The Top 10 Investment Trends in Agriculture

The huge variety of crop choices can be overwhelming to investors new to the agriculture asset class. An option for choosing potentially profitable investments is to follow society’s food trends. Many Americans these days are heavily dedicated to eating clean, local, organic foods. Trending diets and popular foods are raising the value of these crops to farmland owners and investors.

1. Organics - Unless you’ve been living under a rock, you’ve likely noticed society’s dramatic shift towards organic foods. Though the amount of organic farms is still relatively low, that number is growing rapidly. It takes time and capital to convert a conventional operation into an organic one, but returns can be higher for investors. A survey conducted by the U.S. Department of Agriculture found that there are 14,540 organic farms in the country; that amount has doubled since 1990.

2. Naturally-raised livestock is sold under various marketing terms such as free range, anti-biotic free, and grass-fed. These definitions are not firmly defined and can mean different things for different types of animals. For example, organic dairy animals must be pasture-grazed throughout the grazing season, and any supplemental feed (grain) they are fed must be raised organically. In any event, consumers are willing to pay more for the extra costs involved in raising animals in what they see is a more humane and healthier fashion than conventionally raised meat.

3. Vegetable-based protein has become a more popular alternative for many consumers. Soybeans produce a huge range of consumable items for both humans and animals such as soy sauce, soy milk, edamame, and livestock feed. Edamame contains about 18g of protein when cooked, and is exploding in demand. Tofu is another product of soybean crops and has remained a desirable meat substitute. Farmers from Arkansas to Minnesota are now growing the crop, which has experienced long-term price appreciation. Lentils and chickpeas are two other protein-rich crops that are seeing a huge increase in demand due to higher US consumption of hummus, curries, and other dishes containing the edible pulses.

4. Craft Beer inputs have become their own investment class. According to the Brewer’s Association, craft beer was an $8.8 billion industry six years ago and has now exploded into a $22 billion industry. All of that delicious beer has been brewed from crops on farmland whose value increases in parallel. Barley is the fourth largest grain crop globally and is mostly grown to be malted for use in beer and other alcoholic beverages. Hops are the other high demand beer input.

5. Specialty coffee is dramatically increasing in attractiveness. Millennials, who are currently the largest living generation, drink more specialty coffee than any other generation group. Also referred to as “craft coffee,” specialty coffee has largely been popularized by small, trendy, coffee shops and has led to an increase in fresh coffee sales. Coffee consumption grew 1.2% last year, hitting an all-time global high, and America is leading the way.

6. Cacao (aka, chocolate) industry growth is due in large part to an increased knowledge of health benefits of certain types of chocolate. Chocolate is the largest part of the U.S. confectionery industry, accounting for over 60% of the industry. The trees are grown mostly in Central America and West Africa.

7. Beets account for about 54% of all of America’s sugar needs annually. Athletes and other health-conscious Americans can’t get enough of the high-energy anti-oxidant filled juice.

8. Quinoa is another miracle food that was originally grown in the high plains of Peru and Ecuador.  US farmers in the drier parts of Colorado, the Pacific Northwest, Idaho, and Northern California are now struggling to keep up with the demand of this trendy seed packed with amino acids.

9. Non-GMO crops are a controversial topic in the food and agriculture space. What isn’t up for debate is the higher profits that these crops can garner from consumers. At a recent conference of agriculture investors, Rich Gammill, of Proterra Investment Partners, forecasted that the compound annual growth rate for nGMO farmland from 2017-2022 will be 16.2%.

10. Olive oil has been a staple of the Mediterranean diet for millennia and is now used in kitchens across the globe. Because of the heart-healthy effects, its popularity has skyrocketed worldwide. Considering the ever increasing demand for high-quality olive oil and the difficulty in investing in the Northern Mediterranean, an excellent investment opportunity can be seen in other parts of the world with an adequate climate. Olive growers in places like California and Texas are enjoying the high demand for superior oils.

Investing in agriculture is generally a long-term endeavor, but knowing which crops benefit from market momentum can help investors achieve out-sized returns.  A mixed portfolio of farmland containing reliable commodity crops and more trendy specialty crops is a safe bet for any investor interested in diversifying their holdings with agriculture.