2022 is bringing change, improvement, and adaptation to many industries, and agriculture is no exception. Farmers and ranchers are modernizing food production to meet increased consumer interest in supporting local agriculture, and demand for sustainable practices continues to drive buying preferences. We’ve compiled a list of the top 5 agricultural investment trends you’ll want to keep in mind if diversifying your portfolio is one of your New Year resolutions.
Vertical Integration
The trend:
With consumers showing preference for value-based agriculture, food and agribusiness companies are adapting their infrastructure to help meet the demand. Vertical integration is the combination of multiple separate-stage production companies into one, which promotes tighter quality control, cost reduction, and increased operating efficiency.
What it means for investors:
A company willing to innovate its business model will likely be willing to innovate other areas over time to keep up with changing consumer demand, modern technology, and better management practices. These qualities are indicative of a company’s longevity and success, which can lead to more confidence for investors. Most importantly, vertical integration enables farmers to extract more profit per dollar of food they produce.
Regenerative Agriculture
The trend:
According to the International Food Information Council’s 2021 Food and Health Survey, four out of 10 Americans believe their purchasing habits affect the environment. With this buying trend in mind, consumers will likely continue to support agricultural production methods, such as regenerative farming, that improve soil health, maintain biodiversity, reduce carbon emissions, and eliminate chemical run-off.
What it means for investors:
As food consumers themselves, it is likely investors also care how their investment intertwines with the food, agricultural, and environmental industries. By investing in a production method that bridges the gap between concerned consumers and forward-thinking environmentalists, investors can play a critical role in securing a more sustainable future.
AgTech
The trend:
With the world population expected to exceed 9 billion by the year 2050, agriculturists are utilizing modern technology to optimize food production, promote transparency, and aid producers in operating more efficiently.
What it means for investors:
Alternative protein options remain at the top of the list for 2021 food technology trends. While some might feel this is a betrayal of the livestock industry, it’s important to note that many other agriculturists — such as soybean and canola producers — will benefit.
According to recent data from Emergen Research, “the global food traceability market size reached USD 4.54 billion in 2020,” and the projected revenue forecast is 9.75 billion by 2028. Consumers want that farm-to-fork connection, and food traceability technology may be a smart investment to simultaneously meet popular needs and create portfolio diversity.
One rising trend among agriculturists is precision agriculture, which is revolutionizing the way farmers and ranchers monitor and produce our food. The challenges for small farmers seeking to incorporate precision ag technology into their operation are cost, specialized labor requirements, and connectivity issues to rural areas, to name a few. Opportunity often lies close to adversity, and investors looking to grow their wealth can invest in these trends to help support optimal food production efficiency.
Processing Facilities
The trend:
The pandemic unveiled numerous shortcomings of our food system, especially among meatpacking monopolies. The need for competition in the meat industry has led to an increase in small, decentralized processing facilities. As a result, local, family-owned, and direct-to-consumer beef are trending terms with food buyers concerned about supply chain security.
What it means for investors:
In a critical review of consumer trust in food and the food system, researchers found two main influencers. The first influence of consumer trust in food was directly through product labeling, but the second influence was “indirectly through actors of the food system.”
As indirect actors in the food system, investors have the power to influence trust in the supply chain by supporting the growing demand for food processed through smaller, value-added companies.
Controlled Environment Agriculture
The trend:
Currently, 55% of the world’s population resides in urban areas, and demand for locally grown food is increasing in response to health and wellness trends. This dynamic has resulted in a call for agriculturists to adapt production methods that allow food to be grown in proximity to urban areas without utilizing large tracts of land. Controlled environment agriculture is answering the call in the form of hydroponics, aquaculture, and other unique soilless farming techniques.
What it means for investors:
According to a report from KD Market Insights, the global controlled environment agriculture market is projected to reach over $172 billion by 2025, “registering a compound annual growth rate (CAGR) of 18.7% between 2020 and 2025.”
This expected growth means the face of agriculture is changing in correlation to the urban population shift, creating an opportunity for investors to capitalize on a modern movement.
Investing in Agriculture in 2022
Agricultural production is evolving more rapidly than ever — the industry once reduced to simply tractors and row crops is diversifying its infrastructure, technology, and growing practices to reinvent where and how food can be produced while still prioritizing environmental sustainability.