Brazilian Farms Go Public

Nov 30, 2007

Farmers are the latest participants in the Brazilian IPO frenzy. The window is attractive for cashing in on high commodity prices, but the path is not clearly plowed for all.

The larger players in Brazil's farm sector are poised to join the country's lemming-like rush to go public. July's 294 million reais listing for SLC Agrícola, a soy and cotton grower based in Porto Alegre, illustrates this emerging trend. A handful of sugar, ethanol and beef companies have done IPOs in recent years. But SLC's Bovespa float through Credit Suisse and JPMorgan marked the first time a pure-grower has tapped into rising global demand for Brazilian equities to fund expansion amid the soft commodity boom.

Farming in Brazil has hit an upswing in the last three years, explains Phillip Duebras, an analyst with Rio de Janeiro-based hedge fund Paraty Investimentos. A spurt in worldwide demand for agricultural products and macroeconomic stability in Brazil have led to a "recuperation phase" where cost advantages in Brazil have increased relative to farmers in other countries.

If commodities remain elevated, the...

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