The production of food (starting from meat) today represents 70% of water consumption, 40% of land consumption as well as the main source of gas production (30%), according to the United Nations. But what will happen when the world's population increases by another 3 billion people by 2050, as the UN expects? Estimates suggest that as early as 2030 there could be a 40% imbalance between the production and demand for drinking water. Agriculture and our food habits they will necessarily have to change.
First of all there is an issue of waste: worldwide it is estimated that one third of world food production is lost and wasted. Then there is an aspect related to production methods and eating habits. In fact, until recently agriculture hadn't been affected by the technological revolution as much as other sectors. It is estimated that digital penetration was only 0,3% worldwide, compared to 12% for retail distribution (source AgFunder) – obviously these are averages and individual realities can differ substantially.
The use of technology (such as robots, drones, sensors, production control via satellite, but also more efficient distribution chains) is becoming increasingly popular and the agricultural sector is expected to invest heavily in technology in the coming yearsquintupling current investments. In this context, economies of scale could become increasingly crucial.
In fact, some technologies will be able to make agriculture more sustainable: biological solutions that allow for improve production while respecting the environment, innovations such as vertical agriculture (to make better use of the land), irrigation techniques that save water, the use of algae, greater use of vegetable proteins, up to experiments on meat created in the laboratory.
It is, among other things, about a change that is requested by the consumers themselves, especially by young people, and which intersects with the demand for increasingly healthy foods. In fact, the World Health Organization estimates that approximately 80% of cases of diabetes, heart and circulatory diseases are linked to unhealthy diets. There are many opportunities for investors: for example, vegetable proteins are part of a segment where growth could approach 28% per year, while other sectors such as sustainable irrigation and biological treatments are also expected to grow rapidly.
The radical change that will have to be faced by the agricultural industry it will require some kind of alliance between producers and, probably, the intervention of governments that can pool some investments, which would otherwise be too large.
°°°The author is the Head of Asset Management at UBS
