Portugal is a country blessed by the sun, and therefore the land is prosperous, making agriculture one of the most competitive industries in the country. However, it has not yet been exploited to its full potential, and there is room for opportunity.
The country has three sets of influences: the Atlantic, continental, and Mediterranean. This means that not all regions have the same climate and temperature, and it can get both dry and humid. However, this variety of climates ultimately allows the growth of a wide range of crops, from apples and asparagus to almonds and avocados. Portugal has, therefore, the ability to be very self-sufficient, especially in comparison to other countries worldwide.
Old generation of farmers
What appears to be a challenge for the country is that the young generation is not intrigued to work in this industry, leading to farmers getting older and slowing progress. To be more specific, the average age of a farmer in Portugal was found to be 65 in 2016, and this number is expected to have increased to this day.
The biggest issue in these circumstances is that farmers don’t adopt modern farming techniques, which ultimately means that they can not reduce the production cost. They can not be as competitive in the market. This is also getting influenced by the several economic recessions the country has been through so far that have resulted in an investment slow-down.
As always in economic history, ‘in the middle of every difficulty lies opportunity,’ as Albert Einstein said, and Portuguese farmland is no exception. A combination of low profitability for traditional farms, muddy bureaucracy, and a highly opaque land-resale market leads to outsiders having difficulty finding and closing good land deals – hence, the land remains undervalued. To explain further, this becomes clearer if we compare it to Spanish farmland that is approximately 25% more expensive.
The Portuguese government is very involved in the process of improving agriculture and making it more profitable. Among the several agriculture infrastructure projects they have invested in, the Alqueva Multipurpose Project stands out the most. The project is considered to be Europe’s largest man-made reservoir and was ready in 2010.
Some of the benefits of the project for the land include:
- Water sufficiency for three consecutive years of drought,
- Soil improvement with the introduction of 120,000 hectares (300,000 acres) of new irrigated crops in the Alentejo region;
- Environmental protection
- Job creation as a consequence of the above
This has set a tone of optimism for the region and has created an inflection point for farming in Portugal which is currently a net importer of many food products.
As an investment fund in Portugal, we have a local network of landowners that can present us before great investment farmland opportunities. With our knowledge and expertise, we can identify, evaluate and purchase premium (irrigated), undervalued (compared to Spain) conventional (poorly managed soil) farmland.
Then we have a specific process in place to convert it to organic land. The first step is nursing the soil back to full health and allowing growers to command a premium price for a premium crop.
Among the reasons that make the Portuguese farmland unique is that it is part of Europe. Distributing the almond corps and selling it within the continent results in a much lower cost in logistics, especially if you compare it with the world’s biggest almond producer California.
For example, the EU imports over a billion euros of almonds from the USA annually. Almonds grown in Portugal hold the same commodity value as their Californian counterparts. But we can save on shipping, handling, and tax costs, representing a 17% inefficiency for US products.
The Pela Terra Farmland fund is the largest project in Portugal pursuing organic cultivation. We care about economic prosperity and sustainable development, and we are already counting numerous investors. If you have any questions regarding how it all works, please book an appointment with one of our directors.