How To Profit From A Booming (And Hungry) Population

How To Profit From A Booming (And Hungry) Population
Milou Beunk

over 2 years ago3 mins

  • In order to feed the world's growing population, the United Nations estimates that we’ll have to grow 50% more food by 2050 than in 2013, and precision agriculture – the use of technology to increase the efficiency and productivity of farming techniques – looks set to play a key role.

  • The World Economic Forum predicts that if 15%-25% of farms use precision agriculture techniques, global crop yields will be up to 15% higher by 2030, and greenhouse gas emissions and water usage will be 10% and 20% lower respectively.

  • Specialist agricultural equipment manufacturers like Deere & Co and Kubota, pharmaceutical giant Bayer and chemists BASF, Corteva, and FMC, and technology companies like Trimble and Topcon are ways to invest in the theme.

In order to feed the world's growing population, the United Nations estimates that we’ll have to grow 50% more food by 2050 than in 2013, and precision agriculture – the use of technology to increase the efficiency and productivity of farming techniques – looks set to play a key role.

The World Economic Forum predicts that if 15%-25% of farms use precision agriculture techniques, global crop yields will be up to 15% higher by 2030, and greenhouse gas emissions and water usage will be 10% and 20% lower respectively.

Specialist agricultural equipment manufacturers like Deere & Co and Kubota, pharmaceutical giant Bayer and chemists BASF, Corteva, and FMC, and technology companies like Trimble and Topcon are ways to invest in the theme.

Mentioned in story

What’s going on here?

The world’s population is forecast to reach around 10 billion by 2050. In order to feed all those extra mouths, the United Nations estimates that we’ll have to grow 50% more food than in 2013. But the shrinking availability of crop-bearing arable land, combined with a general need for greater agricultural sustainability, makes that a big ask.

All isn’t lost, however. Precision agriculture – the use of technology to increase the efficiency and productivity of farming techniques – looks set to form an important part of the global push for higher agricultural yields alongside more sustainable food production. So I thought it’d be worth taking a look at how you and your money could play a role.

What does this mean?

Making sure there’s enough food for every person on the planet involves tackling the issue on several fronts: reducing food waste and shifting towards more vegetarian diets are two key components. But the way in which farms operate is also ripe for change.

Precision agriculture is all about using technological tools to generate greater yields from arable land while simultaneously lowering the level of input needed in terms of land, water, fertilizer, herbicides, and insecticides. Put simply, farmers employing precision agriculture practices use less to grow more.

The technology concerned includes everything from drones for monitoring crops and soil screening for nutrients to remote sensors and controllers for managing resources. While the principles have been around for a while, it's only over the last decade that falling prices have allowed them to become more widely practicable.

And the impact could be significant. The World Economic Forum predicts that if just 15% to 25% of farms adopt precision agriculture techniques, global crop yields will be up to 15% higher by 2030 – while greenhouse gas emissions and water usage will be 10% and 20% lower respectively.

Why should I care?

Analysts at investment bank Morgan Stanley estimate the precision agriculture market could rake in revenue of $17 billion in 2030, up from $5 billion in 2019. That sort of growth, taken together with the opportunity to sustainably feed the future world, has attracted plenty of interest from companies – and consultancy Roland Berger has helpfully mapped the market, including many publicly investable players.

Specialist agricultural equipment manufacturers like Deere & Co and Kubota have invested heavily in precision agriculture. But so too has engineering firm Bosch, via sensor-producing partnerships with various agritech startups.

Pharmaceutical giant Bayer has taken an early lead in precision agriculture among its crop-protection peers. It uses both its biotechnology research and predictive analytic capabilities to deliver tailored solutions to farmers. Rival chemists BASF, Corteva, and FMC are all spending big to catch up.

Technology companies like Trimble and Topcon, meanwhile, provide complete hardware-software packages for farm management, including things like autonomous agricultural vehicles. And the tech giants are also active in the space: Microsoft has a platform called FarmBeats which connects croppers to the cloud.

As mentioned, there are also plenty of unlisted but ambitious “agtech” (or “agritech”) startups out there. Venture capital investors poured almost $2.8 billion into agtech startups across the globe in 2019 – a fourfold increase on the 2015 figure.

I haven’t yet come across a low-cost, low-fuss exchange-traded fund focused on precision agriculture, so the best way to get exposure to the theme is probably to investigate investing in the above-mentioned firms. As always, do your own homework – but the below table gives you an idea of what the average analyst opinion is for these stocks.

Analyst recommendations for select precision agriculture players
Analyst recommendations for select precision agriculture players (Source: Roland Berger, Bloomberg)
Finimize

BECOME A SMARTER INVESTOR

All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

Finimize
© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG