U.N.’s 2014 Year of Family Farms Opens Up Opportunities in Agribusiness Sector

"We require private sector investment in a world in which governments are struggling with fiscal deficits and other issues in order to deliver the requisite funding that are required to make sure populations have enough food and are eating right," he said. "The health of its population is very important for the future of a nation, since healthcare problems will translate to less productivity and then a drag on GDP."

Among others, Capital Innovations favors investments in agricultural technology, since advanced technology can help farmers increase crop yields, reduce vulnerability to climate change and improve nutritional outcomes. However, the firm is also interested in the stocks of agricultural food producers such as Whitewave Foods and Smithfield Foods, Underhill said. This is not just because their stocks have performed better than those of pure commodity companies, but also because of their future growth potential in countries that have large swaths of population to feed and within the context of the changing patterns of food consumption—the massive pushback against the consumption of GMO foods, for one—that are also manifesting themselves in developing markets.

"Consider that there's a lot of demand for organic milk in China that's being met by companies in New Zealand and it's driving up the value of New Zealand's currency. I see great potential for a company like Whitewave Foods, a producer of organic foods, in China, for instance, in the context of the growing demand for organic and gluten-free products," Underhill said. "China has an opportunity to skip directly to organic and gluten-free foods and skip all the negative steps that the Western countries have been to with respect to food and nutrition. They can learn from the history of the developed markets."

Looking ahead, Underhill said the agribusiness sector will become more and more important and it is already garnering the interest of an increasing number of institutional investors in the U.S., including pension funds, endowments and large insurance companies, as well as with a small number of retail investors. "They're all interested in investing in a portfolio that will be appropriate for the next phase of the development cycle," he said.

To raise awareness of and stimulate active policies for the sustainable development of agricultural systems, the United Nations has designated 2014 as the International Year of Family Farming. The U.N. hopes to raise the profile of family farming and smallholder farming by focusing world attention on its significant role in eradicating hunger and poverty, providing food security and nutrition, improving livelihoods, managing natural resources, protecting the environment, and achieving sustainable development, in particular in rural areas.