Agriculture is a fast-developing asset class among institutional investors providing an excellent combination of security from the land, an annual cash yield, and a potential upside from taking advantage of new Ag-technologies. Agriculture investors are exposed to sustained forces of development, or megatrends, that are transformational to the world as we know it today.

Strategy

Depending on investors’ risk tolerance, the asset class can be employed throughout the value chain from upstream low-risk real estate investments to downstream processing or infrastructure opportunities in different segments such as annual row crops, livestock, or high value permanent crops. There is an endless amount of combinations, which is why it is important to focus on a specific strategy when choosing an agriculture investment manager. IWC’s strategy focuses on:

Farmland investments in Europe which could provide attractive additional returns to investors
Buy-and-lease segment (in some cases own-and-operate)
Commodity crops (wheat, barley, etc.) and high-value annual crops (vegetables, potatoes, blueberries, etc.)
Conventional and organic farming
Access to irrigation.

Services & Investment Solutions

IWC provides tailor-made agriculture services and investment solutions to maximize value for each client.

To know more about our Agriculture services and investment solutions, please contact our Agriculture Investments team.

Why Agriculture?

With an asset class valued at USD 8.4 trillion, a threefold expansion in crop production over the past 50 years, and a 70% projected increase in food demand by 2050, a very strong business case for agriculture investments can be made.

Megatrends exposure – a growing population, increasing protein consumption, decreasing farmland, water scarcity, food health, and safety to play an important role in the development of the sector
Structural changes in ownership – generational shift and consolidation of farms, institutionalization of the asset class and long-term investment horizon, direct exposure ensuring low costs and governance control
Steady income with growth potential – safe and steady income from land leases, growth potential from efficiency gains (precision farming, consolidation of land, and irrigation, among others) and current commodity crop prices at a historical low level; inflation protection built into the lease contracts with upside from higher commodity prices
Experienced management team – on average more than 20 years of experience in farmland investment, management, due diligence, and governance across Europe; strong network sourcing investment opportunities and access to superior advantages for tenants
Solid portfolio attributes – strong historical return-risk characteristics, low correlation to other asset classes, access to low-cost leverage, superior asset-liability matching with bond-like attributes and capital appreciation over time, relatively liquid markets for farmland and land lease, especially for high-quality soils.

Return drivers

Annual cash-on-cash yield – a buy-and-lease strategy is expected to produce a real gross cash yield of 2.5 to 4% depending on geography. Lease contracts typically comprise a variable lease rate and often include an annual upward market price clause (tied to the market price of wheat).

Valuation increases – only a moderate real price appreciation is expected in Western Europe due to implementation of precision farming, genetic improvements, and other efficiency gains. In Eastern Europe, IWC expects farmland value to converge towards Western European prices due to land consolidation, adaptation of better agricultural practices, equalization of EU subsidies, and other efficiency gains.