The First Leaf - #1

THE FIRST RUN - HOT OFF THE PRESS

What we aim to bring here are weekly digestible snippets on investing in agriculture. This can range from soil regeneration strategies in Brazil to the ideal conditions for seaweed growth in Tasmania.

We hope you find enjoyment in our releases while learning something new!

Please note that any topic within this newsletter is not financial advice or a recommendation to invest. Rather, it’s an opportunity to highlight exciting areas of agriculture. If you would like to explore further, please conduct additional research and speak to a professional advisor.

MARKETS

TOPIC #1 - THE MELTING OF CACAO

Over the past week, we have seen a seventh straight decline in cocoa prices, putting futures on track for the first quarterly loss in two years.

Prices have been pressured primarily by improved weather conditions in regions such as the Ivory Coast and Ghana. Improved rainfall and more suitable temperatures have led to a stronger yield, leading to speculators liquidating long positions following a nearly 10% drop in value last week.

However, the market remains extremely tight, with the stocks-to-consumption ratio widely expected to hit a record low by the end of the current season due to poor crops in Africa. Importantly, despite the recent drop, cocoa prices are still significantly higher than they were a year ago.

WHATS NEXT?

Does this create any opportunity for institutional capital? Investors seem to think so due to tight supply inventories and stronger-than-expected demand over the longer term. However, the market remains volatile with substantial price movements.

TOPIC #2 - HANDY HEMP

A versatile, high-yielding, sustainable crop, hemp has a long history with humans and has often been found near early nomadic settlements, possibly indicating evidence of cultivation.

Traditionally, hemp was cultivated as a fiber source, while modern usage has expanded to include seed and medicinal compounds, namely CBD. Further development includes a wide range of applications and the potential to produce carbon-negative products. Materials for insulation and furniture, automotive composites, fashion, and animal products are currently being explored, developed, and marketed.

Hemp also benefits from a rapid growth cycle, fewer pesticides, and less water demand, producing a high nutritional value crop, making it a compelling alternative to cotton and soy.

WHATS NEXT?

The future of hemp as an alternative to traditional fibers is promising. The global hemp market size was estimated at USD5.5 billion in 2023 and is forecasted to grow at a CAGR of 17.5% from 2024 to 2030. Growth is predominantly driven by the rising product demand from application industries, such as food & beverage, and personal and animal care.

However, the industry faces challenges such as limited market analysis and the absence of comprehensive data and scientific research on optimal farming practices and profitability. Additional costs of growing hemp in regulated markets, such as the costs of licensing, monitoring, and verification, seem to be the main deterrent for investors at this stage. Additionally, the need for institutional investors to maintain a sustainable, equitable, and fair portfolio for their stakeholders means hemp often is passed as a potential opportunity. This creates opportunities for more agnostic investors.

Despite these challenges, the expansion of market opportunities with the liberalization of regulations on cultivation, processing, transportation, and the use of industrial hemp is forecast to drive market growth.

Check out this report from Textile Exchange if you are interested.

TOPIC #3 - EU EXPORTS

In 2023, the agri-food trade value between the EU and Asia was estimated at EUR61.2 billion, driven by the diverse range of products that can be exported to a growing demand in Asian markets. Despite this, there was a decrease of 7.6% in the EU’s agri-food exports to China from 2022 to 2023.

In particular, Pork has recently been impacted in response to EU tariffs on Chinese electric vehicles, the Chinese government launched an investigation into EU pork imports. This has introduced uncertainity into the EU’s pork export market which could lead to an over-supply of Pork flooding domestic EU markets.

WHATS NEXT?

This is just another example of EU farmers becoming hostages in a trade war that they have no inclusion in. Although pork is the most recent victim, market analysts are expecting future variances in commodity prices in the EU as the EU government works through the challenge of the far right from within alongside secular country developments and their demands on local politics.

Feel free to read more on this piece, discussing the EU’s Soft Belly.

QUIZ

See how you go on our tree nut quiz, released weekly on Mondays. Give it a crack and brag to your friends.

COMMUNITY

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