By Chris Rawley, CEO of Harvest Returns
At the end of each year, we generate a list of trends in the agriculture investment space based on what we’re hearing from our own investors and what we observe across the industry. Before jumping into 2025 predictions, we’ll take a moment to review how accurate our forecasts turned out for 2024.
Last year, we anticipated a resurgence in the Controlled Environment Agriculture space. This prediction did not pan out as additional high-profile vertical farming companies vaporized shareholder equity, and others struggled to stay afloat. Investment into regenerative agriculture continued to pick up momentum in 2024 and will likely see further gains next year. Agriculture biologicals also attracted significant capital with notable investments by Corteva Catalyst’s fund in SOLASTA Bio, Micropep, and Pairwise.
For 2025, here are five trends to watch:
The RFK Jr. Effect
As the old saying goes, elections have consequences. The Trump Administration’s selection of Robert F. Kennedy Jr. as nominee for the Director of Health and Human Services could have some interesting, if unpredictable, impacts on America’s food and agriculture systems. Among other things, RFK Jr. has opposed the Food and Drug Administration’s mandates against raw milk, clean foods, and nutraceuticals, while arguing against seed oils, pesticide-intensive agriculture, and ultra-processed foods. This appointment, and others at USDA and the FDA could impact where capital flows into America’s food system over the next four years.
Regenerative Appeal Remains Strong
Regenerative agriculture continues to be of interest to investors, despite the lack of standards on what exactly that term constitutes. Several companies announced funds to raise capital for converting farmland into regenerative production, while government incentives and non-profit grants into the space also grew.
Regenerative agriculture production still faces problems with scaling and competes heavily with conventional production for subsidies. One of the areas that could see a “meet in the middle” approach across the spectrum of regenerative food acolytes is some consensus on regenerative standards, disclosure, and labeling. Though the sector may see a de-emphasis on carbon sequestration, interest in other positive aspects of regenerative agriculture including nutrition, soil health, and preservation of biodiversity could gain new backers.
Production Gains Slow, Back Office Ag Companies Accelerate
As noted in a recent edition of Damian Mason’s “The Business of Agriculture” podcast, U.S. farmers have experienced significant production efficiencies in production over the past several decades, but the rate of change in those gains has greatly slowed. Harvest Returns works with dozens of early stage (and some more mature) farms, ranches, and agribusinesses, and one commonality we see is that despite modern agriculture production methods, many of them are behind other industries in the adoption of back office practices. Therefore, we’ll continue to collaborate with and invest in companies that allow farmers to focus on reducing the load of back office farm functions such as accounting and book keeping, lease management, and supply chain management. AI-enabled and Software as a Service (SaaS) companies will attract increasing attention from investors in 2025.
Alternative Proteins Lackluster Performance
Sales of plant-based food in the United States are expected to grow to $1.6 billion by 2029, but despite this growth, many consumers have never tried plant-based meat and many of the companies in the sector are struggling. In February, plant-based “shrimp” producer New Wave Foods ceased operations. Beyond Meat market value has been cut in half in 2024, while its privately owned competitor Impossible Foods was challenged by food recalls in several states.
Mycelium and mushroom-based ingredients seem to be a bright spot in the industry, though some of that interest was driven by a growing demand for psychedelics and micro-dosing in food products. Grand View Research projects a compound annual growth rate of 9.4% from 2024 through 2030 for U.S. fungi-based markets.
A Farmland Price Correction?
The demographic trends that make farmland an appealing asset will persist for the foreseeable future. In addition to the de-emphasis on conventional production and seed oils, other headwinds could impact the rate of appreciation of U.S. broad acre farmland. Commodity prices have fallen and row crop farm income is down. Tariffs are another wildcard that could impact land producing corn or soy over the next few years. On top of these challenges, interest rates remain elevated, agriculture banks have tightened collateral requirements and lending standards, with smaller producers being disproportionately impacted on loan availability. Whether these factors will contribute to a decline in farmland values in 2025 remains to be seen.
In Conclusion…
A dynamic confluence of political, market, and technology trends will make 2025 an interesting year for investors in agriculture. By understanding the key drivers of change and identifying promising opportunities, investors can position themselves to capitalize on the growth potential of this vital sector.