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3 Trends Shaping the Future of Farming,  Agriculture, and Land Use

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"Agriculture is being overlooked, and the issue really is being driven by three major trends that we're seeing," says Ammar James, Deputy Portfolio Manager, and Analyst focused on agriculture, paper, and forest, VanEck. 

What are the three major trends driving the agriculture industry? That was one of the many topics discussed during TheStreet's Investor Playbook: The Resource Transition, hosted by Susan McGinnis, which includes an all-star team of portfolio managers and analysts.

  • Shawn Reynolds, Portfolio Manager for VanEck’s Global Resource Fund GHAAX and Environmental Sustainability Fund ENVAX, VanEck
  • Ammar James, Deputy Portfolio Manager, and Analyst focused on agriculture, paper, and forest, VanEck
  • Veronica Zhang, Deputy Portfolio Manager, and Analyst focused on renewable energy, VanEck
  • Charl Malan, Senior Analyst, focused on minerals and metals, VanEck

WATCH: Investor Playbook: How to Play the Resource Transition - FREE Webinar

Editor’s note. The webinar was recorded on December 22, 2021.

  • Global Population Growth
  • Agriculture's Role in Greenhouse Gas Emissions
  • Change in Consumer Preferences

Video Transcript Below

Ammar James: On that first trend, global population growth, what we're seeing is that the global population is on a path to strain the agricultural industry unless conventional farming practices change ... So if you look at the most recent forecast from the U.N., for example, we're expecting the world's population to increase 28% to 30% from 7.9 billion people today to about 10 billion people by 2050. And that in and of itself might be manageable, but there are demographic changes happening as well. More people are entering the middle class than at any time in history, and that's a trend we see continuing. The issue here is that entering the middle class typically correlates to a ratcheting up of animal protein consumption, and that's very resource-intensive. And the most recent forecast we have right now is that food production needs to increase 70% from 2015 levels to feed this larger and richer population, and that's just a staggering number. So that's point number one.

Quote by Ammar James, Deputy Portfolio Manager, and Analyst focused on agriculture, paper, and forest, VanEck, on three major trends driving the agriculture industry.

Quote by Ammar James, Deputy Portfolio Manager, and Analyst focused on agriculture, paper, and forest, VanEck, on three major trends driving the agriculture industry.

And then agriculture and land use, like deforestation, for example, that's responsible for roughly a quarter of greenhouse gas emissions ... To put it in context, the agriculture sector generates more greenhouse gas emissions than the entire transportation sector. You know, the Paris Agreement in 2015, and even this year's COP26 made it clear that the world's climate initiatives won't be able to succeed without addressing agriculture in some way.

And that all kind of wraps up into consumer preferences. You know, consumers today really are more educated about food than ever before, and you're starting to see that as eating habits are shifting globally ... And that has led to more than 50% of U.S. shoppers experimenting with new kinds of food products with specific labels, like organic or plant-based ... the idea is to really focus on two things. There are existing food and Ag companies that are recognizing these trends and are pivoting. But you can also focus on new and emerging companies that are exposed to and disrupting the Ag sector.

Quote by Ammar James, Deputy Portfolio Manager, and Analyst focused on agriculture, paper, and forest, VanEck, on three major trends driving the agriculture industry.

Quote by Ammar James, Deputy Portfolio Manager, and Analyst focused on agriculture, paper, and forest, VanEck, on three major trends driving the agriculture industry.

3 Pillars to Watch In Agriculture Industry:

  • Food technology companies
  • Precision Agriculture
  • Agricultural Sustainability

Video Transcript Below

Ammar James: We really have three pillars here that we like to focus on when we're looking at and doing due diligence on companies, and that's looking at food technology companies, which are companies that are applying innovative food science to the creation and production of new food products, new alternative proteins, new dairy products, or even the ingredients or flavors that have to get into those end products. 

And the second pillar is precision agriculture. I mean, these are companies that are making or servicing tools or equipment that directly operate on the farm. And things like drones and robotics and automation platforms, even indoor and vertical farms, or even software companies that are developing data collection and analysis software, but targeting them specifically for farmers. 

And lastly, you've got just agricultural sustainability in general. And these are companies that are developing those biological fertilizers or biological crop chemicals, which really are an improvement to the conventional synthetic crop chemicals that farmers have been using for so long.

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