First look

Food and ag GP stake sales to continue
The sale of equity stakes by nearly 30 GPs focused on food and agriculture over the past decade reflects a market consolidation that is expected to continue.

That’s according to Valoral Advisors founder Roberto Viton, who told Field Notes that BNP Paribas Asset Management’s 2022 acquisition of International Woodland Company is the kind of transaction he expects to see repeated in coming years.

One of the tailwinds propelling the trend is a lack of existing inhouse investment strategies among asset managers and banks, leading “some of them make a decision to go and acquire one of these GPs,” said Viton.

Asset managers and banks with expertise in one segment of the food and ag space, such as permanent crops for example, may be moved to acquire a GP with experience in agtech to bring that knowledge inhouse.

Another driver of the trend is financial distress among food and GPs themselves, making an equity sale an attractive way to recapitalize the business at a time when nature-based climate solutions are being sought after.

“They need to bring money in, not only for their own operations, but also to leverage and have more financial strength in the capital of their funds,” said Viton.

“Some of these managers are actually willing to open their equity to other asset managers. You have seen some transactions in the past and this is actually live. I know people having these conversations today.”

Read the full story here.

They said it

“[The] market remains red hot, propelled by pent-up demand from institutional investors who could not compete with the locals for the past couple of years, as well as new money chasing natural capital solutions such as carbon, biodiversity and nature repair”

Danny Thomas, senior director at Australian realtor LAWD, says the firm has registered A$300 million ($196 million; €178 million) worth of transactions across seven properties in the last month.

Carbon credits

UAE signs MOU for blockchain carbon credit system
The United Arab Emirates has signed a memorandum of understanding with blockchain technology company Venom Foundation and Industrial Innovation Group, a provider of ID systems such as biometric passports, to develop the country’s National Carbon Credit System.

The trio will work toward four objects: reducing emissions, promoting sustainable agriculture, enhancing environmental health and conserving biodiversity.

No timeframes were provided with regards to when the carbon credit system would be launched, the types of carbon credits that would be eligible for listing or how the pricing mechanism will work.

“It is a great honor to contribute to the creation of the United Arab Emirates’ first National Carbon Credit Registry System together with Venom,” said Industrial Innovation Group CEO Taryam Matar Taryam in a statement.

The company develops a range of physical and digital ID systems including driving licenses, vehicle registration certificate and credit cards, among others.

Australia

Australia-China barely standoff eases
Following a long-running dispute, China has dropped its 80 percent tariffs on Australian barley, in a move that reopens a major export market for the latter’s grain growers.

The tariffs were introduced in May 2020 when the Chinese government accused Australian firms of undercutting its farmers by selling grain below the cost of production – an allegation always denied by Australia.

The move followed Australia’s call for a more thorough investigation into the origins of the covid-19 pandemic.

A trade war was the result, with Australia referring China to the World Trade Organization while China also introduced punitive tariffs or other imports from Australia such as wine, meat, timber and rock lobster.

China lifted the tariffs after Australia agreed to suspend its appeal to the WTO earlier this year.

Australia’s trade minister Don Farrell expressed hope that wine would be next, after tariffs effectively wiped out what was that sector’s largest export market by both volume and value.

In comments reported by Guardian Australia, Farrell said: “We intend to use this process as a template for resolving the issue in respect of wine, which is still ongoing. I’ve consistently said, including in my warm meetings with the Chinese commerce minister, Wang Wentao, that we would prefer to resolve all of our disputes with China through discussion and dialogue, rather than disputation.”

Murray-Darling water markets
Consultancy Aither has published its annual Water Markets Report, which analyzes developments in the Murray-Darling Basin’s water markets in Australia over the 12 months to June 30, 2023.

The report also looks ahead to how water prices might move in the coming year.

It found that the value of water entitlements had begun to reduce for the first time in a decade, a reflection of the wider challenging macroeconomic environment, with higher interest rates, soft commodity prices for certain crops, and inflation leading to higher input costs for farmers all having a dampening effect.

This is in contrast to the previous year’s report, which found that entitlement values had continued to increase despite an abundance of wet weather.

On water allocations – which is the amount of water awarded to a given entitlement – prices remain very low due to that wet weather, with water storages in the system at their highest levels on record.

Aither expects both trends to continue into 2023, with some caveats around the weather and potential government involvement in water purchases.

Read the full article here.

Farmland

Gladstone banks water as farmland acquisitions go dry
Gladstone Land chairman David Gladstone said rising interest rates, slow-paying tenants and stagnant property prices have encouraged the firm to take a more cautious acquisitions approach.

The NASDAQ-listed REIT reported $7.9 million in second quarter net income, which surpassed the $613,000 reported during the same period for 2022.

During the firm’s August earnings call, Gladstone said he expected to have payment issues related to three specific tenants resolved – including at least one whose lease has been terminated – within a few months.

It is the increased cost of borrowing that has been more impactful, he explained, coming as it has during a time when property owners are not yet willing to reduce the price of their farms.

“These federal lenders are in a position to drop their rates and allow us to get back to the business of buying farms. These farmers that we buy from are not in a hurry, so they are only going to do it if they get the price they want. So we’re kind of on hold,” Gladstone said.

The Virginia-headquartered REIT is taking advantage of the acquisitions slowdown to strengthen the ability of its California properties to withstand increased water risk and regulatory scrutiny, Gladstone explained.

He said Gladstone Land’s overall portfolio currently includes 45,000-acre feet of water sufficient for at least the next two years and the company has planned projects to ensure needed supply through 2040.

“Our overall strategy within the state [California] is to implement projects that will allow us to maximize the water supply opportunities in wet years like we had this past year,” he said. “That’ll reduce our water risk in the dry years.”

VC fundraising

Meatable, a Dutch cultivated meat producer, raised $35 million in a funding round led by Agronomics, with participation from Dutch impact fund Invest-NL, BlueYard, Bridford, MilkyWay, DSM Venturing and Taavet Hinrikus.

Kernel, a plant-based restaurant concept from Chipotle founder Steve Ells, raised $36 million in Series A funding round backed by Raga Capital, Willoughby Capital and Rethink Food, according to DealBook.

Bactolife, a Danish start-up developing gut microbiome-strengthening proteins, raised €30 million Series A funding round led by Athos, with participation from the Bill & Melinda Gates Foundation, Novo Holdings and existing investors.

GroGuru, a California-based water management systems start-up for commercial farmers, closed a $2.3 million in Seed A round co-led by Cove Fund and Impact Venture Capital, with participation from Integral Capital Partners, Comeback Capital, Right Side Capital Management, VIGR Crop, NutraDrip and Thunderhead Crop.

Matter, a British microplastic capturing start-up, raised $10 million in Series A funding round led by S2G Ventures, with participation from Builders Vision, and SOUNDWaves.

BeerMate, a Dutch start-up that develops automated beer serving machines for events, has raised €1.4 million from Tomorrowland founder Michiel Beers, among other investors.

Fieldworks Robotics, a British developer of autonomous raspberry-picking robots, raised £1.5 million ($1.9 million; €1.7 million) from sustainability-focused VC investor Elbow Beach Capital.

GoZero, an Indian sugar-free ice cream start-up, raised $1 million in a pre-Series A funding round led by DSG Consumer Partners, Saama and V3 Ventures, with participation from a range of angel investors.

Also in the news…

Malaysia joins Indonesia in suspending cattle from Australia
The challenge facing Australia to prove to trading partners it remains free of lumpy skin disease has deepened (Beef Central).

GPs ask to extend fundraising deadlines up to 18 months on new pools
Longer fundraising processes can present challenges for GPs to make sure all LPs in a fund remain on equitable footing (Buyouts).

Ocean investment continues to be just a drop of what’s needed
Land-based aquaculture investments, debt-for-nature swaps and DFI-backed investments are on an upward trajectory but the scale of capital needed remains daunting (AI).

Revol Greens appoints James Bradley as CFO
The Equilibrium-backed greenhouse grower is eyeing its next phase of growth and has identified the former Red’s All Natural and New Providence executive as a key hire (Cision).

Kainos Capital brings in Doug Reader as senior managing director
Reader will lead the food and consumer-focused PE firm’s operations team and serve as a strategic partner to its portfolio companies (BusinessWire).

Climate finance for agrifood systems is strikingly low
A joint report from the Climate Policy Initiative, the ClimateShot Investor Coalition, and UK Aid Direct finds only 4.3 percent of global climate finance went to agrifood systems (Report PDF).

Today’s letter was prepared by Binyamin Ali, Chris Janiec and Daniel Kemp