Agriculture finding its place within ‘new Washington consensus’

In an April speech at the Brookings Institute in Washington, DC, US national security adviser Jake Sullivan described the Biden administration’s efforts to craft what he called “a modern American industrial policy.”

Sullivan spoke of “crowding in,” and not replacing, long-term private investment in sectors vital to the country’s well-being in the face of challenges from China, climate change and economic shocks.

“A modern American industrial strategy identifies specific sectors that are foundational to economic growth, strategic from a national security perspective and where private industry on its own isn’t poised to make the investments needed to secure our national ambitions,” he said. “It deploys targeted public investments in these areas that unlock the power and ingenuity of private markets, capitalism and competition to lay a foundation for long-term growth.”

A key plank of government outreach to the private sector in agriculture has been the USDA’s Partnerships for Climate Smart Commodities program, which plans to invest $3.1 billion to support 141 projects designed to help foster new markets and innovations supporting sustainable food production. Undersecretary for Farm Production and Conservation Robert Bonnie, who has been the public face of efforts to bring together a coalition of actors across the supply chain, told Agri Investor the program is part of a broader rethink of how the USDA relates to markets.

“The idea here was to have more flexible dollars and do it in a way that would invite interest from agriculture and hopefully from the private sector as well,” he said. “We’re not directly funding companies, but it’s probably closer to what your folks [Agri Investor readers] are interested in than our classic cost-share programs, where we help a producer put in conservation tillage or cover crops and pay for part of the cost of that.”

Tikehau Capital’s deputy chief executive Cécile Cabanis manages the firm’s Regenerative Agriculture strategy and previously served as a Dannon executive for more than 18 years. She told Agri Investor the mismatch between short-term focus of financial markets and the long-term nature of challenges faced by key private companies in the ag sector can help justify an active role for governments.

“It’s a plus to have government having a program that goes exactly towards what you are trying to achieve, and I think it’s raising interest. I have not seen anybody saying: ‘Because of the Biden decision and its policy, I will invest in your fund,’ but you can see it,” she said. “You can see that it puts some topics higher on the agenda of LPs than they used to be. Its more something on top in the right direction than the catalyst.”

One area in which government investors can play an important role, Cabanis said, is in helping overcome the reluctance and risk-aversion that often keeps LPs away from first-time funds.

“We need to act now,” she added. “Obviously there will be many first-vintage [funds] because we need many new solutions. That’s where the push of the governments and the way they can really support the approach for the private asset new initiatives is very important.”

Clean energy and semiconductors were the main sectors of focus in Sullivan’s speech and food security was mentioned only as an area of potential co-operation between the US and China.

Nevertheless, agriculture remains a vital component of American strategic and economic goals, and it is clear an effort is underway to find a place for the sector within the ‘new Washington consensus’ Sullivan described.