Global food security is one of the most important issues facing policymakers all over the world today. As the globe’s population continues to expand, but the volume of arable land remains constant, farmers are going to have to come up with increasingly inventive ways of crop yield and farm output, doing more with less.

According to research from McKinsey & Company, the food and agribusiness industry represents is worth over $5 trillion and accounts for 10% of global consumer spending, 40% of employment, and 30% of greenhouse-gas emissions. Agribusiness is also the largest global consumer of water (another debate for another day).

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If current trends continue, by 2050, caloric demand will increase by 70%, and crop demand for human consumption and animal feed will increase by at least 100% according to the McKinsey data. This surge in demand will cause some serious global issues if policy makers the industry does not change dramatically to meet these challenges.  For example, if the current trend continues, 40% of water demand in 2030 is unlikely to be met.

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Food Security Poses Huge Opportunity For Investors

There's an enormous opportunity here for companies to take advantage of by solving the problems the farming industry faces. According to research from Bank of America, we may have already arrived at peak production for many food categories. Crop yields have fallen to 1.4% per annum today vs. 3.2% in 1960, the availability of land left to be cultivated has declined to 1.4 billion hectares, and climate change is putting 25% of wheat yields at risk. Solving these issues as well as meeting the challenge of higher food demand is a big task, but for those companies will to step up to the plate, the payoff could be huge.

Indeed, according to BoA's research, every dollar invested in Ag R&D creates $20 in economic activity, with Ag-related growth 2-4x more efficient at reducing poverty than other sectors. Annual investments in the industry currently total $220 billion with 75% coming from the private sector, although to reach "zero hunger" annual investments would need to rise to $480 billion.

"Food security: 805mn going hungry & GDP hit by 3%. Food security exists when all people have access to sufficient, safe and nutritious food. While global per capita calorie supply has improved to reach 2,868kcal per day - 805mn people are chronically undernourished, and hunger and under-nutrition reduces global GDP by c2-3% (cUS$2tn). The global population is expected to grow from 7.2bn today to 9.6bn by 2050E and 11-12bn by 2100E. The combination of rising incomes and changing diets mean that by 2050, the world needs to produce 70% more food globally."

For investors looking to play this theme, BoA's Thematic Investing analysts see eight major entry points for investors: (1) Agricultural Equipment; (2) Agricultural Inputs; (3) Agribusiness, Protein & Dairy; (4) Farming; (5) Food Safety & Animal Health; (6) Water; (7) Healthy Eating; and (8) Reducing Food Waste.

Some of the bank's picks to play these themes are highlighted in the table below:

Food Security