A hunt by investors for a bright spot in the global economic downturn has led to the farm.
Those eyeing investments within the global agricultural sector say growing global demand for food production, biofuels and agriculture-related industrial products is boosting agriculture as a part of many portfolios.
Institutional investors are already well established in commodities markets, but high levels of volatility have added to risk and left investors searching for seemingly safer bets.
Physical agriculture's assets are the new focus in longer term investments as institutional investors explore opportunities in everything from raw land to grain elevators to food processing plants, said Peter Meyer, an agricultural products specialist at J.P. Morgan Chase where he is executive director.
Meyer said heightened concerns about food security in the face of a growing world population and the need for more arable land and improved technology are driving factors.
That interest will be the focus of a Global AgInvesting conference, scheduled for Monday and Tuesday in New York. Sessions are aimed at pension funds, endowments, private equity and hedge funds and corporate agricultural-related companies seeking to leverage the structural changes occurring in global agribusiness.
The conference comes after the Paris-based Organization for Economic Cooperation and Development (OECD) said in a June 17 report that even amid the global financial crisis and economic downturn in all sectors of the economy, agriculture was faring well due to relatively income-inelastic demand for food.
Amid a rapidly growing world population, insufficient food supply and distribution systems and political unrest in many developing countries, the number of hungry people in the world has swelled.
The United Nation's Food and Agriculture Organization forecasts that 1 billion people will be affected by the end of this year, over 100 million more than in 2008.
Political leaders in many countries are getting involved. Recently, Pakistan offered to sell or lease 404,700 hectares of farmland to foreign investors looking to secure food supplies to their countries. And Egypt is expanding its hold on farmland in Nile Basin countries in order to protect its water supply and boost supplies of staple crops.
A key issue for some nations is insufficient infrastructure, with 30 percent to 40 percent of farm production lost before it reaches consumers, according to the
This is a period where people are seeking opportunities to improve and invest, said Eric Silverman, a Milbank Tweed Hadley & McCloy partner in global finance who advises clients on infrastructure issues.
Another factor driving agriculture as an investment vehicle is the rapid expansion of biofuel production. Meeting mandated use will impact demand for such feedstocks as wheat, maize, oilseeds and sugar.
As well, there are opportunities seen in a need for improved barge, rail and port facilities, said Silverman.
The convergence of these and other factors, including rising incomes in developing economies and increasing pressure on land and water resources is creating a range of new investment opportunities attracting new sources of capital, said Philippe de Laperouse, managing director at HighQuest Partners LLC and co-chairman of the conference.
While this noticeable shift of interest in investment in the ag sector preceded the current economic downturn, I believe that the reset of priorities which we are currently experiencing in the wider economy will give continue to attract risk capital into the food, agribusiness, biofuels and bio-chemicals sectors, de Laperouse said.
(Editing by Leslie Adler)