Technical, operational and commercial due diligence for an investment in large-scale crop farming

Agribusiness & Food
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Situation

Following the acquisition of a 23,000-acre farmland asset in eastern Uganda, our client, a diversified pan-African investment group, decided to conduct detailed due diligence—comprising technical, operational, and commercial feasibility studies, and including a smallholder outgrower scheme design—for a transformative, $35 million greenfield investment.

Industries
Strategy, Data & Insights
Market Analysis & Opportunity Scoping
Smallholder Agriculture Development
Commercial Advisory Services
Agribusiness & Food Systems
Finance & Investment
Capital Raising & Impact Investing
Engagement

Over a six-month period, ORI leveraged its collaboration with experts from Makerere University’s College of Agricultural and Environmental Sciences, the University of Nairobi’s College of Agriculture and Veterinary Sciences, and internationally recognized private soil fertility testing labs to conduct extensive technical due diligence on land suitability and soil fertility for the production a range of broadacre crops. 

In addition, we retained experts in large-scale farm mechanization and agro-processing to conduct extensive technical assessments and due diligence and develop metrics for assessing the competitiveness of various technologies to optimize returns. We drew on our business strategy formulation expertise in agribusiness and commercial agriculture and experience in agricultural input-output analysis, resource productivity, and financial modeling to design a crop strategy and recommend solutions for overall enterprise profitability. 

We further assessed the viability of local community labor sourcing and the opportunity for an outgrower farming strategy.

ORI helped the investor by:

  • Working with technical partners to conduct an extensive evaluation of the farmland, including land classification, suitability assessments, and mapping, e.g., via soil sample collection, fertility and nutrient deficiency testing, soil physical and chemical property profiles, agro-climatic evaluation, hydrology and drainage, and demarcation of the farmland maps by levels of suitability, using GPS technologies.
  • Engaging meteorological experts to gather 50+ years of historical data on rainfall, temperatures, sunshine hours, and humidity from weather stations near the farm and utilizing forecasting models to predict likely patterns in the next 15+ years.
  • Modeling irrigation needs based on crop water use requirements of key crops. 
  • Determining the tillable farmland using various methods, such as corn suitability ratings and overall land suitability indices across several broadacre crops, e.g., maize, rice, soybeans, and sunflower. In addition, delineating crop production plots of different sizes to optimize farm operations.
  • Assessing available farming technologies across seeds, crop protection solutions, post-harvest handling, storage and logistics, mechanization, and agro-processing—for various crop options. We examined investment requirements for mechanization of crop production, as well as infrastructure requirements.
  • Modeling variables identified from the technical due diligence, demand sizing, buyer engagement, and pricing dynamics to determine and rank the attractiveness of potential crop options.
  • Developing an operational strategy for farmland utilization, building on the vetted ranking of crop opportunities and post-harvest handling, processing, and trade logistics.
  • Designing a smallholder contract farming scheme and broader community engagement plans.
Outcomes
  • Client confirmed the highest opportunity crops for production, Capex, and working capital requirements, as well as a structured scale-up plan over seven years.
  • In addition, the client understood the farm mechanization and infrastructure requirements relevant to the shortlisted industry/value chains.
  • A risk management strategy enabled the client to understand the practicality of various farm management strategies, including the option of a contract farming scheme for 3,000 smallholders. The community engagement plan was deployed to help with local project buy-in and entailed job opportunities for local labor and small farm custom service provision.
  • The client embarked on raising capital of $35 million for this green field investment and used due diligence products to identify a farm operator for the first 12,000 acres under crop (sunflower, maize, sorghum, rice, and soybeans).