Investment Focus: Why agriculture could be an overlooked investment opportunity
As markets debate whether humans really need AI, the necessity of food is not disputed. The agriculture sector is often overlooked, but it is supported by trends every bit as insistent as the latest technology, including population growth, rising wealth, and climate change. It may also be an unexpected beneficiary of AI, which is set to reshape farming practices across the world.
Why population growth is driving agricultural demand
The agriculture sector is at the vanguard of demographic shifts. The United Nations expects the world’s population to grow for the next 50 to 60 years, peaking at approximately 10.3 billion by the mid-2080s [1]. That’s another two billion more mouths to feed, with no commensurate increase in the productive capacity of the planet.
This wouldn’t necessarily be a problem, but we are already struggling to feed the existing population. Rates of hunger are high, hitting one out of 11 people in the world. More than 2.3 billion people suffer moderate or severe food insecurity[2]. Estimates from US agricultural group John Deere estimates the world requires a 60–70% increase in agricultural production to feed the growing population.
How changing diets are reshaping food production
There are also changes in consumption patterns that are changing agricultural demand. As populations grow wealthier, their demand for food shifts, with many adopting a higher protein diet, with more meat and greater complexity. Urbanisation can also separate people from their food sources. If someone buys direct from a farmer, there is little economic value in the transaction. In contrast, if someone buys in a supermarket, there will be refrigeration companies, packaging companies, and logistics.
The academic paper “Changing diets and the transformation of the global food system”, stated:
The drivers of rapid dietary change include urbanization, rising incomes, and societal changes, such as greater participation by women in labor markets, but also developments in technology, business strategies, and public policy.[3]
Meeting these challenges can only be delivered by optimising the world’s resources. The agricultural sector needs to find ways to maximise crop yields at minimum cost, at the same time as reducing energy consumption and minimising inputs such as fertiliser and chemicals and meeting the challenges posed by climate change. This is where investment opportunities are created.
What affects agricultural commodity prices?
Weather patterns and climate change impact on crop yields
Weather patterns are vitally important for agricultural yields. Crops can be destroyed by rogue climate events, such as floods or droughts, but also by pests and diseases. With this in mind, climate change could have a significant effect on the agricultural sector in the coming years. There are fears that it could dent global yields and raise prices.
Climate change has indirect impacts as well. Another driver behind the expansion of agriculture has been the growth in biofuels to replace carbon-intensive energy. The state-sponsored expansion of biofuels has taken land that would otherwise have been used to grow crops for food.
US agricultural policy and tariffs
The agricultural sector is at the forefront of policies from the US administration. For example, the crackdown on immigration has threatened labour availability for various kinds of agricultural producers that rely on workers to plant and harvest annual crops across the United States. Deportation fears are driving workers away, and the costs of visas for guest workers have risen. This is raising the cost base for agricultural companies.
Tariffs are also having an impact on the sector.
During the past months, new impositions of tariffs have caused a wide range of confusion and many surprises along the way among importers of agricultural products as well as food retailers. And even though many fresh agricultural imports are exempt from tariffs, especially imports from major trading partners such as Mexico and Canada, there remain a handful of countries whose tariffs will result in consumers having to pay higher prices in the near future for vegetables, coffee, seafood, chocolate, tree nuts, and tropical fruits, such as bananas, coconuts, and pineapples.[4]
Both these two factors may lift agricultural prices and also accelerate the drive to find new sources of efficiency.
How AI is transforming modern farming
Agriculture looks set to be one of the key beneficiaries of artificial intelligence. The sector lends itself to AI analysis - there are millions of data points to collect and monitor, from rainfall to crop growth. Minute changes can be vitally important for both yields and risk management. AI brings the promise of precision agriculture, harnessing vast amounts of data to generate efficiencies in farming.
John Deere has been a forerunner in agricultural technology. It creates a virtual ‘operations centre’ for farmers – a digital replica of their farms, from which they can plan planting, harvesting, and fertiliser application. This is particularly useful in the vast farms in the US or Australia, allowing farmers to be more targeted with pest control and fertiliser and to monitor potential diseases.
Geopolitical risks in global food markets
Economic and political shocks have a significant impact on the global food market. The Eurasian Research Institute points out that food prices rose in the global financial crisis – by 2.2% in 2007 and 4.4% in 2008 – and then again in the wake of the pandemic. Russia’s invasion of Ukraine accelerated food price rises further. In 2020, Russia and Ukraine had 18.8% and 9.1% of global wheat production, respectively, plus 20.5% and 44% of the sunflower oil traded globally[5], and the conflict drove prices higher.
Geopolitical conflict can lead to hoarding of resources and the disruption of supply chains. It may also be used as a geopolitical tool to pressure governments into concessions.
Agricultural investment performance: what investors need to know
It has been a difficult period for agricultural commodities. It was one of the few sectors that performed well in 2022, as the conflict in Ukraine lifted prices, but it has struggled in its aftermath. The MSCI ACWI Select Agriculture Producers rose 7.2% in 2022, versus a drop of 18% in the MSCI ACWI. However, the index dropped 7.8% in 2023 and 4.3% in 2024. It remains under water for the year to date, down another 4.3% since January against a rise of 16.9% in the MSCI ACWI.
Cumulative growth rate. Source FE Fundinfo as at 31/10/2025
With a few exceptions (coffee, soybeans), agricultural prices have been weak this year. Supply has improved, and weaker global growth has curbed demand, putting downward pressure on many commodities. Oxford Economics paints a mixed picture for the year ahead:
Agricultural commodities as a whole are less sensitive to macroeconomic business cycles. Staple foods such as wheat and rice are likely to hold up relatively well, as demand is steady even in downturns. Higher-value products such as meat are more sensitive to falling incomes, meaning consumption may weaken. Crops used for biofuel production also face cyclical risks because industrial activity drives that segment of demand.
Higher agricultural prices are not the only factor in performance for many agricultural companies. However, they can influence spending on areas such as technology and machinery.
The agriculture cycle is in a trough and there are no immediate signs of a major upcycle, although we remain aware that geopolitics and climate change could help to put these companies in favour once more.
An important factor to note with investment in the agricultural sector is that it will tend to be only lightly correlated to broader stock markets. This can make it a valuable source of diversification at certain points in the market cycle.
How to invest in agriculture: ETFs, funds and stocks
Investors have a range of options to bring this theme into their portfolios. They could buy an ETF on the underlying agricultural commodity. This is a cheap and easily accessible way to gain exposure. There are ETFs on wheat, soybeans, corn and sugar, among others, as well as diversified agricultural commodities baskets. The problem for investors is that there are a lot of speculators in commodities markets, which can create volatility.
Agricultural stocks and companies to consider
The other option is to invest in listed agricultural businesses. While many farms are family-owned, there are plenty of suppliers. John Deere and AGCO, for example, make heavy machinery for use in farming and forestry. Corteva makes herbicides, insecticides, fungicides, and biologicals to promote crop growth. There are also ‘downstream’ food and logistics groups, such as Nestle, or Tesco. The MSCI ACWI Select Agriculture Producers IMI Index is the main index for listed agricultural groups, with companies such as Ingredion and Kubota Company among its largest weightings.[6]
Best agriculture funds and ETFs for UK investors
Investors can get access to these listed businesses through ETFs, such as the iShares MSCI Agriculture Producers ETF, or through active funds, including the Allianz Global Investors Global Agricultural Trends Fund, the Sarasin Food and Agriculture Opportunities fund, or the Baring Global Agriculture fund. There are also related funds, such as the Franklin Future of Food fund, which provides exposure to companies that are involved in sustainable practices across the food industry. Ark and Rize have passive versions on this theme.
Agriculture is an unusual sector and stands apart from the rest of the market. At the moment, this means its performance looks lacklustre compared to the giddy rise of, say, AI. However, it can provide valuable portfolio protection at certain points in the cycle and is supported by long-term structural trends.
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[1] United Nations
[2] United Nations
[3] PubMed Central, July 2020
[4] PGIM, August 2025
