Private equity investments in agriculture plunge as prices, valuations fall

Private equity and venture capital investments in agriculture have plunged in 2024 on the back of a precipitous drop in investment in 2023, when lower commodity and land prices kept investors on the sidelines.

Aggregate deal value stood at $1.56 billion year to date through Aug. 13, down 48.7% from $3.04 billion in the same period of 2023, according to S&P Global Market Intelligence data. The number of announced deals decreased to 114 from 158.

In 2023, the total aggregate deal value was $4.24 billion, about one-sixth of the $24.99 billion total recorded in 2022.

The data includes target companies in sectors including agricultural products and services, fertilizers and agricultural chemicals, agricultural biotechnology, agricultural and farm machinery, and agriculture industry software.

Deal value and deal count plunged in 2023 as investors hesitated to invest in a sector affected by tough macroeconomic issues, said Ethan Levine, managing director and head of real assets and sustainability at CF Private Equity Inc.

"Commodity prices have come down significantly, particularly corn and soybean. Land prices in certain parts of the US and the world came down as well. So folks that have held agriculture investments, particularly upstream ones, have seen some headwinds," Levine said in an interview.

The investment slump is also linked to a wider bid-ask spread for assets and challenges in accessing credit. "Higher interest rates have made access to credit more challenging, and agriculture is a lead in that," Levine said.

Overall investments in global agriculture and food technology startups — which includes those in biotechnology, farm management software and farm equipment, among others — also fell year over year in 2023, according to private equity firm AgFunder Inc.

"There's also been a halt to dealmaking in many instances at the early stages. This is in part down to some founders' refusals to lower their company valuation expectations but in some cases, the correction has gone too far," the firm said in its "Global AgriFoodTech Investment Report 2024."

– Download a spreadsheet with data in this story. – Read about private equity entries in July. – Catch up on more private equity news and research.

Private equity-backed investments in the agricultural sector are set to be even lower in 2024. Deal value totaled $368.4 million in the third quarter to Aug. 13, down from $1.74 billion in the same period a year ago. Deal count was down to 22 from 27.

Biggest deals

In the biggest transaction year to date through Aug. 13, HAL Investments BV invested €140 million in preferred share capital to crop protection and natural pollination company Koppert BV.

In the biggest M&A deal, Argonautic Ventures' Argonautic Ventures Master SPC offered to buy publicly listed food technology company Benson Hill Inc. for $101 million.

The US and Canada secured the largest amount of private equity-backed investments in 2024 at $848.5 million. Asia-Pacific tallied the highest number of deals at 37.

On a subsector basis, agricultural products and services companies secured the most capital in 2024 year to date at $633.8 million, with fertilizers and agricultural chemicals companies following at $274.8 million.

Outlook

Levine believes that deal activity in the sector will likely increase once investors see a slight uptick in commodity and land prices.

Tailwinds are gathering in the long term, he said.

"The decline in arable land due to climate change, issues around resource security, the global flow of commodities and the growing need for domestically produced agricultural goods offer a five- to 10-year runway," Levine said.