Credit market presents Cordiant with ‘bigger name’ opportunities

The current debt market of high interest rates and a retreating banking sector has convinced some of the “bigger name” players in the food and ag space to turn to private credit providers, said Cédric Garnier-Landurie, Cordiant Capital managing director, head of agriculture value chain.

The managing director said a working capital squeeze for “even the really good names” on their revolving credit facilities has hit permanent crop operations, for example, where there is a requirement for “a lot of capital for harvest.”

“In LatAm, it requires payment every week or sometimes even every day for the workforce,” said Garnier-Landurie. “So you have these big spikes of working capital requirements prior to your payment, which, depending on the specific crops and the contracts, that can be thirty to ninety days thereafter.”

“We’re here to support our portfolio companies on that front but we’re also able to achieve rates with bigger names that we weren’t able to achieve before. So we were able to go up the quality spectrum on that front.”

Cordiant extended a $130 million credit facility to Peruvian agricultural exports company Agrícola Chapi in May to support the family-owned business’s growth plans.

Agrícola Chapi plans to use the funds to double its avocado growing capacity to 1,200ha and intends to expand its table grapes growing capacity fivefold to 900ha.

“A significant advantage of Peruvian avocados is their export season, which runs roughly from May to August – volumes can start in April and go up to October. This is a great addition to the Mexican export season, which runs from August to May,” said Garnier-Landurie.

A May report from Rabobank predicted the avocado market was set for further growth, despite avocado production having grown by a compound annual growth rate of around 7 percent over the past 10 years.

Cindy van Rijswick, Rabobank global strategist, fresh produce and farm inputs, said that “attractive prices and returns” had pushed expansion and encouraged investment into the sector. The crop’s health benefits as a strong source of vitamins, minerals and mono-unsaturated fats were driving demand from the consumer side, she added.

Garnier-Landurie said a lot of growth is still expected to materialize in Europe, where the per capita consumption of avocadoes has still not peaked.

“If you look at the per capita consumption of, let’s say California, it’s around 14 grammes per capita. If you go to the East Coast of the US, it’s still at seven grammes per capita but you go to parts of Europe and its 0.7,” he said.

“And so like any kind of subcategory growth, it’s in the countries that are very low per capita consumption where you will find that growth factor. There’s still tremendous growth potential in Europe.”