the head of the agricultural side of the development group who is also a fourth-generation farmer in Panama. Well, farmer probably understates things. This guy is an agronomist. His expertise spans soil types, weather patterns, water requirements, and fertilizer optimization (some fertilizers are better for mangos and others don’t work at all). With his expertise, the mango trees will be in good hands. This is key to the success of an agricultural undertaking like this one.
With its accessible minimum investment amount of US$33,500, this mango plantation is an easy way to create a cash flow from agriculture…one that can last 60 years or more, as that is how long mango trees can live and produce.
For the purposes of calculating returns, however, the developer is using a 15-year lifetime (speculating on mango prices and maintenance costs further into the future than that wouldn’t be reasonable). The 15-year return is projected at 16.55% annualized.
Real cash flow doesn’t start until year four, when the trees are mature enough to start producing a decent volume of fruit. In year five, the trees are expected to be mature and at full production. However, you should receive some initial cash return by year two, this from revenues from the cattle feed the developer will intercrop with the mango trees. Mango trees are broad and must be planted leaving wide spaces in between. This allows room for a second crop; in this case, grasses for feed.
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