Businesses that make sense
23-08-2018Soy farmers from San Julián (Bolivia) have built a USD 1.5 million grain processing and storing facility with the support of Agriterra to become price makers in the market and increase their income through better prices.
La Paz, 21st August 2018
Alejandra Bazoberry and Guido Guerra
Filial de San Julián is an association composed of close to 300 soy farmers in San Julián region, 170 km northwest of the city of Santa Cruz de la Sierra, Bolivia. Their 300 farmers till 40,000 hectares of soy during the summer campaign to obtain 70,000 tons of soy seed, and grow 20,000 hectares of sunflower during the winter campaign to harvest 20,000 tons of sunflower seed. Additionally they produce rotational crops to rest the land like maize and sorghum with volumes in excess of 5,000 tons per year.
With data from the World Bank soy prices, on average, were USD 400 per ton in 2017, similar to 2016 and with an expected small increase this year. Sunflower prices reach USD 370 per ton and maize prices USD 150 per ton. Crunching some numbers together it is easy to see that San Julián farmers produce tens of millions of dollars per year.
The problem is that each harvesting season farmers market all the production at once and oil industries and traders take advantage of this offer surplus to buy at low prices. The solution is to build up storage capacity allowing farmers to regulate their offer flow into the market to keep prices high. If they are able to store their annual USD 30 million production of grain and increase average prices by 5 percent it can increase farmers´ profit by USD 1.5 million every year.
With this idea in mind in 2014 San Julián farmers created their own private company called UNIPROS. However, they lacked orientation on how to articulate this new enterprise. Agriterra saw the great potential of UNIPROS and started to collaborate San Julián farmers in 2016 by financing a feasibility study and the basic design of the storage facility project. Also, managers and directors were trained in 2017 through the basic and strategic financial Agriterra workshops on how to best deal with investment and business decisions and in November an Agriterra local business advisor visited them to provide further guidance.
As a result on December 2017 UNIPROS farmers decide to invest more than USD 1.5 million to build up Stage One of their storage facility complex and construction is about to finish. Now UNIPROS can weight, clean, dry and storage grain for its farmers and third parties, with a vision to expand storage capacity to 50,000 tons in the future.
Right now Agriterra is working with UNIPROS to find the best financial solution for the current and future investments needs, searching for long term – low interest loans from local banks that could save USD 50,000 per year in financial costs. Another possibility for UNIPROS is to find a strategic institutional investor to expand the storage complex and obtain greater economies of scale and profits faster.
All in all, this bold decision is a first step for farmers to stop being price takers and become price makers. The rule number one for success in markets.
