Yahoo Finance ‘Farmpalooza’ Aims to Renew Allure of Brazil Agriculture Funding
(Bloomberg) -- For the past three years, one of the hottest investment plays in Brazil has been the emerging industry for agriculture financing. No longer.
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The market for the so-called Fiagros, investment funds focused on agricultural receivables such as interest, dividends and land-lease payments, is set to stall this year after a wave of farmer defaults sparked uncertainty. That’s according to a top executive at XP Inc., the South American nation’s largest brokerage firm, which just threw an event gathering thousands in Brazil’s biggest city to reassure investors of the agribusiness sector’s strength.
“This is a year in which we’re practically going to move sideways in terms of growth,” XP head of agribusiness Pedro Freitas said of issuances of Fiagros, which were introduced in 2021 and had roughly 36 billion reais ($6.4 billion) in assets under management as of May. “Fiagro managers need to show their ability to face this moment.”
Net inflows into Fiagros have plunged 66% from a year ago so far in 2024, according to industry group Anbima. Retail investors have become more cautious about their exposure to agriculture as tumbling corn and soybean prices have prompted some debt-heavy farmers to skip payments on credit facilities owned by Fiagros such as Galapagos Recebiveis do Agronegocio. Tighter profit margins should also lead to a slowdown in the rampant pace of acreage growth seen over the past several years.
For XP, which has a 70% share in the distribution of such funds to investors, holding a big festival that could be described as “Farmpalooza” in São Paulo was a logical step to help restore the perception about the industry. The Global Agribusiness Festival, held June 27 and 28, gave an opportunity to emphasize to clients the vitality of the farming sector and the opportunities it still offers.
Fixed-income investors need to be shown that producers of sugar and ethanol, coffee, orange juice and chicken are doing great and offer an alternative to diversify away from the troubled grain sector, according to Freitas.
XP’s event, which was held in the same football arena that recently hosted Taylor Swift and Paul McCartney concerts, featured everything from agriculture technology company exhibitions to Brazilian country music singers and barbecue booths.
“I’m sure we lured people that know little about agribusiness,” Freitas said, adding that XP also looks to strengthen its relationship with big farming companies that use securities to finance their operations. “Showing this to investors undoubtedly brings the farming sector closer to the city, closer to the financial markets.”
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