Identity crisis plagues agri in finance world

Too few people understand agri as an asset class, according to market participants gathered in Chicago for the 2015 Agri Investor Forum. Beyond  fund managers, consultants, producers and institutional investors at the forum, few in the financial world seem to know what to make of agri.

The tendency to parse agriculture into a variety of other niche spaces (real assets, real estate, technology, commodities) can result in overall spotty coverage from the banking sector.

“If you walk into Goldman Sachs today and ask to see the head of agribusiness, they’re going to look at you sideways,” said Angelos Dassios of Paine & Partners. “But if you ask to see the head of energy, you’ve got 50 people there with business cards trying to jockey [for your attention]”.

At a performance level, agricultural plays do not excel in the areas that tend to earn investors accolades.

“We all get measured on returns. Returns are very easy to measure. You can compare them to the benchmark, you can compare them to your peers,” Cordillera founder and partner Agustin Araya told the Forum. “You can imagine your year-end evaluation with your clients or your boss and saying, ‘look, I know I had low returns. I did that on purpose’. But, look at how diversification is. That is something that philosophically makes sense, but technically I think it’s a challenge.”

Even investors new to agri can come in with misconceptions about the opportunities available for capital.

“We frequently get calls from groups that say, ‘hey, we’ve raised $5 million to invest in farmland and we want 2,000 acres contiguous parcels and we also want a 5 percent return. I say I’ve got $4 million for that as well, but it doesn’t generally exist,” says Peoples Company President, Steve Bruere.

“The challenge is really trying to understand where the capital is needed, and where the threshold is,” says Bruere.

For those who can identify those opportunities, 2015 Agri Investor Forum delegates agree there are benefits. With acreage for farming limited across the globe, new innovations and efficiencies will be crucial to meet fast growing demand on the global food supply. Meanwhile, the recent tumble in energy and other commodity prices illustrates the value of the diversification agriculture can provide investors.