An Investment Perspective: What Do We Know About American Farmers?

For decades, the image of the American farmer has remained a nostalgic fixture in the national consciousness - small, family-owned corporations, passing down generational wisdom, and serving as the backbone of the U.S. economy. However, the reality of modern farming tells a different story - one of increasing consolidation, economic pressure, and a shifting power dynamic.

In a recent episode of the Upside & Impact: Investing for Change podcast, hosted by our VegTech? Invest CEO, Elysabeth Alfano, the former Deputy Under Secretary for the USDA, Sanah Baig, provided an in-depth look at the current state of American farming and the economic realities shaping its future. At VegTech? Invest, we see investment opportunities in this evolving agricultural landscape, particularly as it relates to food innovations for system resiliency and food security that are shaping the future of food.

The American Farmer Today: A System Under Pressure

The USDA's 2022 Census of Agriculture reveals several critical trends that redefine our understanding of American farming.

• Declining Farmland: The U.S. lost 20 million acres of farmland between 2017 and 2022, equivalent to the size of Maine. This land is often converted to commercial real estate, permanently removing it from agricultural use.
• Aging Workforce: The average age of farmers has risen to 58.1 years, with over one-third of farmers now aged 65 or older.
• Gender Shift: Women now account for 36% of all farmers, and nearly 58% of farms have at least one female decision-maker.
• Financial Pressures: 84% of farm families rely on off-farm income, and over 50% of farmers operate at a loss when relying solely on farm income.

These statistics highlight a significant issue: the traditional family farm model is under immense pressure, while corporate and large-scale operations continue to expand. The top 8-10% of farms now generate 90% of all farm income, leaving smaller operators struggling to stay afloat.

In other words, the reality is far from the storybook image of our childhood. Our system is increasingly lacking resilience with too much power concentrated with too few players.

Baig explains this further in a clip from the interview here.

The Role of Innovation and Investment in Agriculture

The USDA, under the former administration, invested billions into programs aimed at bolstering sustainable food systems, strengthening rural economies, and encouraging regenerative agriculture. This foundation presents a unique opportunity for investors to engage with the agricultural sector in transformative ways:

• Climate-Smart Agriculture: With over $3 billion allocated to the USDA's Climate Smart Commodities program, farmers are being incentivized to adopt carbon-sequestering practices. The ability of farms to capture carbon in soil, positions them as key players in climate change mitigation.
• Regenerative and Precision Agriculture: Precision agriculture technologies, such as AI-driven irrigation and soil health monitoring, are gaining traction as efficient solutions to maximize yield while reducing resource consumption.
• Diversified Proteins and Bio-Based Economies: The USDA's research arm has historically funded innovations in food technology, including the early development of pea protein extraction techniques used in diversified protein products from companies like Ingredion. With the necessity for a resilient food system and the former administration's bio economy strategy, this sector remains a strong investment prospect.

Investment Takeaways: A New Agricultural Economy

For investors, the current agricultural transition represents an opportunity. The financial headwinds facing small farmers suggest that business-as-usual investment strategies - favoring large agribusiness and commodity crops - may no longer be the most profitable long-term approach. At VegTech? Invest, we leverage our ETF to invest along the supply chain in the following opportunities:

• AgTech companies focused on precision farming and AI-driven solutions.
• BioTech companies innovating with IP around protein generation and fermentation, aligning with the USDA-backed bio economy goals.
• Regenerative agriculture and ingredient companies that support climate-smart farming, promoting soil health and water and land conservation.
• Flavor and Texture companies making novel food innovation delicious and attractive.
• Consumer Packaged Goods companies focused on efficient and sustainable production.

American farming is at a crossroads. The financial pressures and structural shifts outlined by Baig underscore the need for a new approach - one that balances economic resilience, environmental sustainability, and food security. Investors have a unique opportunity to deploy capital in ways that not only generate returns but also create a more resilient and sustainable food system. Secular trends, such as moving from the horse and buggy to the car or from the landline to the cell phone, have historically stimulated robust wealth creation.

Is food system transformation the next big investable trend

Listen to the full audio podcast here. Watch the full video interview here.

For more information on VegTech? Invest, visit VegTechInvest.com.

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