I expect the global food system will continue to enjoy long-term structural growth driven by rising demand as global populations grow. As such, I believe there are growing investment opportunities in companies that can provide solutions to enable greater efficiency and enhance productivity; innovation is emerging across the food complex – from the farm to the table. We believe areas such as precision agriculture, automation and robotics, plant and seed genomics can play a growing role in the modern food system.
Today’s food sector faces challenges. The way food is produced and consumed today has put enormous pressure on the global ecosystem. The sector is responsible for one third of global greenhouse gas emissions.1 70% of ground surface and freshwater reserves are used for agriculture.2 Food security, as well, is a growing near and long-term concern. Between harvest shortfalls and the ongoing war in Ukraine, stock to use ratios remain tight resulting in food price inflation and shortages. The outlook remains uncertain. In 2023, with planted acreage down sharply as a result of the ongoing conflict, there may be less food available to export; in the absence of a sufficient supply response from other markets, we could face another year of elevated commodity prices.
While higher soft commodity prices clearly benefit food producing sectors near term (i.e. farm equipment order books remain quite strong), the longer-term pressure is incentivizing action. As a result of these concerns, governments, regulators and markets are becoming more receptive to innovative solutions. Companies with the capability to address agricultural and food-system resiliency, as well as those that enhance productivity and efficiency, should continue to gain traction and find opportunities.
Karen Miki Behr, portfolio manager, Newton Global Opportunities team