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PHIL HOGAN FOOD European Commissioner for Agriculture and Rural Development Page 11 FRAUD TRENDS IN The Battle for Transparency. ALLOCATIONS TO PAGE 15 FARMLAND INVESTING A Global Perspective. Page 5

BLOOMING DESERTS AND LANDS OF PLENTY BOOST PERUVIAN AG INVESTMENTS P20

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5 TRENDS IN ALLOCATIONS TO FARMLAND INVESTING FOOD FRAUD: – A GLOBAL PERSPECTIVE The evolution of agriculture as an asset class is reflected in shifts in THE BATTLE FOR allocations of institutional capital across the value chain, and nascent opportunities for investment throughout the world. TRANSPARENCY 11 GAI EXCLUSIVE PROFILE: PHIL HOGAN, EUROPEAN COMMISSIONER FOR AGRICULTURE AND RURAL DEVELOPMENT For the past three years, Hogan, a native of Ireland and a former manager of his family’s farm, has been an outspoken advocate for a strong and well-funded CAP which continues to deliver for Europe's farmers and society at large. 15 FOOD FRAUD: THE BATTLE FOR TRANSPARENCY 15 Waging the war on global food fraud, which affects approximately 10 percent of all commercially sold food products at a cost of between $10 billion and $15 billion per year.

21 BLOOMING DESERTS AND LANDS OF PLENTY BOOST PERUVIAN AG INVESTMENTS The agricultural market in Peru is ripe for expansion, development, and investment with over 7.5 million hectares of fertile land available for agricultural use. 27 EXECUTIVE PROFILE: KEVIN SCHWARTZ, PAINE 5 SCHWARTZ PARTNERS As CEO of the firm that has deployed nearly $2 billion in food and ag businesses across soon-to-be 16 platforms, Schwartz sees great potential for investments in the upstream part of the value chain.

31 ENHANCING CROP INSURANCE WITH SATELLITE TECHNOLOGY Three essential ways that satellite technology can develop your crop insurance business in keeping with the continually evolving agtech sector. 11 35 IRRIGATION ADVANCES GROW INVESTMENT OPPORTUNITIES As irrigation has commanded increased attention in recent years from agricultural investors who are laser-focused on maximizing the return on land investments, companies have stepped up the pace of innovation in the space.

38 CHEESE: AN $80.5 BILLION MARKET One of the world’s most popular foods that is guaranteed to see growth, and provide global investment opportunities. 27

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TRENDS IN ALLOCATIONS TO FARMLAND INVESTING A GLOBAL PERSPECTIVE

by Philippe de Lapérouse, HighQuest Partners, and Roberto Vitón, Valoral Advisors

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The evolution of agriculture as an asset class is reflected in shifts in allocations of institutional capital across the value chain.

THE GREAT FARMLAND RUSH OF THE 2000s

While institutional investment in farmland began in earnest in the 1970s with a number of obscure U.S. funds, allocations by institutional investors to this real asset class at a global level accelerated dramatically in the mid-2000s.

Increased demand for food crops and animal protein drove agriculture commodity prices up across the board, generating a massive transfer of wealth to farmers via growth in farm income and appreciation in land values. Since 2000, the NCREIF Farmland Income Index¹ for farmland in the U.S. has more than tripled. A similar positive trend in farm income growth and appreciation of land values occurred in other major crop producing regions such as South America, Australia, and Europe.

Institutional investors were attracted by the advantages that agricultural real assets offered compared to traditional paper assets: relatively higher returns with lower volatility while providing diversification for the underlying portfolio and an inflation hedge. In 2005, fewer than 20 farmland funds were operating around the world. By 2014, that number jumped to more than 100 and currently exceeds 130, with estimated aggregated assets under management (AUM) of $32 billion.²

The global farmland investment space, which successfully weathered the 2008 and 2009 economic crisis, was one of the primary beneficiaries of the race for real assets during this period. A relatively fluid market for farmland developed in the U.S. and other major producing regions around the world due to the scale of institutional allocations to the sector, combined with increasing consolidation of farmland ownership and operations due to a declining population of farmers and the drive to realize cost efficiencies by operating at scale. Initially the focus was investing in row crops with a traditional buy and lease operating model.

Since 2013, conducive weather resulting in record harvests across major producing regions combined with a relatively stronger U.S. dollar and slower global growth, sent agricultural commodity prices tumbling to “Since 2000, the near multi-year record lows, with soybean prices reaching $8.5 per bushel and corn $3.5 per bushel levels in early 2016. Over the past two years, the perception has been that agricultural commodities as a class NCREIF Farmland have joined the broader fallout in commodities referred to as the end of the commodity “super cycle”.

Income Index¹ THE FARMLAND DOWNTURN: RECALIBRATING ALLOCATIONS for farmland in Farmland investors and farm operators have taken note of the changing market conditions, which has put farmland prices under pressure. Geopolitical tensions in the CIS region following Russia’s extra-legal the U.S. has more annexation of Crimea and incursion into Ukraine, the ongoing political and economic crisis in Brazil, uncertainties resulting from Brexit, the U.S. presidential election, and legislation banning or limiting large- than tripled.” scale foreign ownership of land in several countries have dampened enthusiasm for new investors to allocate capital to the farmland asset class. As pure real asset farmland strategies began to lose luster, the number of private equity funds investing across the food and agricultural value chain – in upstream (inputs and farming), midstream

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(storage/logistics and value-added processing), and downstream (retail distribution, renewable energy refining and green products) sectors – “Over the near has increased. This has resulted in valuation multiples typically seen in other industrial sectors becoming more prevalent in the animal protein complex, food and beverage manufacturing sector, and food distribution. to medium

Given low interest rates, there also has been an expansion into new areas. On the debt side, we have seen an increase in allocations term, the level to agriculture trade finance, and in the venture capital space to opportunities driven by the technological convergence between agtech and other high-tech sectors and industrial sectors, including the digital of institutional economy, gene editing, and pharmaceuticals.

Over the near to medium term, the level of institutional interest in interest in farmland will depend on the targeted allocations within portfolios for real assets. There is anecdotal evidence that some investors are reconsidering their real asset portfolios and are rebalancing allocations farmland will out of strategies that have not met expectations while boosting investment in sectors that have. For example, earlier this year the Canada Pension Plan Investment Board (CPPIB) announced that it would no depend on longer make allocations to farmland investments and that it was open to divesting its existing farmland. the targeted However, based on conversations with leading pension funds, endowments, and insurance companies, the overall sentiment among institutional investors points to increased capital flows to farmland assets allocations over the coming decade. As most institutional investors currently have no or negligible exposure to farmland, they should consider allocating more capital to illiquid strategies to capture returns uncorrelated to public within portfolios markets and diversify their portfolios given that the eight-year equity bull market and the 30-year fixed income bull market are at the late stage in their cycles and vulnerable to disruption. for real assets.” TIME TO SOW SEEDS?

Despite the recent softening of crop prices, the long-term macro structural drivers in the food and agriculture sector remain bullish for agricultural crops over the next decade and beyond.

Against the current backdrop of low crop prices, the farmland investment space is in a state of flux with managers seeking to generate future returns from a combination of strategies involving active management of farm operations, land transformation and/or consolidation, and the deployment of capital to higher value permanent and specialty crops and value-added products derived from biomass. Recent developments in the industry point to a possible new wave of investments into land that have the potential to reignite the appetite for this asset class.

HEALTHY FOOD, SUSTAINABILITY AND THE RISE OF THE CONSCIOUS CONSUMER With consumers’ habits shifting in significant ways, we are entering one of the most exciting periods in the history of food production and logistics as technology assumes a larger role in food processing, distribution, and retail environments.

The push for sustainable agriculture and consumers’ increased awareness about food quality, traceability, and healthy lifestyles have become major drivers for the integration of new technologies

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from adjacent industries (manufacturing and has some linkage to agriculture. The development pharmaceuticals, etc.) and the adoption of new of sustainable agricultural practices, the efficient business models. These trends have already begun use of water, the protection of biodiversity, to have an impact across the food and agriculture the development of rural areas, and the reduction value chain, with the emergence of agtech and of food loss and food waste are among the foodtech investment ecosystems around the world. key challenges and opportunities for achieving this agenda. Growing demand for organic food is a major driver for new investments in organic row crops Private and institutional investors recognize that and permanent crops. According to the Research the food and agriculture global industry will have Institute of Organic Agriculture (FiBL), organic great social, economic, and environmental impact farmland area reached 50.9 million hectares in 2015 on the world’s sustainable development, hence their on a global basis, compared to just 11 million at the growing interest to actively invest in the sector via beginning of this century.³ different impact initiatives.

Consumer interest in organic, non-GMO, gluten-free, Agriculture investing remains a niche category and antibiotic-free products, as well as super foods in impact investing. According to the Global and specialty crops, are driving new investments Impact Investing Network’s (GIIN) 2017 Annual in farmland conversion and the adoption of new Impact Investor Survey, just 7 percent of total farming techniques, including indoor agriculture. impact investing assets were allocated to food A distinctive aspect of these opportunities is that and agriculture. Yet, approximately 50 percent of they typically involve the integration of primary respondents had some allocation to the sector - production with different processing and supply greater than any other industry.⁴ chain activities that require investment. The agriculture space offers a broad spectrum of STRATEGIC AND INSTITUTIONAL impact investments for institutional investors: from INVESTORS: NEW FARMERS reforestation and sustainable forestry assets, to ON THE BLOCK agriculture regeneration and organic farming, to landscape restoration and water management. Strategic players, including trading houses and food These strategies are scalable and can provide companies – from fruit processors to chocolate competitive returns in addition to positive social, makers – have suffered in recent years from the economic, and environmental outcomes. high volatility in commodity prices and recurring disruptions in their supply chains. At the same time, These trends also highlight new approaches to the institutional investors continuing their search for pursuit of farmland investing: yield, preferably in alternative assets, have been linking up with institutional investors to develop DIRECT INVESTING VS. FUND INVESTING agricultural production of high-value crops. The business models these collaborations adopt Large institutions such as pension funds are typically involve the development of greenfield increasingly developing in-house sectorial expertise plantations with offtake agreements, or the to pursue direct investments as opposed to acquisition of existing plantations which are then investing in funds. The trend to invest in integrated leased back to the operator. operations and to partner with industry players also favor this trend. The long-term nature of these investment partnerships is conducive to meeting the needs Income vs. appreciation: With robust appreciation of both capital providers and the industry players, in farmland values seen during the 2000s and early assuring a minimum return over a set period of time 2010s in many markets not likely to be repeated any for investors and lower price volatility for strategic time soon, institutional investors have shifted their players for the offtake. attention to the income component for returns, with three major implications. IMPACT INVESTING • First, the initial entry price level has In 2015, the United Nations adopted 17 Sustainable become more critical in terms of determining Development Goals (“SDGs”) to end poverty, protect overall investment performance, as the the planet, and ensure prosperity for all as part of a expected long-term appreciation rate is new sustainable development agenda. No industry limited. This is particularly true for row is as relevant to the successful implementation of cropland and timberland. the SDGs as agriculture: almost every single SDG

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• Second, institutional investors are • South Africa leads the agricultural aggressively targeting investments in production in the region with other permanent crops, given the opportunity countries also offering attractive to generate higher returns compared with opportunities: from cassava and passive investments in row cropland, albeit rice in Nigeria, to corn, beef, and fisheries with higher operating risk. in Zambia.

• Third, to mitigate risk and capture higher • Mainstream crops such as sugar cane and returns, institutional investors are keen palm oil, where new sustainably managed to pursue partnerships with strategic plantations are being developed, also offer offtake partners. opportunities for investment.

2018 GLOBAL FARMLAND TOUR: NORTH AMERICA HARVESTING NEW OPPORTUNITIES • A number of REITS (Real Estate Investment Farm operators continue to account for most Trusts) have been launched successfully to farmland purchases in North and South America provide retail investors with an opportunity because they know the asset class well and to invest in farmland in the U.S. While they seek to take advantage of individual initially focused on passive investing parcels for sale adjacent or contiguous to in broad acre cropland, increasingly their existing holdings to enhance the scale these funds are pursuing investments in of their operations. permanent and specialty crops promising higher returns. In contrast, larger tracts of farmland are more likely to attract the interest of institutional • With demand for organic meat increasing investors. A review of the world’s major farmland more than 10 percent annually in the U.S., hubs points to different value drivers in each of investment by both strategic players and the primary regional farmland markets for 2018. financial investors in organic animal protein production is experiencing strong growth. EUROPE • While strict environmental regulations • Land consolidation strategies remain a limit the opportunity to develop sought-after theme in Eastern Europe, as aquaculture production in U.S. coastal land fragmentation and price gaps provide waters, growing consumer demand for value for the development of large scale, fresh, traceable seafood has resulted in professional farming operations. several land-based aquaculture projects to produce fin fish and shrimp adjacent to • In Western Europe, there are niche large metropolitan markets. opportunities in permanent crops, such as olives and nut trees in the Iberian Peninsula, SOUTH AMERICA favored by conducive weather and the supportive global demand. • Successive years of low commodity prices, over-leveraged balance sheets, and drought • Across Europe, crop conversion to organic in the northeast have left many farmland systems is well underway, providing assets in Brazil searching for new investors. opportunities particularly in the fresh While current restrictions on foreign produce space. ownership limit opportunities for foreign large-scale investment, this could change SUB-SAHARAN AFRICA once drafted legislation is enacted.

• Given U.N. estimates that Africa’s share of • Argentina’s farmland market is awakening the global population will increase from 16 thanks to the pro-business government that percent in 2015 to 25 percent in 2050 and 39 took office in December 2015. Valuations for percent in 2100, Africa will need to produce grazing land in the north and forestry in the more food to meet the caloric requirements Mesopotamia area currently appear to be of this growing population. That is why attractive. The central area of the country current investment opportunities in the also offers attractive opportunities for row region are focused on substituting food crops and for mixed operations. imports with local production.

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• Uruguay remains a top destination for U.S. and European capital due CONCLUSION to its business-friendly environment that provides safety but limits potential returns. We believe that macro drivers supporting investment in the food and agricultural value chain remain bullish. The run-up in real asset investing • Paraguay has quietly emerged as the second largest beef exporter in farmland over the past decade is a precursor for increased allocations in South America following Brazil, with some of the highest levels of of capital by institutional investors to a broader array of investment productivity performance in cattle production. Forestry in the east of opportunities across different sub-sectors, including permanent and the country also is emerging as an attractive theme. specialty crops, agtech, and foodtech.

• Permanent and specialty crops in the Andean region - Chile, Peru, Navigating which types of production (crops and animal protein), which and Colombia (in that order) – have attracted investments from outside geographies and which operating models to employ (passive, active, and the region. strategic offtake agreements) remain the challenge for investors seeking to reap rewards in the sector over the long-term. • Meanwhile, Colombia – with large areas for fruit production in the valleys, and cattle, rice, and other crop production in the eastern plains – is promoting itself to foreign investors.

OCEANIA AND AUSTRALASIA SOURCES: 1. The National Council for Real Estate Investment Fiduciaries • Oceania, along with North and South America and, is one of the key (NCREIF) publishes the NCREIF index which tracks total returns for farmland destinations for institutional capital. farmland investments by institutional investors in U.S. farmland on a quarterly basis. https://www.ncreif.org/data-products/property/. • Interest in the region has been shifting from cereals towards animal protein production and permanent crops to meet demand from 2. Valoral Advisors’ Investment Fund Database. changes in Asian diets. 3. Research Institute of Organic Agriculture – Yearbook 2017. http:// • The recent acquisition of Lankester Avocado’s orchards and packing www.organic-world.net/yearbook/yearbook-2017.html. operations in Australia by a joint venture between Costa Group and Macquarie Agricultural Funds Management illustrates investor interest 4. Global Impact Investing Network 2017 Annual Impact Investor in permanent crops.⁵ Other similar deals have attracted institutional Survey 2017. https://thegiin.org/knowledge/publication/ investors with a buy and lease model and securing offtake agreements annualsurvey2017. with industrial users. 5. Kiernan, Lynda. “Costa Group Selling $300M Fruit Farm Portfolio, • Large-scale beef cattle and dairy production in Australia continue Acquires Avocado Farms Through Macquarie Partnership.” to attract foreign capital to meet growing demand for animal protein GlobalAgInvesting.com. July 13, 2017. Accessed August 17, 2017. http:// in Asia. www.globalaginvesting.com/costa-group-selling-300m-fruit-farm- portfolio-acquires-avocado-farm/ • Water is also an attractive theme: the Murray-Darling Basin (MBD), one of the world’s largest and most productive river basins, provides an important portion of Australia’s food supply and is the focus of one of the largest water trading markets in the world.

ABOUT THE AUTHORS Philippe de Lapérouse is a managing director at HighQuest Partners, a leading global strategy advisory and consulting firm. HighQuest advises strategic players operating in and financial investors allocating capital to the global food and agricultural value chains on making informed decisions on strategy and resource allocation. Lapérouse chairs the Global AgInvesting conference series. He can be reached in St. Louis at +1 978.887.8800 x365 or via email at [email protected].

Roberto Vitón is founder and managing director of Valoral Advisors, an investment advisory firm with offices in Luxembourg and Buenos Aires and specialized in the global food and agriculture investment space, with particular focus on Latin America. Vitón can be reached in Luxembourg at +352.621.463.488 or via email at [email protected].

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GAI EXCLUSIVE: PHIL

HOGANEuropean Commissioner for Agriculture and Rural Development By Michelle Pelletier Marshall

As European Commissioner for Agriculture Appointed EU Commissioner in 2014, Hogan Brexit became a and Rural Development, Phil Hogan manages has sought to simplify and modernize the 1. reality last year. the Common Agricultural Policy (CAP) CAP, while working to develop new export With the value of UK trade which governs food production and rural markets for EU agri-food products. with the EU estimated at development in the 28 countries of the 600 billion euros annually European Union (EU). Most recently in September, Hogan was instrumental in ending the quota system for (US$702 billion), what impact For the past three years, Hogan, a native of sugar in the EU – which had been in place for do you expect this member Ireland and a former manager of his family’s 50 years – giving producers the opportunity state departure to have on farm, has been an outspoken advocate for a to adjust their production to real commercial the agri-food sector in the strong and well-funded CAP which continues opportunities, most notably in exploring EU? In particular, what will be to deliver for Europe's farmers and society new export markets. In July, Hogan signed the consequence in Ireland at large. off on a free trade agreement with Japan where a 20 percent drop in that represents the most significant and far exports was anticipated? Hogan’s work in politics began in Ireland reaching deal ever concluded by the EU in at a young age, and in 1985 at 25 years old agri-food trade, creating improved global he became the country’s youngest council access to nearly all agricultural and food As we are still in the negotiating phase, it is not chairman. Since being elected to national products from Europe. possible to say with any certainty how the EU-UK office in 1989, he has served in several key trading relationship will look post-Brexit. I am on government positions, including Minister This year, Hogan addressed the Irish the record as saying that the best option for all of the State at the Department of Finance; Farmers’ Association in Dublin, the Food parties – short of the UK reversing its decision Chairman of the Fine Gael Parliamentary and Drink Federation in London, and the to leave the EU - would be for the UK to remain Group; and Minister for the Environment, European Environmental Bureau, among full members of the single market and customs Community and Local Government. many others. GAI Gazette caught up with him union. This would allow both sides to maintain a smooth and open trade and business relationship, at his Brussels office. including between Ireland and the UK.

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development operational groups, as well as at the management of natural resources and climate Digital Innovation Hubs we are setting up. These action, and a balanced territorial development September’s launch initiatives are important to ensure our agri-food in the 28 EU countries. The CAP provides a set of 2. of the €20 million sector makes the most of the opportunities digital instruments such as cross-compliance, greening Ireland AgTech Fund (IAF) by technologies have to offer. practices and the rural development policy for Finistere Ventures and the encouraging sustainable agricultural practices Ireland Strategic Investment and the sustainable development of rural areas. Fund highlighted the potential In addition, EU countries must reserve at least Sustainable 30 percent of the budget of each national rural of the agtech market in the 3. agriculture is central development programme for voluntary, targeted EU. With the recent increase to your leadership, with measures that are beneficial for the environment in agtech investment activity, goals to achieve the zero and climate. start-ups, and accelerators hunger target, prioritize in the region, and Global climate action, and create AgInvesting’s launch of sustainable food production Much attention is the AgTech Nexus event in systems and resilient 4. given to presenting Dublin this December, what agricultural practices. What the EU as a global leader implications do you see are the main steps the EU and standard-setter in for future technological is undertaking in these shaping international trade developments in endeavors through its CAP and its rules of “harnessing European ag? to improve the ecological globalization.” What are the performance of the EU? top three ways you see the EU making moves towards this in I definitely share this optimism. New technologies the agri-food sector? have the potential to make agriculture more sustainable, in every sense of the word. That The CAP is at heart of the EU's commitment is why we are making use of funding under to meet the United Nations 2030 Agenda and Horizon 2020 and the CAP to invest strongly contribute to the sustainable development The EU is a key player on international agricultural in research and innovation for agriculture and goals such as "end hunger, achieve food markets: we are the world's largest agricultural we should continue to do so in the coming security and improved nutrition, and promote exporter thanks in part to past CAP reforms years. We not only finance large scale European sustainable agriculture". The CAP has a long that increased the market-orientation and innovation projects, but also stimulate innovation history of addressing sustainability issues, and competitiveness of EU producers. The freedom to in a bottom-up approach. I encourage you to our policy objectives for the period 2014-2020 respond to consumer demands – within a legal take a look at the results coming out of rural include a viable food production, sustainable framework that guarantees key standards - has

“The EU is a key player on international agricul- tural markets: we are the world's largest agricul- tural exporter…”

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“To achieve greater export opportunities for our high-quality EU food and drink products, in 2016 and 2017 I have been undertaking a "diplomatic offensive" to help unlock new markets.”

helped make sustainably produced, safe, high- quality food the EU's calling card on international agri-food markets. An EU agri-markets Building trade 5. task force was 6. relations with non- EU trade policy supports EU farmers and food recently established. What EU states throughout the producers to profit from these opportunities. This is the mission of the group, world has been a priority means not only negotiating trade agreements, and what are some successes during your administration. but also promoting and selling EU farm products thus far? Expanded relations with worldwide. We also work on resolving trade obstacles to real market access – such as Mexico, Colombia, and Japan sanitary and phytosanitary barriers. have prevailed from this. The Agricultural Markets Task force was an What countries will the EU At the same time, we recognise that specific independent expert group set up in 2016 to look focus on next? And, does this agricultural sectors in the EU cannot withstand into how EU agricultural policy can improve include encouraging foreign full trade liberalisation and unfettered competition the position of European farmers in food supply investment in European ag? with imports. The sensitivity of certain products chains, as the CAP has become more market needs to be reflected in our trade negotiations, orientated over the last decades. The food chain If so, what key opportunities making sure that sufficient safeguards for these experts produced several recommendations for exist for investors? sectors are provided. political or legal action, published at the end of their deliberations in November 2016, focusing We also continue to advocate open, rules-based mainly on risk management issues and the and fair trade. The EU remains, by far, the world relationship between farmers and businesses We will continue an ambitious programme largest importer of agricultural products from downstream from farmers in the food supply of trade negotiations with important third Least Developed Countries (LDCs) - €3.4 billion chain. Based on these recommendations, the country partners. Just to name a few examples: worth agri-food imports in 2016. Furthermore, European Commission has launched a public The finalization of the trade agreement with over the past 25 years, the CAP has undergone consultation on how to improve the food supply Japan is top of the agenda as is concluding several reforms which have increased its market chain. Some other recommendations have been negotiations with Mercosur and Mexico. We also orientation by minimising market-intervention taken up by EU legislators to update rules on the may start negotiations with Australia and New measures with production and trade distorting simplification of the CAP. Zealand soon. effects. We make sure that our impact on the growth of agricultural sectors in developing countries remains marginal, or wherever possible, beneficial.

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To achieve greater export opportunities for our At the same time, it is very important for us to The EU agricultural and food sector can be a high-quality EU food and drink products, in 2016 retain our leading role in international bodies very attractive opportunity for foreign investors and 2017 I have been undertaking a "diplomatic such as the World Trade Organisation (WTO), who are interested in producing high standard offensive" to help unlock new markets. I have working towards a further levelling of trading and innovative products to satisfy the interest of visited Mexico, Colombia, China, Japan, Vietnam, conditions; to influence global agriculture policy EU consumers in sustainably produced, healthy Hong Kong, Indonesia, Saudi Arabia and Iran – and take a leading role in global initiatives - for and nutritious food. In this context, I also want to each time bringing with me a trade delegation example in the context of the UN, the G 20 mention that we are in a process of reaching out of EU food companies. I am confident that these and the G-7; as well as to foster relationships to EU farmers and agri-businesses promoting missions will lead to great new opportunities for with developing countries that assist them in responsible private sector investment in our producers in the coming years, creating vital, advancing their agriculture and rural potential. developing countries, especially in Africa. high-quality jobs in our rural areas.

“The EU agricultural and food sector can be a very attractive opportunity for foreign investors that are interested in producing high standard and innovative products…”

BIOGRAPHY

Phil Hogan has served as EU Commissioner for Agriculture and Rural Development since November 2014.

From 1989 until he became Commissioner, he represented the Carlow/Kilkenny constituency in Dáil Éireann, the Irish Parliament. Between 2011 and 2014, he served as Irish Minister for the Environment and Local Government, and before that occupied various senior posts at local, national and European level. These included President of the Council of EU Environment Ministers (2013), Chairman of the European People's Party of Environment Ministers (2012-14), National Director of Elections for the Fine Gael party (2010-11), Fine Gael Director of Organisation (2002-07), Chairman of Kilkenny County Council (1985 and 1998), Chairman of the Fine Gael Parliamentary Group (1995-2001), and Minister of State at the Irish Department of Finance (1994-95).

Before his entry into politics, Hogan established and subsequently directed an insurance and real estate business. He grew up on a farm in rural Kilkenny, in south-east Ireland and managed the family farm between 1981-1983. He is a graduate of University College Cork, with a B.A. in Economics and Geography.

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There exists an adverse correlation in that the more advanced and interconnected our global food trade systems become, the greater the risks we run in regard to food fraud. As advances allow us greater food availability and more diversity than ever, it also breeds regression in safety and a lack of trust on the part of consumers.

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Although there is no legal definition, Michigan A few notable examples include: State University’s Food Fraud Initiative,¹ an interdisciplinary research, education, and • In 1981 in Spain, toxic industrial rapeseed outreach organization dedicated to reducing oil was sold as olive oil sickening 20,000 the vulnerabilities along complex food supply people with a formerly unrecognized chains, defines food fraud as “a collective term condition which would become known used to encompass the deliberate and intentional as toxic oil syndrome (TOS).⁵ Many of substitution, addition (or dilution), tampering, or the affected developed chronic health misrepresentation of food, food ingredients, or conditions and 300 died. food packaging; or false or misleading statements made about a product, for economic gain.”² By 2010 fraudulent olive oil was so pervasive on the market that the U.S. Department of Due to its inherent covert nature, the economic Agriculture (USDA) initiated new standard impact of food fraud cannot truly be calculated – "Improvements grading for the product, including extra virgin, however, the Grocery Manufacturers Association virgin, and refined; however, these industry (GMA) estimates that on a global scale, food in infrastructure standards were allowed to be adopted on a fraud affects approximately 10 percent of all voluntary basis, limiting their effectiveness.⁶ commercially sold food products at a cost of and the expansion between $10 billion and $15 billion per year.³ • In August of this year eggs contaminated Additionally, the GMA estimates that fraud of global trade with an insecticide that is harmful to costs food businesses between two and 15 humans were shipped to 15 countries in percent of annual revenues due to lost sales, webs have made the EU, Switzerland, and Hong Kong.⁷ Also, and in cases where public health is negatively pork products from Holland, Germany, and affected, has the potential to lead to bankruptcies food fraud a global other EU countries that were sold in the UK within the industry. at one of the country’s top supermarkets challenge." were suspected of infecting thousands Furthermore, although estimated damages of people with Hepatitis E (HEV) – a pig resulting from fraud reach into the tens of billions virus that causes cirrhosis of the liver and of dollars, the association notes that documented neurological damage.⁸ incidents of food fraud are indicative of only a small percentage of overall cases, “since the goal • In July of this year the Centers for Disease of adulteration for economic gain is not to be Control (CDC) reported that 47 people in detected,” and that the true scope of food fraud the U.S. were sickened and one person “may be unknown or even possibly unknowable.” died from eating salmonella-contaminated papayas from Mexico.⁹ WORLD WITHOUT BORDERS • In 2016 an outbreak of Hepatitis A, which Improvements in infrastructure and the sickened 297 and killed two people in expansion of global trade webs have made Hawaii, was linked back to raw scallops. food fraud a global challenge. As these trade Another Hepatitis A outbreak in Virginia that routes and relationships become farther sickened 143 people was traced back to reaching and more complex, the number of strawberries from Egypt.10 points of vulnerability along the supply chain increases. These vulnerabilities translate to one • In 2013, Oceana, an international in 10 people becoming ill, and 420,000 people conservation group, tested more than dying every year from eating contaminated or 1,200 samples of fish from 671 retail adulterated food, according to the World Health locations across 21 U.S. states, and found Organization (WHO).⁴ that one third had misleading labels.11 That same group conducted a global Researchers led by Dr. John Spink at Michigan investigation in 2014 into fraudulent State University reviewed records gathered from activity in the seafood industry and found academic journals, and found that the top seven fraudulent labeling in 29 countries, with the food items at the highest risk for adulteration are most mislabeled fish being cod, grouper, red olive oil, milk, honey, saffron, orange juice, coffee, snapper, and wild salmon. and apple juice. However, cases involving other foods have been widely documented. • Also in 2013, a food fraud scandal rocked the EU when the Food Safety Authority of Ireland found horse meat present in one third of beef burgers it tested from a range

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of ready meals sold through supermarkets.12 These sentiments run in direct conflict to the fact Once Ireland’s findings became known, that in 2011 the U.S. Food and Drug Administration other EU countries began conducting their (FDA) inspected only 2.3 percent of the food and own tests with 16 countries including the feed imports entering the country that year.15 UK, Germany, the Netherlands, Austria, Belgium, Italy, France, Poland, and the “There is also a lot of consumer interest in Czech Republic, as well as Norway and transparency and interest from the food industry Switzerland, eventually finding horse “It’s important on how to increase transparency in the supply meat DNA in samples of beef. Consumers chain, and that’s actually one of the factors that were originally told that the contamination to know where a can also contribute to vulnerability for food fraud posed a negligent risk to the public to even happen in the first place,” Jeffrey Moore, health, however it later came to light that product is coming Ph.D., science director for the Food Program at horses are routinely treated with an anti- The U.S. Pharmacopeial Convention, told Food inflammatory drug called phenylbutazone, from or where Ingredients First. “It’s important to know where which is banned from the human food a product is coming from or where it is produced chain due to its potential to cause the rare it is produced which ultimately comes back to this concept of but potentially life threatening condition of visibility and transparency within supply chains.” aplastic anemia. which ultimately WHAT IS BEING DONE? “Restoring the trust and confidence of European comes back to consumers and trading partners in our food As was mentioned earlier, MSU’s Food Fraud chain following this fraudulent labeling scandal this concept of Initiative is working with the support of public- is now of vital importance for the European private partnerships to reduce vulnerabilities in economy, given that the food sector is the largest visibility and the food chain, though this is just one endeavor single economic sector” in the European Union, among a range of new programs, technologies, Tonio Borg, the European commissioner for health transparency startups, and investments all working to fight and consumer policy, told the New York Times in food fraud. April 2016. within supply In August 2016 the U.S. Pharmacopeial Convention Perhaps the most well-known food fraud case chains.” (USP) - the body that establishes the quality happened in China in 2008 when infant formula standards for food ingredients, medicines, and was found to be contaminated with melamine supplements – launched the latest generation – an industrial chemical typically used to make of its Food Fraud Database (FFD 2.0) – a plastics, fertilizers, and concrete that when added continuously updated database of thousands of to foods, makes the foods test at higher protein ingredients and records collected from scientific levels than are accurate.13 The tainted formula publications, the media, regulatory reports, made 300,000 babies ill and killed six. trade association announcements, and judicial records that is available to food manufacturers PUSHBACK and retailers on a yearly subscription basis.16 The goal of the database is to provide food producers It should not come as a surprise that these and retailers with the tools to make informed incidents resulted in a loss of consumer trust decisions regarding the ingredients they include in their food suppliers and an overarching in their foods, and to protect their brands. trend among consumers toward demanding more transparency in food chains, labeling, and “The intersection that we have in this new ingredient lists. database, specifically at an ingredients level, allows companies to manage and prioritize where This result is reflected in the findings of a 2016 the greatest risks are coming from, from a food Label Insight Study that found 83 percent of safety perspective,” said Moore in an interview in consumers want to know exactly what is in their August of last year with Food Ingredients First.17 food; 94 percent of consumers responded that it “The ability to look at past incidents of fraud and is important to them that the brands they buy are take steps to protect their supply chains means transparent about what is in their food and how it the company can protect their reputation and is made; yet 75 percent of consumers do not trust ensure customer confidence.” what food labels tell them.14 Along these same lines, SSAFE, a global non- profit designed to increase food safety throughout supply chains and improve public health, has partnered with PricewaterhouseCoopers (PwC)

A brand of 17 GAIGAZETTE Volume 4, Issue 4 and Wageningen University to develop a Food JD.com, the second largest e-commerce platform Fraud Vulnerability Assessment platform. The in China, is also employing blockchain technology no-charge tool is a first of its kind that allows "Its covert nature, to provide its customers with a detailed and food companies to assess their risk of food fraud traceable history of the steaks it sells. Working – something that can then lead to the creation of increasingly with Kerchin – a beef manufacturer in Inner mitigation plans in order to reduce those risks. complicated global Mongolia – JD.com has used blockchain to trace frozen beef from its point of origin to the customer INSCATECH food supply chains, since May of this year.22 Buyers are provided with the age, weight, diet, veterinarian’s name, and Founded in New York in 2009 by former trade and the savviness slaughter date of the cow from where their steak consultant Mitchell Weinberg, Inscatech originated, and quality testing results for their believes in fighting food fraud with boots on of its perpetrators steak before it was placed for sale. the ground. Weinberg has built up a worldwide network of “specially trained intelligence present a constantly A WORTHY FIGHT operatives” trained to identify violations and shifting target for crimes within food supply chains using covert Although there is likely no one technology or forensic methodologies to detect counterfeiting, those working to solution that will eliminate food fraud, blockchain dilution, substitutions, and adulterations of all looks to currently be our best and most widely kinds. Working with food majors, NGOs, and eliminate it." applicable platform through which to combat the governments, Weinberg told Bloomberg in challenge, both among food producers and along August 2017 that through Inscatech’s operations, the entire food chain. the company found that China consistently presents itself as a key hotbed for food fraud.18 “The blockchain provides the immutable, BLOCKCHAIN open platform that is needed to introduce “Statistically we’re uncovering fraud about trust back into our complex food supply chains,” 70 percent of the time, but in China it’s very Born in 2008, blockchain is a virtual ledger Sean Crossey, associate digital marketing analyst close to 100 percent,” he said. “It’s pervasive, it’s system that provides a platform on which various with arc-net, a provider of a blockchain-based across food groups, and it’s anything you can agreed-upon parties (growers, processors, food transparency platform, told CoinJournal.23 possibly imagine.” suppliers, distributors, regulators, retailers, and “This is where the blockchain’s role as a consumers) can record and view facts that decentralised [sic] ledger is so powerful, Identifying risk is one thing, but what can be done cannot be changed after they are entered. This recording transactions and storing information to prevent this fraud from happening? security enables the tracking of food from the that can’t later be adulterated.” farm, to the processor, to the retailer; or the Inscatech is currently exploring using “molecular documenting of an animal’s life from where it was The challenge of food fraud is a highly, nearly markers” and “genetic fingerprints” through born, what it was fed, where it was transported, impossibly, complex issue. Its covert nature, DNA testing to distinguish true ingredients from and how it was processed. increasingly complicated global food supply imposters – which brings us to Clear Labs. chains, and the savviness of its perpetrators As this technology and its benefits become present a constantly shifting target for those Founded in 2014 in Menlo Park, California, more understood, more leading food retailers are working to eliminate it. But the challenge is a by software engineers and genomic scientists, integrating the technology into their business worthy one, and one that presents an opportunity Clear Labs’ flagship product Clear View is an models as a means of lessening their exposure for investors. analytic platform that analyzes the content of to food fraud. At the end of August 2017, a food and ingredients on a molecular level, and consortium of top companies, including Dole, “It’s a big growth area,” Shaun Rein, managing “translates quantifiable molecular tests into Driscoll’s Golden State Foods, Kroger, McCormick director of China Market Research Group, actionable food data insights”, according to the and Co., McLane Co., Nestlé, Tyson Foods, told Bloomberg when discussing the potential company’s website. Unilever, and Walmart, joined forces to work with growth for tech companies that provide blockchain pioneer IBM to improve the safety and food fraud mitigation services. “It’s a great Reflective of how critical this issue is to food traceability of today’s food chains.21 business opportunity.”24 companies and investors, this next generation technology was successful in raising a $13 million “Unlike any technology before it, blockchain is ABOUT THE AUTHOR Series B19 last year led by Wing VC, and including transforming the way like-minded organizations Google Ventures, Tencent, Khosla Ventures, and come together and enabling a new level of Lynda Kiernan is an editor with GAI Media and Felicis Ventures, followed by another follow-on trust based on a single view of the truth,” Marie daily contributor/editor of the weekly GAI News $16 million round in September 2017 including the Wieck, general manager, IBM Blockchain, told and GAI AgTech Intel, the electronic publications same investors.20 CStoreDecisions. “Our work with organizations of Global AgInvesting. News contributions are across the food ecosystem, as well as IBM’s new always welcome for consideration. Submit them platform, will further unleash the vast potential of to Kiernan at [email protected]. this exciting technology…”

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SOURCES

1. "Michigan State University - Food Fraud Roundup:%20Food%20Dive%20 Global Food Spies." Bloomberg. August 6, 2017. Initiative." Michigan State University - Food 07-29-2017&utm_term=Food%20Dive%20 Accessed September 10, 2017. https://www. Fraud Initiative. February 23, 2013. Accessed Weekender. bloomberg.com/news/articles/2017-08-06/ September 1, 2017. http://foodfraud.msu.edu/. spies-blockchain-and-alibaba-beating- 10. "Outbreak of Hepatitis A in Hawaii Linked to china-s-fake-food-scourge?utm_ 2. Ibid. Raw Scallops." Centers for Disease Control source=Sailthru&utm_medium=email&utm_ and Prevention. August 19, 2016. Accessed campaign=Newsletter%20Weekly%20 3. Johnson, Renée. "Food Fraud and September 10, 2017. https://www.cdc.gov/ Roundup:%20Food%20Dive%20 “Economically Motivated Adulteration” of hepatitis/outbreaks/2016/hav-hawaii.htm. 08-12-2017&utm_term=Food%20Dive%20 Food and Food Ingredients." Congressional Weekender. Research Service. January 10, 2014. Accessed 11. "Seafood Labeling Fraud." Berkeley Wellness. September 1, 2017. https://fas.org/sgp/crs/ June 24, 2014. Accessed September 10, 2017. 19. "Google Ventures-backed Clear Labs gets misc/R43358.pdf. http://www.berkeleywellness.com/healthy- $13 million in Series B to nip food recalls eating/food-safety/article/seafood-labeling- in the bud." TechCrunch. December 13, 4. Campbell, Rabecca . "How Blockchain fraud. 2016. Accessed September 11, 2017. https:// Technology Is Helping to Fight Food Fraud." techcrunch.com/2016/12/13/google-ventures- CoinJournal. September 7, 2017. Accessed 12. Lawrence, Felicity. "Horsemeat scandal: the backed-clear-labs-gets-13-million-in-series-b- September 10, 2017. https://coinjournal.net/ essential guide." The Guardian. February 15, to-nip-food-recalls-in-the-bud/. blockchain-technology-helping-fight-food- 2013. Accessed September 10, 2017. https:// fraud/. www.theguardian.com/uk/2013/feb/15/ 20. Scrovan, Sandy. "Clear Labs Nabs $16M in horsemeat-scandal-the-essential-guide. Funding to Advance Food Safety System." 5. Gelpi, Emilio et. al. "The Spanish toxic FoodDive. September 1, 2017. Accessed oil syndrome 20 years after its onset: 13. "China Dairy Products Found Tainted with September 10, 2017. http://www.fooddive.com/ a multidisciplinary review of scientific Melamine." BBC. July 9, 2010. Accessed news/clear-labs-nabs-16m-in-funding-to- knowledge." NCBI. May 2002. Accessed September 10, 2017. http://www.bbc.com/ advance-food-safety-system/504079/. September 10, 2017. https://www.ncbi.nlm.nih. news/10565838. gov/pmc/articles/PMC1240833/. 21. "Leading Companies Form Blockchain 14. https://www.labelinsight.com/hubfs/ Collaboration with IBM." Convenience 6. "Olive Oil and Olive-Pomace Oil Grades and Label_Insight-Food-Revolution-Study. Store Decisions. August 23, 2017. Accessed Standards." United States Department of pdf?hsCtaTracking=fc71fa82-7e0b-4b05-b2b4- September 10, 2017. https://www. Agriculture Agriculture Marketing Service. de1ade992d33%7C95a8befc-d0cc-4b8b-8102- cstoredecisions.com/2017/08/23/leading- Accessed September 10, 2017. https://www. 529d937eb427 companies-form-blockchain-collaboration- ams.usda.gov/grades-standards/olive-oil- ibm/#_. and-olive-pomace-oil-grades-and-standards. 15. Quagliani, Diane. "The Shady Business of Food Fraud." Food & Nutrition. July 1, 2016. Accessed 22. Huang, Echo. "Blockchain Could Fix a Key 7. Boffey, Daniel, and Kate Connolly. "Egg September 9, 2017. https://foodandnutrition. Problem in China’s Food Industry: the Fear contamination scandal widens as 15 EU org/july-august-2016/shady-business-food- of Food Made in China." Quartz. August 10, states, Switzerland and Hong Kong affected." fraud/. 2017. Accessed September 10, 2017. https:// The Guardian. August 1, 2017. Accessed qz.com/1031861/blockchain-could-fix-a-key- September 10, 2017 https://www.theguardian. 16. "Food Fraud Database Version 2.0." USP. 2017. problem-in-chinas-food-industry-the-fear-of- com/world/2017/aug/11/tainted-eggs- Accessed September 10, 2017. http://www. food-made-in-china/?utm_source=AgFunder found-in-hong-kong-switzerland-and-15-eu- foodfraud.org/. Updates&utm_campaign=6789947272- countries. Aug17_2017&utm_medium=email&utm_ 17. Kenward, Elizabeth. "New USP Food Fraud term=0_7b0bb00edf-6789947272-97886833. 8. Campbell, Rabecca. Database Helps Industry Mitigate Risk of Food Adulteration." Food Ingredients First. August 23. Campbell, Rabecca. 9. Marler, Bill. "Why the U.S. Imports Tainted 24, 2016. Accessed September 10, 2017. http:// Food That Can Kill You." The Hill. July www.foodingredientsfirst.com/news/New- 24. O'Brien, Emma, Jiefei Liu, Lulu Yilun Chen, Yuji 24, 2017. Accessed September 10, 2017. USP-Food-Fraud-Database-Helps-Industry- Nakamura, Samuel Dodge, Shuping Niu, and http://thehill.com/blogs/pundits-blog/ Mitigate-Risk-of-Food-Adulteration.html. Yue Qiu. energy-environment/343444-why-the-us- imports-tainted-food-that-can-kill-you?utm_ 18. O'Brien, Emma, Jiefei Liu, Lulu Yilun Chen, source=Sailthru&utm_medium=email&utm_ Yuji Nakamura, Samuel Dodge, Shuping campaign=Newsletter%20Weekly%20 Niu, and Yue Qiu. "Inside the Secret World of

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BLOOMING DESERTS AND LANDS OF PLENTY BOOST PERUVIAN AG INVESTMENTS By Michael DeSa, AGD Consulting

As the trade in food products and ingredients becomes increasingly globalized, markets that were once unavailable are beginning to break into the spotlight. Technological advances have reduced time and space limitations, making investment opportunities in emerging markets, such as Peru, more accessible and attractive for investment capital. Certain macro trends are influential to the rising agricultural sentiment in Peru, and specific sectors hold promise in a variety of ways.

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A GROWING TREND Lee Addams, managing director and co-head of HighQuest Partners’ consulting business, pointed to other thriving businesses in South America, Over past five years, Peru has experienced sustained economic growth such as equipment and input companies, who are quickly responding to led by increased exports and rising domestic demand. The combination of increases in foreign investment in farmland. “In many respects, the Peruvian strong export growth and favorable domestic economic policy have enabled production landscape may develop as among the most advanced in South Peru to demonstrate a positive macro-economic balance that has recaptured America, starting with some of the new advancements in irrigation schemes,” the confidence of investors. From 2000 to 2013, Peru’s economy achieved an he said. impressive cumulative growth of 113 percent of its Gross Domestic Product (GDP). As of 2015, the country’s annual GDP was approximately US$400 A LAND OF PLENTY billion, elevating it to the top quartile for GDP growth for the entire Latin American region.¹ Agriculture represents 8 percent of Peru’s economy, employing more than a quarter of the country’s working population.⁵ This industry exploits The country’s attractive legislative and fiscal framework are strong approximately 19 percent of the country’s national territory, while another contributing factors to these above average GDP figures, resulting in 53 percent remains forested. This means that less than 30 percent of Peru’s favorable investment conditions. So favorable in fact that the S&P and Fitch land is covered by cities and towns. As a result of this, there is tremendous recently upgraded Peru to an investment grade of BBB+, second only to Chile room for development and value-added opportunities in Peru’s under-served for the entire continent, according to The Ministry of Economy and Finance agricultural market. of Peru. Peruvian law grants national treatment for foreign investors and permits foreign investment in almost all economic sectors, as long as one is A number of companies, such as Camposol and Agricola Cerro Prieto, registered with Peru’s investment promotion agency. Thus, foreign investors are already operating at scale in the Peruvian fruit and vegetable sectors have the same rights as locals to benefit from investment incentives. and have become national champions,” said Lapérouse, explaining that both companies are major exporters of Hass avocados to the U.S. and EU. Peru also permits foreign business ownership, provided that the company Camposol, founded in 1997, has developed into a vertically-integrated fruit has at least two shareholders, and that its legal representative is a Peruvian and vegetable producer, owning and farming over 27,500 hectares and resident. Additionally, Peru has the second-lowest country risk factor in processing and distributing the crops the company produces. The company, Latin America, and one of the lowest inflation rates in the region at only 3.25 which has revenues in excess of US$300 million, is the third largest employer percent as of March 2017.² in Peru.⁶

In recent years, Peru has emerged as a leading destination in South America Peru’s agricultural market is ripe for expansion and development, with over for Foreign Direct Investment (FDI), with US$7.7 billion coming into the 7.5 million hectares of land available for agricultural use, of which only three country in 2015.³ The country’s low cost of wages and modest land prices million is presently developed.⁷ Favorable business conditions, positive are contributors to Peru’s growing FDI numbers. Peru also ranks in the top foreign-investor sentiment, and a geography well-positioned to support quartile of over 180 countries for a favorable business environment for foreign agricultural development has given rise to a vast array of agricultural investors.⁴ These growth trends and advantageous business conditions products from Peru, ensuring that investors will find options that meet their extend to Peru’s agricultural sectors as well. return and risk preferences.

“We have seen keen interest among foreign investors allocating capital to permanent and specialty crop productions, evidenced by a substantial increase in investments over the past two years,” said Philippe de Lapérouse, managing director and co-head of HighQuest Partners’ consulting business. “Not only is the investment and biological climate in Peru positive, but it also provides a counter-cyclical advantage in seasonality for supplying markets in the northern hemisphere.”

Country Comparison For the Protection of Investors

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IDEAL CLIMATE AND DIVERSE PRODUCTS Aromatic herbs and native plants for homeopathic and medicinal purposes constitute another widely desirable product category for consumers in Peru’s expansive biodiversity provides an opportunity to produce and export developed markets. Optimal growing conditions and expanding demand a variety of native crops with growing demand in the international market. from consumers in export markets continue to generate interesting business The Andes region of the country produces products such a quinoa and tarwi, and investment opportunities for the entire sector. while regions in the lower altitudes support the production of a range of vegetables, including a variety of beans, corn, and nearly 2,000 varieties of Peru classifies its exports into two product categories: traditional and potatoes, many of which are only known to Peruvians.⁸ non-traditional. Traditional exports include coffee and anchovy, while non- traditional exports include a variety of agricultural and fish products. In 2014, non-traditional export sales surpassed US$5 billion, a nearly 20 percent increase from the previous year’s growth.⁹ Within the first three years of establishing a Trade Promotion Agreement with the U.S. and a Free Trade Agreement with China, Peru produced and shipped nearly 500 different non-traditional products to its North American neighbor, and over 200 new non-traditional products to China. These growth figures clearly illustrate that Peru is well-positioned to supply the world’s growing demand for these agricultural products. THE SPECIALTY FRONTIER

Among non-traditional exports, a growing demand for specialty crops by international markets has spurred the Peruvian agricultural sector to allocate an increased number of hectares to support the cultivation of these products. Some of the more recognized specialty crops from Peru are avocados, blueberries, quinoa, and grapes. Peruvian exports of Hass avocados are 10 Figure 1- Tarwi: A Staple Peruvian Food expected to increase 20 to 30 percent in volume by the end of 2017. In

Principal industries in the different regions of Peru

Source: EY

A brand of 23 GAIGAZETTE Volume 4, Issue 4 addition, the Peru Trade & Investment Office is funding Peru’s avocado THE FERTILE DESERT campaign - the first time this organization has ever funded an avocado promotion for an international investor. This growth of agricultural exports from Peru is one of the country’s greatest success stories, however, much of this would not have been possible without Exports of Peruvian blueberries topped out at US$30 million in 2014, nearly the conversion of desert plains into fertile agricultural land. Peru’s desert twice 2013’s total. Likewise, blueberry exports in 2015 surpassed US$97 plains were characterized by arid, dry regions which remained largely million, representing a nearly seven-fold increase in three years.11 According uncultivated until the late 1990s. The construction of hydroelectric plants led to research by Agronegocios, a Peruvian-based digital information platform, to the further creation of large reservoirs needed to store excess water. These blueberries were the most profitable agricultural export product for efforts resulted in the development of Peru’s first reliable water supply and producers in 2014, generating nearly a 70 percent gross margin. subsequently, an investment in public irrigation infrastructure initiatives.

In early 2015, Peru became the world’s number one grower of quinoa, The Peruvian government saw this as an opportunity to develop a large producing nearly 12,500 metric tons compared to the second largest portion of the country’s underutilized territory to support a growing producer, Bolivia, with only 9,200 metric tons.12 As a spike in supply of quinoa agricultural industry. In 1993, the law was revised to eliminate size restrictions from North America and Finland led to a slowing growth in demand from of private land holdings and allowed for the private acquisition of land. The the EU and the U.S., Peru moved to producing organic quinoa in an effort to government began auctioning off large tracts of desert land – between 500 regain market share. and 1,000 hectares – with minimum investment criteria, thus incentivizing agribusiness companies to take an initial stake in Peru. Once under contract, As agricultural exports increased, production shifted from the highlands to the government then subsidized the construction of an irrigation network to the coastal regions. supply these newly acquired lands with water for crop cultivation. As of 2013, nearly half a million acres have been irrigated through these efforts, with In 2015, table grapes led non-traditional crop exports from Peru with total 30 companies holding land tracks of 2,500 hectares or more. Three major exports of nearly US$700 million. Peru has emerged as the world’s fifth irrigation projects currently underway in Peru will bring an additional 150,000 largest supplier of table grapes to the international market. During the hectares into agricultural production.14 2016/2017 season, Peru produced over 600,000 metric tons of table grapes, of which 350,000 metric tons, or 58 percent of the country’s total production, “Similar to other countries in South America, water is plentiful in Peru, in were exported.13 aggregate, but not necessarily where agricultural productivity has the greatest potential,” said Addams, noting that major projects are capturing the significant water resources on the eastern slope of the Andes then conveying

Projection of regional exports of Peruvian goods 2011 vs. 2021 (in US$ billions)

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24 © 2017, HighQuest Partners. All rights reserved. Volume 4, Issue 4 GAIGAZETTE

Figure 2 - Mission Avocado (Chao - La Libertad) the water across the Andes to the western arid regions. “Nevertheless, total territory.15 Irrigation initiatives, flat land, a temperate climate, and plenty the Peruvian government is moving aggressively to utilize irrigation as of natural fertilizers have directly contributed to the agricultural success of the anchor for transformative agricultural growth.” The Olmos transfer and the region. development scheme in northern Peru is cited by Addams as an example. “It will result in over 43,000 hectares of new irrigated land -- growing fruit FUTURE OUTLOOK and vegetables (grapes, avocado, berries, mango, citrus) as well as some commodity crops (sugarcane, corn),” he said, giving credit to Brazilian While the economic losses resulting from the 2017 coastal El Niño floods company Odebrecht, which has been responsible for most of the large works, cannot yet be quantified, the underlying fundamentals of Peru’s agriculture including a 19-km trans-Andean tunnel; and to top irrigation equipment firms, sector are expected to remain strong and intact. The recent decrease such as Netafim (Israel) and Valley Irrigation (USA) that have collaborated in Peru’s traditional exports have validated the country’s decision to on the development of the irrigation schemes. “Government sponsors have diversify production into non-traditional products and to continue to invest continually emphasized technology as a differentiating element of the project in irrigation infrastructure projects in an effort to increase agricultural and as a result, the Olmos development is among the most advanced in production in underutilized regions. South America,” said Addams.

To date, the desert regions of Peru are the most agriculturally productive areas in the country, generating an estimated 50 percent of the gross agricultural product from an area comprising just 4 percent of the country’s ABOUT THE AUTHOR

Michael DeSa is the founder/CEO of AGD Consulting, a U.S.-based, veteran-owned firm offering strategic advisory services and customized due diligence trips for investors seeking exposure to Latin American agriculture. DeSa is an experienced LatAm land owner, former Marine Corps Officer, and family farmer. He has years of technical management experience with the Marine Corps from his assignments in Djibouti, Jordan, and Afghanistan and throughout Latin America. DeSa can be reached at [email protected].

DISCLAIMER All views, data, opinions and declarations expressed are solely those of the author(s) and not of Global AgInvesting, GAI News, GAI Gazette, or parent company HighQuest Group.

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SOURCES:

1. EY Peru (2014). Peru’s Business & Investment Guide 2014/2015. 9. Oxford Business Group (2013). Agricultural Exports on the Rise in http://www.ey.com/Publication/vwLUAssets/Peru-Business-and- Peru. https://www.oxfordbusinessgroup.com/overview/fresh- Investment-guide-2014-15/$FILE/Peru%C2%B4s%20Business%20 horizons-agricultural-exports-are-taking-place-traditional-foreign- and%20investment%20guide%202014-2015-2.pdf currency-earners

2. Trading Economics (April 2017). Peru Inflation Rate. http://www. 10. Fresh Plaza (February 7, 2017). Peru Expects to Export 30% More tradingeconomics.com/peru/inflation-cpi Hass Avocados. http://www.freshplaza.com/article/170547/Peru- expects-to-export-up-to-30-procent-more-Hass-avocados 3. Santander Trade Portal (2017). Peru: Foreign Investment. https:// en.portal.santandertrade.com/establish-overseas/peru/investing 11. Ibid. Oxford Business Group.

4. Ibid, Santander Trade Portal. 12. Ibid.

5. ProInversion (2012). Exploring Investment Opportunities in Peru. 13. Figueroa, Gabriel. An Overview of Peru’s Exports of Table Grapes to http://www.investinperu.pe/modulos/JER/PlantillaStandard. China. SinoLATAM. April 25, 2016. http://www.sinolatamforum.com/ aspx?are=1&prf=0&jer=5936&sec=17 opiniones_detalle/1-m177-525/an-overview-of-perus-exports-of- table-grapes-to-china 6. Camposol 2015 Annual Report. http://www.camposol.com.pe/ userfiles/cms/pagina/documento/annual_report_csol_2015_vf.pdf 14. Ibid, Oxford Business Group.

7. Ibid. ProInversion. 15. New Agriculturist (September 2004). Country profile – Peru. http:// www.new-ag.info/en/country/profile.php?a=852 8. Ibid, ProInversion

IT’S NOT TOO LATE TO REGISTER

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A publication of 26 Volume 4, Issue 4 GAIGAZETTE

EXECUTIVE PROFILE: KEVIN SCHWARTZ CEO and Founding Partner, Paine Schwartz Partners By Michelle Pelletier Marshall

You assumed the role of CEO Big picture, our goals remain to be the best 1. in February 2017, at the same in class private equity investor in food and Paine Schwartz Partners is a time the company changed its agriculture. We will continue to invest in the private equity firm focused marriage between investment acumen with name from Paine & Partners. proven operators in the industry. exclusively on sustainable food What are your top goals at the chain investing. The firm has helm of the company? Why food and ag? What deployed nearly $2 billion in food 2. benefits have you found for and ag businesses across soon- The name change and the title were more to your investors, and what’s the to-be 16 platforms and 40 total reflect our long-term succession planning in market potential? the firm and less about a role change. My partner, investments. Global companies Dexter Paine, and I have co-managed the firm Personally, we had backgrounds in the ag like AgBiTech, Global ID, Meadow for a long time and continue to do so. We industry. I grew up in Moline, Illinois in the corn Foods, Costa Group, and Sunrise have made some investments in our team and belt. My father and several family members comprise the Paine Schwartz functional skills to continue to differentiate worked for John Deere so I literally grew up Partners portfolio. ourselves in the sector. climbing around on tractors. After college, I went into private equity but always had that personal With U.S. locations in New York On the team front, we have created an in-house interest and connection to food and agriculture. and California, and portfolio portfolio performance function and hired a Similarly, my partner Dexter Paine, was one of the senior executive from KKR Capstone with an early private investors in the ag inputs industry company operations in more than operating excellence functional skill set. We as well. So when we starting working together, 20 countries, the firm has carved are deploying that resource across the portfolio we made it a priority to dig in to the food ag out a niche with its thesis-based companies, mining them for opportunities for value chain, particularly focusing on ag input focus on upstream investments them to increase their operating efficiencies, and companies that drive productivity. in the supply chain, working driving value creation initiatives such as add-on acquisitions. We are also looking for opportunities The other driver of the firm’s focus is that towards the mission of driving for business extension. we saw a highly competitive overall private private equity level returns on a equity industry with lots and lots of capital risk adjusted basis and avoiding We also have a partnership with McKinsey & and plenty of capital market availability. We felt direct commodity exposure. Company where we collaborate on deep dives that specialization in a sector where we had on industry sectors, as well as longer-range unique focused expertise and relationships was Kevin Schwartz, CEO and a strategic research projects, to identify where we critical to driving consistently outperforming founding partner, has been with think the hotspots are going to be for growth returns for our investors. the firm since 2002. GAI Gazette and investment opportunities in the ag industry caught up with him as he was over the next 10 years. We did a project about The food and ag industry is both huge, with five years ago called Ag 2020 and are now almost 9 percent of total global output, and preparing to head to Global updating that project for Ag 2025. This significant attractive, in that it has been the fastest growing AgInvesting Asia in Tokyo. investment in research allows us to map the major segment of the global economy for a entire global ag industry and identify the areas we number of years, yet is very underrepresented think will be most attractive for investment. from an institutional capital investment

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perspective. Less than 2 percent of private equity There are a couple of processes that we have As far as in the pipeline, at a high level, we will deal flow is in food and agriculture, and very created over time, the most important of which continue to focus on the upstream part of the little of that is in the upstream value chain where is our in-house deal generation process, which value chain – ag inputs and ag input distribution we focus. We felt it was an incredibly attractive starts with extensive research projects on – and continue to focus on high value, crop industry that was very underserved so we segments of the value chain that we think have production like Costa Group or Wawona Packing, decided about 10 years ago to focus solely on the potential. We go offsite as a firm twice a year which we just acquired. food and ag space, which allows us to orient our to accomplish these projects and prioritize the entire firm to being the best in class in that target opportunities that we have identified. All of our We see consumers continue to focus on healthy area of investment. platform investments have been generated foods, traceability, and convenience, and those through this process. big buckets of consumer demand drive the We think there’s huge potential in this sector. supply chain. We’re focusing on the production There’s no limit to the number or scale of We then turn to our network of contacts and of crops that address those consumer drivers, as the opportunities for investment. There’s an domain experts to create catalysts for investment well as services across the value chain that can opportunity and a trend toward consolidation, in the companies that we’ve identified as provide solutions. even at the farm level, that will drive continued being attractive, or to connect us with the right consolidation through the value chain. It’s the counterparty with whom we can interact. That’s ESG (environment, same at the retail level, and as a result there’s a the core of what we do; it’s a huge investment 4. sustainability and corporate great opportunity upstream in the value chain of time and resource, but we feel that when governance) goals drive Paine to create very successful business models investing in food and agriculture, you really need Schwartz Partners’ investment that require investment for either transactional to be proactive. strategy. Can you explain the execution, growth initiatives, or upgrading importance of this? talent and capabilities, and that’s really been We also have our partnership with McKinsey the hallmark of how we approach investing is to where they take risks on our investments and ESG is a priority for the firm. It’s something we bring those resources to companies to help them are aligned with us economically – they don’t continue to enhance and invest in at the firm and grow and succeed. do that with other private equity firms. Through in our portfolio companies, and it’s also a part of this partnership, we have at our disposal and our investment criteria. Our job is to create value Your investments run our portfolio companies’ disposal, all of the for our investors, and in the food and ag industry 3. the gamut of upstream services that McKinsey provides: strategic sustainability is a critical success factor, so we businesses – from pest control to advisory services, business improvement, sales feature that across all of our investments. irrigation solutions to growing, force effectiveness and more. We also partner packing and supplier operations. with McKinsey on long-range research projects At the firm level, an ESG audit is conducted How does Paine Schwartz Partners through collaborative teams, and also engage our annually and we continue to drive those combined networks of industry executives from principles in everything that we do. For find the next best investment and all over the world and all across the value chain, investment selection, we’ve been able to what’s coming up in the pipeline? in the process. find investment companies that, while highly

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profitable and rapidly growing, also align with I recall at some of the early Global AgInvesting This in part is an appreciation of the fact that our broad sustainability goal. For example, we conferences that most of the investors the macro view isn’t necessarily going to drive invested in Verdesian Life Sciences, which were predominantly addressing investment successful investment outcomes – you really provides products to farmers to enhance the opportunities in land. What we’ve seen over time need to be smart on the micro and get the right nutrition of their plants by assimilating the is an increasing sophistication in looking for individual companies in your portfolio. And we macronutrients that they need for growth. higher returns or operating-oriented businesses have been laser-focused on getting the micro that are participating along the same value chain. right, and that orientation is a key to long-term Ultimately our technology enhances the yield and investing success in the industry. provides for better soil health, better plant yields, An interesting shift is that a meaningful chunk and a reduction in the use of bulk fertilizer so it’s of our investors are actually the real asset BIOGRAPHY a high ROI product for the farmer. investment groups of the major institutions that invest in our firm. So what started out for us as Kevin Schwartz is CEO and a founding partner You can go through our portfolio and see that a very traditional private equity investor base of Paine Schwartz Partners. Prior to co-founding every company is going to have some element of has in some ways transferred to folks that invest Paine Schwartz Partners in 2006, he was a sustainability. We are constantly evaluating new real asset dollars. They want a higher-returning managing director at the Predecessor Firm. opportunities that align with our sustainability strategy that is uncorrelated to some of the Before this, he worked for the private equity goals, all set against the primary mission of the broader private equity or equity market driven firm Fremont Partners, where he assisted with firm to generate value for our investors. We have outcomes that they have in other parts of their the management of approximately $1.7 billion of found that in the food and ag industry, there’s portfolio. I see that trend continuing. funds focused on the building products, financial fantastic alignment between ESG principles, services, and consumer products industries. sustainability, and investment outcomes. Additionally, five or 10 years ago we were in a Schwartz began his professional career in 1997 very different soft commodity price environment at Goldman, Sachs & Co., and in 1999 joined Paine Schwartz Partners than we are today. The recognition that we are American Industrial Partners, a private equity 5. has participated in Global in a new normal for major broad acre crops investment firm, where he assisted with the AgInvesting events since 2010. As like corn and soy has impacted how some management of approximately $1 billion of funds we come up on the 10th anniversary institutions look at investing in the industry. Our focused on the general industrial sector. of GAI in 2018, what do you note as approach has always been to disentangle our the greatest changes in investor investments from any of those broad acre crops Schwartz serves on the board of directors at commodity exposures, and so part of what we AgBiTech, Costa Group, Global ID, Verdesian Life interest and/or market conditions do in identifying the value chain where we want Sciences, and Wawona Packing. He also is a in the ag sector in the past decade? to invest is to avoid commodity price fluctuation member of the Rush Associates Board of the issues. That lends itself to a sector-focused Rush University Medical Center. A graduate of approach, which has helped drive significant the University of Illinois with a B.S. in accounting, investor demand for what we are doing. Schwartz was raised in Moline, Illinois.

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Register today at www.globalaginvesting.com Volume 4, Issue 4 GAIGAZETTE ENHANCING CROP INSURANCE WITH SATELLITE TECHNOLOGY By Thomas Neher, Geosys Director Global Risk Management Markets

Some may argue that crop insurance becoming narrower over time due to their fields is no longer a luxury, but is a farmer’s most important risk insurers needing to react faster and an expectation that insurers use management tool. With uncertainty more precisely to the volatility and technology to help manage risk. in crop production constantly advancements in agriculture. Satellite imagery can help develop looming, insurance is something your crop insurance business in secure; a safety net for the Ag technology is continually evolving three essential ways: increase unpredictable. However, in the United and it’s essential that crop insurers operational efficiencies, manage States in particular, profit margins evolve with it to remain reliable exposure to risk, and provide for ag insurance companies are and progressive. Providing clients substantiated validation. with advanced data and views of

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EYES IN THE SKY, LESS YOUR RISK MORE ACCURACY 1. BOOTS ON THE GROUND 2. MANAGEMENT TOOL 3. AND VALIDATION

Insurers are always looking for ways to Farmers come to you for risk management, but There are many factors affecting yield and increase efficiencies and lower operating costs, who has your back? Satellite imagery provides plant growth and many ways to measure them, especially since farmers are constantly relying advanced levels of insight so you’re able to plan however, the best information comes from the on the output. and manage your financial risk. plants themselves — think of them as tens of thousands of sensors per hectare. Satellite According to Calem Hoffmann, an agronomist Satellite technology allows you to receive real- imagery is used to give you an accurate and with Agri Business Consulting Group, an time updates of anything that’s occurring in your unbiased view of a crop’s status and potential, Australian loss adjusting firm and Geosys clients’ fields, providing you the ability to monitor and therefore your business potential, by customer, anything that improves efficiency and any severe weather conditions and properly analyzing information directly from the plants. accuracy is worth the investment. “The satellite- manage cashflow to pay eventual indemnities based tool that we use through Geosys allows versus waiting to react to situations. Satellite Hoffmann added, “Due to the spatial variability us to input a field boundary following a ground imagery also is able to cover larger areas in less inherent with crop growth, there will always survey, which instantly provides us with data time to provide a complete overview of one’s be a level of inconsistency associated with that is beneficial in validating our assessment. fields, giving you peace of mind regarding the physical counts. However, the use of technology, Previously, it often took many days and personnel decisions you’re making. such as satellite imagery, allows for a higher to obtain that type of data. Satellite imagery degree of accuracy when quantifying a loss. not only increases our ability to identify certain “NDVI imagery allows us to confirm the impact Accuracy is key.” agronomic variables, but also reduces the cost of a particular peril, including hail, chemical and time required to accurately quantify a loss.” overspray, waterlogging and drought, which may Satellite technology allows you to move forward have influenced the growth and development of a with data you know is accurate and reliable, Satellite technology provides both historical and specific crop,” said Hoffmann. “With NDVI imagery, helping with more precise loss adjustment current perspectives of your local conditions we are able to use the data to further support the processes, reports and index-based models for versus needing to send team members out to quantification derived from in-field assessment.” your clients. scout every area. Imagine, rather than having a new field to scout and having no reliable Connacht Tribune reported about satellite Satellite imagery can provide you with a greater background, you have access to 30 years imagery being used to detect illegally burned view of your business and what’s occurring in of reputable, historical field data. With this land in Ireland.¹ Illegal burning on agriculture your clients’ fields; it might just be the additional information, insurers can prioritize the necessary and forestry land led to a serious outbreak of perspective you need. field visits and simplify the claims management forest fires, and satellite imagery was used to process. The data also enables you to quickly and detect which land was illegally burned. Without confidently validate loss adjustment claims with the use of historical satellite imagery, the ability reliable third-party data. to distinguish between the illegal burning and accidental burning may not have been possible, and certainly not as quickly, providing an additional level of protection to the insurance companies involved.

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ABOUT THE AUTHOR AND GEOSYS

Thomas Neher is the director of Global Risk Geosys supplies real-time, actionable Management Markets for Geosys, where he is insights to clients across the responsible for developing commercial applications agriculture supply chain based on for remote sensing data for the agricultural satellite and weather technology. As insurance and finance sectors. the first global digital agriculture company founded by agronomists, we bring 30 years of industry experience to businesses in more than 50 countries. Geosys provides clients with the data, analysis and insights needed to make more informed decisions by using the latest research in agronomics, information technologies and satellite imagery. Products range from worldwide risk management and supply monitoring of agricultural commodities to input sales and precision farming support. Geosys also develops highly customized business solutions for large, multinational agricultural companies. With global headquarters in Minneapolis, Minnesota, Geosys has sales and marketing teams in North America, Europe, Australia and Brazil. Visit geosys.com to learn more about how satellite technology can benefit your insurance business.

SOURCES

1. Connacht Tribune Reporter. “Satellite imagery being assessed to detect illegally-burned land.” Connacht Tribune. 17 May 2017. http://connachttribune.ie/department-issues- stark-warning-in-aftermath-of-cloosh-valley-fire-033/

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www.highquestconsulting.com Volume 4, Issue 4 GAIGAZETTE

CAPITAL AND INNOVATION FLOW INTO A NEW GENERATION OF IRRIGATION TECHNOLOGIES

BY LEE ADDAMS, HIGHQUEST CONSULTING

Agriculture is intimately linked with water season. But more than just providing moisture, Irrigation Today Irrigation today availability challenges throughout the world. irrigation also de-risks the investment by Overall, irrigation constitutes approximately 70 producers into other inputs such as fertilizer, crop percent of the global withdrawals of freshwater protection, and other land preparation – all of Share of 20% for human purposes, with the fraction of total which increase the yield and crop value. cultivated human water use even higher in large agricultural Area areas such as India, Pakistan, California, the Black Irrigation has commanded increased attention in Sea region, and Brazil.¹ recent years from agricultural investors who are laser-focused on maximizing the return on land Yet, irrigation has always been part of the solution investments. As a result, both entrepreneurs and Share of total 40% to achieve increased yields while optimizing established equipment companies have stepped production the use of limited arable land. Currently, only up the pace of innovation in the space. The recent 20 percent of the global cultivated area is acquisition of Netafim Ltd. by Mexichem – valued irrigated, but that area provides 40 percent as the world’s largest drip irrigation player at Share of of the total production, and 60 percent of the $1.9 billion – is evidence of the value-creation total value total value of production² (see chart). Irrigation occurring in the equipment space. Both internal 60% contributes to that increased value by providing corporate investment and external venture capital soil moisture and the ability to meet the crop also have been flowing to irrigation sensor and Source: FAO evapotranspiration required by plant growth other software technologies in the irrigation Source: FAO 2 processes, in environments where rainfall is space over the last five to 10 years. not sufficient or consistent across the growing

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ADVANCES IN TECHNOLOGY led to large improvements in the uniformity and control over the rate of irrigation along the drip lines. For example, pressure-compensating drippers, For the global water situation, the good news is that companies developing pioneered by Netafim, help growers give consistent water and fertilizer irrigation technologies have been on a rapid pace of innovation, and that needs across their fields by providing uniform flow rates even with elevation gains enhanced by irrigation technology are indeed part of solving the changes across a field. global water challenge. Today’s irrigation is definitely not your grandfather’s irrigation, or even the irrigation of a generation ago. Soil moisture sensors and other sensors: Soil moisture sensors 3. provide information on the moisture actually available to the crop in The main types of irrigation are flood irrigation (also referred to as gravity the subsurface. Despite advances in irrigation application technology, using irrigation), and pressurized irrigation (or modern irrigation), which is much technology to actually time and plan irrigation has been slower to gain more efficient in delivering water directly to the root zone of the crop. The acceptance. Currently, only about 5 to 10 percent of irrigated fields have some total fraction of such “modern” irrigation nevertheless is still only about 6 type of soil moisture measurement, but new companies like AquaSpy of percent of total irrigated area. While some innovations continue to improve the U.S. are joining traditional players such as Sentek (Australia) to develop the efficiency of flood irrigation, the lion’s share of future efficiency gains will sensors measuring soil moisture at different depths. Many growers or their be in conversion to and improvement of pressurized irrigation. advisors will simply feel the soil to determine when to irrigate, but the top growers are finding they leave considerable profit on the table without The level of precision available in irrigation technology in 2017 is having detailed knowledge of the current status of their crop and soil. considerable, nearing the precision more associated with indoor horticulture systems. A few examples: As irrigation is more than just providing water, another frontier for the soil sensor industry is to develop and integrate data streams for additional crop Mechanized/pivot irrigation technology: Center-pivot irrigation, needs in the subsurface, and thus be able to couple irrigation prescription 1. consisting of a water source at a central point with a mechanized, with fertigation prescriptions. Some companies, such as Hortau in Canada, rolling arm (with a radius of 150 feet to a half mile or more), has been a are meeting these needs by coupling their subsurface soil-tension sensors standard technology since being introduced in the Nebraska plains in with additional nitrogen sensing capabilities in the soil. the 1950s. Currently, mechanized irrigation constitutes about 5 percent of the total irrigated area globally. The large global U.S.-based center pivot Cost is one factor that has limited grower adoption of sensor technology thus manufacturers (Valley Irrigation, Zimmatic, and others), as well as other far. All companies are trying to lower the threshold for investment in soil- regional players (e.g. Fockink – Brazil) have significantly increased the moisture sensing capabilities, with some startup companies – such as CropX application efficiency of these systems in the last two decades. Today, of Israel and SensoTerra of the Netherlands – leading the way in driving cost instead of sprinklers at the top of the moving pipe, drop hoses now allow for for soil moisture sensors, in some cases making up to two to five sensors per application at the base of the canopy at the level of the soil surface. Such field cost effective for growers. precision is augmented by enhanced speed control of the center pivot to change the rates of application across the field. In addition, most systems Controls and system integration: Many of the system now have the ability to control different packages of sprinklers, allowing 4. manufacturers have their own set of control technologies to start center pivots to apply water as variable rate irrigation (VRI) to areas of irrigation pumps, system drive-trains, and fertigation units (which directly different soil type or slope throughout the field. Both conventional irrigation inject nitrogen or crop protection products into an irrigation scheme). equipment manufacturers and other specialists, such as navigation and Additionally, startup companies such as WiseConn of Chile are able to link software provider Trimble Inc., have made such VRI technology cost-effective directly to the various components, and provide the grower or operator with in recent years. a full suite of tools to manage the system remotely in a single, unified system.

Conventional drip technology: Drip irrigation technology, 2. originally pioneered by Israeli companies and cooperatives, has been a technology especially suited towards orchards, vineyards, and other high-value crops such as vegetables. Currently, drip irrigation constitutes about 1 to 2 percent of the total irrigated area globally. Many drip irrigation components are commoditized plastic lines or PVC connections, but other components such as filters and in-line drippers have required more innovation. Recent advances over the last 10 years have

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Advanced irrigation scheduling and analysis: Finally, in addition ABOUT THE AUTHOR 5. to having the equipment and ability to irrigate efficiently, growers are now able to apply advanced crop analytics to actually know when and how Lee Addams is managing director for HighQuest to irrigate. Many equipment and sensor providers, including those mentioned Consulting and co-leads the consulting practice of above are starting to build out proprietary crop irrigation prescriptions that HighQuest Partners, LLC, advising senior investor and link with their equipment. agribusiness clients on commercial strategy across the breadth of the agriculture and food value chains. Alternatively, manufacturer–agnostic advisory software, such as CropMetrics in the U.S., can provide optimal recommendations by incorporating multiple Prior to joining HighQuest Consulting, Addams data flows of actual soil moisture, recent irrigation history, soil information, was senior vice president at Valmont Industries (NYSE:VMI) where he had and even precipitation and temperature forecasts. By following such responsibilities for growth strategy and government relations. He also co- advanced analysis, in many cases irrigation and associated energy costs can founded Good Earth Irrigation. Before this, Addams was part of the founding be reduced considerably. In commodity crops such as corn, such savings global leadership group of McKinsey & Company’s Sustainability and can determine whether a crop is profitable or not. Resource Productivity Practice. Currently, Addams serves on several Boards of Directors, including CropMetrics, an irrigation technology company, and INVESTMENT OPPORTUNITIES International Development Enterprises (iDE), a non-profit organization.

Many sources of capital are finding growth opportunities in the $6 billion Addams holds a Ph.D. (Earth Sciences) from Stanford University and a B.S. irrigation equipment space. Real-asset investors also are deploying capital in (Applied Physics) from Brigham Young University. He can be reached at modern irrigation systems to stabilize and increase returns for their holdings. [email protected]. Others may choose to invest in some of the emerging technology companies themselves. Private equity has participated via both traditional equipment SOURCES companies as well as local irrigation services companies. For example, in addition to the Netafim transaction (sale by Permira), 2017 has also seen 1. 2030 Water Resources Group (L. Addams et al.), “Charting our Water Future: the merger of two private equity backed drip irrigation companies in Rivulis Economics Frameworks to Inform Decision-making”, 2009 (FIMI) and Eurodrip (Paine Schwartz Partners)³. Even impact investors are able to help find and mobilize capital towards low-cost irrigation solutions 2. Food and Agriculture Organization of the United Nations (FAO). AQUASTAT for the 500 million small farmers of two hectares or less through groups like website. “Did you know?” http://www.fao.org/nr/water/aquastat/didyouknow/ International Development Enterprises (iDE). index3.stm

The frontier of irrigation is developing rapidly along with the rest of the 3. Press release: Rivulus and Eurodrip Announce Merger to Create a World Leader agriculture sector. Increasingly, investors and entrepreneurs, and even in Micro Irrigation. January 11, 2017. http://rivulis.com/2017/01/11/rivulis-eurodrip- downstream food players, are developing efficient irrigation as lever to announce-merger-create-world-leader-micro-irrigation/ maximize productivity and compete sustainably in resource-constrained environments.

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The earliest evidence of Cheeses are inextricably The global cheese Cheese production in the cheese-making dates linked to each area’s market was valued at EU is expected to grow 1.9 back to 5,500 B.C. in geography, climate, history, approximately $80.5 billion percent annually between Kujawy, Poland.¹ and ‘terroir’ – the unique in 2015, and is projected to 2016 and 2021.10 flavor attributes associated be $110.5 billion by 2021.⁷ Legend has it that the with each region.⁴ M&A activity for cheese first cheese was made Asia Pacific is the companies abound. Just accidentally by an The top three countries largest growth area for this year, Land O’Lakes Arabian merchant who for cheese consumption cheese, forecasted to acquired artisanal cheese put his supply of milk into per capita are: France (57.0 grow 7.9% annually and butter maker Vermont a pouch made from a pounds/year); Germany through 2019.⁸ Creamery; Svoboda Capital sheep's stomach and the (53.2 pounds/year); Fund IV made a $10 million rennet in the lining of the and Luxembourg investment in cheese and pouch, combined with the (53.2 pounds/year).⁵ cheese snack company heat of the sun, caused the Sonoma Creamery; and milk to separate into curd Canada’s Saputo made and whey.² a cash offer to buy into Australia’s oldest dairy, The Pilgrims included Warrnambool Cheese and cheese in the Mayflower's Butter, where the company supplies when they made is valued at $682 million.11 their voyage to America in 1620, though it wasn’t until Why is wine such a perfect 1851 that the first cheese The U.S. leads complement to cheese? factory opened in the U.S.³ the world in Food scientists attribute cheese production this to the combination of at 11.1 billion pounds, The European Union is the world’s top cheese how an astringent food followed by Germany (wine) opposes the fatty at 4.81 billion, France exporter. Top destinations are the U.S., Japan, food (cheese) to create a at 4.27 billion, and Italy balanced “mouthfeel.”12 at 2.55 billion.⁶ and Switzerland.⁹

SOURCES: 1. “History of Cheese”. International blog/history-british-cheese- 8. Conick, Hal. “Global Cheese Market Economic_Report_2016.pdf Dairy Foods Association (IDFA). introduction/ to Exceed $100bn by 2019”. Dairy 10. Ibid. http://www.idfa.org/news-views/ 5. “The Most Popular Cheeses in the Reporter.com. January 19, 2016. 11. GAI News. www.GlobalAgInvesting. media-kits/cheese/history-of- World”. The Wisconsin Cheeseman. http://www.dairyreporter.com/ com. cheese http://www.wisconsincheeseman. Markets/Global-cheese-market-to- 12. Wolchover, Natalie. “The Real 2. Ibid. com/blog/cheese-nation/popular- exceed-100bn-by-2019 Reason Wine Goes with Cheese 3. Ibid. cheeses-world/ 9. European Dairy Association (EDA) Revealed”. LiveScience. October 4. “A History of British Cheese”. 6. Ibid. Economic Report 2016/17. http:// 12, 2012. https://www.livescience. The Courtyard Dairy. September 7. Ibid. eda.euromilk.org/fileadmin/ com/23786-food-pairings-wine- 26, 2016. https://www. user_upload/Public_Documents/ cheese.html thecourtyarddairy.co.uk/ Facts_and_Figures/EDA_EWPA_

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