African Agriculture Inc. (AAGR), a New York-based Africa-focused company, is on a journey to deliver protein to the world through the enhancement of cattle feed via high nutrition content and fiber alfalfa production, the responsible environmental and employment management of Africa’s abundant coastline, and the deployment of cash flow ultimately into a global program of carbon offsets.
With capital in a very strong asset provided by the founder and majority investor, Frank Timis, the company’s wholly owned subsidiary, Les Fermes de la Teranga (LFT), is developing a commercial farming business in Northern Senegal that will initially focus on producing and selling alfalfa for cattle feed and nutrition purposes. Over the next two to three years, the company plans to largely develop 62,000 acres of land located at LFT and also aims to expand within Senegal, Niger, and potentially to other West African countries.
“Protein is a necessary component of every diet. It is necessary for children to develop their brain power and for bone development. So, we want to make sure there is a balance of protein in every aspect of service to the world’s what would be close to 10 billion people by the middle part of the century,” Alan Kessler, Chairman and CEO, African Agriculture, said in an interview last October.
“So, we will be producing alfalfa as our first crop in African Agriculture. Alfalfa provides protein to livestock and cattle necessarily for beef production, dairy product production, which will feed into the making of other products. Additionally, it can be used as a biofuel. So, we think we can really drive protein access both domestically and also potentially for export of what we produce. Our next strategy also involves the production of fish. That will help serve protein directly to the local communities and also potentially for export,” said Kessler, a former investment banker and investment researcher with extensive emerging market investment experience.
Currently, African Agriculture is seeking to raise capital through an initial public offering (IPO). It has filed for an IPO with the U.S. Securities and Exchange Commission, with Spartan Capital Securities as the sole underwriter for the IPO. It did not, however, disclose the amount it expects to raise nor an expected price range for its IPO.
The principal purposes of the initial public offering, according to the management of African Agriculture, are to fund their program of incremental planting expansion of 10,000 hectares at the LFT Farm, which they expect to occur in 2022 with approximately 50 hectares seeded on a daily basis.
The management said they intend to use approximately $9,500,000 of the net proceeds from the offering, together with their existing cash and cash equivalents, to prepare the pivots, irrigation, all farming operations, machinery and infrastructure necessary to complete such expansion, which based on average yield expectations would produce approximately 250,000 tons per year.
“We currently intend to use approximately $18,000,000 of the net proceeds from this offering for phytosanitary products, including Soil treatment, Potassium, Gypsum, Seeds, Fertilizer, payment of salaries and personnel for two years and D&O, Crop and Workers Compensation insurance for two years,” the management said.
“Additionally, we currently intend to use approximately $650,000 of the net proceeds of the offering to conduct feasibility studies for potential new businesses including approximately $50,000 for aquaculture, $300,000 for carbon credit and reforestation programs and $300,000 for biofuel from algae.
“We intend to use the balance of proceeds for ongoing operating expenses and other general corporate uses.”
The outlook for alfalfa is positive, according to a 2021 market research report by Fortune Business Insights, which puts the global market for alfalfa at an estimated $19.9 billion in 2020, with a projection to reach $35.2 billion by 2028 on the back of growing cattle production and the use of more nutritionally balanced feed products.
The demand for food and sources of protein will continue to rise on the projected increase in the world’s population to about 9.7 billion by 2050. Already, the ongoing Russia-Ukraine conflict is piling pressure on food supply. Dana Peterson, in an Op-ed for CNN Business Perspectives published April 9, 2022, points to how sanctions, import bans, destruction of infrastructure, a refuge crisis, and supply chain disruptions due to the Russia-Ukraine conflict are stoking global food prices and risking shortages, paving the way potentially for greater food insecurity around the world.
“The war in Ukraine is seriously disrupting production and exports of grain to vulnerable countries. Not only is it making farming in Ukraine more difficult, but sanctions are disrupting logistics for producing things like fertilizer,” Peterson writes.
Russia and Ukraine together supply a large chunk of the world’s grains – almost one third of its wheat, a quarter of its barley – and nearly three-quarters of its sunflower oil, according to the International Food Policy Research Institute. Apart from being used in the production of breakfast cereal, bread, pasta and corn syrup, the grains also provide feed for animal stocks. The disruption in the supply of these grains will continue to drive up prices of proteins, like chicken or pork.
But with African Agriculture’s investment in alfalfa production beginning in Senegal, with planned expansion into other high margin food product categories in the West African region, the company is well positioned to make a significant contribution to global food and protein security whilst delivering significant value for its shareholders.