I come from a farming family and grew up on an irrigated wheat, soya and tobacco farm in northern Zimbabwe. Fifteen years ago we relocated to Zambia where we lived in tents, cleared land and started again from scratch. My brother has since built a large high-quality farming business and my Dad has developed a successful conservation farming program with large and smallholder farmers in the surrounding area.
I moved back to the UK to finish my DPhil at Oxford and have subsequently forged a career in London as an investment manager with a series of global agri funds. Most recently I designed and built a $4billion global investment portfolio for a Canadian Pension Fund and before that was involved in managing and restructuring some large scale farming investments in Latin America and Eastern Europe.
Earlier this year I decided to take some time away from the coal face. My wife Callie and I flew to Cape Town with Patrick (our 7 month old son) and packed a land cruiser with a few provisions (and my mother-in-law!) and spent two incredible months on safari in Namibia and Botswana. Our 8,500km adventure took us up through the Namib Desert, along the Skeleton Coast and then back down through the Kalahari.
Nuffield scholarships were always a prominent feature of farming in Zimbabwe and something that I’d always hoped to apply for at some stage. This mid-career break presented the perfect opportunity in terms of time and topic and I am delighted and honoured to join the Nuffield ranks. Callie is a farm girl and has been extremely supportive and we’re excited about this as a shared venture. I am also very grateful to the NFU Mutual Charitable Trust for their generous sponsorship.
Can Institutional Investment Capital provide opportunities for Family Farmers and Young Farmers into UK Agriculture?
NFU Mutual Charitable Trust
Over the past 15 years institutional investment into global farming has increased 8 X to over USD45billion and looks set to continue expanding in the decades ahead. This resurgence is being driven by a variety of factors including strong market fundamentals, shifting consumer preferences, evolving supply chains and the desire for diversified real asset exposure by institutional investors.
However, the patterns of this investment to date have been predominantly focused on corporate farming in a narrow range of geographies. Less than ten percent of the USD45bn has been invested into family farm structures which still make up >75% of global agriculture. In the UK, institutional investment into agriculture has only increased 0.25 X over this period and the proportion directly into family farms or indeed young entrant farmers has been virtually nil.
The objective of my Nuffield was to compare UK agriculture with a relevant set of core countries, firstly to better understand the investment patterns above and secondly, to explore innovative business models and structures that are successfully attracting institutional capital into the family farming sector elsewhere, or helping new entrants across the capital gap.
My travels took me through the US, Canada, Spain, Portugal, France, Italy, the Netherlands, Australia and Southern Africa. I also drew from contacts and past experience in New Zealand, Brazil, Argentina and Ireland as well as a network of farming friends and contacts in the UK.
Key Messages and Conclusions from my study are as follows:
- UK farming returns are at the low end of the spectrum of international comparisons, both in absolute terms and cash yields – and both in active (operational) and passive (rental) models
- This is predominantly due to high/over inflated asset values underpinned by the mix of alternative land use potential, tax incentives, and subsidy profiles
- The cultural and relative trust gap between investors and farmers in the UK remains significant largely due to the legacy of the Global Financial Crisis (GFC)
- A worrying shortage of new blood coming into the sector is being compounded by increasing capital barriers to entry
- Despite these challenges, I came across some interesting and exciting business models and approaches that could be applicable to the UK
Key Recommendations for UK Agriculture:
- We need a new, clear, inspiring vision for UK agriculture with supporting subsidy profile aligned to a revamped diet-focused health policy
- UK farming should focus on competitive advantages of quality and sustainability. We cannot compete with the US or Brazil on an open market without the environment continuing to bear the cost of cheap food
- We need to acknowledge and address the young entrant farmer issue more directly and more proactively in conjunction with the ageing farmer issue
- Review and revise the tax relief legislation on UK farmland to ensure that it is fit for purpose.