A rising population
The base case for investing in food and agriculture is an obvious one. The world population is projected to grow by two billion people over the next 35 years and these people must too eat.
Land restrictions and erosion
Farmland is giving way to to towns and cities as urban growth outpaces rural living. Every year the planet loses almost 25 tons of topsoil. Over the past 20 years the world has lost enough soil to cover the entire cropland of the United States.
A diverse range of investment opportunities
Strong supply and and demand trends driving food and agricultural production have created opportunities across a range of sectors (upstream, midstream and downstream), from field to fork. These include land and farm inputs, equipment, producers, traders, processors, food companies and retailers.
with greater income
At the same, average incomes in developing countries are rising quickly and there is a large emerging middle class with more discretionary money to spend.
with water shortages and climate change
Water, an increasingly scarce resource in many parts of the world, is threatened by the competition of human consumption and agricultural production. Agriculture already accounts for 70% of all freshwater drawn from rivers, lakes and aquifers3. Extreme weather conditions, creating both droughts and floods, continue to impact key crop areas.
with compelling returns
Returns have been high while providing unique portfolio diversification, with a general tendency to be uncorrelated to traditional stock and bond assets, resistant to inflation and less sensitive to economic shocks and interest rate hikes. Offering both yield and capital appreciated, it has been dubbed “gold with a coupon”.
and changing diet
As people grow richer they shift from a subsistence diet of basic staples to one with more meat, dairy, fruit and vegetables, beer and wine, processed foods and restaurant prepared meals.
are leading to scarcity
Growing demand for meat, particularly beef and dairy products, require disproportionate quantities of water to produce. By 2050, climate change has been estimated to hamper food and agriculture production by as as much as 30 percent.
overlooked by investors
And yet there are only limited agriculture-focused funds managing a mere $15bn of AUM in the space, a trifle compared to the 144 funds focused on infrastructure $89bn) and 473 targeting real estate ($163bn).
is disrupting the food chain
While every 1kg increase in beef consumption requires 7kg of grain and 7kg of water to produce it, biofuels are drawing on crops once produced for human consumption. As much as 25% of US grain crops, for example, are used to produce ethanol for cars.