Coffee is the second most traded commodity globally, worth 90 billion US dollars per year, with 76,685,44 metric tonnes consumed annually. This item is in high demand, part of global culture, and will never go out of style. The investment being highlighted here allows you to own a piece of the worldwide coffee industry. You own the underlying asset, the coffee farm, rather than the business or the balance sheet, making this investment even more unique. Because coffee plantations are neither commoditized nor securitized, financial wizardry has less potential to obscure market price when owned directly. Let’s find out more information about international coffee farms!
International Coffee Farms: Investment Strategy
International coffee farms, a corporation based in Columbia and Panama, sell this product. The company first introduced its product in Columbia, where it could assess the viability of its business plan. Colombian coffee farms have an advantage over Panamanian coffee plantations in that they have two harvests per year rather than one.
Mr. David Sweell started ICF (International Coffee Farms). He began his career in the Canadian Navy as a sailor. Since then, he has lived and worked in Canada, California, México, Costa Rica, Colombia, Argentina, and Panama, among other places.
International coffee farms purchase typical commercial coffee farms as part of their business model. Agronomists repair these coffee farms to produce high-quality coffee with more significant profits.
How International Coffee Farms Function
- For $18,900, an investor can buy a half-acre block of land ($18,000 for the land and $900 for transfer taxes).
- The firm (ICFC) buys underperforming raw land and existing Panama coffee plantations that can be planted or “turned around” to become highly profitable Specialty Coffee farms.
- Commodity coffee is not the same as specialty coffee. Specialty coffee commands a significantly higher price (which translates into higher profit margins).
- ICFC provides turnkey maintenance when the property is deeded to you in your name (or corporation), resulting in a completely passive income stream for decades to come.
- The average annual return is estimated to be 12%. Cash flow usually begins three years after you invest your money, with annual returns.
- Aside from the stable, long-term potential income that such an investment might give, it also provides a good, honest job for local farmers and their families in Boquete, Panama. They are paid a living wage that includes perks such as education, medical, pension, and housing.
You’ll probably be interested in this if you care about investing in socially and environmentally sustainable projects that truly assist people and better the world (i.e., things that give real estate investors and capitalism a good name).
So, how precisely can an investor profit from this type of investment?
When the coffee farm generates revenue, the first 20% is used to pay the coffee growers and any other farm-related expenses (wages, seedlings, equipment, etc.). The remaining 16 percent is used to cover the ICFC’s administrative costs. Following the upfront operational expenses payment, the remaining 64% is returned to the investors. You won’t have to worry about paying any of your distribution to the Panama government because all of the Panamanian taxes have already been paid (however, you will have to report this income on your federal tax return). The farm doesn’t have much to produce because all of the plants start as seedlings and aren’t large enough to provide a harvest in the early years of the business. However, as the trees expand, so does the yield and the coffee farm’s overall earnings, and this is where (according to forecasts) things start to get interesting.
Compare International Coffee Farms to Other Real Estate Investments
- Coffee plantations generate a yearly profit.
- Because it is a real asset rather than a securitized commodity, the price of a coffee plantation is likely to fluctuate less than the price of equities on a stock exchange. It means it is less correlated with these assets daily. The value of any investment might go up as well as down.
- You can go to the farm on your own; ICF hosts “kick the trees” tours regularly.
- International coffee farms have an advantage in the local market since they use locals to discover new farms and hire local agronomists to refurbish them. The firm’s managers are likewise local to make the relationship with the people more fruitful. It is especially crucial because the farm’s surroundings are densely populated with Panamanian Indians, who have a distinct culture that must be honored.
- Rather than bulk commercial coffee, international coffee farms produce specialty coffee. They accomplish this by employing enhanced procedures for managing the investor’s coffee farms and the appropriate investments and scientific understanding. Creating a coffee with no defects is a complicated process, and this premium product comes at a premium price. Coffee connoisseurs are willing to spend top bucks for the finest brew.
- Asset protection: Those attempting to seize your assets may have to go via the Panamanian legal system. It is not a simple task. It is certainly worth considering, given that we live in a litigious world.
- Coffee has numerous health benefits, and the active chemicals found inside coffee aid the human body in the battle against disease and aging. Many people are unaware of these health benefits because science has only lately provided us with this information. As this information becomes more widely available, coffee consumption, particularly premium coffee, will rise.
International Coffee Farms can take care of the science and the day-to-day processing (milling, babysitting the coffee trees and beans, and so on), while the investor takes care of the money.
- The risk concentration. If you own shares in JVA (http://www.coffeeholding.com/), you possess numerous coffee plantations, and if one of them is flooded or infested with pests, the other farms will compensate. On the other hand, when you own this company, you own the balance sheet, which contains all of the company’s assets and liabilities.
- Premium coffee is a premium product that necessitates premium customers. We anticipate a recession in late 2016. If a recession occurs, consumer discretionary products such as high-end coffee will be in lower demand, resulting in a price reduction.
Structure of Investment
A coffee plantation of half an acre, or 2000 square meters, costs $18,000 as of December 2016. You will receive a deed of ownership once you have signed. After 12 to 15 months of investing, you will see your first rewards. You will receive a status report on your coffee plantation investment every six months. Returns are estimated to be in the range of 12%. The cash for the coffee plantation comes from the investor, and the coffee trees on the investment plantation are cared for by multinational coffee farms.