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Profit-yielding bananas shortage

Russian businessmen Oleg Dobrovolsky and Alexander Bychkov launched BananaCoin banana farm in Laos. Through a crowdfunding, by late February they raised $2.5 mio from 10,000 investors to expand the farm, and they are not going to stop there. The secret of their success is a very low token price which is 80% lower bananas market price and thus ensures large investments.

Banana farm in Laos

BananaCoin farm is situated in Laos, in Vientiane province. The same name company is registered there as well. The crop estate is currently 100 hectares. The lands were rented from local peasants for 30 years. For three years by now BananaCoin has been growing bananas to export them to China where plantations are shutting down because of the pesticides use.

BananaCoin grows Lady Fingers bananas and operates as an Organic Farm. It does not use any pesticides and applies organic fertilizers instead of chemical ones. The concept of organic agriculture is also adhered to by Russia’s LavkaLavka and its partners who have issued biocoin, a digital currency of their own. In February they accomplished an ICO having raised $16 mio.

In the near future, BananaCoin team intends to expand its plantations to 360 hectares. For that, they will need to raise slightly over $7 mio. A full production cycle from preparation of the ground to reaping the first crop takes about 18 months. The farm had its first harvest in December 2016. In the long-run, BananaCoin team plans to increase its plantations to 1,000 hectares and establish cooperation with major international and regional organizations.

Local authorities granted BananaCoin respective permits and tax preferences, as in Laos, businesses do not pay taxes for four years following their incorporation. In China, running such a business is more expensive, while Vietnam’s agriculture is environmentally unfriendly due to chemical pollution of the soil during the war. BananaCoin founders invested about $2 mio in the business which in 2016 generated $4 mio.

The team of the project includes Alexander Magomedov who has lived in Laos for 17 years, is fluent in the local language, has good relationship with the local governor and is in charge of the plantation’s performance. Prasan Sangsatjtham is BananaCoin’s agrotechnologist, whose family owns large banana plantations in Thailand. The owners of BananaCoin though, are two Russian businessmen who had had nothing to do with bananas or with agriculture in general. Alexander Bychkov, one of BananaCoin cofounders, had registered Freestyle.Dist skateboarding goods and sportswear distributor in Russia, while Oleg Dobrovolsky, according to Kontur.Focus service, owns 50% of Moscow Avtolombard No 1 (a vehicles pawn shop) and an individual enterprise of the same name, whereas previously he had a share in Dunayskaya Hotel in Saint Petersburg.

Banana option

One BananaCoin token is secured by 1 kilo of bananas. BananaCoin is in fact an option. Under its terms, 1 kilo of Lady Finger bananas until February could be bought for $0.5, while a market price of such bananas ranges from $1.14 to $3.5. The price is higher than in stores in Moscow, as BananaCoin supplies ecologically-safe bananas.

BananaCoin is also a financial instrument which can be traded at a cryptocurrency exchange. A banana plantation brings crop eight months after bananas are planted. In 18 months BananaCoin honors the terms of the option or exchanges its tokens for money or bananas. A BananaCoin token can be sold at exchange at an attractive price or one can come to Laos to get one’s bananas. BananaCoin can arrange a delivery to China, but the minimum shipment is to be 16 tons or one truck. Lady Finger is an elite brand of bananas which are popular in China. BananaCoin investors may expect a double-fold growth in the value of the tokens in 18 months’ time, the production company claims. If at an exchange the price of BananaCoin drops, the company is ready to buy it in 18 months at its double face value.

As Nikolay Kardashov, the project consultant, told Invest Foresight, “$2.5 mio means some 4K tons of bananas, which is less than one harvest of an operating farm”.

According to Kardashov, BananaCoins were purchased by private investors, some 10,000 individuals. There were no large retailers or exporters among those.

Large retail companies are not aware of BananaCoin yet”, the company representative notes. Alexander Bychkov says, he will not sell bananas to Russia, as “We have a stable market in China and we want to sell our bananas at above $1.14 per kilo”.

Shortage means profit

Since 2011-2012, exports of bananas from Laos to China doubled and keep growing. In 2012, Laos and China signed an agreement on export of bananas to China which regulates customs procedures, quality control and product safety. China annually consumes about 13 million tons of bananas. Over eight years, consumption of bananas grew 12-fold and keeps growing. Laos, besides, has prohibited Chinese producers who use chemicals grow bananas on its soil. In the neighboring Thailand banana plantations are lost because of strong sea winds, while in Laos there are no such winds since the country has no access to the sea.

One more factor contributing to the expansion of banana business in Laos is fruit diseases. Banana fungi affecting the most common brand Cavendish is gradually conquering the world. By late 2017 the disease had affected over 30% of banana plantations in Asia and Australia and the fungi was detected in Africa and the Middle East. The producers worldwide are now actively searching for a Cavendish substitute. Even in Moscow one may observe shortages in bananas supply. The latest shipments were all of poor quality, with bananas looking fine on the outside but decayed inside.

By Natalia Kuznetsova

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