July 5, 2021

By Michelle Pelletier Marshall, Global AgInvesting Media

This sponsor-contributed article is being featured as part of our annual Global AgInvesting New York event, which will be held this year at the prestigious Sleepy Hollow Country Club, just an hour north of NYC, July 13-15. Learn more about the expert speaking faculty, see the full agenda and register here. 

In this just-released, 25-page paper from HNRG, the company outlines Chile’s distinct advantages for agricultural production in a climate that is ideal for high-value fruit and tree nut production, providing growing CAGR numbers, acres under cultivation, and commentary and mitigation strategy suggestions for the consideration of keen investors examining this flourishing agricultural plethora of opportunity.

Executive Summary

Chile is a leading producer and exporter of a wide range of high-value crops, with its Southern Hemisphere location enabling harvest when few regions of the world provide fresh supplies. Chile’s key features supporting its competitive advantage in agriculture include:

Deep competitive agricultural industry position—Chile has key competitive advantages in crop production and export, including its Southern Hemisphere location, infrastructure, human capital and production scale.

Global market access—Chile has free trade agreements with over 90% of the world’s economy, and exports are a strategic priority for the government. Chile’s overall economy is export-oriented, providing strong benefits to the agricultural sector. Chile plays a leading global role exporting products to China, the U.S., EU, and Latin America

Favorable legal and political institutions—Chile’s democracy is ranked favorably by international institutions and has adapted to meet the needs of a population that erupted into protests in fall 2019, with drafting of a new constitution underway as of spring 2021.

Natural resources—Chile’s land, water, range of latitudes, and geographic isolation from pests and diseases help increase crop prices and keep input costs lower.

Macroeconomic climate and currency—Chile has among the strongest credit ratings and most stable currencies in Latin America.

In this review, HNRG outlines Chile’s macro environment and explore the country’s competitive positions in key crop markets where we believe Chile’s role in supplying global consumers will likely continue to grow, including cherries, apples, avocados, citrus and tree nuts. Chile’s competitive advantages in agricultural production include natural resources, logistics, infrastructure and government policy. Trade and logistics infrastructure, supported by Chile’s wide range of export sectors, facilitates the cost-effective, reliable, and timely movement of goods from producing regions to key ports and onward to global customers, with major producing regions within 150 miles of the coast.

Transportation advantages over other Southern Hemisphere producers into North America and South America combine with significant tariff advantages from free trade agreements in these markets, as well as major markets in Asia and Europe. Growing bargaining power of Chilean exporters engaged in supply contracts with foreign buyers reflects product quality and reliability. Development of supporting industries, including machinery and crop chemicals, has encouraged price-competitive inputs and product innovation.

Chile’s agricultural subsidies are limited, just 2.7% of farm cash receipts in 2019 compared to the OECD average of 17.8%.1 Chile’s policies generally create minimal market distortion and are mainly aimed at improving the productivity and competitiveness of small-scale farmers, with more than 50% of budgetary allocations to the ag sector spent on general services, mainly directed towards infrastructure, R&D and inspection services.2 This leads larger farmers to compete based on market conditions and incentivizes innovation to adapt with new technologies and varieties to maintain competitiveness.

While direct subsidies are low, developing commercial agriculture is a strategic priority for the government given the sector’s important contribution to GDP and rural employment. Chile features a well-educated agricultural workforce and a more developed university system compared to most of Latin America. The government also supports the creation of public-private partnerships to vertically integrate farmers to markets. A strong emphasis is placed on water access and use, specifically irrigation. Over 20% of the public budget allocated to the agricultural sector is invested in irrigation infrastructure.

Learn more and download the full paper here.

About Hancock Natural Resource Group

Hancock Natural Resource Group, Inc. is a registered investment adviser and part of Manulife Investment Management’s Private Markets platform. We specialize in global farmland and timberland portfolio development and management on behalf of our investors worldwide. Our timber division manages approximately 5.4 million acres of timberland across the United States and in Canada, New Zealand, Australia and Chile. Our agricultural investment group oversees approximately 474,000 acres of prime farmland in major agricultural regions of the United States and in Canada and Australia.

About Manulife Investment

Management Manulife Investment Management is the global wealth and asset management segment of Manulife Financial Corporation. We draw on more than a century of financial stewardship to partner with clients across our institutional, retail and retirement businesses globally. Our specialist approach to money management includes the highly differentiated strategies of our fixed-income, specialized equity, multi-asset solutions, and private markets teams—along with access to specialized, unaffiliated asset managers from around the world through our multimanager model.