Ag looks to be on its way to a good 2021

The asset class has stood up well this year in the face of unprecedented societal and economic challenges. GPs are understandably expecting to follow it up with another good one.

This has been a year like no other in living memory.

Social norms, economies and state intervention were all pushed far beyond any previously recognizable parameters, as many certainties of the old world found themselves unable to coexist with the strict adherence required by coronavirus lockdowns.

No shops or restaurants, no visits with family and only pre-approved commercial activity for ‘essential businesses’, constitutes the type of draconian rulebook previously reserved for dystopian fiction.

In the niche world of agricultural investment – perhaps unsurprisingly to some, given one of the most keenly extolled virtues of the asset class is the fact it is uncorrelated – covid-19 has, in many ways, been its making.

As early as March, Growth Farms managing director David Sackett told Agri Investor: “If anything will help prove the thesis that agricultural investments are non-correlated to other asset classes, this is it.”

Since then, the likes of MIRA’s Australia-based head of agriculture Liz O’Leary, Canada-headquartered Bonnefield’s CEO and president Tom Eisenhauer and Palladium’s US-based partner Chris Allen, have all told us about the resiliency they have seen across their geographically diverse portfolios.

When NCRIEF recorded its first negative quarterly US farmland returns for 19 years in May, University of Illinois professor Bruce Sherrick was quick to point out the results were the product of the US-China trade war, not the pandemic.

And this has been the recurring theme of ag’s resiliency – fundamental growth drivers, unless they have been unnaturally distorted as in the case of trade wars, remain strong. Whether the area of investment is farmland, agtech or aquaculture, GPs remain broadly satisfied with the way their assets have held up against covid-19 and are confident of a good 2021.

As we have reported, areas such as seafood, dairy and animal protein have been impacted negatively in various ways by the coronavirus. But, as we have also found throughout the year across our reporting, private capital’s exposure to the affected areas has been limited.

Of the farmers in those subsectors that have been impacted, overcoming supply chain challenges to divert produce away from food service and towards supermarkets – wherever possible – has helped cushion some of the blow.

As Fiera Comox agriculture partner Matthew Corbett writes in his forthcoming review of the year, “the farmland asset class is poised for a solid 2021 having demonstrated clear resilience through a challenging 2020.”

Based on the evidence of what the market has told us throughout the year and the plans being laid for the New Year, it’s a summary that’s hard to argue with.

This will be our last Weekly Letter of the year. We will back to our usual programming on January 6. From all of us at Agri Investor, have a happy holiday season.