Hardman & Co | 26 May 2010
The World Agriculture Industry: A Study In Falling Supply And Rising Demand
After decades on the periphery as an investment category, farmland worldwide is increasingly becoming an acceptable holding for traditional investment funds. We believe that farmland, and agriculture generally, will shortly move beyond the ‘acceptable’ in the eyes of the world’s investment management community and become a core product. In the future, we believe, it will be as normal for a pension fund to invest direct in farmland – or in a fund specialising in farm ownership – as in commercial property. Similarly we anticipate the emergence of a more defined “agriculture sector” embracing all of equipment & systems suppliers; genetics & biotech expertise; and land management practices able to manage production yields and sustainability alike.
The numbers involved are huge; 1.5bn hectares of land worldwide can be classified as suitable for arable production. This land has a current estimated value of circa US$5 trillion. Food prices, after decades of decline, are starting to rise. Farmland prices are showing annual increases in value that put conventional equities to shame.
In this research document we examine some of the underlying trends that are driving these rises in prices worldwide, and that are encouraging investment banks, hedge funds and investment management organisations to launch and promote new pooled funds to act as vehicles for investment in this area. We examine some of the investment philosophies that are being followed, and the structures of some of these funds.
Full report: http://www.hardmanandco.com/Research/Agriculture%20Funds.pdf
We also look at some of the quoted companies offering a way to take a stake in the agriculture sector. We believe that the next phase of the re-emergence of agriculture will be a focus on the value adding scientific, infrastructure and management assets needed to generate extra productivity.This is the first of a number of studies in the agricultural sector that Hardman & Co will be producing over the coming year.