This article provides an overview of the capital markets in the western Canadian agriculture and food industry.
More Investment Interest in Agriculture and Food Projects
The agriculture and food industry extends far beyond traditional primary agricultural production and includes transporting agricultural products, processing agricultural product into food and other products as well as biotech, potash production, cannabis and beverage and retail food sales.
Agriculture and food projects are attracting more attention and equity in recent years. In 2020, many venture capital firms were established with a focus on the industry. Farm Credit Canada (FCC) announced a $100-million venture-based fund in partnership with Calgary-based Forage Capital Inc. to support agribusiness and agri-food companies. FCC built on its previous $50-million investment in other venture-based funds including the InvestEco Sustainable Food Fund, District Ventures Fund and Ag Capital Canada Fund.
Meanwhile other funds or institutions have continued their growth in the industry, including SVG Ventures, Business Development Bank of Canada, Rio Investment Partners and Conexus Credit Union, among others.
Protein Industries Canada, one of the superclusters funded by the Federal Government, has sparked investment interest in the plant protein processing sector. The initial success of several publicly listed companies focused on plant protein has shifted some investment capital from other industries to the food and agriculture industry.
There is clearly an increase in investment interest from venture capital funds in the food and agriculture industry.
A missing piece, however, is significant investment from retail investors due to the absence of a well-established capital market for agriculture and food.
Developing Capital Markets
While publicly traded agriculture and food companies are becoming more common, particularly in the cannabis sector, most agricultural companies are not listed on a stock exchange partly since the industry has traditionally been dominated by a small number of large companies. Despite the increased investment interest in agriculture and food, the capital markets are not as well developed in the industry and many mid-sized and emerging agriculture and food companies have typically used private placements to raise equity.
Private placements raise many control and liquidity issues that companies need to consider when raising the equity. This has led to many creative yet simple ways to structure share offerings in the agriculture industry including some creative ways to provide for liquidity for investors.
As agriculture projects tend to attract investors who are more patient, being publicly traded on a stock exchange is not critical for companies raising equity. As investors move away from other industries that are experiencing downturns, the challenge for entrepreneurs and investors is connecting with each other, as the investment community is often unaware of the agriculture projects in development.
While some retail investments funds focused on the agriculture and food industry have recently emerged, such as Eat Beyond Global Holdings Inc., finding investment opportunities often requires companies to network with those involved in the agriculture and food industry. While networking opportunities have become more accessible in recent years, more time is typically spent educating the investment community on the industry and the opportunities that exist.
Agriculture and food is a growing segment of the Canadian economy; however, access to capital remains an issue for many food and agriculture companies. While there is more interest in the industry from the investment community, the capital markets for agriculture and food are still developing but certainly improving.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.