Depending on who you ask, durian – known as the king of fruits – either smells like heaven or will make you want to 🤮.
But love ‘em or hate ‘em, investing in durians is just one of many ways for investors to pry their way into Southeast Asia’s agricultural sector, which is crying out for funding right now.
The world’s growing population – predicted to rise by more than 2 billion people over the next 50 years or so, according to the UN – means there will be more mouths to feed, and Southeast Asia’s smallholder farmers (about 70 million of them) are doing a lot of the heavy lifting.
Agriculture currently makes up around 10% of the region’s GDP, according to the World Bank. Southeast Asia can make a reasonable claim to being the world’s rice bowl; it’s home to the world’s second-and third-largest rice exporters, Thailand and Vietnam. The top three exporters of bananas, mangoes, sugar, coffee and palm oil also hail from the region.
Southeast Asia’s agritech startups have taken a beating of late, with scandals rocking Indonesian unicorn eFishery, and layoffs at EdenFarm earlier in the year.
But growing demand means there are opportunities for investors, especially since many farmers lack access to capital and advice to increase their yields.
Field knowledge
Of course, you don’t need farming skills to get into agricultural investment.
Some agriculture stocks like Corteva, John Deere and Archer-Daniels-Midland have outperformed the S&P500 in the past five years.
There are also agriculture-focused financial products with exposure to businesses in Southeast Asia, such as the Fidelity Agricultural Productivity Fund and VanEck Agribusiness ETF.
Peer-to-peer lending platforms like Indonesia’s CrowdE and Cropital in the Philippines allow investors to lend cash to these small businesses in return for an interest or profit-sharing. While there are risks in P2P lending, it’s a more accessible way for small farmers to get the capital they need. According to CrowdE, 78% of the small farmers in Indonesia do not qualify for bank loans.
Then there are investment opportunities in specific products such as livestock, aquaculture and crops – like the polarizing durian.
In Malaysia, for example, investors can buy durian trees in the form of interest units from a 312-acre plantation via a Durian Capital Investment Scheme backed by the government. More than 8,000 Musang King trees – a variety of the fruit in high demand in China and elsewhere in the region – have been planted on 200 acres of land to date. The licensed scheme claims that the durian market is expected to be worth $30 billion by 2025.
But beware: Durians are seasonal, which means market demand can fluctuate. And if there’s a bad yield because of “acts of God” (think: unpredictable events like droughts or floods), it can be a thorny investment.
Edited by Azar Zaidi, Tim Hume and Victor Loh. If you have any tips, ideas or feedback, please get in touch: talk-to-us@moniify.com
