Pause on agribusiness investment as COVID-19 eats away at certainties
Efforts to contain the coronavirus means agribusiness investment is in suspended animation. Should the global economic pause be ended within a relatively short timeframe, there is reason to believe that business as usual will return. If disruption is more prolonged, certain types of investment are likely to suffer.
Henry Wilkes, a London-based agricultural investment advisor working with Farrelly & Mitchell on a Spanish food-based project believes new investments are vulnerable. “Will investors start to see distressed assets crop up, and choose those ahead of pioneering or greenfield possibilities? If so, why should they opt for riskier early stage projects, if there are proven opportunities available?”
It is an evolving situation, and the consensus among investment funds appears to be about playing the waiting game, but the potential emergence of distressed assets is undoubtedly a motivator. If there is to be growth and investment opportunities in food and agribusiness in the short to medium term, this looks a likely channel.
Specialised produce vulnerable?
With guidance in short supply, what can we deduce?
What is apparent is that farming businesses serving niche and specialised products for restaurants and other catering outlets are highly exposed. If lockdown doesn’t work and restaurants do not reopen in a conventional manner, can these businesses adapt?
Wilkes cited the example of a goat cheese manufacturer he spoke to recently who serves high- restaurants in the UK. That individual says his business will run out of money within three months.
Meanwhile in southern Europe, berry producers are under similar pressure, as restaurant demand has suddenly vanished.
As Farrelly and Mitchell's co-founder and Managing Director, Malachy provides unmatched expertise. Working alongside CEO's, executives, and leaders from public and private sectors, Malachy empowers agribusinesses to fully achieve their potential.
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