Food demand is set to soar in the coming years, and farmers will have to squeeze a lot more out of their current acreage to meet it. That’s a big plus for agriculture stocks—especially those with a history of innovation.

One factor spurring crop demand is the increased use of biofuels. There are two main types: ethanol and biodiesel. Ethanol can be made from sugar-rich crops, such as sugarcane and corn, while biodiesel comes from oilseeds, such as soybeans and rapeseed.

According to the International Energy Agency, world biofuel production will hit 2.36 million barrels a day in 2018, up from 1.86 million in 2012. Right now, about 40% of the U.S. corn crop is converted into ethanol, up from almost zero a decade ago.

Emerging Markets Set the Table for Agriculture Stocks

Biofuel consumption is one reason to be bullish on agriculture stocks, but the key drivers of food demand remain growing populations and changing diets, mostly in the developing world.

Right now, the world’s population is around 7.2 billion, but the UN estimates this figure will hit 9.6 billion by 2050. Most of that growth will take place in developing countries: the UN sees their combined population rising to 8.2 billion in 2050 from 5.9 billion today.

By some estimates, farm productivity will have to increase by at least 60% if we hope to have enough food for the globe’s population in 2050.

But to get a complete picture of rising global food demand, you have to look beyond the amount of food people eat and focus on their diets. Changing diets in developing countries spell rising demand for meat and protein.

According to a report from the Worldwatch Institute, demand for livestock products in sub-Saharan Africa and South Asia will nearly double by 2050. Rising meat consumption has an outsized impact on grain demand, as feeding livestock is grain-intensive.

This all makes agricultural yields the key fundamental to watch in coming years. That’s because the amount of arable land is relatively fixed, so farmers will need to maximize harvests from existing acreage to meet rising demand. Agricultural stocks whose products facilitate that will be in line for serious profits.

Tech-Focused Agriculture Stocks Will Be Big Winners

Farming isn’t commonly thought of as a high-tech industry, but without a steady succession of agricultural advances, most of us couldn’t live in cities and work in industries with little or no connection to food production.

That’s where Monsanto (NYSE: MON) comes in. The agriculture stock’s GM seeds—designed to resist insects, herbicides and drought—are market leaders.

For example, Monsanto sells corn and soybeans that are resistant to the effects of glycophosphate, a common herbicide marketed under the Roundup name. This allows farmers to spray Roundup—which is made by the agriculture stock’s Agricultural Productivity division—to control weeds with­out harming their crops.

Corn is Monsanto’s most important crop. The company’s rootworm-killing corn seeds were used on 37 million of the 96 million acres that U.S. farmers planted last year. The firm also has a strong presence in South America, accounting for 77% of Brazil’s 30 million acres and almost all of Argentina’s 11 million acres. 

Even so, there’s plenty of room to grow in these markets, because their crop yields tend to be much lower than those in developed countries. In Brazil, for example, corn yields are just 70 bushels per acre, compared to 150 bushels per acre or more in the U.S.

Big Data Buy Fits Perfectly

Monsanto recently acquired Climate Corp. for $930 million. This company, founded in 2006 by software engineers and data scientists from Google (NasdaqGS: GOOG) and other Silicon Valley firms, makes software that analyzes local weather patterns to provide crop planning, monitoring and recommendations to help farmers better manage risk and boost their yields.

The company calls this type of data analysis “the next major growth frontier” in agriculture. It believes the majority of farmers are capable of producing an additional 30 to 50 bushels per acre, and Climate Corp.’s tools will help them unlock that value. Climate Corp. also sells weather and crop insurance.

“I like this deal,” BGC analyst Mark Gulley told Businessweek. “It’s big data meets big ag biotech. It’s a new platform for growth.”