The haves and the have-mores

For private investors in global agriculture, growing concerns about inequality are by no means academic; the chasm between large and small is already shaping their environment in important ways.

It will take months, if not years, for analysts to ferret out all the insights contained within the 6.4 million data points that make up the 2017 Agricultural Census USDA released last week. But if there was one thing that was clear immediately, it was that the survey reflected US agriculture’s continued march toward scale.

Within the first paragraph of the survey’s announcement, USDA highlighted growth in the numbers of both large and small farming operations alongside a dwindling presence of those in the middle.

This ‘barbell’ structure is replicated across industries and has become a key talking point in the active dialogue about inequality and capitalism that is shaping political and financial sentiment in the US.

For private agricultural investors, such concerns are by no means merely academic: the chasm between large and small is already shaping their environment in important ways.

At the Columbia Global Business Forum in New York last week, for example, agriculture was at the center of discussion on how resource scarcity will shape investment opportunities during the decades ahead. Panelists representing global finance’s boldfaced names discussed agriculture’s greenhouse-gas emissions and how their respective firms plan to harness changing developing world diets and booming global demand for more sustainable offerings.

More striking, though, was the foreboding tone with which panelists addressed political populism and the growing sense of urgency that now marks discussion of how private investment should further broad societal aims, such as those put forward in the UN’s Sustainable Development Goals.

One panelist spoke of society’s increasing unwillingness to accept negative externalities. Another highlighted future efforts to more accurately price water consumption as a potential pivot point in a painful transition toward a redistributive political framework, seen as likely inevitable.

Last month, Massachusetts senator and presidential hopeful Elizabeth Warren identified agriculture as the central target of such redistribution, alleging policymakers had long favored large multinationals over family farmers. Warren proposed reversing key ag mergers, breaking up large agribusinesses and a range of more modest steps, that would transform the ag landscape.

It will not take federal antitrust enforcement, however, for the growing gap between the haves and the have-mores to help determine winners and losers in agricultural investing markets.

In region after region, farmland buyers already report effectively separate markets where diverse groups of investors face off at one level and gigantic, often state-linked pools of capital compete (sometimes with the world’s very few highly-empowered individuals) for opportunities at another.

Even savvy institutions with hundreds of billions of dollars under management have found building scale in some farmland markets too challenging. As emissions-reduction, health-consciousness and scarcity draw investor attention toward agribusiness development bordering on infrastructure investment in sub-sectors like wastewater treatment and indoor farming, market segmentation by scale will likely only become more pronounced.

Of course, factors propelling the consolidation in farmland ownership reflected in the USDA’s survey are complex and include many that have nothing to do with economic inequality. Still, the rural/urban divide has played a key role in the ongoing political crisis in the United States and there is little reason to expect the long history of farmers being used as political props will end before the 2020 campaign truly reaches fever pitch.

With agriculture already in the sights of the political left, investors would be wise to attempt to shape its role within the debate on how to reform capitalism and address economic inequality.

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