Agriculture offers a range of investment options capable of fulfilling numerous portfolio objectives. In meeting one of society’s most fundamental needs, investments in “Ag“ can come in many forms. The sector’s diversity and resiliency have been on full display during various economic downturns, including those arising from the efforts to respond to Covid-19. In this way, Ag is not unlike infrastructure and real estate. The inexorable demand for food stands in stark contrast to other sectors, which have suffered since governments have put in place policies to stanch the pandemic’s deleterious effects.
Although we find the rationale compelling for investing in Agriculture, several historical barriers have made it difficult for institutional investors to deploy capital at scale. In the last 15 years, however, the sector has made several inroads to becoming a realistic investment option for large, sophisticated investors. There are more managers that can provide access to the space and more vehicles for doing so: Secondaries and co-investments are becoming common. What has been a highly fragmented sector is seeing greater consolidation. The combined effect of these factors, in our opinion, translates into an attractive opportunity for investors and a natural extension of LPs’ existing real-asset portfolios. In other words, Agriculture is ripe for institutional investment.
Introduction To Agriculture
As seen in Figure 1, we use the term Agriculture to describe four categories of investments:» Farmland: Leased and operated farmland and associated biological assets and equipment used primarily to produce crops and animal products.
» Agri-Infrastructure: Leased and operated irrigation, intensive production, storage, and logistics assets.
» Agribusiness: Businesses involved in the provision of goods and services that support the Agriculture supply chain (e.g., farming inputs, agronomy services, marketing and processing agricultural commodities).
» Agri-Technology: Businesses that develop the technological solutions to enhance productivity, quality, and environmental outcomes across the entire supply chain.
Because each of these categories embodies varying degrees of real-asset and operational intensity, investors can use Ag to meet an array of risk and return objectives.
