"Money grows on trees": For these investors, the European countryside is business

He european countryside has become one of the most dynamic and profitable sectors on the continent for investment funds and large companies in the 'Agribusiness.

With returns greater than 15%, Investors have found in agriculture a safe haven from uncertainties economic and geopolitical events that have shaken the world since the COVID-19 pandemic, the Russian invasion of Ukraine and the disruption of global trade routes.

While farmers' protests continue throughout Europe, Carlos Fernández, a farmer in Seseña (Toledo), cannot understand who might be interested in acquiring his neighbors' land.

“It's like the black hand. With all this perfect storm, that we are bored with our lack of profitability and liquidity, that we are in ruin, investment funds with a lot of economic capacity come, that as unprofitable as you see the field, they see it as a business.” the farmer explained to Euronews.

Large investors have found a crisis-proof asset in agricultural properties: It is estimated that food production will have to grow between 60% and 70% to feed the world population from now to 2050.

“With successive financial and political crises, and even wars, rural land is the most resilient asset; the one that best manages to maintain its value. Because? Because we all have to eat,” Regino Coca, founder of Cocampoa company specialized in agricultural properties in Spain with more than 3.5 billion euros in properties for sale.

Some 950 investment funds dedicated to food and agriculture operate around the world, managing 150 billion euros in assets. Of the 32 large operations registered in the sector by the specialized consulting firm Value In recent years, 40% was destined for Europe and more than half consisted of the acquisition of farmland.

The disruption of global supply chains is attracting investment and production to environments closer to mature and stable markets such as Europe or the United States whose consumers have greater purchasing power.

“In the case of agriculture and livestock, many products are fresh, they are local and we demand that they be produced close to us. So that determines where the investments are made,” said Regino Coca.

Who are the new actors in the European field?

In recent years, the agribusiness sector in Europe has witnessed significant transactions carried out by prominent asset management firms, according to the consulting firm Valoral.

In May 2023, the British company M&G acquired a stake worth €150 million in Regenerate Asset Management, a fund specialized in addressing climate-related challenges in the agri-food value chain.

Similarly, Belgian asset manager Incofin secured capital for its growth in April 2023, with the support of Degroof Petercam Asset Management and Korys, strengthening its ability to support sustainable initiatives in the 'agrifood' sector.

Another notable transaction occurred in December 2022, when BNP Paribas Asset Management acquired a majority stake in International Woodland Company (IWC), a Danish natural resources specialist.

Furthermore, in October 2022, the Spanish Group Azora acquired a 33% stake in Iberian Smart Financial Agro (ISFA Gestion), which expects to achieve 10,000 hectares of almond trees in the Iberian Peninsula.

According to the consulting firm's data CBREin 2022 in Iberia The total volume of transactions carried out by institutional investors in the sector was greater than 1,000 million euros20% more than the 800 million invested in 2021.

Other prominent players in the Iberian panorama are Bolschare and Elaia, from the Atitlán group in the cultivation of pistachio, almond and avocado, or the multinational Citri&Co, dedicated to fruits and citrus with more than 900 productive hectares in Spain.

According to the latest report Rustic Soil Structure From Cocampo, from January to November 2023, 412,269 rural properties were transferred in Spain, of which 138,000 were purchase and sale operations.

“Long-time farmers and ranchers continue to invest in the Spanish countryside. What happens is that they do it in smaller operations where they have very little notoriety. Then there would be the institutional investorswhere we enter the world of family office or the big landownersand there would be a next group, which are investment funds,” explained Regino Coca.

Winners and losers of agrarian transformation

Currently, 93.8% of farm owners in Spain are natural persons and 6.2% are legal persons -mercantile companies, production cooperatives and public entities.

However, “in the next decade, land ownership will undergo significant reconfigurationin which a few large corporations will coexist with farmers, ranchers and owners of recreational or tourist farms,” states the Cocampo report.

“The first will be specialized in certain agricultural, livestock and sustainability productions, such as renewable energy or CO2 capture. These large corporations will concentrate land to have larger farms with greater economies of scale.”

As small and medium-sized farmers face challenges arising from high production costs and lack of profitability, The big players in agribusiness have known how to adapt to the new trends in the sector thanks to economies of scale, efficiency and sustainability and the adoption of new technologies.

In Spain, the bulk of production is concentrated in 78,000 producers who harvest 72% of the production value, while another 583,000 farmers only obtain 3% of the benefits, according to a study by the consulting firm Armanext.

“Before, a farmer could live with ten, 20 or 30 hectares. Nowadays, in order to obtain benefits from these crops, investments or areas greater than 100 hectares or 150 hectares are necessary. and invest in machinery. “This is really making the work of small and medium-sized farmers and ranchers difficult,” Coca explained to Euronews.

“When we talk about the profitability of the countryside, investment in Spain is profitable depending on the crops and surfaces. Mechanization and economies of scale are determining profitability,” added the founder of Cocampo.

Generational relief

In a panorama where 40% of farmers are over 65 years old and where almost half of the annual transactions correspond to inheritances, investors find an opportunity to acquire farmland.

“Right now, 41.3% of rural property owners in Spain are over 65 years old. They are farmers and ranchers in their last years of working life. who are not in a position to carry out the necessary investments to expand the exploitation area and the investment in machinery necessary to optimize the crop. However, those they compete with can do so.”

The agrarian unions have warned of the consequences of changes in the property structure which, in their opinion, “does not generate social fabric, nor the maintenance of the rural population and the environment and can end with the disappearance of the social model and agriculture professional,” explains COAG in your report 'The uberization of the Spanish countryside'.

The platforms of the sector demand to promote the agricultural cooperativesthat unite farmers so that they have strength against other operators, are capable of facing investments and have the necessary extensions to compete in the sector.

But above all, they demand policies that guarantee generational change on farms for young farmers to join the field.

“Investment funds and companies in the agri-food sector are buying from small and medium-sized farmers. But we also found that there are farmers who we can consider traditional, who are not in that higher age group, and who are also making investments,” explained Regino Coca.

“I don't think we should be afraid of progress and advancement, but I do believe that there has to be a controlled generational change, encouraged by the Government, with monitoring, with special attention to what we want to do with the countryside. Because the countryside feeds us and is part of our heritage and our culture,” Coca concluded.