Field Notes: Solum closes Fund II on $850m; pork faces restricted demand; Citi adds agribusiness to ESG-risk list; New Agriculture gives green light to Green Park.

Solum closes Fund II on $850 million; pork faces restricted demand; Citi adds agribusiness to ESG-risk list; and New Agriculture gives green light to Green Park. Welcome to Field Notes, the start-of-the-week briefing for our valued subscribers only. Tips and feedback to:  

First look

Solum closes Fund II on $850m
Harvard Management Company spin-out Solum Partners has closed its second fund on $850 million.

The strategy focuses on global production assets for crops, including avacados, coffee, almonds, apples and berries.

Anchor investor deal sweetener: A March SEC filing shows that in exchange for “significant initial capital commitments” to Solum’s first two funds, anchor investors receive interests substantially different from other fund investors.

Anchor investors will receive a portion of Solum’s management fees and carried interest distributions, as well as other informational, participation and protective rights not offered to other LPs.

Harvard Management Company, from which Solum was spun out in 2020, was a $200 million anchor investor in the firms Fund I, along with insurance company American International Group.

Single crop verticals: Solum CEO Colin Butterfield told Agri Investor in October 2020 that Solum would look to mimic the investment approach developed at HMC, which focused on single crop verticals.

In August 2021, Solum carried out what it said was its second transaction in the form of an acquisition of Monta Vista Farming Company, a California-headquartered almond processing company that followed a deal focused on coffee.

“Once we decided we are going to get into a fruit type, we really, really get into it very seriously,” said Butterfield.

They said it

“We see persistently high retail prices limiting consumption of all proteins”

Christine McCracken, senior analyst, animal protein, at Rabobank surveys the demand for proteins in an inflationary market.


Pork faces restricted demand   
Softer consumption trends in early 2023 have left the global pork industry confronted with a weaker consumer market, according to the Q2 Rabobank pork report.

Despite some signs that the peak of the inflationary climate has passed, the lagged impact on consumption and demand for protein products is likely to be felt throughout 2023.

During this restricted growth environment, pork remains well positioned said Rabobank, as demand for the protein is historically less income-sensitive than more expensive proteins like beef and premium seafood.

“Nevertheless, we see persistently high retail prices limiting consumption of all proteins. Consumers continue to conserve capital by shifting everyday purchases to lower-value protein options, switching channels and moving to smaller pack sizes,” says Christine McCracken, senior analyst, animal protein, at Rabobank.

Feed stocks and swine fever: Low global feed stocks are one of the factors contributing to higher prices as availability remains limited.

A reduced harvest in Argentina is expected to partially offset Brazil’s record 2023 soybean and safrinha corn crops, leaving the market to focus on import needs, Black Sea grain and the successful planting of a new crop in the Northern Hemisphere, said the report. “Rabobank expects the small global cushion in grain and oilseed stocks to drive additional feed cost volatility in 2023,” added McCracken.

African swine fever outbreaks in China, South Korea, the Philippines and Europe led to proactive farmer culling in late 2022 and continue to affect the rate of restocking this year.

“Losses appear contained and remain regional, however, which should limit market impact. Currently, global pork supplies appear sufficient, though a sizable shortfall in China due to disease would disrupt the global industry and drive a sharp upward correction in pork prices,” said the report.


Citi adds agribusiness to ESG-risk list
Citi Group has added agribusiness to a list of “sensitive sectors” that includes coal mining, oil and gas, military equipment and firearms “in response to emerging risks”.

The financial group’s 2022 environmental, social and governance report says the change was made last year. Clients or transactions from the sector could now trigger an environmental and social risk management policy review.

Beef and soy in the spotlight: Citi’s new ‘Agribusiness Sector Approach’ includes “new requirements for the soy sector (including producers, processors and traders) and beef sector (including cattle ranchers, slaughterhouses and processing facilities) in sensitive ecoregions.”

The new measures are the product of “several years” of research and monitoring of risks associated with the agribusiness sector, which includes “deforestation, decreased climate resilience, biodiversity loss and risks to the rights of Indigenous Peoples.”

Agribusiness accounted for 56 of the 608 transactions or potential transactions Citi’s ESRM team was engaged on in 2022.

LatAm is highly sensitive: Latin America is identified as a specific focus of the updates, which include an expansion of existing policies governing clients in the palm oil and forestry industries to the soy and beef supply chains.

Relevant agribusiness clients are evaluated against standards provided by independent certification organizations including the Roundtable on Sustainable Soy, the Forest Stewardship Council and the beef industry’s Accountability Framework.

“These external certifications and standards require that companies have processes that ensure free, prior and informed consent for indigenous communities, among other environmental and social principals and criteria,” Citi wrote.


New Agriculture gives green light to Green Park
When timberland asset manager New Forests launched its farmland asset management arm, New Agriculture, in 2022, head of agriculture Bruce King told us in an exclusive interview that the team’s early priority was to explore the “excellent opportunity” to expand Lawson Grains, the massive portfolio of farmland it acquired from a fund managed by Macquarie Asset Management in 2021.

That plan is now bearing fruit, with the firm acquiring the Green Park Aggregation in the Riverina region of New South Wales for a sum reported to be in excess of A$35 million ($2.3 million; €2.1 million).

Joining Borambil: The aggregation neighbors the Borambil aggregation that Lawson Grains acquired in 2013, making it a relatively simple decision for the firm to absorb it into that asset.

Green Park comprises five separate holdings of varying sizes and has been used for cropping as well as carrying up to 4,000 ewes in the past.

New Forests confirmed the acquisition but declined to provide any further detail.

Agtech fundraising

Woodoo, a French biomaterials start-up, has raised a $30 million funding round led by Lowercarbon Capital. Woodoo modifies wood at the molecular level, making it stronger, less susceptible to rot and reducing waste.

KoRo, a German nut butter and snacks startup, raised €20 million in Series B extension funding from Associated British Foods, SevenVentures and Haub Legacy Ventures.

Arado, a Brazillian agribusiness marletplace, raised a $12 million oversubscribed Series A led by Acre Venture Partners, with participation from from Syngenta Group Ventures and Globo Ventures, as well as Maya Capital, Valor Capital and SP Ventures.

VFC Foods, an alternative protein start-up, has completed a £6 million ($7.5 million; €6.8 million) funding round led by Veg Captial. The company said that the funding will drive expansion in the UK and international markets and will support the introduction of chilled products.

8 Myles, a frozen foods startup, raised $1 million in seed funding from Andreessen Horowitz, Virginia Venture Partners, The Enterprise Center, gener8tor and Kompass Ventures.

Also in the news…

Amazonian state to enter carbon credit market
The state of Para pledges to auction three public lands for forest conservation and generate carbon credits in 2023 (The Brazilian Report).

How CalSTRS vets climate funds
Investing in climate involves working with emerging teams. CalSTRS portfolio manager Nick Abel explains how his team balances risk and return in the pension’s sustainable investments portfolio (VCJ).

Carbon pricing ‘only way’ to deliver green transition, says Banque de France chief
Work on climate change does not mean central banks are wading into politics, Villeroy argues in London speech (Responsible Investor).

UK retailers report record food inflation but see falls ahead
Food prices at British supermarkets rose 15.7 percent in the year to April, the biggest annual increase in records going back to 2005 (Reuters).

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