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IIF - Trading Platform for Agricultural Assets

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DamienR

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I am new to this forum but have been an active US commodity trader for over the past 12 years. I am seeking information on whether anyone has heard of and used this new Agricultural Exchange called IIF. It stands for "Invest Inya Farmer" . According to their website, iif.today, a farmer sells his products like cattle, oysters, bees, rice, and even apricots on the IIF platform, and mum and dad investors can buy any small amount that suits their risk profile, like a cow or 20 doz oysters or 2 beehives. The investment cycle is normally 6-12 months. A mate of mine has been using the app for some time now, and the annualised returns have been an impressive 20%. He said the most important strategy is to have diversity in your portfolio, which will minimize risk. It sounds interesting and I wonder if anyone is familiar with this platform.
 
welcome to ASF ,

nope , i hadn't heard about it until your post

however currently i invest in ASX listed stocks ( that include some agricultural companies ) and have some fruit and vege plants in the backyard
 
DamienR said:
I am new to this forum but have been an active US commodity trader for over the past 12 years. I am seeking information on whether anyone has heard of and used this new Agricultural Exchange called IIF. It stands for "Invest Inya Farmer" . According to their website, iif.today, a farmer sells his products like cattle, oysters, bees, rice, and even apricots on the IIF platform, and mum and dad investors can buy any small amount that suits their risk profile, like a cow or 20 doz oysters or 2 beehives. The investment cycle is normally 6-12 months. A mate of mine has been using the app for some time now, and the annualised returns have been an impressive 20%. He said the most important strategy is to have diversity in your portfolio, which will minimize risk. It sounds interesting and I wonder if anyone is familiar with this platform.
Click to expand...

Never heard of it, thanks for bringing it to our attention.

IIF seems to stand for Invest In Farming according to their site.

@Joe Blow do you think you'd mind updating the title to include the acronym/name?

It seems like it's essentially forwards (see the difference vs futures here: https://www.investopedia.com/ask/answers/06/forwardsandfutures.asp) on the settlement price of the commodity (non-deliverable).

The farmer shorts their commodities to you and promises to return you the profits. You are long the settlement price which can fluctuate based on supply/demand/weather/macro conditions. You can expect to profit if the settlement price is higher than what you paid. You can expect to lose money if the settlement price is lower than what you paid.

From their FAQ
IIF Coop will source, screen and offer share farming opportunities to its members via the IIF app. As a member, you can elect to participate in any program that you are interested in, in the volumes you desire.

Once a member selects an opportunity, the member provides the funds to the IIF Coop by way of a member contribution (debenture). IIF Coop will then purchase the items on the member’s behalf and the item will be show in the member’s Farm on the IIF app.

The relevant farmers will use their best endeavours to farm the items on behalf of IIF (and the member). The farmers will provide updates during the growing period. An indicative holding period will be displayed, but the farmer will determine when the items are ready to sell and fetch the best price. IIF Coop will oversee this process and collect the proceeds upon settlement.

The profit (or loss) will then be determined and settled with the member.
Click to expand...

For example, if a farmer shorts 10 boxes of avocados to you:
  • You might profit if there is strong demand for avocados due to economic boom
  • You might profit if farmers grow not enough avocados and cause undersupply
  • You might profit if a storm destroys other avocado crops but not your farmers
  • You might make a loss if economic bust reduces demand for avocados
  • You might make a loss if farmers grow too many avocados and cause oversupply
  • You might make a loss if a storm destroys your farmers avocado crop
From their FAQ
There are risks in farming and there are no certainties in the outcomes. The harvest yield, price and timing will be determined by an array of factors, especially weather and market conditions. There is a chance your farm product will be negatively impacted and not reach potential. In this case you may suffer a financial loss on that farm item.
Click to expand...

Some things I like about it:
  • Get exposure to Aussie Ag commodities which aren't really available on any easily accessible markets
  • It's essentially a unlevered forward, so no leverage risks
  • The farmer handles the product sale
  • There's no concern about making a mistake and ending up needing to take delivery of 400 bushels of wheat or something
Some things I don't like about it:
  • Physical markets are not transparently priced, how do you know the farmer is getting the best price for his avocados or trees or whatever. They've already sold the risk to you, what's the incentive for them to get the best price?
  • It's not a two way market, you are entirely reliant on IIF pricing each deal with an appropriate risk/reward ratio
    • This is really the biggest issue.
    • You hopefully get paid to warehouse the farmers forward risk. How do you know the price is right? You don't!
  • In each deal you are making concurrent bets on individual commodity prices, market conditions, macro conditions, etc
    • Even if you diversify you are still making an aggregate bet on commodity pricing and macro conditions
  • Ag commodities are notoriously volatile and this is a long only bet with a 6-12month lockup.

As for your friend making annualised 20% return...what's the timeframe? Futures traded Ags have done exceptionally well off the pandemic lows...are they outperforming the benchmark or just matching it?
(below Invesco Ag ETF (USD) ratio'd to Invesco AUD ETF (USD) to try and approximate AUD pricing)

1664768898773.png
 
InsvestoBoy said:
Never heard of it, thanks for bringing it to our attention.

IIF seems to stand for Invest In Farming according to their site.

@Joe Blow do you think you'd mind updating the title to include the acronym/name?

It seems like it's essentially forwards (see the difference vs futures here: https://www.investopedia.com/ask/answers/06/forwardsandfutures.asp) on the settlement price of the commodity (non-deliverable).

The farmer shorts their commodities to you and promises to return you the profits. You are long the settlement price which can fluctuate based on supply/demand/weather/macro conditions. You can expect to profit if the settlement price is higher than what you paid. You can expect to lose money if the settlement price is lower than what you paid.

From their FAQ


For example, if a farmer shorts 10 boxes of avocados to you:
  • You might profit if there is strong demand for avocados due to economic boom
  • You might profit if farmers grow not enough avocados and cause undersupply
  • You might profit if a storm destroys other avocado crops but not your farmers
  • You might make a loss if economic bust reduces demand for avocados
  • You might make a loss if farmers grow too many avocados and cause oversupply
  • You might make a loss if a storm destroys your farmers avocado crop
From their FAQ


Some things I like about it:
  • Get exposure to Aussie Ag commodities which aren't really available on any easily accessible markets
  • It's essentially a unlevered forward, so no leverage risks
  • The farmer handles the product sale
  • There's no concern about making a mistake and ending up needing to take delivery of 400 bushels of wheat or something
Some things I don't like about it:
  • Physical markets are not transparently priced, how do you know the farmer is getting the best price for his avocados or trees or whatever. They've already sold the risk to you, what's the incentive for them to get the best price?
  • It's not a two way market, you are entirely reliant on IIF pricing each deal with an appropriate risk/reward ratio
    • This is really the biggest issue.
    • You hopefully get paid to warehouse the farmers forward risk. How do you know the price is right? You don't!
  • In each deal you are making concurrent bets on individual commodity prices, market conditions, macro conditions, etc
    • Even if you diversify you are still making an aggregate bet on commodity pricing and macro conditions
  • Ag commodities are notoriously volatile and this is a long only bet with a 6-12month lockup.

As for your friend making annualised 20% return...what's the timeframe? Futures traded Ags have done exceptionally well off the pandemic lows...are they outperforming the benchmark or just matching it?
(below Invesco Ag ETF (USD) ratio'd to Invesco AUD ETF (USD) to try and approximate AUD pricing)

View attachment 147610
Click to expand...
Hi Insvestoboy, thank you for your feedback and you make some valid points. I will talk to my mate again and discuss these points with him. That said I might put my toe in the water and see what it's all about.
 
DamienR said:
Hi Insvestoboy, thank you for your feedback and you make some valid points. I will talk to my mate again and discuss these points with him. That said I might put my toe in the water and see what it's all about.
Click to expand...
Did you end up investing your capital via IIF? Keen to learn about your experience if you don't mind sharing.

I came across IIF's ad on insta, and downloaded disclosure statement and coop rules just to get an idea of how it operates. I certainly liked the concept from the financing perspective to support farmers' endeavours, but a little bit concerned about the key point that @InsvestoBoy raised (you entirely relying on IIF pricing) and transparency of pricing mechanism for the produce.
 
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