We Need To Talk About Food – Geopolitics, Pandemic Puts Focus On Sector
While hardly a new focus for holders of "patient capital" as deployed by family offices and investment firms, agriculture and food technology – in its widest sense – is a hot topic because of disruptions to supplies. This news service is examining what's going on, including the opportunities and new ideas bubbling up.
The expression “supply-chain disruptions” sounds rather abstract, but over the past three years people have had to learn what it means: Empty shelves, skyrocketing prices for bread, fruit and vegetables, and household basic items. In the developed world such as the US, Europe and developed parts of Asia, it is hitting wallets hard. In emerging countries such as in parts of Africa, Asia and Latin America, the results are hunger and unrest.
Russia’s invasion of Ukraine in February ratcheted up the problems for food supplies and production that were already feeling the pinch after Covid-19. Ukraine produces about a fifth of the world’s market in tradable wheat, for example, not to mention being a big supplier of sunflower oil. This has clearly grabbed attention from wealth and asset managers, at least judging by the weight of emails this news service has received. Investment firms large and small are talking about “food security” and the investment case for it. (Arguably, the smart money should have been doing this months ago.) Agriculture in all its forms is front page news.
Whether it is modern technology such as using drones to fly over fields, hydroponics (using fluids to support plant growth instead of soil); genetically-modified crops (a controversial but important area); new approaches to irrigation and fertiliser and agricultural machinery, farming is big business. Shares in tractor and harvester giant John Deere (now even more famous for being used to tow away Russian tanks from Ukrainian farms) have surged 92 per cent over the past five years, although they have fallen more than 11 per cent since January, unable to fully shrug off a wider decline in global stocks. Performance of other big concerns has been mixed.
Farmland is also a classic “direct investment” play, of course. Microsoft tycoon and philanthropist Bill Gates owns 242,000 acres of North American farmland (source: AFN, 27 August). In the past, hedge fund rainmaker Jim Rogers touted the wisdom of riding the commodity super-cycle. Farmland has certain qualities beyond the obvious benefits of producing food: it can be an inflation hedge, and besides land reclamation efforts that take time and money, it is relatively scarce. (That said, new crop production methods, including hydroponics, and the rise of “artificial meat,” mean that supply constraints may not be as severe as supposed.)
There is a lot going on in farms, logistics, distribution and marketing food. And this news service is going to be producing more articles examining what the wealth industry thinks about food as an investment area. We will be digging “into the weeds” (please excuse the pun) of why agriculture makes a good place for the sort of “patient capital” that family offices, private banks and wealth managers wield.
Also, we won’t ignore the risks and problems that exist: the frictions that can arise when modern science comes up against environmental/aesthetic worries about the state of the countryside.
There are also subsidies and tariffs – a longstanding issue in farming – employment practices, logistics and distribution. We hope readers find these articles interesting and urge those who want to comment to contact the editors: email@example.com and firstname.lastname@example.org.