Written by Cheryl Wilson, ESG Senior Manager at Capital Group
Some of the main drivers of food insecurity include conflict, economic shocks, climate extremes, and soaring fertilizer prices. With the global population expected to reach nearly 10 billion by 2050, the agricultural industry faces immense pressure to meet rising food demands amidst tightening resource constraints.
To address these challenges, advancements in farming technologies, reducing food waste, and shifting dietary preferences will be crucial. For long-term investors, these structural changes present both opportunities and risks. Here, we highlight key food trends and the investment opportunities they create.
Seed innovation
According to the UN, nearly 40% of the world’s land is degraded due to deforestation, water and soil overuse, and rural infrastructure. With arable land unlikely to expand, seed-related innovations are expected to play a more prominent role. The innovations aim to improve crop resilience and nutritional value, through germplasm (traditional crossbreeding of plants) and genetically modified (GM) or edited (GE) seeds (using biotech to introduce new characteristics, such as disease resistance or size increase).
If 10–15% of farms began using multi-trait gene-edited seeds by 2030, yields could climb as much as 400 million metric tons, according to analysis conducted by the World Economic Forum in 2018. This level of adoption could, in turn, help alleviate deficiencies in iron, vitamins and other micronutrients in up to 100 million people.
Concern about long-term food security and the growing scientific evidence that GMOs are not harmful to human health have prompted the European Commission to propose deregulation of certain genetically modified organisms. Looser regulations and yield-boosting innovations could further increase sales of GM and GE seeds relative to conventional seeds in the next decade.
Lower-impact fertilisers
Chemical fertilisers and pesticides have been the enabling technology for agriculture’s sharply higher productivity in the last century. Unfortunately, this has had a major downside: damage to the environment and, in some cases, human health.
Production of nitrogen-based fertilisers is incredibly energy-intensive. And this type of fertiliser leaks nitrous oxide, a greenhouse gas, which has a global warming potential of more than 250 times that of CO2 — and stays in the atmosphere for more than 100 years on average.
Development of fertilisers that lower greenhouse gas emissions is still nascent, but we think it could be one of agriculture’s key innovations in the next decade. Engineered microbes, slow-release nitrogen and targeted application technologies are among the early breakthroughs. Technologies that help mitigate the overuse of fertilisers — through precision application or the use of carbon capture in fertiliser production, for example — are also gaining in popularity.
Precision agriculture
To increase crop yields and adapt to unfavourable climatic conditions, farmers need precise information. Precision agriculture uses field data and weather patterns to enable better real-time decisions. Advances in artificial intelligence and data analytics can drive even more efficient resource allocation and yield improvements.
New advances in precision agriculture, such as use of artificial intelligence, could drive even more efficient resource allocation and yield improvements. One firm suggested such innovation could create tens of billions of dollars of additional value creation for customers and shareholders through cost cuts and crop-yield improvements in coming yearsRegenerative farming
Regenerative farming, which includes cover crops, multi-cropping, and the elimination of inorganic pesticides and fertilizers, improves soil health, biodiversity, and agriculture’s climate impact. This approach integrates seed innovation, lower-impact fertilizers, and precision agriculture. Analysis from Bernstein Research suggests that farmers switching to regenerative practices could see a 15-25% return on investment due to higher crop yields and lower input costs.
Nestlé is one of the companies that is helping move regenerative farming into the mainstream. Through 2025, the Switzerland-based food and drink multinational has earmarked US$1 billion to scale regenerative farming across its supply chain.
Alternative proteins
The rising popularity of plant-based diets and growing concerns about meat consumption’s impact on health, animals, and the environment are shifting consumer preferences. Since 2014, demand for meat substitutes has grown six times faster than conventional meat, and dairy substitutes have doubled the growth rate of conventional dairy. It is estimated by research from Statista Market Insights that the global market for meat substitutes could exceed $16 billion by 2028.
While plant-based is the main alternative to conventional meat at present, we also seem to be at an inflection point for cultivated meat — this nascent segment may approach parity with conventional animal proteins in the 2030s.
Investors may find opportunities not only in companies producing alternative products but also in those supplying ingredients and formulations. For instance, Givaudan partners with manufacturers to develop new formulations and has increased its focus on biodegradable and plant-based ingredients.
Waste management and reduction
According to the World Wildlife Fund, 40% of food that is grown is never eaten — contributing toward an estimated 2.5 billion metric tons of wastage each year. The reduction of food waste, alongside reuse and recycling, is a critical part of managing available natural resources and minimizing future emissions.
Food waste is poised to become a much more widely used input (feedstock) for alternative proteins, animal feed, fertilizers, biofuels, bioplastics and even clothing. Regulation is generating additional tailwinds.
Closing thoughts
Governments, regulators, companies and consumers are rethinking the way food is produced and consumed in an increasingly resource-constrained world. In response, innovation and disruption are already happening and, in our view, will accelerate in coming years.
Undoubtedly, all the longer-term trends we have highlighted here will face setbacks at certain times. However, in our view, these developments are among those that will shift food production toward a more sustainable future while also providing compelling opportunities for selective investors who can take the long view.
