Start Your Own Plantation

You want to own commodities in the ground, not derivatives at Citigroup.

Marc Faber — investment analyst and entrepreneur.

Many people have already pursued this dream. Sometimes investors run into trouble when they have to finance and cultivate the plantations during the 5-6 years before they see any return on their investment. I receive phone calls from plantation farmers in Africa regularly to refinance them. Compare it like this: if you and me come to the conclusion that there is a lack of semiconductors in this world, we can build a factory that produces semiconductors, for instance, in Taiwan or the United States. With a production time of 1 year, I am sure we can churn out as many semiconductors as the market can absorb. With Jatropha, for instance, it is very different: we need 5 years before this plantation plant reaches full maturity to yield hopefully 2-3 tonnes of oil per hectare per year. Meanwhile, we have to pay for all the costs, the labor, the fertilizers, the water, the concession rights and so on. A lot of companies I know did not survive these first 5 years. If you still choose the route of having your own plantation I think it is a better option to participate in an existing plantation that will reach maturity soon. A lot of plantation companies need financial injections and I get requests regularly.

If you are the proud owner of a mature Jatropha plantation somewhere around the equator, your investment could look like this:

• Every hectare absorbs 40 tonnes of carbon dioxide a year and you can receive carbon credits, provided you registered your plantation at the start of the project,

• Every hectare produces 1-3 tonnes of crude jatropha oil a year; market value in 2012: $1000 per tonne.

• Every hectare produces 6 tonnes of organic fertilizer; market value in 2012: $300 per tonne.

• Your plantation can produce active carbon or polyol — renewable packaging material.

• Your plantation provides jobs to the poorest people on Mother Earth.

• Your customers are airlines, refineries, commodity trading firms, cruise ship companies, chemical companies, and so on.

• Your crude oil production costs (in developing countries) are around $50-60 a barrel, while crude oil is selling at $100 a barrel (April 2012).

• The plantation gives you an annual crop over 45-50 years.

Now you understand that the return on your capital can be 20-30% a year on a fully grown Jatropha plantation, when Mother Nature provides your plantation with rainwater and no major surprises like floods, droughts, and the like occur. However, you will need a lot of time, patience, and financial muscle to reach this goal and recuperate all of the initial costs you have incurred during the first 5 years.

20.2.4

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