Agribusiness and Food Security

Reap What You Sow

Following on the heels of the 2007-08 food crises, during which prices for many global food commodities spiked and a number of countries enacted protectionist measures to ensure their own food supplies, “food security” – like energy and homeland security before it – has emerged as a national priority for many countries. Long-term concerns about reliable access to food are further compounded by global issues like climate change, which many experts believe will lead to a significant decline in global agricultural production over the next century, and a capital gap that prevents developing countries from fully exploiting their agricultural capacities.

Insights from the Ergo Network

Given the growing importance of global food security, Ergo asked five experts to comment on possible roles for private sector investment with an eye towards new trends, technologies, and methodologies in the agricultural field.

• Expert 1: Head of research at a leading international consultancy to the farming, food, bioenergy and agri-investment sectors based in the United Kingdom

  “From a technology perspective, [there will] probably [be opportunities] in the areas of plant and animal breeding for specific traits, like drought tolerance, or improving efficiency of irrigation systems. We’re going to have to grow more food on smaller areas and pressure on water resources will increase.”

• Expert 2: Former senior U.S. Government expert on international food and security policy

  “A less politically risky – and potentially more profitable – investment strategy to land acquisition is uncovering well-run local firms that operate effectively across critical parts of the supply chain, such as those that purchase, store and process foodstuffs as well as have long-standing trusted relationships with haulers and shippers. With the current global credit crunch, a large number of distressed investment opportunities exist in countries that have little risk of imposing export restrictions given excess production. Subsequent targeted investments in infrastructure are welcomed locally and further improve supply chain vulnerabilities and resulting supply capacity.”

• Expert 3: Former chairman of a leading meat industry company in Australia

  “There are three main areas of focus: primary production, processing, and biosecurity (the systems the industry develops to protect all its advances). On the biosecurity side, I think that’s where there’ll be more investment. It’s going to be increasingly important how we manage a more sophisticated approach to food protection and how you protect that from sabotage…In Australia, campaigners opposed to the live-export industry fed pork products to sheep to make [the sheep] ineligible for halal certification. That wasn’t particularly sophisticated, but you can imagine if there was a big enough political will there could be more sophisticated attempts to sabotage the food production.”

• Expert 4: Former economic advisor to Mozambican government; Expert on climate variability in agriculturally dependent economics

  “India and China are in the dietary transition in earnest. We’ve been talking about it for a long time, but it’s happening now and you can definitely see it in the data – the global grain demand that it is producing is quite strong. Those countries will not want to be significant importers because they’re so large that they can easily shift world markets. Both will work hard to maintain a high degree of self sufficiency and rely upon public-private partnerships and private mechanisms to deal with that.”

• Expert 5: Senior Researcher at a GCC-focused think tank; Writes extensively on agricultural land acquisition

  “Land acquisition can be successful if they have a community-based cooperative structure that has a government regulatory body monitoring everything. That is sustainable for business and for communities. Without taking the community into confidence the investment won’t be secure.”

Ergo's House View

In order to mitigate increasingly volatile swings in the global agricultural markets and future export bans, many nations are working to ensure food supplies through both domestic and foreign investment.

• For countries with agricultural capacity, like China and India, this can mean anything from dedicating more land to production, to implementing protectionist tariffs, to researching new technologies and processes by which crops are grown, harvested, processed, and distributed.

• On the other hand, countries with limited agricultural capabilities are now turning to outright land acquisition.

While the efficacy of the above strategies provides fodder for debate, the recent emphasis on food security has had another important effect: it has ensured that agriculture investment opportunities will continue to grow, despite a multitude of related political and economic risks and tensions. As our experts note, countries across the globe are working to secure their food supplies and related opportunities abound – ranging from cutting edge scientific research into new crop strains, to improved irrigation systems that make barren regions fertile, more efficient food processing and packaging, to modernization or expansion of infrastructure, and, finally, to direct acquisition of agricultural land.

Ergo has conducted numerous studies on agricultural investment opportunities over the last few years, the most recent of which focused on the global supply chains of seven foodstuffs.