Better ways to feed the world

Mayssa Al Midani, Head of Pictet Nutrition, Pictet Asset Management.

Food security has become an even more pressing global problem as a result of the Ukraine crisis. Investors can help find solutions – from farm to fork.

The sharp rise in food prices and supply problems, exacerbated by the Russian invasion of Ukraine, have drawn attention to what was already a major global problem: food security.

Demand for food is expected to increase by 60 percent by 2050.1 Still, supply will struggle to keep up as the availability of farmland and water resources falls and about two billion people are short of food even with current demand.

The war, which has led to a shortage of grain and fertilizer and even higher inflation, may have slowed down food security progress by ten years. An increasing number of people in South Asia and Africa are likely to spend more than 20 percent of their income on food expenses, exacerbating the problems of the Covid-19 pandemic.

This creates enormous and complex social and environmental challenges for which there is no one-size-fits-all solution. Solving them requires different adjustments throughout the food value chain. However, the crisis should sharpen focus and stimulate the development of alternatives to cereals and less efficient animal proteins, as well as efficient food production and shorter and safer supply chains. In return, it provides an opportunity for innovative companies and for investors who can work together to improve the sustainability, availability and quality of the foods we need for health and growth.

FIG. 1 – Food costs
Percentage of consumer spending on food, selected countries

Source: United States Department of Agriculture (USDA) Economic Research Service, Our World In Data. Data from the period 2015-2016.

A promising solution is ag-tech – a technology that makes it possible to improve crop yields with fewer resources. The agricultural industry is likely to pay more attention to reducing fertilizer dependence given the current supply disruptions (Russia and Ukraine together account for about 20 percent of global nitrogen fertilizer exports and 30 percent of global potassium carbonate exports). It can be solved with vertical farming and precision farming, both of which have the added benefit of less pollution.

In the wake of grain shortages, livestock farming can now become more efficient through better diagnostics and preventive measures for animal health, including vitamins, eubiotics (which promote intestinal health), enzymes and vaccines (which increase feed intake and yield).

Another way to compensate for the shortcomings is to make the most of what we already have. The priority here is to reduce waste, which today consumes a third of all food produced – about 1.3 billion tons per year.2 Reducing the mountain of waste requires better logistics, better distribution networks and better food security. All this can be improved through technology. Promising innovations include aseptic packaging – the use of high temperatures to sterilize food before packaging, extending shelf life without chemicals or refrigeration. Another approach, known as natural bioprotection, is based on traditional fermentation principles and uses specially developed food cultures to better preserve yogurt and cheese.

However, residual waste is increasingly recycled, for example by converting excess oil and animal fat into animal feed and biofuels or (on a smaller scale) by using cheese whey for food packaging.

And then there is the production of food. An urgent problem for food producers is how to make food more nutritious, affordable and ideally more sustainable. Food companies are trying to develop laboratory-grown meat, find plant-based alternatives to milk (such as oats or potatoes) and increase the affordability of their products. There is also a great demand for natural ingredients that are less dependent on gasoline than synthetic ones.

Another solution that offers more benefits is to produce more food locally: it provides more reliable delivery, reduces waste, has a smaller CO2 footprint and improved traceability. Locally produced foods also ease the pressure on shrinking resources, such as freshwater supplies and farmland. Indoor vertical farms, meanwhile, are also growing rapidly, allowing for high-quality local food for areas with limited space or challenging climatic conditions. The companies that run such farms invest heavily. For example, the vertical agricultural company Kalera will build a new mega-farm in Singapore this year, aiming to grow about 500,000 kg of leafy greens a year as part of the island’s plans to self-supply 30 percent of its nutritional needs by 2030 (vs. percent). currently).

Traditional farms also embrace the latest scientific advances, enabling farmers to use water and fertilizer exactly where they are needed. This results in a reduction in freshwater and fertilizer consumption of up to 80 percent. Such techniques can also improve yields, save on scarce resources and reduce nitric oxide emissions.

Food logistics is also changing.

There is a growing demand for direct-to-consumer food services (such as ground-to-table meal sets) and for almost every new generation of food production and logistics model, which can shorten complex global supply chains and reduce the risk of logistics problems, spoil and reduce pollution .

For the first time, we are seeing a scenario where both governments and consumers are interested in developing more sustainable food and better quality agricultural practices. We also see a future where companies operating across the food value chain will use the technology they already have to meet these requirements.

The Pictet Nutrition strategy takes a long-term bottom-up approach to identifying and investing in companies that are critical to building a sustainable food system.


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