January 20, 2014
Abu Dhabi invests US$25 millionin Brazilian cattle feedlots
Abu Dhabi Equity Partners (ADEP) has raised US$25 million on a Sharia-compliant programme to provide Brazil''s top 40 feedlot operators with money to buy cattle to maximise their capacity.
Typically, feedlot operators buy one-and-a-half year old cattle that weigh 300-360 kilogrammes and feed them corn until they weigh 500 kilogrammes. Then they are then sold to meatpackers.
"A cattle rancher has feedlot capacity of say, 12,000 cattle heads, but is only using 4,000 of it due to other commitments. This is where ADEP comes in. We provide the rancher the balance sheet to buy more cattle and pay for their on-going feed and other costs," said Muneef Tarmoom, ADEP''s founder.
The deal allows Arabian Gulf investors to buy and take title of cattle, which are registered through a global investment bank. The investors also have certificates in their name on BMF Bovespa, Brazil''s biggest exchange. During the grazing period the cattle are covered by insurance, they are stored physically in separate feedlots and investors are provided surveillance services through a global monitoring company.
Investors –financial institutions and wealthy people- "can actually watch their cattle grazing in the feedlot all the way from their offices here," said Tarmoom.
Once the cattle reach their ideal weight, ADEP appoints the rancher to sell the commodity at principal plus the agreed profit rate to beef processing companies. The remaining profit goes back to the rancher.
ADEP and a handful of Arabian Gulf banks have ramped up their presence in the commodity trade business, which until recently have been dominated by French banks, such as BNP Paribas and Crédit Agricole.
ADEP''s programme follows a series of similar Islamic finance deals made by the Abu Dhabi-based boutique investment bank since its inception with sugar, soy and ethanol.