Private Alternatives   |   Apr 21, 2021

Agriculture’s resilient 2020 paves way for solid 2021

The investment thesis for agriculture was put to the test in 2020 as the COVID-19 crisis unfolded. There were both positive and negative economic factors arising from the pandemic and its impact on the economy, however, on balance, the agricultural markets and economies emerged relatively unscathed.

In fact, in 2020 every major developed agriculture market generated positive appreciation and income for the year. It is this lack of correlation to the broader economic cycle and more traditional investments that is continuing to drive investor interest in agriculture. And, if nothing else, the COVID-19 crisis has served to highlight just how fundamentally important agriculture is as an asset class in our daily lives. As we look forward to 2021, we expect that the events of the last year will be a catalyst to continue the long-term growth in institutional investment in this asset class, and that the impact of the crisis overall will be relatively neutral on the sector. 

With this in mind, we anticipate that the asset class will continue to see strong capital flows from investors in 2021. The question is – how has COVID-19 impacted what strategies investors will be looking at and what will be their investment priorities? Given the growth of the agricultural investment sector, particularly over the last decade, investors have an ever-growing number of managers and options from which to select. It is our opinion that strategies focused on high-quality farmland assets, sustainability, operator quality, and implementation of proven technology will be best positioned to perform going forward. 

The demand for increased traceability, freshness, and healthiness of food is not new. It’s been a long-term shift in consumer habits that COVID has only served to accelerate. Scaled agricultural businesses located in core producing regions can serve this increasing demand in a more efficient manner than sub-scale operations or production coming from regions where the regulatory environment is less clear. In this environment, farmers should be able to capture market prices above basic commodity levels if they can clearly demonstrate to consumers (or perhaps as importantly, retailers) that their products are fresh (i.e. leveraging consumer desires for local and farm-to-table), traceable (i.e. have a story) and that they are healthy. 

[…]

 

Matthew Corbett 
Partner, Fiera Comox Partners Inc. 
A subsidiary of Fiera Capital Corporation 

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