Download - Tanja havemann
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November 2013
INVESTING IN AGRICULTURAL INNOVATION: JUMPING THE KUZNETS CURVE
Why are you here?
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Kuznets’ theory of development Society demands a beMer environment as it grows…
…But, the global environmental resource stock is diminishing rapidly, and do emerging economies need to go through the same growth paradigm?
Stage of economic development: Income per capita
Environmental degrada5on
?
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Why agriculture? • Heavy reliance on agriculture par;cularly among rural poor • Improved agriculture can reduce poverty & s;mulate growth • Increasing pressure on land for food, fuel, fiber, habitats • Environmental resource base is being degraded & altered
For developing economies to grow & prosper with constrained natural resources, they have no choice but to jump the curve!
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Trends to help jump the curve within agriculture • Mobile & RFID technology • Applica;on of ‘big data’ • Regional infrastructure & connec;vity • Voluntary labeling & cer;fica;on • Urbaniza;on & growing middle class • Financial product innova;on • RemiNances • Innova;ons in agri supply chains • Legisla;on: Coopera;ves, collateraliza;on, standards,
transparency, trade, food safety, market liberaliza;on…
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Example #1: Producers that aggregate
Nucleus Farm Smallholder farmers
Contracts that help smallholders gain access to exper;se, inputs, infrastructure and markets
Investor
Security to investor / buyer increases
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Example #2: Market & Supply Chain Infrastructure
Farmer Buyer
Warehouses / Markets Products graded & receipts issued: More flexibility & transparency to farmers.
Central point of purchase provides the buyer more transparency and choice.
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Example #3: Reliable & affordable energy
Agri-‐facility
Gasifier / digester / solar
RE Facility
Land, waste products
Grid
Energy / steam / heat / by-‐products
Energy
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How to invest?
Type Pros Cons
Direct equity in land owner / manager
-‐ Asset backed -‐ Infla;on hedge -‐ Low correla;on to equity markets -‐ Stable returns if well managed
-‐ Med-‐low returns -‐ Illiquid asset / long-‐term view -‐ Poli;cal & reputa;onal risk -‐ Larger ;cket size
Trade finance / produc;on loans
-‐ Poten;al for higher returns -‐ Less risky due to shorter ;me and
collaterals -‐ Smaller ;cket sizes
-‐ Transac;on costs -‐ Difficult to assess risk -‐ O`en missing basic underlying
infrastructure & informa;on
Listed equi;es linked to agriculture
-‐ Liquid -‐ More accessible
-‐ LiNle choice par;cularly in developing countries
-‐ Ability to influence may be low -‐ Typically indirect exposure
Agri products & technologies
-‐ Can generate high returns -‐ Growing demand due to
mechaniza;on, etc.
-‐ Rela;vely new sector, dominated by large co’s
-‐ Regula;on & patents
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Inves^ng to jump the curve Fit depends on a host of factors, including: ü Partners ü Risk / return appe;te ü Deal size, term and transac;on cost ü Speed to act / entrepreneurialism ü Non-‐financial outcomes ü Geographies The right deal depends on the par^es involved, but we see opportuni^es throughout the value chain.
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