Getting Started with Greenfield Bamboo: Video 2 - Economics - YouTube

So let's talk about the economics of getting into the bamboo farming business. You know,

the costs, the uh, what you expect in returns, and so forth. And as part of that, I need

you to understand the plant deal that you make with OnlyMoso because it's important.

You might even, in the back of your mind be thinking well if this bamboo farming is so

great, why is it just now happening? Why didn't it happen 25 years ago, for instance? So,

I think that's a good question. The main thing to understand is that farmers are really careful

about investing a lot of money in a new crop without knowing exactly how they're crops

going to make it to the market place. So we see that with a lot of crops. OnlyMoso had

their own genius idea on this. They take over that market risk by providing a 10 year contract

to new farmers. They buy all the crop, a production contract with a floor and a rise for 10 years.

That's great. So, that really gave encouragement to the industry to get planting. That uh,

they didn't have to take that on themselves. Then when you get to the plant deal, understand

that the cost of the plant is 50 dollars. Now if you compare that to a citrus tree of

8 dollars, it's a lot of money. But with that, is that 10 year contract with favorable pricing.

So, that's why it cost what it does. But, OnlyMoso understood that 50 dollars was a

lot of upfront cost, so they charged half of it in the first year. The remaining part

was deferred until years 3 and 4, where it could be paid out of production. And worth

noting, it only gets paid out of production. You don't write a check if there is no production,

you would never pay it. So you can see the interest of investor and OnlyMoso are aligned

in having a successful farm. There are 3 real components to the cost. One is plants and

one is the farm build out, okay. The land if you uh, don't already own it, it's going

to cost you about 7 to 8 thousand dollars per acre if you're getting it through one

of the Managed Farms that Greenfield Bamboo has. The plants are going to cost a little

over 6 thousand dollars per acre. The farm build out, you remember we talked about those

3 steps of the farm build out, which takes you all the way through to having it planted,

that costs a little of 5 thousand dollars per acre. All in all, if you are a professional

farmer and already have the land, you're going to paying about 11 thousand dollars per acre

in upfront costs. The investor, including land, is going to be paying about 19 thousand

dollars per acre. But, you're going to get income when it's mature, which is about year

6, of about 15 thousand dollars per acre. I know, that's really big income and I'm glad

it's there. We like that, right? So, and I would just caution you to remember that we're

talking about farming. This is not just a forecast on a spreadsheet. You have variability

in farming. You have a good season and a bad season. You can have variability across different

farms, etc. So, anytime you're considering production or income, just say plus or minus

25 percent. I would think that would be a safe way to frame it. Your first year of harvest

is year 3. Our experience, because we've had experience with a couple of years of harvest,

is that year 3 production is 3,000 - 3,500 pounds per acre. Okay. What I didn't tell

you is that floor price, the fixed minimum price, is a dollar a pound. So you have an

easy conversion in understanding dollars on this. So if I say 3,000 pounds, you're going

to think 3,000 dollars. And that's fine. So, you can see that if you took out the harvesting

and you took out caretaking, what we've found is that you're netting 2,000 dollars per acre

in your first year of production. It seems amazing. It is! At maturity, which is about

year 6, we estimate, and this is from information we get from Thailand and other industry people,

production should be about 15,000 - 20,000 pounds per acre. So, this is exciting! I want

you to know that we think 75 percent of your income will come from the bamboo shoots, which

I'll explain more about what those are, and 25 percent of that comes out of the wood,

from the culms. Ok, so you get the lay of the land of costs, income, and we're going

to talk more about the details as we go forward.