農地プラス戦略：農業バリューチェーンへの投資

オリバー・ウィリアムズ、CFA
農地投資グローバル・ヘッド

キース・バルター
マネージング・ディレクター、エコノミック・リサーチ

ダニエル・セルナ
アソシエート・ディレクター兼シニア・ポートフォリオ・マネージャ

【日本語抄訳】

・農地プラス戦略とは、従来型のコア農地投資に加えて、農産物の加工や販売を手掛ける企業や資産への投資を組み合わせたものであり、農業のバリューチェーンへの投資を通じて投資可能ユニバースを拡大することができます。

・農地プラス戦略は、プライベート・エクイティのような単独の投資ではなく、生産から加工、販売といった農業関連資産の垂直統合を目指すものです。リスク・リターンは、コア農地投資とプライベート・エクイティ投資との中間程度が想定されます。

・コア農地投資戦略に農地プラス戦略を組み合わせることで、ビジネスの分散、サプライチェーンの効率化、消費者嗜好に合わせたプロダクトミックスなどを通じ、農地投資のリターンのボラティリティ低減が期待できます。

【英語原文】

Farmland plus: investing in the agricultural value chain

Combining "farmland plus" with traditional farmland investment strategies can provide investors with a host of potential benefits.

Farmland plus refers to investments in companies and assets that combine farm production with processing and marketing, and substantially expands the range of investment options beyond pure farmland investments. Food and beverage processing contributed $274 billion to U.S. GDP in 2020, and more than 31,000 companies operate over 36,000 food and beverage processing facilities.¹ Food and beverage manufacturing comprises about 12% of all value added in the U.S. manufacturing sector.²

The agriculture value chain begins with farm inputs and extends to the consumer, encompassing growing, processing, marketing, and distribution of the full range of agricultural products. The complete farm-to-consumer value chain is estimated to have contributed $1.0 trillion to U.S. GDP in 2020.³

Components by sector of the U.S. agricultural supply chain are illustrated below, with the two largest sectors, food service and food processing, together representing 65% of the total value of the supply chain, compared to just 13% for farm production.⁴ 

U.S. agriculture supply chain, value added to GDP by industry ($US billion)

Food and beverage manufacturing is the second-largest industry in the U.S. food supply chain.

Source: U.S. Bureau of Economic Analysis, March 25, 2021.

U.S. food and beverage product industry composition by value added to GDP  

Crop processing and manufacturing comprises one-third of U.S. food and beverage manufacturing.

This compares to the $138 billion added to GDP by the U.S. farm sector. Significant portions of the food and beverage processing sector clearly fall outside the bounds of farmland plus, including bakery, beverage, and livestock products. Even limiting farmland plus to processing and services more directly associated with crop production, we believe the potential investment opportunities in farmland plus assets represent significant value in the market. 

The scale of the farmland plus opportunity set is indicated by data from the debt market. The Farm Credit System is the largest lender to agriculture in the United States, and in 2020, loans to agribusiness at $56 billion, and to infrastructure at $35 billion, comprised a total of 29% of all Farm Credit System loans. This compares to $206 billion in Farm Credit loans collateralized by farmland or designated for farm production (65%).⁵  

U.S. Farm Credit System gross loan volume at year end ($US billion)

Agribusiness financing through the Farm Credit System exceeds $56 billion. 

Source: Farm Credit Funding Corporation, March 25, 2021.

Farmland plus: opportunities at the interface of farmland and crop markets

Farmland plus investments aren’t conceived as stand-alone private equity, but focus on integration across agricultural assets, combining production, processing, and marketing. Potential target companies in a farmland plus strategy tend to be farmland-centric with vertically integrated operations.  

Investments in farmland plus companies can build on and augment existing returns from farmland properties, facilitating improvements in the quality and product mix to align more closely with consumer preferences and trends. Consumer preferences for protein, freshness, convenience, sustainability, and food traceability and transparency are all affecting agricultural supply chains. For rapidly growing markets, such as specialty, niche, or organic crops, farmland plus investments can be directed to necessary additions to agricultural infrastructure, such as sorting, manufacturing, and storage facilities, or improvements to marketing and distribution channels.    

Potential farmland plus opportunities 

One example of a farmland plus project is an enterprise in Washington managed by Hancock Natural Resource Group (HNRG), part of Manulife Investment Management's comprehensive private markets strategies. This enterprise consists of apple orchards, an apple processing/cold storage facility, and an interest in a marketing desk selling fresh fruits to retail outlets. This vertical integration of the orchards with processing and cold storage has the potential to reduce return volatility relative to an orchard-only investment by eliminating supply chain expenses and balancing crop prices and processing volume income, as apple prices and packinghouse volumes may move inversely in the short run. The incorporation of the marketing desk into the enterprise provides a direct link to current market preferences together with consumer-directed insight into preference shifts to newer apple varieties that can command premium pricing, generating higher returns. The integration of marketing increases the efficiency of the sales process while also informing the strategy for redevelopment of orchards; this provides insight into the targeted varietal, fruit harvest timing, and product mix that has the potential to deliver optimal return performance.

Another example involves HNRG cranberry production in Quebec, Canada: Instead of selling cranberries raw from the bog, HNRG developed a cleaning and freezing facility that reduces the time from bog to freezer, maintaining the quality fruit destined for manufacturing into sweetened, dried cranberries by keeping the berries firmer. This integration of the cranberry bogs with first-stage processing provides an improved product to key downstream customers while enabling the crop to be more effectively marketed over the course of the year rather than concentrating sales at the time of harvest, when markets are often oversupplied, and pricing challenged. 

Market conditions favoring a farmland plus strategy

A farmland plus strategy may provide an impact on crop types where genetics and production techniques are changing rapidly to meet shifting consumer preferences, requiring capital to fund advances and improvements. Crops where access to certain desired varietals and nursery stock are restricted also present opportunities for farmland plus investments to integrate the sources of these improved stock with farmland and farm management. Finally, fragmented sectors and geographies with smaller farms can be combined with centralized processing and marketing to generate production efficiencies and help niche crops achieve more consistent supply and a more prominent market position in retail channels. 

Potential benefits for farmland investors

Traditional farmland investment strategies that include associated opportunities falling within the farmland plus category may provide investors with a number of potential benefits; a broader investable universe, potential to achieve greater supply chain efficiencies, and access to enhanced market information that informs operational decisions.

• Widening the investment mandate to include companies involved in processing and marketing agricultural products may allow access at scale to market segments that would be challenging to enter through ownership of farmland property alone.

• Combining production agriculture with storage and processing can unlock efficiencies by providing the tools to better optimize the mix and timing of crops marketed for sale.

• A feedback loop of market information back to farm operations can help adjust crop mix, quality, and sustainability to better meet the needs of other value chain stakeholders. 

Historical returns and standard deviation, 1996–2020

The role of farmland plus in an agricultural portfolio.

Source: Data for timberland refers to the NCREIF Timberland Index, December 31, 2020. Data for farmland refers to the NCREIF Farmland Index, December 31, 2020. Data for commercial real estate refers to the NCREIF Property Index, December 31, 2020. Data for non-U.S. equities refers to the MSCI EAFE International Equities Index, December 31, 2020. Data for U.S. Treasury bills refers to the Ibbotson series IA SBBI U.S. 30 Day Tbill TR USD, December 31, 2020. The S&P 500 series is from Standard & Poor’s Financial Services LLC, December 31, 2020. Data for U.S. private equity refers to the Cambridge Associates Private Equity Index, December 31, 2020. 

We believe farmland plus investments fit between farmland and private equity on the risk/return spectrum with a lower leverage, return and risk profile than private equity since farmland and real assets comprise a significant portion of the operating companies’ balance sheets. These assets contribute to the company's sales and add valuation stability relative to the operating company only. Investment assets and companies feed underlying markets for essential food and agricultural products, aligning with fundamentals similar to those of farmland and directly operated agricultural investments.

An important feature of food production and processing supply chain components is the margin fluctuations that occur due to changing farm product prices. An increase in farm product prices often boosts farm income but compresses margins for food processors as their costs rise. Likewise, a fall in commodity prices often reduces farm income, but expands food processing margins.

Annual % change in value added to U.S. GDP by key sectors in food supply chain 

Farm production and food and beverage processing can offset each other during cycles.

Source: U.S. Bureau of Economic Analysis, March 25, 2021.  

Investors in agriculture have the opportunity to pair real asset investments in farmland with operating companies within the food value chain, with the potential to add value to farm crops through processing and marketing as the crop aligns more closely with consumer preferences. 

Where innovation meets demand

We've examined how farmland plus, paired with a portfolio of farmland properties, broadens the investable universe and provides the potential to increase income and reduce volatility by enhancing supply chain efficiency, product quality, and alignment with consumer trends. Furthermore, new processing plant technologies and economies of scale are producing efficiency gains that can benefit the overall supply chain, from agricultural production to consumers. And an increased focus on health and wellness, and on sustainability, is driving innovation and transformation across a range of crops and foods, creating a need for additional investment in these typically capital-intensive food and agriculture companies.  

Continued innovation in agriculture production and processing, combined with shifting consumer trends towards fresh and healthy foods in the United States and globally, creates a need for capital in companies that combine agricultural production with processing and/or marketing. This is when an appropriately structured farmland plus investment strategy can help streamline costs and timing from farm to market, align supply chain interests, and facilitate the implementation of long-term initiatives in quality, sustainability, and traceability.

1 U.S. Census Bureau, October 26,2020. 2 USDA Economic Research Service, March 25, 2021. 3 U.S. Bureau of Economic Analysis, March 25, 2021. 4 USDA Economic Research Service. 5 Farm Credit Funding Corporation, March 25, 2021.