Invest in rice paddies! (No thanks).

December 9, 2011

I must have missed ticking a “don’t sell my name on” box somewhere recently, as I am being inundated with unasked for investment propositions, mostly real estate schemes in various parts of the world, or, in this case, a more interesting but equally suspect investment in rice growing.

If someone cold-emails me with investment propositions, I generally delete them as scams or bad ideas. I can dream up enough rubbish investments in various parts of the world myself, and have done, without others pushing theirs on me.

But this one about investing in rice did strike me as interesting only because of its novelty value (I doubt it has any other value as an investment, that’s for sure).

An outfit based in the UK cheerily suggested I should bung nearly 6,000 quid (nearly 300,000 baht), or multiples thereof, into a rice-growing scheme which it proudly introduced as follows:

“Rice is the most consumed grain in the world. Invest with a projected 15% income per harvest .“

It then went on to suggest there would be "up to" two harvests a year (so none or one then?), and that I could sell at any time with their online trading platform (on which they also took a commission), and that (ominously) I could have all my money back if the “plantation” (surely rice paddy?) failed to yield anything within two years.

Besides all the other sales puff, it said the 6,000 quid would buy 3 acres (around 2.5 rai) of rice paddy, which sounded very cheap to me - of course depending where the rice paddy is located, and of course it did not say.

Dear Sir unfortunately, due to recent flooding, I regret to inform you......

Out of interest, I wonder if any readers in Isaan could say how many rai of rice paddy you could buy for 300,000 baht?

Having read this offer, I quickly binned it.

Why?

Well, like I said, I can lose my own money in stupid investments, thanks, without having to hand it over to internet cold-callers to do it for me, but also:

I noted the 15%income figure was not profit, just income. What does that even mean? Does it mean out of 100% rice planted, only 15% is sold? If so, what happens to the rest of the 85% “income”? On second thoughts, maybe I shouldn’t ask.
Don’t ask for my money for a rice scheme and call it a plantation;
Rice is basically a commodity, and as such it is subject to a fluctuations in price. Who can say where the price of rice will go? One could argue it will go up in the short term, but just because I hand over my cash today doesn’t mean it will be invested today. Maybe I will miss the price hike caused by the recent floods, or, more likely, the promoters of the scheme will benefit from that, as they use investors’ cash to speculate on the markets before “buying” that 3 acres of rice paddy. There is nothing to stop them doing this. What happens if they lose it all?
As a commodity crop, rice is subject to the weather. Try telling Thailand’s, Cambodia’s and Vietnam’s farmers they will be getting a double rice crop this year after the recent floods. So what happens if my three acres of rice paddy are inundated by water and won’t produce even one good crop in a year? I’m sure this is another excellent excuse for where the “lost" 85% income goes.

Even if it was a viable investment proposal (and it may well be), I can buy my own rice paddy in Thailand, and lose my money directly investing in rice myself. But then at least, even if the crop fails, I get no profit, I break my back toiling in the fields, I – or rather my loved ones – would actually have title to the land, and not all the money would disappear in a corporate “Dear John” letter in a couple of year’s time.

Has anyone else been invited to invest in this or other unusual money-making schemes recently?