The Savvy Investor Farmland and Forestry section provides members with the latest white paper research, commentary and thought leadership on the themes affecting agricultural and timber-based institutional investments.
Farmland and forestry investments are classified as real asset within the alternatives asset class and include assets related to food and timber production and their ancillary activities. Investment returns generated from these assets will usually be derived from the purchase, sale and leasing of land for primary food and timber production. Returns derived from new technologies e.g. fertilisers and next generation planting and harvesting technology may also feature.
There are 195 countries globally with the Food and Agriculture Organization of the United Nations (UN FAO) tracking each country’s production statistics by food group, food product and forestry product. The UN FAO’s top five global wheat and timber producers are listed below for illustration:
Top five wheat producers (2017) Top five timber producers (2018)
- China 1. USA
- India 2. Russia
- Russia 3. China
- USA 4. Canada
- France 5. Brazil
As investible assets, both farmland and forestry confer many benefits to long-term institutional investors such as pension funds namely: diversification, low price volatility, non-correlation versus equities, inflation protection, an income yield exceeding the yield on developed market government bonds and stable investment performance across economic cycles.
According to the UN, the world’s population is expected to grow from 7.7 to 9.7 billion people by 2050. As populations expand in a finite world, both in terms of space and resources, governments, corporations and investors are increasingly being looked towards by cross border institutions to promote the long-term management of sustainable real assets. This emphasis on sustainable investment is especially relevant in food production where, despite the existence of sophisticated global supply chains, environmental concerns regarding both food loss and food waste remain.
In an attempt to move toward more sustainable farming practices governed by ESG principles, the agricultural sector in developed economies is now looking towards new product offerings e.g. alternative protein and technological innovations to help improve crop yields, reduce production costs and improve farm efficiency. This has been evidenced through the deployment of agricultural microbials, automated planting and harvesting technology, satellite imaging and data analytics. It is hoped this drive for efficiency may help to offset the rise in Chinese and Indian protein consumption, which is expected to grow significantly in the decade ahead.
For investors in forestry, sustainable development in production remains key to the health of the sector. This is particularly relevant given that demand for timber, from Asia and China in particular, is expected to rise in the future. As well as covering investment angles on timber’s traditional uses e.g. construction and paper, Savvy Investor members can find research and analysis on the investment case for new wood related products, such as biomass and agricultural bioplastics and resins.
The Savvy Investor Farmland and Forestry section covers all the above topics and more including investment guides, commentary and popular papers from the following respected publishers:
- World Economic Forum - Meat: The Future
- OECD & UN FAO - Agricultural Outlook 2018-2027
- UN Principles for Responsible Investment - Introduction to Investment in Forestry
- The Economist - Getting from Farm to Fork: Roads, Drones and Digital Highways
- NN Investment Partners - Agricultural Microbials: Towards Leaner, Greener Food
- Global AgInvesting - A History of Institutional Farmland Investment
- Knight Frank - Rural Report UK