On Monday, Agri Investor’s editor joined agri-investment professionals on Resonance FM’s N@ked Short Club radio show. The show featured one hour of discussion about investing into agriculture today.
Paul McMahon, managing partner at SLM Partners, the agricultural land management firm, and author of Feeding Frenzy: The New Politics of Food, commented on fluctuating food prices over the past 50 years and what factors will impact food values in the near future. “There will be money to be made in farming, but you need to be careful,” he said. “There is not much money going into it yet.”
Paddy Docherty, chief executive of Phoenix Africa Development Company, a firm dedicated to the reconstruction and development of post-conflict countries in Africa, talked about the unique opportunity available in African farming. But he expressed frustrations about the lack of capital that is channelled into early stage agriculture, and the failure of development finance institutions (DFIs) to step up.
“It is extraordinarily difficult for a start up project to raise money… and one big factor that makes it much harder than it should be is the willingness of DFIs and multi-laterals to come in early in the way that they should,” Docherty told listeners. “They are aping the behaviour of private sector actors but just not doing it as well which in my view suggests they don’t really have a purpose and they are certainly not having the catalytic impact or development impact they would like to.”
Alistair Kennedy, head of private markets for Dexion Capital, a boutique investment bank, talked about the need for scalability to make agriculture an attractive asset class for many institutional investors. “The reality for them is that agriculture is idiosyncratic,” he said. “You have different types of farming in different jurisdictions and it can be very piecemeal so a lot is not scalable. A corporate-style infrastructure doesn’t really work for farming.”
Chris Erickson, managing director at HighQuest Partners Consulting, an agri-investment advisory firm, detailed the increase in assets under management since 2009 from $15 billion to $30 billion today. He also pointed to the attractive long term properties of agriculture for pension funds and insurance companies with long term liabilities to match. “It is not your typical private equity return environment,” he warned. “But if you are looking at is as an inflation hedge with bond-like returns, it can match well.”