Shortly after the financial crisis in 2009, investors were beginning to turn to real assets for portfolio stability. HighQuest Partners, a strategy consulting firm in the global food, agribusiness and biofuels sectors, began receiving many requests from institutional investors for help to understand the agricultural asset class. This influx of interest encouraged the firm to produce the first-ever Global AgInvesting conference in New York, which attracted about 150 people in its first year.
In 2010 that number doubled, and in 2011 it doubled again, the growth of the conference mirroring the growth of the sector. Global AgInvesting (GAI) now hosts five events including the flagship event at the Waldorf Astoria in New York (April 27-30, 2015) and the newly launched GAI AgTech Week in San Francisco (June 22-24, 2015). We’ve now established a worldwide presence with annual events in London, Singapore, and Dubai. GAI Media publishes daily and weekly news services and the industry-leading magazine, the GAI Gazette.
Agriculture and farmland can act as an inflation hedge and has a low or negative correlation to the stock market, which is why it was gaining so much attention immediately following the crash. However, there are myriad ways that agriculture can add value to a portfolio, including diversification and compelling return potential.
We’ve all heard the statistics about the global population skyrocketing to 9 billion by 2050. The implications of that growth for agriculture are staggering, requiring a doubling of productivity – meaning that we need to grow more food in the next 35 years than in the entire history of humankind. It’s a frightening thought, and for some intrepid investors, a clear opportunity.
Not only will the population grow as a whole, but the world’s developing middle class will be demanding more protein-rich diets, and the demand for crop-based alternative fuels will likely grow as well. These factors all suggest that more farmland will be needed, but the reality is that arable land will be increasingly constrained by various factors including degradation and urbanization. The challenge of growing more food than ever on even less land requires capital investment to scale existing operations and conduct research and development for new technologies and new best practices.
Editors’ Note: AIMkts is a strong proponent of ag investing as an asset class. For past articles on the subject, you can check out Should You Buy A Farm; Investing in Farm Land by Dave Freedman; and Food Scarcity Risk Creates Need for Investment by Jason Stevens. You may also be interested in hearing AIMkts Radio’s interview with Charles Smith on the subject, which you can listen to here. You may also enjoy Melissa Rudy’s primer about the basics of investing in raw land.
The agriculture industry is underinvested and largely misunderstood. The momentum that the sector has achieved in the last seven years is palpable, and yet the asset class remains largely nascent. There is certainly a perceived learning curve, with unfamiliar complexities and risks.
Most investors who are active in something like commercial real estate, for example, are not used to being concerned about weather patterns or water rights, or understanding farm subsidies or land tenure. Investing in agriculture requires patient capital and a willingness to learn about foreign concepts.
Global AgInvesting is working to educate investors on the opportunities available, but until more agricultural fund managers have a comprehensive track record, and until data on land values become more consistent, many large investors are not likely to make the leap. In the next 10 years as the sector continues to mature, there will no doubt be a significant uptick in institutional activity.
At that time, the conference was solely dedicated to investment in farmland, with the most popular strategy being a simple lease agreement with farmers and investors avoiding any significant operational risk. Since then, there has been an increasing appetite for diversification, not just geographically, but all along the value chain. The conference program itself has adapted to these growing interests by adding sessions on ag private equity and venture capital, logistics and infrastructure, aquaculture, water-themed investments, permanent crops, dairy & livestock operations, and agriculture technologies (agtech). In fact, we have seen so much interest and activity in the agtech space that since 2013 we have devoted an entire day to it at the New York event, and will launch our inaugural GAI AgTech Week in San Francisco in June.
Two words: success stories. Once people see some meaningful deals, like Monsanto’s 2013 purchase of Climate Corp for nearly $1 billion, they will start to take a more serious look at the space. We are seeing it with agtech now, and will continue to see it as high-value, high-visibility deals occur throughout the value chain. But also important is information and education, and we strive to provide both through GAI Media and GAI conferences worldwide. I hope you will visit us at www.globalaginvesting.com and www.agtechweek.com.
For more about Stephanie Strait, check out her LinkedIn profile.
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