Why invest in an agricultural fund like Panda?

The agriculture industry is among the most largely overlooked by the financial industry, which is odd given that financial services originally emerged to address the needs of agriculture. There are references to early forms of future contracts for agricultural trades Aristotle’s Politics, and banks — originally sacred Babylonian temples — started out as storage facilities for crops during winter and times of drought.

With the birth of cities and the industrial revolutions (1760 and 1840), finance started to disconnect from agriculture to focus on the latest, highly disruptive, industrial innovations. The agriculture industry is poised to face massive challenges in the coming decades with unstoppable growth in food demand on the one hand and strong restrictions on the supply side on the other. The industry needs heavy investment in production and research and financing will be key in helping it achieve a new state of affairs. We aim to funnel a growing share of savings into research, production improvements, storage and transport for the agricultural and water industries. We also want to retrieve and strengthen the connection between the financial and agricultural industries.

We bet on agriculture as a very long term investment, and these are some of our reasons for going into it.

By 2050, world population is expected to have an extra 2 billion people. This increase will almost entirely be accounted for by Asia and Africa. The United Nations estimates world population to reach 9.6 billion in a best case scenario. We are certain that global growth of the middle classes will contribute to an agricultural, water and food revolution.

In the past 50 years, the world’s overall life expectancy has gone up by more than 30%. The Asian economic revolution has been driven by improved diets, hygiene and medical progress. In that time, Asia’s standard of living has improved to reach Western levels. It is estimated that China’s calorie intake per capita has the potential of increasing about 74% (assuming > $27,000 per capita income in 2040). Per capita protein consumption in India is on the same track as China’s. A second wave of growth in demand for agricultural products is expected.

In that same period, the global number of cultivated hectares per capita has been halved. This ratio explains the need for continued improvements in agricultural productivity. Advances in chemical fertilizers, pesticides and irrigation contribute to increasing productivity per hectare.

Today, there are about 1,420 million hectares of arable land in the world, just 11% more than in 1960. Meanwhile, world population has increased by a factor of 2.4. High agricultural productivity in the 70’s and 80’s has helped respond to the sharp increase in world population. Currently, the increase in global crop yield is estimated at between 0% and 1%.

Despite the exponential growth in demand, prices of food accumulate an annual decline of 1% from the early twentieth century. The exceptional productivity has avoided price increases. The next few years will be determined by the current low productivity, lack of water and lack of arable land.