Agriculture


This pure Agriculture theme is driven by powerful long-term trends such as world population growth, economic development, changes in eating habits and environmental challenges.
    

Why agriculture ?

The long term investment case for agriculture equities is based on a structural imbalance between supply and demand.
Demand will be supported, on the one hand, by population growth and on the other, by the impact of economic development on eating habits. In particular, emerging middle classes’ dietary pattern is shifting towards greater animal protein intakes, which has in turn a multiplier effect on demand for grains as feed for animals. 

While demand is rising, there are constraints on supply as the necessary resources are undergoing heavy stress. Arable land expansion is stagnating due to increased competition from other uses (urbanisation, industry, etc.) and soil degradation. Water scarcity is growing, due to overexploitation and pollution. Lastly, the effects of climate change, such as rising temperatures, changes in precipitation patterns and increasing intensity of extreme weather events, will strongly impact agricultural productivity.
Massive investments will be needed to help supply meet demand by adding new arable lands and associated infrastructures and by optimizing land yield thanks to rationalization and mechanization of farms, progress in seed and crop protection technologies, and to the development of precision farming. These massive investments should support growth for the agriculture sector and agriculture equities.



La production alimentaire mondiale :

Les terres arables augmentent moins vite que la population mondiale :



Our approach

We do not invest in soft commodities but in equities only to avoid adding to agricultural products’ price pressure and speculation.

Our universe goes throughout the upstream agriculture value chain, breaking down the universe into six segments which display different sensitivities to soft commodity volumes and prices.

Agricultural Products, Fertilizers, Agricultural Chemical and Farm Machinery are sensitive to soft commodity prices as demand for those segments will be impacted by farmers’ profitability. Agricultural Services are mainly sensitive to volumes and need good harvests to achieve a high utilisation rate for their infrastructure and processing assets. Livestock is inversely correlated to grain prices as lower grain prices mean lower feed-costs and higher margins.

This diversity in sensitivities within our universe combined with a flexible sector allocation allows for the universe to perform regardless of soft commodities’ price trends.

We hold a long term approach as our goal is to identify throughout the entire upstream agricultural value chain the subsectors and companies that will successfully adapt to supply/demand imbalance and best deliver on their growth potential through a strong and sustainable development. Moreover, our through-cycle standpoint allows us to cope with the volatility of soft commodities’ prices.

View all thematics

Past performances are not a reliable indicator of future performances of the funds and of the funds manager.