Investment in agribusiness: everything you wanted to know!

Learn everything about how investing in agribusiness works and how to start this financial investment!

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Do you know what the most profitable asset in the world is? At first glance, we might think of oil or the famous niobium. But there is another type of asset that is very profitable in times of crisis: productive land, requiring an operating efficiency level greater than 100%.

Agribusiness is a prominent activity, linked to the economy and development of Brazil. Let's understand the growth trends of this industry in Brazil, which has attracted a lot of attention due to its expansion, productivity and capacity to generate jobs.

We have separated the main information for you to clarify your doubts. Therefore, continue reading and check out everything about:

• Current scenario of the agribusiness sector in Brazil;
• Types of investments in agribusiness;
• LCA Agribusiness Letter of Credit;
• CRA Certificate of agribusiness receivables;
• Agribusiness actions;
• Fiagro agribusiness investment fund.

Current scenario of the agribusiness sector in Brazil

It is no secret that Brazil is the fourth largest producer and second largest exporter of grains in the world, with 19% of the global market. The country of football is also an agricultural country, accounting for 50% of the world soybean trade.

We are not at the back of the line when it comes to livestock: Brazil has the largest cattle herd and is the largest exporter of beef in the world. Chicken is also a favorite among Brazilians, we are the fourth largest producer and the first exporter of chicken on the planet.

The future is difficult to determine, but there are strong signs of a new commodity super cycle. Analysts believe that agricultural prices may remain high for longer, after an economic recovery and increased demand.

I must emphasize that this situation is not only beneficial for Brazil, but also for other large producing and exporting countries. This is great for us because, as I have shown above, agribusiness drives the economy.

At this point, you might be thinking, “Oh, too bad, I’m not a farmer and I can’t benefit from this commodity boom.”

The good news is that You don't need to have a farm, live in the countryside or even have a lot of money to ride this tram. For just 100 reais, you can easily enter this market – which means you can profit from the most productive farms and companies that represent the sector.

Types of investments in agribusiness

1 – LCA Agribusiness Letter of Credit

Initially, LCA stands for “Agribusiness Credit Letter” and is a credit instrument that can be issued by public or private financial institutions. The aim is to obtain resources to finance the agribusiness sector.

What is it and how does it work?

When you buy an LCA, you lend money to agribusiness and receive, in return, your money plus an interest rate.

This title is linked to credit rights on transactions carried out between rural producers. This type of investment works as a transfer of all receivable assets to private investors before maturity.

Think about it, this is a fantastic way to make your money profitable, because while you boost your capital safely and with a very attractive rate of return, agribusiness is being boosted through the resources coming from this type of investment.

 What is the yield?

We can have daily liquidity in Agribusiness Letters of Credit. It is possible to check the balance daily to see the profitability of the investment. It is important to pay attention to the investment term before investing in an Agribusiness Letter of Credit.

If the grace period is 90 days (minimum) and you want to withdraw the funds before the stipulated deadline, you may have difficulties. Therefore, if you need the invested capital before the grace period expires, it may not be a good idea to invest your funds in agribusiness assets.

It is important to highlight that you need to pay extra attention to the grace period, because even if the LCA return rate is higher than that of a CDB, for example, the investment can be profitable for you who are not sure whether you can actually give up possession of the resources during the grace period.

It is common for LCAs to have return rates of 93% of the CDI or more. These return rates vary according to each financial institution.

What are the advantages?

• It is guaranteed by the FGC (Credit Guarantee Fund) up to R$250,000 per CPF and per financial institution.

• No Tax on Financial Transactions

• No income tax is levied

• Due to the exemption from income tax, it generally has a higher yield than Savings and CDB,

• It has great value in financing rural producers and helps in the growth of the agricultural sector.

2 – CRA Certificate of agribusiness receivables

CRA could be all you need to boost your portfolio. Learn all about this investment category and how to choose the best one to make your money really grow from now on.

What is CRA and how does it work?

This is a private credit title that is only issued by securitization companies. The financial collection from the CRA is used to finance activities in the agribusiness sector, such as financing machinery or building farms.

Interested?! So, to start investing in CRA, you just need to open an account with a brokerage firm. Of course, you should consider the operating costs, quality and efficiency of the brokerage firm, as well as the range of investment products it offers. After that, simply apply the amount to be invested and execute the purchase order.

Profitability

Profitability is the ability to produce final income, in other words, the profitability is the result of financial return. Generally, Agribusiness Receivables Certificates (CRAs), similar to other fixed income assets, have the following profitability dynamics: Pre-fixed and post-fixed. Let's learn about each of them?

For those who don't like surprises, the most viable option is the Prefixed option, because, in this case, It is possible to calculate the exact amount you will receive when the contract expires. It is possible to calculate exactly because the rate is fixed, so it does not change throughout the contract.

Assets that have a post-fixed nature, in turn, follow the same trend as Selic or CDI. In other words, the return is only revealed at the time of redemption or at the end of the maturity period.

What are the risks?

It is important to highlight that Agribusiness Receivables Certificates (CRA) are a type of moderate-risk investment. CRA has higher liquidity and credit risks than conservative private fixed-income investments, such as CDB, LCI and LCA.

These types of assets are called “long-term investments”, or rather, very long-term, and what’s more, they have low liquidity, making them an expensive option.

Before you start investing, you should know that it is difficult to withdraw your investment before the maturity date. Therefore, it is important to check the maturity dates of each security before investing your money, always keeping your goals in mind.

CRA may not be the best option for you if you need money in a shorter time frame.

3 – Agribusiness actions

In short, shares represent a fraction of a company's share capital, that is, when you buy a share, you become a partner in the organization.

As a partner, then, you start to run the risks of this venture: it is as if the company's share capital were a big cake, in which you, the holder of a share, owns one of the slices.

According to investors and analysts, the main agribusiness stocks are: Brazil Ecodiesel, Friboi e Cosan.

How does it work?

Before investing in this area, you need to have some technical knowledge or specialized assistance. So, keep reading our content to understand all the necessary points. In addition, it is important to consult the portfolio suggested by a stock brokerage firm and the like.

To start buying shares, you need to keep an eye on the initial public offering (IPO) of companies. To help you understand better, this procedure is a type of public offering in which a company's shares are sold to consumers.

In other words, it's a kind of stock market. So the initial public offering (IPO) is the moment when you're in front of the pie and you can choose the best slice for you.

Advantages

• According to the latest IBGE census, agribusiness accounts for approximately 20% of Brazil's Gross Domestic Product (GDP) and was the only sector that had a positive result in 2020.
• Agribusiness represents a profitable market in times of crisis, due to the growing global need for food and the large production capacity of the Brazilian countryside.

4 – FIAGRO investment fund

FIAGRO is a tax incentive for agribusiness investment funds, promoted by Law 14,130/2021. This law instituted the Investment Funds in Agroindustrial Production Chains (Fiagro), which are an instrument for agribusiness to raise funds in the financial market.

This is a fund that allows any investor, national or foreign, to apply their resources to the sector, either directly (with the acquisition of rural properties) or indirectly (with the application in financial assets linked to agribusiness).

When investing, the funds will be managed by financial market institutions, such as banks and securities distributors (DTVMs), which will attract investors.

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