By Chris Rawley, CEO Harvest Returns
We expect 2020 to be another exciting and dynamic year for investments in agriculture and related businesses. One of the ways we seek to understand momentum behind agriculture investments is to examine consumer food preferences. According to Nielson’s recent “How America Will Eat” report, sales growth during the last year for fresh foods has increased $4.6 billion, organics are up more than $925 million, and plant-based foods have grown to $982 million. Socially and health conscious younger generations are increasingly concerned with all aspects of the food they eat to include how, where, and by whom it is grown. Based on these developments, we’ve developed the top five investment trends to watch in 2020.
Graphic found on Nielson’s report on “How America Will Eat.”
1) Plant-based Protein Related Crops
The rapid rise of Impossible Foods, Beyond Meat, and other plant-based proteins is driving a significant number of farmers to adjust into crops that support production of these products. Opportunities exist for investors who want to acquire farmland suitable for growing these crops or agribusinesses for related processing facilities. For example, Beyond Meat’s protein ingredients include peas, mung and fava beans, brown rice, and sunflowers. Though pea prices are at 20 year lows (primarily due to tariffs reducing demand from China), pea production is up 40% from last year. In recognition of this trend, Cargill recently invested $100 million in Puris Foods, a pea protein producer.
2) Grass-fed Meats
Despite the rise of plant-based foods, consumer demand for beef, lamb, poultry, and other meat producing animals is not likely to be significantly impacted. However, consumers are more concerned about the welfare of the animals they are eating and how they are raised. A study from global communications consultancy Ketchum also found that 41% of Americans selected animal welfare as a top social cause.
Grassfed beef will continue to be a growth sector in 2020 and demonstrated 15% year-over-year growth for the year ending April 20, 2019. Approximately 50% of the grassfed beef consumed in the United States is produced in Australia, representing a significant growth opportunity for North American beef producers.
3) Hemp & CBD
Hemp, not to be confused with marijuana, are both part of the Cannabis plant family. Cannabis contains a variety of different compounds called Cannabinoids, two of the most dominant are Tetrahydrocannabinol (THC) and Cannabidiol (CBD). Both Cannabinoids have shown to provide profound benefits to the human body; however, THC induces psychoactive effects (gets the user “high”), while CBD does not contain any psychoactive properties. Hemp contains a very low concentration of THC, while marijuana is abundant in THC. Because of this, marijuana is grown for recreational and medicinal purposes, and hemp actually refers to the industrial, non-drug variant that is cultivated for its fiber, hurd, and seeds. Newer uses include hemp wood and hempcrete.
New York based hemp farm, Scotch Valley Ranch.
In what President Trump called a “tremendous victory for the American farmer,” the 2018 Farm Bill signed into law the legalization of hemp at a federal level, and allowed states to have programs for growing industrial hemp commercially. The new law allows for transporting hemp across state lines, expanding export and sales options. Additionally, crop insurance is now available for hemp operations, making it less of a risk for farmers to produce. Driven by explosive growth in hemp-based consumer products, the global hemp market is expected to jump to $10.6 billion by 2025.
4) Indoor Agriculture & Locally Grown Produce
Soil-based agriculture has dominated food production for tens of thousands of years. More recently, so-called "novel farming systems" have become more prevalent. Indoor farming, or “controlled environment agriculture (CEA),” promises to revolutionize and decentralize America’s food system. CEA will bring food production closer to consumers, while improving quality, taste, and consistency. The vertical farming market is expected to grow 33% between 2018 and 2024, and locally grown food sales rose by 66% between 2014 and 2019.
5) Natural Sweeteners
Americans want to limit sugar intake are beginning to embrace natural sweeteners made from crops, such as dates, raisins, and other fruits. The Whole Foods 2020 Report predicts that consumer brands intend to replace sugar in desserts and marinades with “syrupy reductions from fruit sources like monk fruit, pomegranates, coconut, and dates.” Look for a growth in the crops that produce these sweeteners in the next 12-24 months. For example, while global sugarcane prices have fallen considerably since 2010, the sugar substitute stevia is projected to see a compounded annual growth rate of 11.3% from 2017 to 2025