AGR Partners drew from an ag-infrastructure-focused separately managed account for its $75 million equity investment to support construction of a high-volume soybean crushing facility near Shell Rock, Iowa.
AGR chief executive Ejnar Knudsen told Agri Investor demand among institutional LPs that traditionally invest in assets such as airports and toll roads has been boosted by the performance of ag-related infrastructure following the spread of covid-19 in 2020.
“What was discovered last year was that those infrastructure investments [airports and toll roads] that are supposed to be non-correlated to the economy became very correlated,” Knudsen said. “When things got shut down, the revenue streams of those businesses were impacted.”
AGR’s $75 million outlay represents more than half of the total investment by a group that also includes New York Stock Exchange-listed energy company Phillips 66, Knudsen said. In April, Phillips 66 agreed to purchase soy oil for sustainable fuel production from the Shell Rock facility.
Knudsen highlighted that while energy firms have long been active in ethanol and biodiesel-related businesses and are now eager to capitalize on California and Washington State’s low carbon fuel standards (that could soon extend into Canada), LPs supporting AGR’s investment include US pensions looking to add ag-related real assets to existing infrastructure portfolios.
“Ag infrastructure is specifically an uncorrelated real asset class that was resilient last year that shows resilience in financial crisis and pandemics, and represents an area where pensions and other institutions are under-allocated,” he said.
Pre-determined policies, Knudsen said, govern which types of investments will draw from AGR’s ag-infrastructure focused SMA as opposed to its Fund III, which was launched with a target of $250 million in August 2020. That vehicle – which Knudsen said AGR expects to close on that target by July – is devoted to agribusiness investments without a significant real assets focus and has been used to support an investment into an unidentified pet food ingredient company.
Shell Rock Processing is a group of local farmers and cooperatives created to build the high-volume crushing plant in Butler Logistics Park, northwest of the city of Shell Rock. AGR originated the deal directly through contacts developed in a sourcing process Knudsen said brings the Nuveen affiliate into contact with about 250 companies each year.
Plans call for Shell Rock’s 110,00-soybean per day facility to be operating 24 hours a day by late 2022. In addition to crushing about 40 million bushels of soybeans annually, the plant is expected to produce more than 900,000 tons of soybean meal and hulls for livestock feed each year.
Government policies in key developing markets, Knudsen explained, help make global soybean oil markets attractive to investors.
“Government policies and evolving food trends around Asia and more protein consumption [help dictate that] the soybean meal that’s produced here is of greater and greater value when imported into China,” he said. “We like to be long real assets. We like to be long quantitative easing and assets that are going to do well in an inflationary environment and we like to be long government policy that is going to support evolving food and agriculture trends.”