Pace of ag evolution could separate winners from losers

The 2019 Agri Investor Forum in Chicago was marked by a clear sense of momentum even if an overall direction for the market seemed harder to discern.

It would be a stretch to say any single theme emerged from the 2019 Agri Investor Forum, held over a day and a half in Chicago last week. Given the event’s aim of providing investors, managers and producers an intimate venue to swap notes on key trends in ag investments, summing it up too neatly would gloss over nuances surfaced by each panel.

If any set of onstage and networking discussions best captured the tone of the conference, it was those devoted to alternative proteins, led by an early investor in Beyond Meat.

Evaluating an exciting consumer-driven development that has been one of the standout stories across public and private markets over the past year, panelists predicted how opportunities will vary throughout the value chain. They offered first-hand observations about likely short-term challenges for startups, newly crowned incumbents and strategic entrants while exploring potential implications for primary agriculture.

Panelists agreed that in the near-term, consumer demand leads naturally to the question and study of which crops are best suited to plant-based protein production, as well as who will finance the expansion of food science and processing infrastructure and through which investment vehicles.

One panelist ventured that over the long-term, emerging global production challenges such as African Swine Fever could help cement a view of food security similar to that which guides thinking about energy markets – where transition from old to new production systems is expected to accelerate after a period when parts of each are in active use simultaneously.

If so, they said, the rise of alternative proteins suggests the need to re-examine fundamental relationships among population growth, grain production, global trade, farmland values and investment returns in agriculture.

Offstage, those structural questions gained a surprising degree of purchase among delegates as they exchanged first-hand reviews of new protein products and debated vigorously how best to classify booming demand along a spectrum running from “fad” through “trend” towards “secular change.”

Fast-paced change is a key characteristic of contemporary life. While it has long been clear that agriculture sits at the intersection of many of the most potent such changes, this years’ Agri Investor Forum demonstrated clearly how determining the pace of change will be key in distinguishing winners from losers among investors in the years ahead.

The conference included deep-dives into aquaculture, biologicals and hemp, as well as bigger-picture attempts to gauge the current state of emerging markets, water, farmland fundraising and deal markets. Many panels inevitably came to focus on areas where recent events have highlighted uncertainties that complicate assumptions long held among ag investors.

Among others, examples included: the rules, limits and outlook for global trade; the durability and nature of government support for agriculture; investment and political conditions in Brazil and Ukraine – two countries repeatedly highlighted for their real assets potential – and the character and regulation of future water rights markets in the United States.

On other topics, consensus was stronger around how things might change than how quickly. Key examples there included: the entry of more generalist private equity and distress-focused investors; the increasingly direct approach of large institutions; rising minimum wages, robotics advancement and climate and efficiency concerns strengthening demand for controlled-environment food production.

One doesn’t have to believe the success of Beyond Meat suggests a trajectory towards animal proteins becoming obsolete, to see that it does point to fundamental uncertainties to which investors must respond.

The most impressive participants at the 2019 Agri Investor Forum were those demonstrating the agility to respond thoughtfully to the blistering changes we can all see today, while staying open-minded about how, and how quickly, conditions might evolve in the future.

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