Even as states across the U.S. come closer to reopening in the wake of COVID-19, the economic impacts of the global pandemic are far from over. In fact, some are just beginning to surface as issues that had been pushed out of the spotlight for years begin to appear in daily headlines and day-to-day conversations.
Enter: the nationwide “meat scare.” Though advocates for vegan and vegetarian lifestyles have made a considerable mark on today’s discourse – with many passionate Op-Eds appearing throughout popular news sources like the NY Times – meat-based products remain a staple of American life as we know it.
That said, massive conglomerates like Tyson – and similar companies who mismanaged workers for the sake of the supply chain – will be seeing the hard-hitting impacts of COVID-19 for years to come. Their ability to respond to this disruption will depend heavily on the resources they allocate towards mitigating the damage done to appropriate and safe workplace standards. So, what gives?
Enter: plant-based proteins. The boom in alternative protein demand has created an interesting moment for the agricultural space, and a unique opportunity for investors looking to invest in farmland.
In this post, we dive into the impacts the virus has had on meat production in the United States, and the potential results we might see it have on plant-based options gaining popularity as an alternative. We also highlight a few direct investment opportunities in American farmland that give investors an opportunity to ride the wave of the agricultural boom caused by the meat shortage.
Today’s reality: the United States is facing a significant meat shortage across grocery stores and restaurants. The culprit: a sizable chunk of coronavirus cases attributed to breakouts at meat processing plants.
USA Today reports that “as of May 20, officials have publicly linked at least 15,300 COVID-19 infections to 192 U.S. meatpacking plants.” To try and combat the spread, companies like Tyson, Smithfield, and JBS have implemented increasingly targeted safety measures throughout the plants, such as plastic sheeting installed between workers, access to PPE equipment like face masks, and temperature checks.
Protective measures, however, proved to be somewhat of a bandaid for a much larger issue at hand: unsanitary conditions at meat processing plants that led to compromised workplace safety. With a magnifying lens now turned to the meat industry, the article reports that “at least 46 plants have closed since the start of the pandemic,” and “closures precipitated a drop in production, sparking fears of national meat shortages.” This triggered a response from the Trump administration that deemed meat plants as essential businesses. And as meat processing plants continued to operate, employees began reporting mistreatment in their working conditions that promoted a “work-while-sick culture”.
Throughout April and May, more and more headlines surfaced exposing poor working conditions and called for shutdowns that led to a potentially minimized meat supply. It was a matter of time before American consumers started to notice the effects of these conditions affecting their day-to-day lives.
For shoppers and restaurant-goers, the meat shortage first began to appear as a purchasing limit, or as an out-of-stock notice on some of their usual go-to products. BBC reported in early May that “the Costco chain is limiting customers to three meat items each. The fast-food chain Wendy's acknowledged in a statement that they're having trouble sourcing enough beef.” Because of a lack of safe working conditions, many meat plant workers had no choice but to stay home as a result of the virus. Unsurprisingly, this led to a lack of physical labor necessary to efficiently and fully execute processes like deboning, carving, and slaughtering.
The reality? Massive meatpacking plants run by corporations have outdated systems and poor workplace health practices. This, in turn, doesn’t just lead to a meat shortage or scare that affects your dinner – it also financially impacts farmers who breed animals for slaughter. With no facility to send their pigs to, farmers are taking a huge financial hit, which means that millions of pigs run the risk of being put down without ever being processed to be used as food for Americans.
The BBC article above highlights one farmer’s experience: “currently he is only able to sell about 25% of his normal loads, and now his operation of 150,000 pigs could be facing serious trouble, to say nothing of the roughly 100 men and women who make their livelihood at the farm.”
All of these factors have taken a financial hit on farmers who run small, independent operations. As a whole, the meat scare might lead to actions like staffing cuts as small farmers’ livelihoods continue to be affected.
But what does this mean for those farmers on the agricultural side who focus solely on plant crops? Could there be a silver lining – both for plant farmers and for plant-based advocates?
In an unexpected shift (and a huge win for plant-based lifestyle advocates,) the alternative protein industry has been noticeably picking up steam. This press release published in June 2020 by GlobeNewswire reports that as people have started to understand the link between animal meat consumption and deadly human viruses, consumers have increasingly made choices to adopt meat-free protein diets. As a result, companies who have created alternative protein options have seen success and made changes in strategies to boot.
Here are some highlights and statistics taken directly from the GlobeNewswire report mentioned above:
For investors looking to actively take part in this change, supporting small agricultural businesses and enterprises looks like a silver lining. Making the choice to invest in farmland not only supports smaller agricultural enterprises but also sets up your portfolio for additional success. Since farmland is an alternative asset class to traditional stock and bond investing, an investment doesn’t conform to typical market movements. Put simply, farmland income and capital appreciation do not depend on the stock market’s fluctuations. So during unprecedented economic times, much like the current COVID-19 pandemic, farmland investing can be an excellent investment option that will be less affected by the market’s volatility.
Increased return and decreased volatility make an investment successful. Thus, in response to the volatility of publicly traded companies such as Tyson, some investors are turning to the alternative meat market for investing opportunities instead to avoid the uncertainty. With that said, the last 40 years have illuminated farmland investments to show higher returns than any other asset class category (small-cap equities excluded). On a 40-year timeline, farmland investing poses an interesting option for passive income, due to its ability to provide “bond-like income streams from contractual lease obligations and the sale of commodities.” Plus, when exit time comes around, look no further than land appreciation for additional capital gains, not unlike those of a stock.
Direct-to-consumer farmers and agricultural providers have been seeing a potential silver lining. While some consumers have excitedly adopted plant-based diets, those looking to buy meat products are increasingly buying directly from local farms. Forbes reports that while some tech companies are helping small farms reach their consumers directly with new software, others are coming up with new solutions to help boutique farming.
A farmer quoted in the Forbes article sees a potential middle ground that can be a win: “[farms that are] not so small that they can’t scale up but not so big that they can’t respond to disruptions to the supply chain like a global pandemic.”
Today, looking toward a revival of small-scale farming in the United States can not only help local agricultural businesses but might even set the stage to guard us against economic fallouts from future pandemics.
Those looking to invest in farmland in 2020 directly can do so in a few different ways. Investing through a sale-leaseback transaction is a direct investment option that’s low-risk, but requires a substantial amount of cash upfront. An even more direct (albeit more complex) purchasing option involves buying an existing farm and leasing it directly to a new tenant, creating the potential for a high-yield return. Again, though, this requires a significant commitment at the onset – both time-wise and financially. While there is always an option to invest in specialty real estate investment trusts (REITs) focused on farmland, these are publicly traded and are subject to many of the fluctuations and volatilities discussed above.
An alternative option for Farmland investing is via crowdfunding platforms. FarmTogether makes it easy to invest in farmland by providing interested investors with an easy-to-use marketplace for farmland investing. The company sources opportunities directly for qualified investors from pre-vetted United States-based farmland and provides a few different options. Investors can either join a fund that holds several farmland investments or invest directly in a specific farm.
FarmTogether provides additional support as well in the form of a seamless platform that allows you to consistently monitor the progress of your investment. The platform sends regular updates on your investment, including up-to-date KPI’s on productivity, as well as real-time photos and videos. By partnering with the industry’s best operators and maintaining quality assurance according to industry standards, FarmTogether maximizes the productivity of your farm, so there’s no guess-work or uncertainty involved – letting you invest in American farmland with added confidence.
Download our free Farmland Investment 101 White Paper to learn more about farmland as asset class