Which Crop is the Next to Pop?

Agriculture can be contradictory asset class, with investors often viewing the opportunities as both over-heated and under-invested. But throughout our research with investors and managers alike, all signs points to permanent crops as the next segment to pop. 

Many investors lump long-time favorite timber into the permanent crop category – and there are some relative newcomers like palm oil and perennial energy crops that are also getting attention. But more frequently, we’re hearing that the more niche permanent crops are the ones to watch. Investors love these “boutique” items, such as avocados, almonds and pistachios because they, often command higher prices resulting in higher margins. There’s even a shift within individual commodities – with the more profitable and easy-to-peel Clementine orange gaining traction over the more cumbersome Valencia version. And with last summer’s drought still fresh on the mind of many investors, permanent crops are often viewed as a more palatable investment amid environmental instability. 

Of course, there are risks. While permanent crops may be a better buy amid weather volatility, they are subject to market volatility and the whims of consumer demand. And while Asian countries are among the biggest purchasers of U.S. permanent crops, there’s some anxiety that China will become a hefty competitor in some categories in the not so distance future.

Currently row crops still dominate, accounting for roughly 70% of most Ag Investors portfolios but with permanent crops showing so much promise we expect allocations to increase.

How do permanent crops factor into your agriculture investment strategy? Tell us and get involved with the AgReturn conference series. Contact Conference Producer Diana Middleton, dmiddleton@iirusa.com, for more details.

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Fifty Shades of Ag Investing

Agriculture as an asset class has gained major traction with investors of shapes and sizes in the last few years. Institutional investors’ allocations to agriculture are expected to grow from 1% of portfolios to 5% in the next five years according to industry estimates. That increase in investment is sorely needed. According to UN estimates, by 2030, the world will need at least 50% more food, 45% more energy and 30% more water. In short, the population of the planet is growing faster than its food and water supply. To learn more about the coming shortage click here.

(Photo: thegreenpages)

The metrics alone are cause for urgency, and our research shows that investors are paying attention. But with so many entry points into agriculture investing, investors are still forming their strategies.

Many institutional investor players have entered the game with farmland investments, although some are turned off by lofty valuations in the U.S. or lagging yields abroad. Others are pondering agribusiness private equity plays, both domestic and in emerging markets poised for growth.

The research is clear – there is an abundance of investment opportunities in ag across the food chain, from inputs to row crops; farms or packaged goods; grain elevators or disruptive technologies. In a relatively untested industry, investors are hungry for tried-and-true agriculture investing strategies.

Our AgReturn series, which released its agenda this week, gives investors the inside scoop on the myriad opportunities in agriculture, including commodities, farmland, biotech, crop protection and many others. This is a comprehensive view of an overwhelming space that highlights true success stories in an industry some have worried is the new cleantech.

This year’s AgReturn speakers have accomplished a lot in ag recently. They’ve debuted the hottest non-Facebook IPO of the year; sold portfolio companies to major corporate agribusinesses; or set the stage for governmental agriculture policy.

It’s a feast for investors who are hungry for opportunity. Click here to see a bit more about the November program.

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