Global crop production has expanded threefold over the past 50 years, largely due to higher yields per unit of land and crop intensification. Nowadays, 1.5 billion hectares are agriculture land, or 37% of the global land suitable for crop production. Even though 721 million hectares of land are under cereal production, food output needs to increase with 70% by 2050, in order to meet the higher global demand of exponentially growing population. With close to 40 % of the global workforce, agriculture is the world’s largest provider of jobs.
AGRICULTURE AS AN ASSET CLASS
The entire asset class sums up to USD 8.4 trillion, from which only about USD 40 billion are owned by institutional investors. The asset class has the potential of meeting financial goals and hedging against inflation, while addressing global issues, like- food security and arable land scarcity. Some of its characteristics and expected course are:
- Increasing demand for agricultural products and decreasing supply of arable land- due to global forces (growing world population, projected to reach 9 billion by 2050)
- More liquidity and better pricing- if the expected asset class’ institutionalization materializes
- Consolidation of land ownership- necessary to increase productivity
- Generational shift- requiring new farmers to seek capital from institutional investor’s base
- Good asset/liability match for institutional investors
- Attractive cash yield and capital preservation attributes
- Large investments in AG-tech (intellectual know-how and capital) to have huge implications for the land productivity.
FOCUS AND SERVICES
Mission: IWC and AG-Advice joined forces to create a strong track record and become among the top agriculture investment management teams in Europe by 2020.
Strategy: IWC’s focus is on farmland investments in Europe, with primary focus on Denmark, Romania and the Baltic region and secondary focus on the geographical region of Danube River-Black Sea. Main strategy is to buy land and lease out to strong tenants and, in some cases, buy and operate the land which could provide attractive additional return to investors.
Services: IWC can provide bespoke services throughout the whole value chain, based on the strong backbone of a support team (finance and compliance, client relations and business development, ESG and SRI) and deep agriculture experience (AG-Advice‘s founder has over 25 years experience in the sector). For more information about agriculture, please contact IWC.