By Ignace De Coense,
Equity Fund Manager


As spikes of volatility and turbulence affect asset classes across the board, investing in the agri-food value chain can contribute to a diversified approach. Let’s dive into the key factors that make up and define this compelling theme.


The agri-food cycle is very different from a traditional economic cycle. Consumer spending on food items is inherently less volatile: people will continue to eat, no matter the circumstances. This generally gives a defensive edge to the agri-food sector, as markets can reasonably assume that global food demand will continue to grow and develop in line with the overall population. It is true that pressure on income can impact how people consume or what they consume. But even if consumers switch to fewer branded goods or lower their meat consumption, this won’t have a significantly impact on the broader demand in the sector.

However, we need to make a clear distinction between developed and emerging markets, which have generally evolved in different ways:

Developed markets have undergone a clear shift in consumer consciousness. People have become increasingly aware of food production’s impact on the environment. Next to that, Western consumers have started to pay attention to the health benefits (or hazards) linked to the foods they eat. Finally, the origin and production of certain foods is also increasingly scrutinised. We have noticed broad changes across the industry, like, for example, an uptick in salmon consumption (considered healthier than meat), but also a difference in the way the salmon is reared. Whereas salmon feed used to consist largely of smaller fish, most producers have now moved towards plant-based substitutes. Developed markets are no longer content with the mere availability of food. They now focus on the whole value chain, favouring healthy and high-quality products with a limited impact on the environment. As a result, even though the sheer volume growth in mature markets is rather limited, we do see a clear tendency of premiumisation and innovation.

Conversely, emerging markets still focus heavily on general food availability. Imbalances in food supply mean that a large part of the world still struggles to access (sufficient) food. As soon as people start to move up the income ladder, one of first items they will spend more money on is the quantity and quality of their food. As more people in emerging markets start to enter the middle class, we see a clear switch to higher-priced foodstuffs. This explains why – even though the West has started to shift away from meat-based products – global meat production is still one the rise. As personal income continues to grow over time, there will probably be a similar increase in per capita spending on food.


Thematic investing can be a valuable tool for investors looking to profit from long-term structural changes in the economy. Such investments allow market participants to target a specific theme which they believe will experience significant growth going forward.

It is also important to note that the ‘agri-food’ theme allows for meaningful internal diversification. It is a broad theme, covering a multitude of industries and sectors. To simplify matters, we can divide the agri-food value chain into three broad segments. First, the upstream segment mostly refers to the foundational elements and building blocks of the value chain: anything related to growing, rearing, and harvesting of basic agricultural commodities. Companies in this space tend to focus on, among others, property, equipment, and fertilisers. Next, the midstream segment covers the transport, processing, and logistics. In this space, B2B facilities mostly act as middlemen to cover the processes between the farming and the selling of the products. The downstream segment is the final part of the value chain, and includes consumer goods, distribution to the consumer, retail, packaging, and ingredient companies. Companies can be involved across multiple segments at once, or solely specialise in a single one.

Cheese value chain (Upstream – Midstream – Downstream)

Source: DPAM, 2022

As the agri-food industry is a complex web of interconnected (but vastly diverse) businesses, it offers variety to investors, and allows for a lot of manoeuvrability: by looking across the whole agri-food value chain, investors have the possibility to focus on those aspects that are supported by current market conditions. For example, the current inflationary and geopolitical pressures have led to an uptick in prices for soft commodities. This will generally benefit the farmers, who will likely use the increased disposable income to reinvest in their farms, by purchasing better equipment, seeds and fertilisers


While the basics of the agri-food sector have remained largely unchanged throughout history (i.e., growing foodstuff and getting it to the consumer’s plate), the way the industry operates is in constant flux. In fact, the recent push for sustainability has led to some particularly exciting developments in the last decade brought on by recent technological innovations. On top of a rapidly changing climate, the world needs to cover the nutritional needs of an ever-increasing population with a finite set of resources. It’s hardly surprising that technology and innovation play such a key role in this industry.

Some examples of exciting innovations in this sector include the recent use of ‘precision farming’. This new technology allows farmers to be more precise in their planting, irrigation, and fertilisation thanks to the use of GPS technologies. This results in less water and fertiliser use, and less soil erosion. Linked to this, the equipment manufacturer John Deere recently developed a technology called ‘See & Spray’, which uses computer vision and machine learning to target weeds and deliver only the amount of herbicide needed to optimise crop growth.

This defensive theme will likely benefit from continued demand in line with population growth. It also covers a broad selection of different companies, industries, and sectors. We believe in a diversified approach across the whole agri-food value chain with a focus on innovation and key growth themes.


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