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On the ground: end of year views

Investment managers and consultants share their experiences of 2014 and plans for 2015.

It has been an interesting and important year for the agri investment market as the numbers of institutional and other investors assessing investment opportunities in the sector were bigger than ever before. While much of this interest has remained just that, there are hopes that 2015 will bring more solid commitments to the asset class. Here a few investment managers and consultants share their experiences of 2014 and plans for 2015.

Tom Arthey, director at Mintridge International, the Central and Eastern Europe farmland investment manager[quote]The way things turned out in Eastern Europe with the ongoing problems in Ukraine and Russia, from a fundraising point of view, has been frustrating. Central and Eastern Europe is now perceived as a riskier option than it was this time last year. In some ways it clarifies our reasoning for being in European Union countries, but we have learned that we shouldn’t assume people new to the region and the sector will distinguish between different geographical boundaries.

In 2015, we are going to look at more niche sectors in cropping due to the success of Norman Paske’s (Mintridge’s managing director) blueberry farms in Poland. We have a 5-year track record growing them and they are suited to Poland’s slightly acidic sandy soil, which is challenging for traditional cereal crops. More generally we hope to raise capital and start acquiring land.[/quote]

Nick Tapp, head of client advisory, Craigmore Sustainables, the New Zealand dairy fund manager[quote]Our view is that there are some very thoughtful and careful investors out there that are taking a long time to assess the agri space but I think that some will be getting into a position where they are willing to make investments next year.

A challenge for all agri funds currently is low commodity prices, although this might tease out a few managers with slightly less merit. For us, low dairy prices help to focus the mind. We are comfortably capitalised with good cost control in place, and will be able to see ourselves through this round in the cycle.[/quote]

Sebastian Popik, managing partner, Aqua Capital, the Latin American private equity firm[quote]It has been a tough year in Brazil with the political uncertainty surrounding the elections and a sharp downturn in the value of the real. This volatility led us to be cautious regarding our investment plans in light of these circumstances and that’s why we were more active towards the end of the year. It also means that 2015 will be an interesting time to be investing.[/quote]

Renee Cheung, independent consultant in sustainable agriculture[quote]2014 was overall a good year for my independent consulting work. I see an increased number of potential clients, mostly asset managers, who deal with sustainable agriculture asking me to assist them with understanding what investors look for and how to present their investment case in a way that is attractive to investors. This leads me to think there is a need for the sustainable agriculture investment sector as a whole to acquire more experience and talent in marketing and fundraising. The money is there, but the green projects have a harder time competing for capital with the business-as-usual conventional ag projects. I sometimes wonder how Goldman Sachs would go about raising capital for sustainable agriculture and how much fundraising success they would have.

In the near to medium-term future, the number of potential investors interested in regenerative agriculture will remain limited because environmental externalities (for water runoff and pollution, soil erosion, soil carbon depletion, biodiversity) are not priced into conventional farming systems, which makes them look more profitable and less risky than they actually are. Many investors also think that conventional farming today is already more sustainable than before hence business-as-usual is good enough. The investors that are interested in regenerative agriculture will be those who have more realistic return expectations, understand that conventional agriculture is not financially or environmentally sustainable in the long-run, and are not afraid to invest in something that is considered slightly unconventional by today’s standards.[/quote]