• Agribusiness: A trend rising-up

    September, 2022

Agribusiness refers to any investment that is linked to agricultural products.

Over the last year, investment funds that have adopted this type of investment have increased +15% compared to the figures of previous years. This data is mainly due to technological improvements in the agricultural sector and the low prices of the Spanish market, compared to other markets such as the American or Australian.

The demand for this type of investment is constantly growing for several reasons. On the one hand, investment in this type of asset offers a stable yield between 5%-8% (and can even reach double figures). On the other hand, it is an investment that behaves extremely well in periods of crisis, as has been demonstrated on previous events with the 2008 crisis and the crisis caused by the COVID-19.

Currently, there are more than 700 investment vehicles in the Agribusiness sector in Spain. A large part of them operates in Andalusia as it is having the largest number of hectares available for agricultural exploitation (c. 30% of the almost 4 million hectares in Spain destined for irrigation).

As for the type of investors, we can highlight three different groups: private equities, family offices and pension funds. The business plan of private equities is to buy the asset and lease it so that they can exploit it with the objective of selling it in a period of time of around 7-10 years. In the case of family offices, their investment period is quite longer than that of private equities. Finally, pension funds and insurance companies are now beginning to take an interest in this type of investment.

Although some agricultural associations do not agree with this type of investment, if we consider that agricultural production is expected to increase by c.70% in the next decades and that these investments offer very safe yields, it can foresee that this trend will last in time.