Much More than Farmland

Big investment funds, such as those responsible for managing the portfolios of millions of individual investors here and abroad, will remember 2009 for a very long time. Marked by the Great Recession, the year was synonymous with dismal yields and with several markets dreading a period of scarcity.
Faced with modest stock performances, fund managers sought other investment opportunities to generate better and more stable long-term yields. It wasn't long before they turned their attention to the agrifood sector. Consequently, four times a year since 2009, several hundred investment fund representatives meet in Singapore, Abu Dhabi, London and New York – no less! – to attend briefings on the best agrifood investment possibilities. Some might say they're opportunistic, but what if this was a win-win situation?

The main perception among Quebec's agricultural sector is that investment funds are the equivalent of an unwelcome acquisition, bordering on a hostile takeover of farmland. In reality, it's not that simple.

The main perception among Quebec's agricultural sector is that investment funds are the equivalent of an unwelcome acquisition, bordering on a hostile takeover of farmland. In reality, it's not that simple. It's true, big investment funds buy farmland. They're active in Asia, Eastern Europe, and to a lesser degree Africa (the risks are too high), and much less so in North America. They are almost nonexistent in Quebec because the competition is too aggressive. Above and beyond annual yields, investors from outside the farming world determine an investment's performance based on the difference between an asset's purchase price and its resale value. They are therefore more conscious of the purchase price than a farmer who covets the neighbour's land with the intention of developing the business beyond the current generation. In this context, without necessarily being completely absent, institutional investors see very few opportunities in the Quebec farmland market.

Regardless, even on other continents, the larger funds aren't investing in land only. Storage and transport requirements are immense if we are to increase global food production. From better seeds to innovative irrigation techniques, this will also require new technologies designed to increase yields. That kind of development doesn't happen overnight. Considerable financial influx will be necessary to make it happen. That's why agrifood will take on a bigger share of investment fund portfolios over the next few years, rising from 1% to 5%. Far from being catastrophic, this is in fact good news and is absolutely essential in attaining global food security objectives.

Quebec is also feeling the impact of big investment funds. Our cooperative is able to realize some of its growth objectives because funds like the FTQ's Fonds de solidarité and Desjardins' Capital régional et coopératif chose to financially participate in La Coop fédérée. Solid financial partners are essential here at home and they are in agricultural businesses. Bottom line is that they always are.
 
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