Meeting the Challenge of 2050 – A Partnership in the Making

While attending the Global Agribusiness Summit at Millikin University in Illinois Brett Begemann, President and Chief Commercial Officer of Monsanto stated that “If” was not an acceptable option in describing the challenge of feeding an additional 2 billion people worldwide by 2050.  In an article written by Tom Doran of AGRINEWS, he reported Mr. Begemann suggested the potential global food demand creates a significant opportunity for the agricultural industry to step up innovation and efficiency to support a sustainable path for agricultural producers and consumers.  It is clear that this opportunity is real based on the array of world organizations predicting that by 2050 there will be an additional 2 billion people to feed worldwide.  It is estimated the world population will increase by 47% to 8.9 billion by 2050, and the impact of this growth will push the agricultural industry to double its production in the next 30 years to meet this demand.  This fact coupled with the evolution of dietary preferences along with growing income in countries like China provides much evidence to support an increased need for food in the world.

This is an exciting time to be in agriculture, and now more than ever farmers are going to be asked to toe the line and meet the challenges of greater production.  As a land broker specializing in agricultural properties this proves to be an exciting time for my industry as well.  A limiting factor to any farmer today is finding land on which to produce their product and I am working each day to find ways to bring active buyers in the market together with sellers interested in trading agricultural land.  On the Delmarva Peninsula, agriculture seems to be taking a front seat for land use and agricultural producers and actors in the market are taking positions to capitalize on this need.

In the last month alone, clients have reported to me the construction of new grain facilities and the formation of interesting agricultural investment strategies that are focused on aggregating land for production and maximizing outputs by maintaining fixed up front costs for agricultural inputs.  Strategies for maximizing agricultural returns have been mastered by large agricultural investment groups like Westchester.   I had the good fortune recently to hear Randall Pope, President and Chief Executive Officer of Westchester speak, and he described the model his investment group has used to bring consistent returns to investors through production agriculture.  In 2010, TIAA-CREF acquired a majority interest in Westchester and today the company manages over $2-billion of assets in a management portfolio which includes over 400 “high quality diverse farmland assets across the United States, Australia, South America and Europe”, as reported under their company profile at www.wgimglobal.com.  Westchester has proven that investing in agricultural production can bring a consistent return on investment and they serve as a model of success in establishing strong investment standards for the industry.

This is a unique time for the agricultural industry as technology continues to shape the efficiencies in the industry for producers and the foundations of demand for agricultural commodities remain strong.  Leveraging global food demand and production, agriculture can be a sound strategy going forward for investors seeking consistent returns in a limited risk asset class.

I see a strong partnership between the farmer today looking to increase production as he installs a new center pivot on the farm, and the investor seeking consistent returns based on well documented market forces driving the agricultural market place.  Clearly there is much to accomplish in the next 30 years and one of the largest hurdles a farmer has to jump is the capital cost of land acquisition to maintain or grow their operation.  In Mr. Beggeman’s speech he suggested that we must be innovative and work together to meet this challenge, and from this I welcome the idea to bring investment to production agriculture on the Delmarva Peninsula.  The synergies between the agricultural and financial sector are significant, and if we can work together to build strategies to bring investment to agriculture while working to provide food and improved quality of life around the world in the coming decades, the outcome will be immeasurable.