The Pereda name is not yet as well known outside Argentina as it is inside. But the family’s latest generation of entrepreneurs is determined to change that.

By Dario Bard

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On the walls of the Buenos Aires offices of Pereda Agro, S.A. hang portraits of ancestors from generations past, some from more than a century ago. These forbearers represent the company’s roots, and it is fitting that their presence accompany Matías and Agustín Pereda as they talk about how the family enterprise is stepping up to the next level.

“Last year was the first year we exported,” says Agustín. “We shipped nearly 30 containers of confection sunflower to countries like United Arab Emirates, Spain, Egypt, Syria, Colombia and Mexico. Today, we are shipping 4,000 to 5,000 MT of confection sunflower a year; that puts us among the top seven confection sunflower exporters in Argentina. We plan to export 150 containers this year and the goal is to export 10,000 MT per year by 2017. Additionally, this year, we’re going to start exporting popcorn.”

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Photo: Matías and Agustín Pereda

Pereda Agro S.A. was established a decade ago, making it the newest company in a family-managed business group that traces its origins back more than a century, when Celedonio Pereda purchased a farm called Nueva Castilla in the town of Trenque Laquen in 1883. Pereda Agro’s mission is to add value to the crops produced on the farms owned by Celedonio’s descendants.

“My father, Eduardo, Jr., and my uncle Santiago, were looking to add value to our products,” says Matías, recounting how Pereda Agro came about. “They experimented with various crops until they hit on confection sunflower in 2004.”

In 2006, Pereda Agro sold its first confection sunflower crop through an exporter. But then the idea to export for themselves began to take shape.

“From 2009 to 2011, Matías and I went to trade fairs like Anuga and Gulfoods to check things out,” relates Agustín. “We learned a lot about the business during those three years. We really studied the market before we dove in. So when we started exporting for ourselves, it felt familiar. It was just adding that last step, because we’ve been doing everything right up to the actual shipping of the container since 2007.”

“In 2012,” continues Matías, “we started going to the trade fairs as exporters.”

Intrigued by the emergence of a new player in the Argentine specialty crops arena, IFT caught up with the brothers Pereda at their offices in Buenos Aires for an interview just as they were preparing to head out to Cologne, Germany for Anuga 2013.

IFT: What factors led you to decide to enter the popping corn business this year?

Matías: We had been growing popping corn up to 2007 for other exporters. Then we had some dry years in Trenque Lauquen and we stopped, because popping corn is a less stable crop than, say, sunflower or common field corn because it doesn’t tolerate drought conditions as well, and Trenque Lauquen is right on the edge of a drier area that gets less precipitation.

Agustín: Then when we started going to the trade fairs, we had people come up to us asking about popping corn. We were there to sell confection sunflower, and we had clients expressing interest in popping corn.

Matías: We already knew how to grow it and process it from that past experience. Besides, if you know how to process confection sunflower, you can also process popping corn. The only thing we needed was the plant and the courage to do it.

IFT: What markets were demanding popcorn?

Agustín: In Europe, for instance, there is more demand for popping corn than confection sunflower. In the United Arab Emirates, too. Besides, you attract a lot more attention at these trade fairs if you offer two or three or more products instead of just one. With popping corn and confection sunflower, you can often sell both to the same client under the same arrangement. They are both very similar products in that regard.

Matías: The fact is that it is advantageous to have a broader portfolio of products. Ours isn’t as broad as we would like it to be because we like to do what we do well. We’ve launched these two products and we are doing trials with garbanzos and peas to familiarize ourselves with those crops and see if they fit into our production plans and our rotations.

IFT: What are your popping corn production plans for this year?

Agustín: We have the bags ready to go and we are ready to plant ourselves and through arrangements with other producers. We are looking to plant 1,085 hectares and produce somewhere between 4,000 and 5,000 MT, depending on the yields we get. I expect we’ll be shipping 180 containers this year to many of the same clients who buy confection sunflower from us. We will also be selling through brokers that we have a relationship with.

IFT: Now that you are exporters, when you contract other producers you are on the other side of the negotiating table, so to speak. What sort of arrangements do you have with them?

Matías: We see them as our allies, and instead of offering them a fixed price, we invite them to share the profits with us. So, they bring us the sunflower crop, we process it and absorb the costs of freight, packaging and shipping. We subtract our costs from the final sales price and split the profit. We’ll do the same with popping corn producers.

Why have we implemented this system? When we started exporting, my father was on one side of the counter and the family business was on the other. He had to divide the profits between Pereda Agro, which doesn’t have its own lands and rents, and the family business that provided him with the confection sunflower crop. So he developed this profit sharing system that applies to the entire value chain. And we use that same system with third-party, non-family producers, too.

This has created farmer loyalty. It doesn’t matter what the price is at planting. We go in together, like partners, sharing the profits and the risk.

IFT: Is this type of arrangement common in Argentina?

Matías: The relationship with the producer is changing, not because we’re the innovators of this type of arrangement, but because processors and exporters need to offer different alternatives to farmers to generate the product, and this need has led to the formation of new types of profit sharing arrangements.

All the companies here are doing something similar today so that they can get fields planted. In the case of popcorn, for instance, prices over the past two years have ranged between US$ 400 and US$ 1000 FOB. When the price is at US$ 400, you are going to pay the farmer to grow popcorn based on that price. But when the price goes up and you are selling at US$ 1000, the farmer isn’t going to be happy about it. So our idea is to form a partnership that joins us through good times and bad. That’s how this system came about and it has worked phenomenally.

IFT: So you don’t work with pre-sale contracts?

Agustín: With specialty crops, the price fluctuates quite a bit. We never sell with more than a month and a half or, max, two months of anticipation. The problem with pre-sales is that, if the price drops when the time for the actual sale comes around, you are going to run up against buyers who will make all sorts of excuses to default on the contract and not buy. There is no futures market with specialty crops.

On the other hand, producers, who are worried about covering their costs and making a profit, demand a fixed price upfront from processors and exporters. As a result, when prices go up during good times, processors and exporters make much more off pre-sale arrangements than the farmer. And during bad times, the farmer has to deal with processors and exporters who will try everything to wiggle out of the deal.

That’s why many companies have a new sort of profit sharing system like we do. Many base it off the FOB price, which is more transparent. The farmers we work with trust us, so, although our costs can change depending on taxes and so on, they believe we’ll subtract no more than the appropriate amount.

In short, things were typically done by pre-sale contract, but today we are seeing this new tendency.

IFT: What would you say is the key to your success?

Agustín: The key for us is quality. We maintain the highest quality standards, using state-of-the-art technology during production in the field through to cleaning, sorting and bagging. Good money management is also important, because sometimes you can’t sell, and when you do, sometimes payment comes 60 days later. And lastly, confidentiality when it comes to the producers we work with, so as not to cause friction among colleagues.

Matías: I would only add that the strength of the company is in the familial ties that bind it together. Working at Pereda Agro today we have my father, Eduardo, Jr., and my uncle Santiago handling the production side. My brother Lucas manages the financial side of things and Agustín handles the exports, while I run the processing plant. And then there’s our grandfather, Eduardo, who sits on the board and advises us based on his many years of experience. A lot has changed since 1883, but this is still a family company.