AgStream

[Hopperbin]

Just looked at the first page of Grainews.
A new company Agstream is willing to give select growers half the expenses to plant a canola crop. In return the farmer gives up half his production to Agstream, they will market their share of canola.
Sure hope there are no farmers dumb enough to enter that deal.

[agstar77]

What would be included in expenses, labour , risk , ins custom work etc. ?

[IAMTHEMOLE]

Probably the same guy who presold 2008 production for 9.00/bu

[Hopperbin]

The artical is not clear on what is included in expenses. Since they are using 300 dollars as a reference cost to grow canola there would not be much left out. Must include basically everything.
The farmer must meet some criteria like having a 35 bushel/acre yield for the past years, be a PMG member(not sure what that is) purchase crop insurance and hail insurance etc.
What I cannot figure out is if a farmer wants to share expenses and profit then why farm, or at least farm half the land and have half the stress.
I cannot imagine such a thing flying.

[SASKFARMER3]

Only someone with "NO" credit available would look at such a company I almost choked when I read it.
But these are interesting times we live in with higher prices and watch as a bunch of SCUM start coming out of the woodwork.

[cottonpicken]

This sounded kooky to me,until what the mole said.Good call.

Somebody or entity is short.

[Hopperbin]

CP you drunk already today?? LOL

[Lifer]

The investor idea has merit.
Farmer as general contractor why not?

The risk share would have to work out better. How about Pay 75% of my costs (Crop inputs, Equipment, overhead) and receive half my crop FOB my yard.


"You do not get what you deserve, but what you are able to negotiate"

[Lifer]

PMG could be Pike Management Group


"I reserve the right to be wrong. I am good at it."

[Lifer]

Investor cash flows to canola production

Kevin Hursh, The StarPhoenix
Published: Wednesday, February 06, 2008

You know times have changed in the grain business when outside investors are putting money into primary production.

Pike Management Group based in Alberta has launched a new company called AgStream Inc., which is seeking private and institutional investors for a joint venture with farmers on canola production.

Founded by well-known consultant and entrepreneur Gary Pike, Pike Management Group provides business management and marketing support to more than 120 farmers across Western Canada. Most are large operations and many of them are rapidly expanding. That makes access to operating capital a big concern.

Grain price prospects are excellent and there should be money to be made for anyone who can grow a good crop. However, even though the numbers look positive, it can be tough to find the operating capital to expand the farm from, say, 10,000 acres to 13,000 acres in a single year.

Large-acreage producers typically rent much of their land base rather than owning it all, so there's a limited amount of security they can use to get debt financing. Often the security they do have is already tied up.

As well, money borrowed has to be paid back with interest -- no matter how the crop turns out. AgStream is offering a joint venture approach that shares the risk.

To understand how the joint venture works, take for example a participating Pike Management Group farmer member with a three-year average canola yield of 35 bushels per acre. The variable and fixed costs to grow the crop, including a 15 to 20 per cent allowance for return on investment for the producer, are assumed to be $300 an acre.

In a 50/50 joint venture with AgStream, the producer will receive $150 in cash for each acre of canola grown on the farm. For its contribution, AgStream would get half of the canola produced. Any canola above the average of 35 bushels per acre would be divided with three-quarters going to the producer and one-quarter going to AgStream.

Producers with less or more than a 35 bushel per acre historical yield average will get proportionately less or more than the $150 per acre contribution from AgStream.

Participating producers will get 70 per cent of their money in advance of seeding and that will reduce their need for financing from financial institutions and/or crop input suppliers. With assured financing, they may be better able to negotiate lower input costs.

In the case of a crop failure, AgStream would take a loss just like the farmer. Participants would have to be enrolled in crop insurance and that would provide some revenue protection. AgStream has the added advantage of production that's dispersed across Western Canada and that will help mitigate the risk of localized production problems.

AgStream is hoping to raise about

$20 million, allowing it to partner on over 100,000 acres of canola this year. If that happens, AgStream will be the largest canola producer in the country. Having such a huge volume should provide significant marketing advantages.

Farmers partnering with AgStream will be able to market their canola alongside the company if they so desire. Farmers may also be investors in AgStream, although they need to be qualified or accredited investors under security regulations. Investments are RRSP-eligible.

number of outside investors have been buying into Saskatchewan farmland in recent years in the belief that land values will appreciate. AgStream appears to be the first significant foray of organized outside investment into primary crop production.

The AgStream model could readily be expanded to other crops and to regions outside of Western Canada. If it proves successful, other groups are likely to emulate the approach.

Profits attract money. For the grain sector, it's still a novel concept.

[SASKFARMER3]

Again a farmer would be a total idiot to enter into this type of arrangement.
One with today's crop prices name one lender that's not their for their clients. If they are in grain production. I am sorry if someone is having trouble obtaining credit this isn't the answer.
Yes some larger farmers rent a hell of a lot of land but again some. Also why for the life of me does a farmer liquidate his farm to one of these investment groups for no more than two to four of his neighbors would pay for the same dirt. Simply the answer is Cant let the neighbor get ahead so we will fix them and take our land off the market. Watch what happens when it freezes or drought and the renters don't pay the investment house.

[Jay-mo]

I saw this article yesterday and was thinking the same thing. What the $#*& is this??? If you are a producer that averages canola yields over 35 b/a why would a idea like this even look remotely attractive?

[lesm]

Does anybody know Gary Pike's history or background?

[Steve_Winkler]

I have a landlord trying to get me to do a similar rental agreement. My lease on the land expired this past crop year and this is very similar to what he's proposing. 50/50 split of everything, all costs, all revenue. The main thrust of this deal was for he and his wife to maintain farmer status ( tax & capital gains issues)and was discussed well before the big jump in prices. In my opinion it wasn't meant to be a money grab but it may turn out that way.

I'm not thrilled about the deal in light of the dramatic rise in commodity prices, but I need the land base as well.

Any thoughts, suggestions as to how I should proceed??


Thanks,

Steve

[IAMTHEMOLE]

grow barley on that piece