Cross-portfolio implications arising from the global food system
critical crops and resources
Given the reliance of the global food system on international trade, interruptions in food supply chains can be highly disruptive – especially given the export concentration of key agricultural crops and inputs. To assess risks, investors must consider:
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AgTech
Supply Distruption RISK
Farmland INVESTING
Farmland INVESTING
AgTech
Supply Distruption RISK
Grain exports are highly concentrated
Share of top 5 global exporters for select key crops (2020)
Source: Food and Agriculture Organization of the United Nations.
Portfolio-wide Investment Implications
US farmland
While farmland is still a maturing institutional asset class, CIOs may want to give it consideration. As a real asset, it has proven to be an effective store of wealth in periods of high inflation and uncertainty as well.
Farmland can be an effective inflation hedge
Source: USDA Economic Research Center and Federal Reserve.
US farmland price compared to US CPI (year-over-year % change)
Food price inflation, sustainability and disruptions to the food supply chain all raise important considerations beyond the specific asset class opportunities.
1. Disruptions in food distribution may reveal hidden risks and vulnerabilities across portfolios
Disruptions may be more common and widespread in the future
Food inflation can be destabilizing from a social and political perspective – especially in emerging and frontier markets
2. The food system presents unique tensions and opportunities for ESG-minded investors
There are no perfect solutions for the inherent tensions of the food system
3. Farmland investing has some unique investment characteristics
Offers negatively correlated returns with both stocks and bonds
An approach that engages with companies and emphasizes active research as well as collective advocacy may be most effective
Farmland has proven to be a reliable inflation hedge
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Incorporate food security vulnerabilities into their country risk assessment
The impact of more frequent supply disruptions going forward
Food inflation’s destabilizing effect on economies and societies, especially in emerging markets
• Incorporate food security vulnerabilities into their country risk assessment
• The impact of more frequent supply disruptions going forward
• Food inflation’s destabilizing effect on economies and societies, especially in emerging markets
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Jamie Shen, CIO of Agricultural Investments, explains the opportunities in farmland debt and equity.
farmland & Agriculture
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