Food Production Mergers & Acquisitions Update – March 2025

Food Production Mergers & Acquisitions on the Rise as Sector Profitability Pressures Ease

In 2024, Food Production mergers & acquisitions (M&A) accelerated as farmers explored exit opportunities amid pressured margins. Divestments also surged as brands reorganized operations to prioritize high-margin and growing business segments. Farm profitability struggles continued in 2024 as inflationary input costs and low prices, stemming from crop production surpluses, exacerbated two-years of muted farm income. However, surges in federal aid and rising prices for select commodities are expected to bolster farm income in 2025, creating a favorable backdrop for an acceleration in sector consolidation activity.

Adjusted for inflation, U.S. Farm income is projected to grow 26.4% year-over-year (YOY) in 2025 to $180.1 billion, according to the U.S. Department of Agriculture (USDA) Farm Income report.¹ While this forecast has buoyed sector outlook for 2025, uncertainty surrounding tariff and international trade policy continues to plague the Food Production sector, threatening to disrupt Agricultural Export markets, and increase input costs for U.S. farmers.

As large farming operations continue to generate an increasing portion of farm production value in the U.S., consolidation is expected to remain an ongoing tactic. Food Production sector players have aimed to expand production capacity, increase product diversity, and capture more of the food production value chain. Easing sector pressures related to interest rate cuts, anticipated increases to select crop prices, falling farm production expenses, and expectations for improved farm income will likely further support Food Production M&A activity throughout 2025.

As investment bankers, we are seeing the beginning of the long-awaited recovery in Ag and Ag-related mergers and acquisitions, driven principally by lower interest rates, improved commodity prices and continued industry consolidation. This is a good time to for motivated sellers to review their liquidity options with the help of their financial advisors.

Jerry SturgillHead of Agriculture Investment Banking, Capstone Partners

Farmer Sentiment for 2025 Outlook Improves Amid Rising Income and Crop Price Projections

Improving Farm Income: Producer sentiment on sector outlook started to recover in late 2024, supported by improved farm income projections for 2025 and increases in select, key commodity future prices. This shifting sector sentiment comes after two years of sharp declines, where estimated U.S. inflation-adjusted farm income decreased 28% to a $142.3 billion trough in 2024, according to the USDA Farm Income report. However, sector sentiment improved in late 2024, supported by an expected rebound in federal farm aid from an all-time low of $9.5 billion in 2024 to a projected $42.4 billion in 2025—an anticipated 354.5% YOY increase. While still below 2022 highs, downward revisions in month-over-month (MoM) yields for key soybean (-2.1% MoM) and corn (-1.9% MoM) crops in the U.S. have lifted futures prices and have further raised sector sentiment in early 2025, according to a report from the American Farm Bureau Federation.²

Positive Sector Indices: In addition, leading sector indices have reflected improved farmer outlook heading into 2025. The Current Conditions Index, a measure of the health of the U.S. Agricultural economy, rose six points YOY, demonstrating a marked improvement in current sector conditions for farmers compared to January 2024, according to the Purdue/CME Group Ag Economy Barometer February report.³ Concurrently, the Farm Financial Performance Index increased 13-points MoM alongside expectations for improved profitability and lower interest rate expenses in 2025. A 47-point higher index reading for Future Market Conditions compared to the Current Conditions Index further demonstrates farmer confidence in improved sector conditions and bodes well for 2025 Food Production M&A growth.

Producers Retain a Positive Outlook Despite Trade War Threats to U.S. Agricultural Exports

Tariff Impacts: Food Production sector players have maintained a positive outlook in the face of potential tariffs, with less than half of U.S. farmers surveyed viewing trade war risks to U.S. agricultural exports as likely or very likely, according to the Purdue/CME group Ag Economy Barometer. As of February 2025, the Trump administration announced a 25% tariff on imported goods from Mexico and Canada, a 10% tariff on Canadian energy imports, and an additional 10% tariff on imported goods from China, according to a White House press release.⁴ In response, Canada has implemented retaliatory 25% tariffs on U.S. imports and Mexico officials have confirmed plans to follow suit, according to AP News.⁵ The proposed tariff on imported potash, a key fertilizer ingredient, is expected to have a significant impact on U.S. farming operations as U.S. farmers source 85% of potash from Canada, according to an American Farm Bureau Federation memo.⁶ Already grappling with elevated production costs, farmers gearing up for spring planting season could see even higher fertilizer costs as a result.

Farm Aid Relief: While proposed tariffs have the potential to ignite a trade war between the affected nations and exacerbate producers’ ongoing profitability pressures, anticipated increases in financial aid have largely overpowered farmers’ fears of agricultural export trade losses from tariffs. Of note, despite the 2018/2019 trade war between the U.S. and China causing $27 billion U.S. agricultural exports losses, the Trump administration successfully counteracted these losses with $28 billion in trade-based farm aid relief, according to USDA and Congressional Research Service press releases.^7,8,9

Potential Boost in Domestic Demand: Furthermore, U.S. tariffs on Mexican and Canadian imports have the potential to boost stateside consumption of domestic agricultural products and offset reduced demand in those nations for U.S. agricultural exports. Despite the threat of a trade war, farmers continue to remain positive that sector conditions will improve in 2025 amid projected increases to federal farm aid, including USDA discussions suggesting similar trade-based farm aid relief as was allocated during the first Trump administration.

Food Production Mergers & Acquisitions Accelerate, Buoying Sector Valuations

Private Equity Driven M&A: Food Production M&A activity rebounded in 2024, as interest rate cuts and strained farm margins fueled a 21% YOY increase in deal volume with 144 transactions announced or closed. Specifically, interest rate cuts in the latter half of 2024 supported a rebound in private equity transactions while cost-saving portfolio realignment efforts drove an acceleration in bolt-on activity. Two years of strained farm income continued to plague public buyers and kept deal volumes muted in 2024, with M&A activity falling 26.1% YOY at 17 deals. However, food production public players remained active in the M&A market, instead turning to divestments to realign operations around high-growth, high-margin business segments amid shareholder pressure to cut costs and improve performance. These portfolio realignment efforts across the sector helped invigorate bolt-on M&A activity in 2024 as participants scooped up divested assets to bolster market share, operational capabilities, product diversity, and capture more of the food production value chain—from growing and packing to distribution. Additionally, interest rate cuts helped reinvigorate private equity activity across the sector, with financial buyer deal volumes increasing 23.5% YOY from 34 deals in 2023 to 42 in 2024. Food Production M&A activity will likely keep accelerating in the near-term as sector conditions continue to improve, particularly as additional interest rate cuts materialize and pressures dampening farm income subside.

Consolidation Continues: Increased M&A activity in the sector was also driven by depressed farm income and record-low federal aid, with many farmers pursing a liquidity event through farmland sales. Of note, nearly half (49%) of farmers surveyed in January indicated that they were financially worse-off compared to a year ago, according to the Purdue/CME Group’s Ag Economy Barometer February results. As a result, Growing & Feeding Operations segment deals remained on par YOY with 40 deals announced or closed in 2024, a marginal decline from 43 deals in 2023. Growing & Feeding Operations segment transaction activity in 2024 was also maintained by rising demand for farmland acquisitions among financially stable, private farming operations pursuing long-term inorganic growth strategies in an effort to expand acreage and production capacity. Private strategics remained the sector’s largest buyer group, with 2024 M&A volume rising 40.3% YOY to 87 deals (59.6% of total transactions). Strong demand for farmland has led to increased competition for high-quality Growing & Feeding Operations segment targets, which has in turn continued to push farmland valuations higher. Of note, the average enterprise value for Growing & Feeding Operations segment deals between 2023 and 2024 ($298.6 million) increased 78.4% compared to the average valuation between 2021 and 2022 ($167.4 million). Sector M&A and valuation growth will likely continue in 2025, supported by the Short-Term Farmland Value Expectations Index rising 5 points in January, according to the Purdue/CME Group Ag Economy Barometer report.

Rising Food Processing Segment Deals Underpin 2024 Growth for Food Production Mergers & Acquisitions

Renewed Focus on Processing: Food Production sector M&A growth in 2024 was notably marked by a sharp rise in Food Processing segment transactions. M&A within the Food Processing segment increased 160% YOY from 20 deals in 2023 to 52 in 2024. Segment deal flow in 2024 prioritized portfolio realignment and divestment strategies into high-growth, high-margin product categories as Food Processing players aimed to mitigate higher-for-longer inflationary pressures causing reduced consumption and tougher product competition. Of note, General Mills (NYSE:GIS) agreed to sell its North American Yogurt Processing business to two French dairy companies, Lactalis and Sodiaal, for an enterprise value of $2.1 billion, or 1.4x EV/Revenue (September). The deal follows a series of other divestments from General Mills as part of its "Accelerate Strategy," with the company selling off nearly 30% of its net sales base since 2018 as it shifts focus towards high-growth and high-margin products, according to a press release.¹⁰ In addition to three yogurt manufacturing facilities across Michigan, Tennessee, and Québec, General Mills’ North American Yogurt divestment includes the Yoplait Liberté, Go-Gurt, Oui, Mountain High, and :ratio yogurt brands that have faced tough competition in the Yogurt space from the Chobani brand and Danone’s (ENXTPA:BN) Dannon brand. As part of the deal, Sodiaal acquired the Canadian portion of the business unit, while Lactalis is expected to close on its acquisition of the unit’s U.S. operations in 2025.

Expect More Bolt-Ons: While 2024 deal activity was marked by portfolio realignment strategies within the Food Processing segment, these strategic initiatives have primed the segment for an uptick in bolt-on consolidation activity throughout 2025. Balance sheet preservation efforts coming off the back of an active divestment period have strengthened food processors’ ability to resume inorganic growth strategies that have characterized segment M&A activity over the years. Segment players have utilized bolt-on M&A not only to bolster market share and production capacity, but also to invest in new and innovative products amid shifting consumer preferences. For example, an increased focus on health and wellness among consumers spurred M&A and investment activity in organic foods as well as the creation of plant-based meat alternatives. “Our balance sheet is in a great place…so with this divestiture of our North American Yogurt businesses, we felt it important to make sure that all of our investors know what we intend to do with those proceeds….Our focus right now and what we see in the marketplace really is probably more availability of smaller-size assets that we could bolt-on [and] enhance our growth,” noted Jeff Harmening, General Mills Chairman and CEO, in a September earnings call.¹¹ As brands aim to bolster portfolio realignment strategies in core, revenue driving operations, bolt-on acquisitions will likely continue to drive M&A market growth in the Food Production sector. Several notable sector deals are highlighted below.

• Farmland Reserve Acquires a Portfolio of 46 Farms from Farmland Partners (October 2024, $289 Million) – In October 2024, Farmland Reserve, an investment auxiliary of the Church of Latter-day Saints and farm management provider, acquired a portfolio of 46 farms from Farmland Partners (NYSE:FPI) for $289 million. The portfolio of farms, comprising 41,554 acres, extends across Arkansas, Florida, Louisiana, Mississippi, Nebraska, Oklahoma, North Carolina, and South Carolina and primarily consists of row crop operations, according to a press release.¹² The deal represents a $50 million premium (21%) to the net book value of the farm portfolio for Farmland Partners, after Farmland Reserve approached the seller hunting for additional farm assets to acquire. Farmland Partners touted the valuation as a representation of the premium value and appreciation of the asset-base after a prolonged period of being undervalued within the market. The seller plans to leverage the deal proceeds to reduce its debt load by $140 million, buy back stock, and pursue additional M&A opportunities.

“We are grateful for the opportunity to work with Farmland Partners to acquire this unique portfolio of high-quality farmland…We’re also gratified they saw us as the right buyer for these properties and the farmer tenant relationships that come with them. As an investor with a long-term vision, we look forward to leasing these productive farms to local farmers for many years to come,” noted CEO of Farmland Reserve, Doug Rose, in the press release.

• Performance Food Group Acquires Cheney Bros. (August 2024, $2.1 Billion, 0.7x EV/Revenue, 13.0x EV/EBITDA) – Performance Food Group (NYSE:PFG), a marketer and distributor of food and food products, acquired independent broadline food distributor, Cheney Bros., for an enterprise value of $2.1 billion, or 0.7x EV/Revenue and 13.0x EV/EBITDA (August). PFG cited the expansion of its existing platform and distribution density, with the addition of five distribution facilities and capacity for expansion across four Southeast states, as motivation for the deal, according to a press release.¹³ Additionally, the Cheney Bros. acquisition provides PFG with a diverse portfolio of customers and synergistic opportunities to increase the target’s high-mix of sales to independent restaurants by expanding its private brand sales within the PFG portfolio. PFG expects the deal to generate $50 million in run-rate synergies within the areas of procurement, operations, and logistics cost savings.

“This acquisition will expand and enhance our offerings to a high-quality and diverse customer base. We have long admired the success of Cheney Brothers in the Southeastern U.S. and believe that the combination of our organizations will push the business to new heights. We are excited for what the future holds for the newest addition to PFG,” noted PFG Chairman and CEO, George Holm, in the press release.

• Cal-Maine Foods Acquires Egg Production Assets of ISE America (June 2024, $111.8 Million) – In June 2024, Cal-Maine Foods (Nasdaq:CALM), the largest producer and distributor of fresh shell eggs in the U.S., acquired the egg production assets of ISE America for an enterprise value of $111.8 million. The egg production assets from ISE America have a capacity of 4.7 million laying hens, including one million cage-free hens, plus 1.2 million pullets, feed mills, 4,000 acres of land, and an egg breaking facility focused on commercial shell egg production and processing, according to a press release.¹⁴ With a strong presence in the Southeastern, Midwest, and Mid-Atlantic regions of the U.S., Cal-Maine cited the enhancement of production capacity and distribution network in the Mid-Atlantic region and entry into the Northeastern U.S. region as motivation for the deal. This includes Cal-Maine’s first production assets in Maryland, New Jersey, and Delaware.

Encouraging M&A Environment: While macroeconomic and geopolitical pressures within the Food Production sector are expected to remain volatile throughout 2025, an easing inflationary environment, potential additional interest rate cuts, rising prices for select crops, and increases to federal farm aid are expected to buoy sector conditions and further propel M&A activity. In 2025, expectations for improving conditions will likely continue creating an attractive M&A environment for Food Production sector players aiming to generate inorganic growth, diversify products and operations, and capture more of the food production value chain.

To discuss the outlook for the Agricultural environment and market in 2025, provide an update on your business, or learn about Capstone's wide range of advisory services and Food Production mergers & acquisitions knowledge, please contact us.

Izzy Jack, Associate, was the lead Market Intelligence contributor to this article.

Endnotes

1. U.S. Department of Agriculture, “Farm Sector Income & Finances - Farm Sector Income Forecast,” https://www.ers.usda.gov/topics/farm-economy/farm-sector-income-finances/farm-sector-income-forecast, accessed February 10, 2025.

2. American Farm Bureau Federation, “First Major 2025 Reports Bolster Corn, Soybeans,” https://www.fb.org/market-intel/first-major-2025-reports-bolster-corn-soybeans, accessed February 12, 2025.

3. Purdue University, “U.S. Farmers Retain Optimistic Outlook for 2025 Despite Ag Trade Uncertainty,” https://ag.purdue.edu/news/2025/02/u.s-farmers-retain-optimistic-outlook-for-2025-despite-ag-trade-uncertainty.html, accessed February 10, 2025.

4. The White House, “Fact Sheet: President Donald J. Trump Imposes Tariffs on Imports from Canada, Mexico and China,” https://www.whitehouse.gov/fact-sheets/2025/02/fact-sheet-president-donald-j-trump-imposes-tariffs-on-imports-from-canada-mexico-and-china/, accessed February 10, 2025.

5. AP News, “Trump’s Trade War Among Allies Triggers Retaliation from Canada and Mexico,” https://apnews.com/article/trump-tariffs-canada-mexico-retaliation-trudeau-sheinbaum-70e067b092a3af72c2eb7ca37d532c91, accessed February 10, 2025.

6. American Farm Bureau Federation, “Trade Tariff POTUS-Letter-on-Trade,” https://www.fb.org/files/backgrounder/Trade.Tariff.POTUS-Letter-on-Trade.AFBFLTR.FINAL.01.31.25.pdf, accessed February 10, 2025.

7. S. Department of Agriculture Economic Research Service, “Amber Waves: Retaliatory Tariffs Reduced U.S. States’ Exports of Agricultural Commodities,” https://www.ers.usda.gov/amber-waves/2022/march/retaliatory-tariffs-reduced-u-s-states-exports-of-agricultural-commodities, accessed February 10, 2025.

8. S. Department of Agriculture, “USDA Announces Details of Support Package for Farmers,” https://www.usda.gov/about-usda/news/press-releases/2019/07/25/usda-announces-details-support-package-farmers, accessed February 10, 2025.

9. Congressional Research Service, “Farm Policy: USDA’s Trade Aid Package,” https://crsreports.congress.gov/product/pdf/R/R45310/10, accessed February 10, 2025.

10. General Mills, “General Mills Announces Agreements to Sell Its North American Yogurt Business to Lactalis and Sodiaal,” https://investors.generalmills.com/press-releases/press-release-details/2024/General-Mills-Announces-Agreements-to-Sell-Its-North-American-Yogurt-Business-to-Lactalis-and-Sodiaal/, accessed February 10, 2025.

11. General Mills, “General Mills Q1 F25 Earnings Call,” https://events.q4inc.com/attendee/539155585, accessed February 10, 2025.

12. Farmland Partners, “Farmland Partners to Sell $289 Million of Farmland to Farmland Reserve, Inc.,” https://ir.farmlandpartners.com/news/news-details/2024/Farmland-Partners-to-Sell-289-Million-of-Farmland-to-Farmland-Reserve-Inc/default.aspx, accessed February 10, 2025.

13. Performance Food Group, “Performance Food Group Company Announces Agreement to Acquire Cheney Bros, Inc.,” https://investors.pfgc.com/press-releases/press-release-details/2024/Performance-Food-Group-Company-Announces-Agreement-to-Acquire-Cheney-Bros-Inc/default.aspx, accessed February 10, 2025.

14. Cal-Maine Foods, “Cal-Maine Foods, Inc. Announces Acquisition of Egg Production Assets of ISE America, Inc.,” https://calmainefoods.gcs-web.com/news-releases/news-release-details/cal-maine-foods-inc-announces-acquisition-egg-production-assets, accessed February 10, 2025.