Baja Agriculture Update
Our JV partner Inmobiliaria Contel (Contel) has over the past several months conducted due diligence on verticals in the produce farming supply chain in Baja California.
Contel has now established a channel to the US market that allows them to grow fresh produce directly for US importers. Leasing land for agricultural use can be very lucrative, but growing produce on the land offers significantly higher returns. We did not expect Contel to gain access to this point of operations so soon; however, this opportunity has been presented by 2 buyers with immediate demand.
As a producer, Contel will be able to grow more than one cycle per year, depending on produce.
Example: Onions in Baja average 20-25 tons per acre with a 3-4 months cycle and $150-$200 per ton, or $3,000-$5,000 per acre/cycle. Garlic, in contrast, is a lighter type of produce containing less water with a longer growing cycle of about 6 months, fetching a much higher price per ton; a typical yield of 8 tons per acre gives a value of $500-$1,000 per ton, or $4,000-$8,000 per acre/cycle.
The example above should be compared to previous leasing estimates of $800-$1,200 per acre for a whole year.
Contel is preparing operations for January seeding on the farmable 150-acre portion of the first tract of land, and the first harvest is expected for May/June 2017. Initially, a generator will provide the power needed for direct irrigation. Solar power will later replace the generator, and drip irrigation will be connected to a gravity reservoir, making the farm totally “green.” This first tract of land will serve as a showcase property.
ProGreen will provide the financing as stated in our JV agreement with Contel from February 16, 2016, stating that profits will be shared equally between the parties after ProGreen first recovering its investment.
Contel controls an abundance of land with the options to increase the growing operation, leasing land, partnering with other growers, etc.
This development is a great step forward, creating new and varied opportunities to accelerate growth.
Statistics from the U.S. Department of Agriculture show that Mexico by far is the most important supplier of fresh produce, accounting for 69% of U.S. fresh vegetable imports. U.S. imports of Mexican fresh vegetables amounted to $4.05 billion in 2012, as compared to 4.8 billion in 2015, an increase of approximately 6% per year.