Publications

- May 1, 2019: Vol. 6, Number 5

Ag sectors to watch in 2019: New technologies offer investment opportunities

by Philippe de Lapérouse and Mark Zavodnyik

Despite the headwinds facing agricultural investing — such as lower crop prices, weak farmland values, and the U.S./China trade conflict — farmland still represents attractive investment opportunities because of advancements in crop inputs and services, the use of robotics in the field, aquaculture, and indoor farming.

Crop inputs and services: Consumer concerns over food safety and how it is produced (i.e., organic, non-GMO, etc.) has become a big issue in developed markets. To stay ahead of these matters, retailers and distributors are requiring their suppliers to meet strict protocols that are radically upending established practices throughout the supply chain. This trend has opened the door for new players to develop and offer novel products, services and technologies. The rapid adoption of biologicals used for pesticides, fungicides and root development, and other precision ag technologies, has increased the options available. This is a sector where nimble new players and legacy crop input suppliers will have opportunities to acquire new capabilities and expand geographically by targeted acquisitions.

Robotics: In response to a shrinking and more expensive labor force, the adoption of robotics in agriculture is increasing. The global market for ag robotics has been estimated by various industry analysts to be $3 billion and is expected to increase to about $12 billion over the next seven years. Increasingly stringent U.S. immigration laws are complicating the ability to hire qualified labor. According to a California Farm Bureau Federation survey conducted in 2017, 55 percent of responding growers have experienced labor shortages in recent years.

Aquaculture: Global demand for seafood has increased 3.2 percent annually since 1960, outpacing the growth in the world’s population. While investment in integrated aquaculture production continues to attract capital, most investments in aquaculture have focused on developing alternative proteins — derived from insects, algae, and single cell proteins. New gene editing techniques offer the opportunity to boost productivity of aquaculture production by reducing stress and increasing disease tolerance.

Indoor ag: Indoor agriculture has been one of the fastest growing agricultural sectors. This method of “farming” can be undertaken in both urban and rural areas, reduces the water and carbon footprint of crops grown, and provides an opportunity to grow high-value crops year-round in inhospitable climates. It also reduces the distance required to ship products to urban areas with high population densities.

Other opportunities abound: Attractive investment opportunities are not limited to the sectors highlighted above. Another area to monitor is the market for products and technologies addressing animal health. Merck’s recently announced the acquisition of Antelliq, a digital livestock tech company focused on digital animal identification, traceability and monitoring solutions. This sector will undoubtedly provide further investment opportunities as advances in tech and big data continue to redefine animal health and management to meet growing global demand for animal protein, and address consumer and regulatory concerns regarding traceability and food safety.

 

Excerpted from a report by Philippe de Lapérouse, a managing director at HighQuest Partners, and Mark Zavodnyik, a project manager with the organization. Read the full report on the Global AgInvesting website at this link: https://bit.ly/2CPsYNn

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