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New Capital Flows for AgricultureMoscowNovember 9, 2010
Chris EricksonManaging Director - HighQuest PartnersCEO - Soyatech
Copyright © 2011 by HighQuest Partners LLC. All rights reserved.
Welcome
Agriculture is Attracting a Flood of Capital
Why Now?
How Much / Over What Time Frame?
Who is Investing / In What?
What are their Investment Objectives?
How Can FSU Agricultural Projects / Companies Attract Capital?
Copyright © 2011 by HighQuest Partners LLC. All rights reserved.
First ... Who Am I / Why Am I Here?
Our Companies Our Investment Conference
Copyright © 2011 by HighQuest Partners LLC. All rights reserved.
~$20 Bn of committed institutional capital
10X over the past 5 years
$10+ Bn of new money already in the pipeline
The pace is accelerating
How Big is This?
Fundamentals
$100 - $200 Billion Capital Inflow over 3-5 years
Copyright © 2011 by HighQuest Partners LLC. All rights reserved.
1. Food Security
2. Financial Crisis
3. Attractive Fundamentals (supply / demand imbalance)
Why Now?
Copyright © 2011 by HighQuest Partners LLC. All rights reserved.
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20
-
200
400
600
800
1,000
1,200
World Corn Consumption1990-2020; MMT
Source: USDA; IMF; HighQuest Analysis
Why Now?Growing Demand
Global demand for major crops is being driven by three factors
02,
000
4,00
06,
000
8,00
0
10,0
00
12,0
00
14,0
00
16,0
00
18,0
00
20,0
00
0
10
20
30
40
50
60
Example: China Oilseed Meal Demand
GDP per capita (PPP)
Co
ns
um
pti
on
(M
T p
er
00
0)
Source: USDA; IMF; HighQuest Analysis
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000 World Population Projections
(millions)
Source: UN
1. Population Growth 2. Protein Consumption 3. Biofuels
Feed
Ethanol
Food
Copyright © 2011 by HighQuest Partners LLC. All rights reserved.
0
0.01
0.02
0.03
0.04
0.05Soybeans
Why Now?Tight Supply: Declining Yield Improvements
0%
1%
2%
3%
4%
5% Corn
0%
1%
2%
3%
4%
5%Rice
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
0%
1%
2%
3%
4%
5% Wheat
Trailing 10-Year Yield Improvement
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Global Yields for 4 Major CropsHistorical and Projected
(MT / ha)
Corn
Rice
Wheat
Soy
Source: USDA; HighQuest Analysis
Copyright © 2011 by HighQuest Partners LLC. All rights reserved.
Needed to Meed Demand
USDA Projection FAPRI Projection
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Additional Acreage for 10 Major Crops2010-2020; 000 Hectares
Co
rn
So
y
Ric
e
Ra
pe
se
ed
Su
nflo
we
r
Co
tto
n
So
rgh
um
Pe
an
ut
Ba
rle
y
Wh
ea
t
To
tal
0
10
20
30
40
50
60
70
80
Net Additional Acreage Needed by Crop(2010-2020; Million Hectares)
Why Now?Tight Supply: New Acreage Needed
60 million net new hectares needed over 10 years This is not realistic The result will be high / volatile crop prices
Included Crops are: Soy, Wheat, Corn, Peanut, Rapeseed, Sunseed, Sorghum, Barley, RiceSource: USDA Baseline Projections, FAPRI (Food Agriculture Ppolicy Research Institute); Highquest
Copyright © 2011 by HighQuest Partners LLC. All rights reserved.
Why Now?Tight Supply: Challenges Expanding Acreage
Sources: Aprosoja; HighQuest Analysis
Infrastructure Political Instability
Copyright © 2011 by HighQuest Partners LLC. All rights reserved.
Farmland
Farming / Crop Production
Protein Production
Infrastructure / Logistics
Commodities
Private Equity
Sovereign Wealth Funds
•Middle Eastern•Asian•Western
Private Institutional
Capital •Pension Funds•Endowments •HNW Individuals
Funds
•Managed Accounts•Private Equity Structures•Hedge Funds
End Investors
Managed Investments
Direct Investments
Direct Investments
Investment Focus
Who is Investing ... in What?
Copyright © 2011 by HighQuest Partners LLC. All rights reserved.
Ag Managers Tend to be Geographically FocusedGlobally there are ~60-70 ag-investment managers ... of which ~20 are institutional calibre
Copyright © 2011 by HighQuest Partners LLC. All rights reserved.
Assets By Target Geography ($ Invested and Raised)
Assets By Target Type($ Invested and Raised)
South America
37%
North America
26%
Oceanea13%
Eastern Europe
11%
Africa6%
Other6%
Row Crops83%
Protein/ Dairy
13%
Other4%
Institutional Ag Land Today:~60-70 managers ~$18-$20 Billion
(excl. Sovereign Wealth)
Where is the Money Going?
Up to now, most of the capital has targeted North and South America – this is changing
Copyright © 2011 by HighQuest Partners LLC. All rights reserved.
Brazilian Government “Reinterpreted” 1971 statute
Effectively shutting down foreign investment in Agriculture
As a result, Investors are looking to Russia and the Ukraine
Why is this Changing?
Copyright © 2011 by HighQuest Partners LLC. All rights reserved.
Russian Agricultural Sector Needs $100-$150 Bn Investment
Government Can Only Provide a Small Share of This
Foreign Investors Can Fill the Gap
But , There are Perceived Barriers
Land Ownership
Legal System
Political Risk
Russia / FSU Agriculture Needs Foreign Investment
Copyright © 2011 by HighQuest Partners LLC. All rights reserved.
1. Sound business plan ...
2. Credible management...
3. Government participation / partnership...
4. Target committed capital providers ...
5. Have something (anything ) to show...
How Can FSU Projects Attract Capital?
Copyright © 2011 by HighQuest Partners LLC. All rights reserved.
How Can We Help You?
458 Boston Road, Topsfield, MA 01983
(978) 887 8800 | www.highquestpartners.com
Boston - St. Louis
Hunt StookeyManaging Director – Investment ConsultingHighQuest [email protected]+1 (617) 872 7477
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