Research & Data

US must support PE investment in developing agri markets – report

Private investment can build agri chains to feed growing cities, but only with help from policymakers in developed economies, a report finds.

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NAJ' AT TUNAB, EGYPT - OCTOBER 6, 2014: The farmer rides on the donkey, loaded with the bunch of the sugarcane, on October 6 in Naj' At Tunab.

Increased US support for private equity investment in developing countries’ agri sectors is crucial, according to a recent report from the Chicago Council on Global Affairs.

Urbanisation and demographic trends in the developing world will drive a transformation in agri supply chains that can only be achieved with support from private investors, the report finds.

By 2050, two-thirds of the world’s population is expected to live in cities, creating new supply chain challenges, particularly in low- and middle-income countries in Asia, Africa and Latin America. Global population growth and climate change will also create stress throughout the agriculture value chain.

As much as 90 percent of food consumption in low-income countries comes from domestic sources in rural areas, according to the report. As demand shifts toward urban centres, supply chains will have to extend further, bringing in previously isolated small-scale farmers and increasing demand for wholesalers, transporters, processors and input suppliers. Processed foods and high-value products including fruit, vegetables and dairy will also become more important. This will bring significant opportunities for private investment.

US policy must support investment to bring smallholders and rural entrepreneurs into the supply chain for the food and beverage industry to continue delivering returns and meet demand, the report argues.

“For US companies to make such investments, however, the US government must play a role in helping to reduce the risks of investing in low-income countries, even in areas that welcome investments,” the report reads.

The US government can support and incentivise these investments by prioritising and expanding existing programmes that support investment in low-income country food systems, including debt financing guarantees, political risk insurance and support for private equity funds.

Increased emphasis on these efforts now will improve returns for US investors, support international food security and reduce global poverty in the future, the report argues.