Investing In Organic Agriculture

The Opportunity In Agriculture

Total world population is projected to reach 9 billion by 2050.

That’s a lot of mouths to feed, and the U.S. Department of Agriculture figures that the world will need to double current production rates to meet the demand.

It doesn’t take rocket-scientist thinking to connect the dots between that reality and the current opportunity to invest in agriculture. Productive land is the world’s traditional depository of wealth, but it’s never been as solid a play as it is right now.

At last week’s Global Property Summit, special guest speaker Greg Holzman, founder of Pacific Organic Produce, now
US$5.4 billion United Natural Foods Inc., helped to put the opportunity into perspective:

“Produce buyers buy every day whether they use the product or not. The movement in the market is incredible, like no other market I’ve ever seen.”

Agriculture is a no-brainer right now. The only question is: How best can the individual investor position him- or herself to profit from the exploding opportunity?

The experts who presented at last week’s event in Panama City highlighted three secrets to individual investor success in this context:

  • First, invest turn-key. Unless you’re prepared to go really big and to become an expert farmer, you should invest with a group that will handle all aspects of production for you, simply sending you your share of profits from each harvest…
  • Second, focus on turn-key opportunities where you take title to the land. You want to own the fundamental asset…
  • Third, specialize. You aren’t going to get far investing at a commodity level. Go into a highly specialized crop…

The most interesting specialty crop right now is organics.

“The demand for organics is exploding,” Greg told the group last week. “It’s all market driven, and the demand is only going to continue to grow. People are more aware of what they’re eating and more educated about food than ever before. Costs have been steadily climbing for years. Prices keep moving up and up, but the demand continues to expand at a greater rate. Frankly, those of us in the industry just don’t see any end in sight.

“Whole Foods is building one to one-and-a-half new stores each week across the United States. When a Whole Foods opens, all nearby supermarkets add an organic section, too. Now Wal-Mart and Costco are getting into organics, too. These are game-changing developments for this industry.”

What specific opportunities did our panel of agricultural investment experts recommend?

“We’re watching mangos follow the same growth curve as avocados,” Greg told the group. “Avocados have become huge. Mangos are on the same track.”

What else, we prompted Greg…

“A few months ago,” he continued, “a group came to me with an apple cider vinegar product. It’s a health item, and it needs to be organic. I was shocked when they explained the demand for this product. It’s huge. They need 35,000 tons of apples this year. A container load is 20 tons. They want 50,000 tons next year. It’s just amazing.

“The price for organic apples was US$200 a ton eight years ago. Today it’s US$600 a ton. That price is only going to continue up.”

Here’s one more specific recommendation, this one from Panama agriculture professional Alan Winstead:

“I’ve been working with neem in Panama for more than 20 years. The benefits of neem are enormous. In India they call it the hospital tree. Neem can be used to make soap, shampoos, biopesticides, natural fertilization, natural insecticide, natural fungicide… it’s the original organic.

“Yes, neem is a good investment.”

Kathleen Peddicord

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