Upstream is defined in simple terms as business carried out close to the farmer. Meinhold, product specialist to the DWS Invest Global Agribusiness Sicav, suggests large equity positions in fertiliser companies – such as Mosaic Co, a nitrogen producer and the largest holding in the fund (6.8%) – with high correlation to grain prices, is an ideal investment.
“We view potash as a viable asset to farmers that is not necessarily a ‘must have’ on a yearly basis, as opposed to nitrogen, where the lack of seasonal application would be catastrophic to the income of a farmer,” he remarked.
An ‘hourglass’ approach is recommended for the downstream story, i.e. consumer-facing businesses, through investing in both cheap private label products as well as high-end premium brands and organic foods. Brands without significant market share are avoided. Safeway, which has interests in both segments, is a large investment in the fund (around 3.7%).
Meinhold believes this idea of “shoptimizing” – buying more private label rather than branded goods – is a definite trend.
“Consumers are not eating less calories during times of food inflation, but they are trading down,” he said.
By 2050, around 70% of the world’s population are expected to live in urban areas. Innovation and greater efficiency within agribusiness will be vital in feeding a growing population. With this in mind, Meinhold also singled out vertical farming – high tech green houses within the heart of cities – as a future investment opportunity.
