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Ag sector investment prospects 'highly positive'

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Last week, I was asked to chair the two-day conference held in London by Agrimoney on the very pertinent subject of "how to raise and deploy funding and generate returns in the agricultural sector".

This was a well-attended event with delegates and speakers from the UK, the rest of Europe, Australia, the Ukraine, Argentina, the US, the Middle East and Asia.

Talking points

Looking back, I have come up with what I saw as being the main points that emerged from the plethora of speakers and panellists at the event.

These included:

* the fact that, despite challenging times at the moment in world agriculture, the fundamentals for investment in the sector still remain highly positive, and farmland is still seen as an excellent investment asset class.

*countries such as Argentina, the Ukraine and Romania in particular were all seen as offering opportunities.

* Africa, including Ethiopia and countries in West Africa, will present exciting new opportunities and should not be ignored.

* the issue of water usage and sustainability in the supply chain will all increase in importance over the next 5-10 years. There is still a good deal of work to be done before supply chains can be considered as truly sustainable, but those that can display these characteristics will be in a position to generate higher than average returns

* other issues, such as health and wellness - especially in more mature markets - will see more prominence in the future.

* In emerging and developing markets, the story will still be about securing volume supplies of affordable food rather than exploiting niche areas.

* as an industry, there is still more work to be done in understanding the nature of political risk and having a more rigorous approach to the process of due diligence.

* top-quality management teams are normally a pre-requisite for success in terms of making investments work and just "being good" is not seen as "being good enough".

* there will be further market growth in Asia, especially in markets such as Indonesia, the Philippines and Vietnam - not just in India and China.

* ongoing volatility in terms of commodity prices is seen as almost inevitable across the globe and there is a need to gain a balance of investments in all senses of the word – in terms of geography, by crops and livestock and in different parts of the supply chain, but timing of investments will remain a challenge.

* farm supply chains are ripe for further integration and consolidation to ensure both the volume of farm goods, quality, efficiency and security of supply that international markets require.

* there will be ongoing growth in the development of a more corporate approach to farming. Supply chains will prosper if they get closer to and really understand customer and consumer needs. Supply chains that do not add value to products and/or services will face a particularly challenging time ahead.

* climate change is maybe the single biggest threat to the challenge of feeding a global population of 9bn within a generation, and we will need to make use of high tech solutions and precision-based farming techniques to help achieve this.

'Overriding sense of optimism'

These were among my own personal "take home" points. I am sure those who attended will have had their own too.

What struck me most was the overriding sense of optimism that many delegates had and the thirst for knowledge they displayed.

All of the speakers should be congratulated for they way they delivered their papers in such an open manner and were prepared to answer questions submitted to them in an equally open and forthright manner too.

This, in my experience of chairing similar events, is not always the case. With most of them sticking to the pre-agreed times for speaking, it made my job as chair reasonably easy! This was the first time that Agrimoney has organised such an event and they should be congratulated for their efforts.

Worldwide trend

The whole role of investment in agriculture is still one we need to be better informed on and know more about.

Money is still being pumped into the sector almost regardless of geography.

I made a reference in my final summing up to hearing about projects and significant funding going into a range of countries as diverse as China, India, Chile, Ireland, Australia and Russia.

Exact geography to me doesn't seem to be the major issue, but as always finding fundamentally good projects is still the key requirement.

'Time and patience'

As one speaker commented with a somewhat rueful smile: "while finding these good projects is always a challenge, on top of that, you need just two more things, which are the time and patience to make them work".

And I don't think she was altogether joking - the clear inference being that finding less-than-good projects was altogether easier, but not what is required.

To me, the global agricultural sector still needs to be investing in best of class farm enterprises and units and there is no need for any more investment in what might be seen as "the average".

Overall (and I might be biased of course, but am willing to admit it), this was a great two days. If the same sort of event goes ahead again next year, and I think it will from what I understand, I would recommend you get along to it.

John Giles is a divisional director with Primer International, the value chain consulting arm of Genus plc and the current chair of the Institute of Agricultural Management

By John Giles

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