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Which Agricultural trends are changing consumer demand for the new decade?

February 28, 2020
Corey Hulls

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Which Agricultural trends are changing consumer demand for the new decade?

The concerns of the future world seem to be present at the forefront of many people’s mind at the moment. While 2019 seemed to be a year in which many looked inward to reconcile their positions, often publicly, the beginning of the new decade seems to have brought with it a renewed optimism and proactive attitude, facing numbered challenges head-on.

The question, however, remains for investors. With an eye on similar events from history, do investors have adequate reason to be nervous? Or is the Coronavirus just a small blip in a long term waiting game?

The concerns of the future world seem to be present at the forefront of many people’s mind at the moment. While 2019 seemed to be a year in which many looked inward to reconcile their positions, often publicly, the beginning of the new decade seems to have brought with it a renewed optimism and proactive attitude, facing numbered challenges head-on.

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Due to issues such as soil degradation, African Swine Flu, and COVID-19, attention is switching quickly towards more sustainable, safe and trustworthy food production models as people are re-examining the comfort and viability in which they have been living.

Two major agriculture trends that have been in the spotlight in recent months are the demand for high-quality, safe protein supply (especially with the continued prevelance of the Novel Coronavirus) and a call for effective land management. While agriculture is always evolving, this is particularly true now. Australia is certainly one country that could benefit both environmentally and economically from these trends.

Innovations in Land Management

We’ve all heard the phrase ‘innovation is the mother of necessity’. Perhaps this explains why some of the smallest countries are the most innovative when it comes to effective land management for food production.
In the past, the Netherlands was limited in its food production due to a lack of space and seasonality. But the country now grows crops in greenhouses that produce their own fertiliser and energy. This ensures high-quality soil and year-round yields. Thanks to this innovation, the Dutch are the second-largest food exporters in the world.

In order to make the best use of Australia’s vast land, there’s growing interest in the potential for holistic farming practices and regenerative farming.

Regenerative farming is all about creating a healthy ecosystem within your land, which in turn will become a productive one. The practice requires the farmer to re-imagine their role in the ecosystem. Instead of focusing on inputs and extracting profitable outputs, regenerative agriculture is more focused on fostering complexity in the surrounding environment. Farming becomes less of a day to day proposition, and more about ecosystem management for the now and for the future. Farmers become a part of the ecosystem with their animals.

By focusing on farming practices like rotational grazing, cover crops, and organic enrichment of soil, farms produce better quality food in higher yields. These practices also make the soil more drought-resistant. This alleviates the need to buy feed, thus increasing profitability of livestock as well as improving land value.

The benefits of these holistic – or regenerative – farming practices would be two-fold for Australia. First, we could be global heavyweights as high-quality meat exporters. Secondly, these practices would enable us to handle and mitigate extreme climate conditions like drought, which would lessen their economic impact.

The demand for high-quality protein

The world now produces more than four times the amount of meat than was the case fifty years ago with pigmeat being the most popular globally. Meat consumption increases as the world gets richer.

This is particularly true in China. As China has grown economically, so too has the country’s taste for meat. 50 years ago, the average Chinese person ate 4 kilograms of meat a year. That figure now sits at 54 kilograms.

While that’s only half of what the typical Australian eats, once you multiply 54 by 1.3 billion, it becomes clear that the demand for protein in China is nothing short of astronomical.

Last year, African Swine Fever swept through the Chinese pork industry, wiping out 30-40% of all pig stock. The price of pork skyrocketed to record-highs and led to a major shortage of China’s staple protein. Since then, Chinese consumers have been replacing domestically-produced protein with that of trusted international sources like Australia and the US.

“African swine fever will be the biggest influence on the global meat markets for the next few years, if not the decade,” said Tim Ryan, a Singapore-based market analyst with Meat & Livestock Australia late in 2019. In Australia, exports of beef to China surged 66% and lamb followed that trend. China is already the world’s biggest importer of lamb, with Australia and New Zealand supplying the lion’s share.

Quite naturally, this demand is set to dramatically increase even from Tim Ryan’s lofty expectations with the impact yet to be seen from the COVID-19 virus. Locals have already seen a reaction to local produce in China due to the virus coming out of the food market, as well as manufacturing and distribution being impacted by containment.

Food safety and food security will likely dominate the headlines in these markets, and will only increase demand for the already preferred Australian and American brands. We may in fact see a phenomenon in the coming year where demand outstrips supply for some of these exported products and the pricing market might be forced to react.

These are Australian companies, which are not directly correlated with sectors such as airlines, travel, insurance, mining commodities or education – all spaces which may see negative impacts from the last years’ trends.

To many investors, an investment in agriculture is considered a smart way to strengthen and diversify their portfolio due to general low correlation to sectors influenced by wider economic factors like mining and energy.

Australian Food and Farming perhaps is in the enviable position of being one such company, leading the way at scale. With a breeding flock of 20 000 sheep all raised on regenerative farmland, Australian Food and Farming is meeting the demands of high-quality animal protein as well as other commodities to markets whereby these products will be preferred as well as sustainable agricultural practices.

To learn more about the investment opportunities with Australian Food & Farming, please click here to request the IM.


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