Declining food security should galvanize LPs

The grain price spikes widely credited with helping bring more investors’ attention to farmland roughly 10 years ago are – in the popular consciousness – more strongly associated with the unrest that preceded the Arab Spring.

Reports the FAO has recently registered levels of global insecurity not seen since that period are among a number of recent reminders that food security’s rising profile among policymakers will continue to shape risks and opportunities for ag investors.

The largest, most tangible and immediate opportunities stemming from this food security focus are efforts to localize production of cutting-edge technologies, which offer surety of supply. Growing attention to food insecurity also suggests potential future demand for financial services and technological innovation necessary to support sustainable development of rural economies.

“We are seeing a lot more interest by different countries – particularly more high-income countries – in being able to collaborate with the private sector on some of these issues and also invest in tech innovation in order to become more food secure,” Pratima Singh, who leads the Global Food Security Index (GFSI) research at Economist Impact, told Agri Investor.

Earlier this month, Economist Impact released the tenth edition of its GFSI, which measures underlying drivers of food availability, quality and safety across 113 countries. The report highlighted that after seven years of progress towards the Sustainable Development Goal of zero hunger by 2030, last year saw the index register its second consecutive decline in food security.

The report attributed the reduction to lingering effects of covid-19, volatile prices and intensification of climate-related challenges. It also singled out a lack of government investment in the sector as a contributing cause to the accelerated decrease in food security.

Singh explained that the recent interest in partnering with food tech companies comes after years of underinvestment in the research and development underlying new agricultural production techniques. Such research is often designed to improve resilience against the extreme weather events that this year’s research revealed are increasingly a challenge to local and national governments worldwide, Singh added.

This suggests a need for both the public and private sectors to help improve implementation of climate-smart agricultural practices down to the smallholder level, according to Singh. Although many of the challenges facing smallholders predate the pandemic, she explained, the fact many had trouble securing necessary inputs following covid-19 helped bring rural issues to the top of mind for policymakers.

Mind the gap

“That kind of ‘filling in the gap’ and ensuring that the farmers on the ground are equipped with the right resources, technology, skills, education and knowledge can be an area where both the public sector and the private sector start partnering in order to improve food security at all levels,” she said. “It’s quite a sad situation that the majority of the world’s farmers are smallholder farmers who are producing all of this food, but also tend to be some of the most food insecure people in the world.”

In the years since the Arab Spring, institutional investors from the Middle East and elsewhere have partnered with private managers in global investments, which impart security by strengthening global production across crops and protein categories.

The nimblest and most successful among those managers in the years ahead may prove to be those willing and able to evolve with the market’s growing focus on local production, and its demands as they vary across climates.