Introduction: Doug Bell grew up in Los Angeles and graduated from Wesleyan University. After nearly a decade as an industrial designer and project manager in a professional education company, Bell was recruited to the growing Supercuts haircutting franchise. He went to Houston to open his own stores and from '83 – '04, Bell grew his Supercuts business to $18,000,000 annual sales with 500 employees. He was the third largest franchisee in the system in 2000 with 52 shops in Houston, TX and Florida. After leaving Supercuts and selling his business, Bell began focusing on farming and eventually decided to offer farmland in Uruguay, resulting in the current Grasslands UY, LLC project. He has completed five marathons and was a nationally ranked Grand Prix motorcycle racer.
Daily Bell: You're doing something very interesting – and it's a growing trend, in our view. Tell us about it.
Doug Bell: We syndicated a farming investment business we call Grasslands, which enables people to participate in buying farmland outside of the United States. Farmland is a hard asset that provides capital stability, offering operating income and asset appreciation. We began buying Uruguayan farmland almost a year ago.
Daily Bell: And how is it going from a buying perspective?
Doug Bell: We've purchased two farms so far, and are looking for our third farm.
Daily Bell: Okay … but why go out outside the US?
Doug Bell: Among other reasons, for purposes of diversification. People have stocks, bonds, even precious metals but it doesn't occur to most people that they can add farmland to their portfolio.
Daily Bell: Should it?
Doug Bell: Well, in our presentation, we point out that food is an essential survival element. If you want to make a compelling investment, you could do worse than invest in some sort of food production. The world's farmland is finite and beginning to reach its limits. Actually, a very small percentage of the world's arable land remains to be developed and some part of existing farmlands suffer from abuse, erosion and urban encroachment. The better producing the property, the more it positively correlates to inflation and commodities prices. The world's best farmlands with adequate water will always be in demand, and will continue to be increasingly valuable.
What we're trying to do is offer superior farmland investments in Uruguay. Our charter, if I may quote some of our material, is to invest in the world's best farmlands – with good water resources – located in a politically, socially and financially stable environment.
Daily Bell: Uruguay is that environment?
Doug Bell: Uruguay is one of the places in the world that offers some very positive characteristics when it comes to farmland.It possesses the right combination of natural, political and economic characteristics to optimize farmland investments. It's ranked equal with the US and Chile for lack of corruption, safety, political transparency and economic freedom. Also, it has no restrictions on foreign direct freehold ownership of farmland and has ahigh level of protection of property rights and efficient legislature with no corruption and a solid record of governance as a 'rule of law' republic.
Daily Bell: The country is not so well known.
Doug Bell: No, it is a small country on the South Atlantic Ocean between Argentina and Brazil. The big countries get all the press – Brazil, Argentina, Chile, etc., but from a farming standpoint, Uruguay has a lot to recommend itself, including rich, fertile farmlands, a moderate temperature that offers two growing seasons, ample rainfall and an experienced farming community that provides nearly 10 percent of GDP.
Daily Bell: Have economic problems in Argentina affected Uruguay?
Doug Bell: Good question. I'm not an expert on Argentina's economic or political situation. But the locals tell us Uruguay is better insulated this time than the last time Argentina's economy imploded ten years ago.
Daily Bell: Argentina has put in place price controls and is restricting the number of dollars that people can take out of the country.
Doug Bell: Yes, there are currency controls in place and since Argentina took over the Spanish oil company Repsol, there have been various repercussions that have played out domestically and, of course, in the public arena. But as I said, Uruguay so far has been insulated to some degree from that. In fact, Argentines look to Uruguay as a safe haven if they can move themselves or at least their assets there legally, though that is getting harder to do from an Argentine standpoint.
Daily Bell: What's the end game there?
Doug Bell: Hard to say. Maybe some kind of formal devaluation and continued hard times for Argentine people, businesses and international commerce. But intrinsically there's nothing wrong with the Argentine economy. They have a good many domestic industrial strengths, including a big farming sector, so what we've got going on there is, at the moment anyway, a financial crisis even more so than an economic one. Of course, things could change.
Daily Bell: Isn't Uruguay called the Switzerland of South America?
Doug Bell: If by that question you're referring to the idea that Uruguay is often seen as a kind of regional safe haven in difficult times, I think that is so. In fact, Uruguay sits between Brazil and Argentina and some would say its situation there is no accident. Maybe every continent needs a Switzerland.
Daily Bell: It's not strictly speaking a South American country …
Doug Bell: Well, obviously it is physically but if you're referring to the population, yes … you're looking at a Spanish and Italian population with other European settlers, as well, from Germany and Eastern Europe.
Daily Bell: So in a sense it is a European country.
Doug Bell: It's got a combination of influences from Europe and South America and it is a very small country, only about three and a half million people, so the cultural influences tend to be cohesive. The big city is Montevideo, and that's also a banking center. But much of the rest of the country, especially in the interior, is just one big farm. And much of that farmland is in increasing demand.
Daily Bell: What are the big crops?
Doug Bell: Soy is a big crop because it has so many uses. And wheat, corn, barley and sorghum. The Uruguayans are famous for their beef, much of which is exported – though obviously a good amount stays at home, as the Uruguayans are big beef eaters. The native tradition includes parillas, and you can see them throughout Uruguay and especially in Montevideo. These are wood-driven grills that allow hot charcoal to slow-roast meats and are very popular for both home cooking and in restaurants.
Daily Bell: Yes, we're aware Uruguay does have a reputation for beef, including beef that has little or no exposure to the kinds of hormones and other additives that are found in Western cattle. Is it efficient from an economic standpoint?
Doug Bell: The numbers seem to bear that out.Uruguayan farmland on average is one-third the cost of equivalent US farmlands. As well, Brazil, Argentina and the United States have 40 percent higher taxation. Uruguayan farmers can produce a double crop and these advantages give a significant multiple capital advantage for investing in Uruguay.
Daily Bell: From a portfolio standpoint, would you consider farmland a commodity?
Doug Bell: Within an investment context I certainly would. Water, food and energy will continue to increase in value and cost as worldwide demand grows and fiat currencies inflate. Experts like Barton Biggs and Jim Rogers tell us the best options are precious metals, superior art and jewelry, and other hard assets, including farmland.
Daily Bell: Generally speaking, would you recommend farmland as an investment?
Doug Bell: Again, when you look at land what you must conclude is that we're not making any more of it. And thus, for various reasons we're looking at a diminishing, finite supply. Underdeveloped farmland is increasingly more difficult to find and current farmland is subject to drought, erosion and urban uses, so worldwide farmland per person continues to shrink.
Also, though people may not know this, farmland is less productive these days on the whole. The Green Revolution of the last century was based in large part on artificial methods, including fertilizer and pesticides, to keep up with previous yields. It's also water intensive and fresh water supplies are often diminishing in farming regions. Meanwhile, the world's population is increasing, demand for grain is increasing and demand for protein is expanding as well.
Daily Bell: Okay. We've discussed Uruguay from a farmland and investment perspective but let's get a bit more of a personal perspective from you. Your father was a farmer?
Doug Bell: My grandfather was a Canadian immigrant who farmed in Colorado. My father managed the Greeley farms and I always wanted to get re-involved with farming … though my professional career focused on building entrepreneurial businesses, especially via Supercuts – the haircut franchising operation.
Daily Bell: You were obviously successful with Supercuts.
Doug Bell: I was fortunate to do well. I owned a number of stores and was involved in the larger company. When we sold our stores, my wife Carolyn and I finally had the time and ability to look around and examine other personal and professional opportunities. My background includes both managing and syndication. Once we became convinced that farmland was an opportunity we wanted to invest in, then offering it within a larger investment context – to other people – was a logical evolution. Nine months after we made the decision, we began presenting our private offering to people. Now we've raised several million dollars and we will keep offering the farmland opportunity and keep buying farmland as our resources expand.
Daily Bell: When did you begin the formal money-raising effort?
Doug Bell: We started raising money February 2012 and our first tranche closes at the end of March. The land we've purchased already, by the way, has already appreciated about 15 percent.
Daily Bell: You've harvested crops?
Doug Bell: Yes, we have, and we're pleased to see the process in action. One of the things that sold us on Uruguayan farming is the practice of no-till farming, which is sustainable and conservative.
Daily Bell: How does no-till work?
Doug Bell: You could say it begins with harvest. Crop residues or other organic amenities are retained on the soil surface and sowing/fertilizing is done with minimal soil disturbance No-Till farming applies advanced technology to preserve as much of the farming ecosystem as possible. The net effect is lower farm costs, environmentally sound practices, and greater yields. Crops are scientifically rotated to improve soil condition and nutrients.
Pretreated seeds are planted at a precise depth so you don't have to treat the soil itself. And the big issue is that you are not tilling when you plant. The lack of tilling reduces erosion and other damage that intensively-farmed fields often incur.
Daily Bell: So is Green Revolution farming still prevalent outside Argentina and Uruguay?
Doug Bell: Importantly, the Green Revolution approach depletes soils nutritional and microbial content, which then has to be supplemented with fertilizer inputs. . Maintaining soil health has to be Job One. By doing so, the microbes and worms can keep the soil healthy; and by following best practices of local agriculture experts, rotating crops helps ensure sustainability.
Daily Bell: What's the weather like?
Doug Bell: It's fairly dependable. Uruguay's rainfall is consistent. We think of climate change more as climate volatility; weather extremes are quite apparently here. Polar caps are reaching extremes of melting or icing; and Australia, for instance, just invented a new color for record highs.
Daily Bell: Are you confident food prices will continue to rise?
Doug Bell: Well, that's one reason we decided to involve ourselves in this project. We believe that currencies around the world will continue to lose value because of the way the current monetary system is set up. At the same time, crops will continue to appreciate. Corn, soy and wheat have all increased between 12 – 15% each year for over ten years now– and meat and poultry have increased in the 6-8% range as well.
Daily Bell: You don't see things turning around?
Doug Bell: I think currencies are being debased and they are in a 'race to the bottom.' Your 1960 dollar has the purchasing power of three cents today. Meanwhile, hard assets have appreciated rapidly – including gold, silver, even art if you can call that a hard asset, and people do. The trends are clear. We have less farmland, consistent world-wide erosion of farmland, and an upper limit on what is available. At the same time, you've got a growing population and a growing appetite for meat protein. How are we going to feed 9 billion people?
Daily Bell: Vegetarianism?
Doug Bell: We developed as carnivores and that was how our brains got bigger. There's a great deal of talk these days about conservation and vegetarianism, but the most important thing that made us human was eating meat, which in turn increased our brain size. And meat continues to be a staple. China has more pigs than the next 43 countries in the world combined.
There's no doubt the world will feel food constraints – I think so anyway and I'm not alone. China has become a net importer of grain. Because of GMOs and other trends we're ending up with fewer strains of seeds, and fewer varieties of food. Wheat allergies are becoming a problem, as is obesity. Food substitutes like corn syrup are badly metabolized and you can make the argument that even dairy is bad for mature adults. Our daughter lost 65 pounds by cutting dairy, sugar and wheat out of her diet, as well stopped drinking coffee and alcohol.
Daily Bell: How about carbonated drinks?
Doug Bell: You've got to stop sodas altogether if you can. They're really not good for you. Drink carbonated water if you can.
Daily Bell: In other words, eat as naturally as you can?
Doug Bell: There's considerable evidence that we've been evolving along with our diet. Blood type O comes out of the Rift Valley and the A, B and AB blood types came later and were perhaps dietary adaptions. There's some evidence, from what I've read, that the estimated 700 year old AB blood types are more tolerant of grains, breads and various kinds of domesticated food products.
Daily Bell: Obviously, there are reasons you've decided to create a farming investment pool that go beyond the monetary aspect.
Doug Bell: We're concerned about nutrition as a family and we're concerned about the worldwide financial situation. If things ever got really bad in terms of wars, famines, etc. we can devote some of our Uruguayan farming acreage to housing and food crops.
Daily Bell: That scenario is a possibility – is it a probability?
Doug Bell: I'm not hopeful about what is going on in the US. The current trends are not encouraging.
Daily Bell: Thanks, Doug.
It was interesting to interview Doug Bell, who has a track record as an entrepreneur and businessman. While buying farmland in Uruguay may not seem to be a logical "capstone" career choice, it makes sense within the context of Doug's other concerns that have to do with nutrition and the unsettled state of the world.
Uruguay itself is an interesting place and Doug is correct that it is seems more stable than other South American countries, though how stable remains to be seen. From an objective vantage point, it sometimes seems as if there is no place to go that offers a guarantee of peace and security, and certainly the United States itself, like the rest of the Western world, has its problems.
The idea of creating an investment vehicle that serves double duty as a money-making entity that can produce annual dividends as crops are sold and a metaphorical port in a storm seems like a clever way of accomplishing two objectives at once. We're sure that Doug is part of a growing trend that not only includes "getting back to the land," but doing so in a way that is financially profitable and environmentally successfully.
Doug's particular innovative solution is familiar to us from a socio-philosophical perspective. The term we would apply to it is "human action."
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