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Agriculture tech: A bright future ahead

Agriculture technologies helping generate greater yields and lessen the environmental impact are positioned for a bright future. What are the top technologies for modernising agriculture and potential opportunities for those planting the seeds today?

Agriculture technologies, or “AgTech” is the use of technology and innovations to improve the efficiency and productivity of farmlands. Technological innovations in farming are critical to meeting ever-increasing demand for food that is expected to increase 70% by 2050. Increasing awareness around sustainability issues is also helping shed light on agricultural methods, since these are responsible for 30% of greenhouse gas emissions and, it is believed, 70% of the world’s water resources. A lack of farm workers, climate change, and new technologies are other pressing issues.

Solutions are aiming to i.) digitalise farming, ii.) grow crops indoors in controlled environments, and iii.) enhance supply-chains to reduce waste.

Smart farming

Smart farming or precision farming is about employing new technologies from data collection, robotics, drones, and AI to increase efficiency and boost farmland productivity.

  • Drones help collect data about the condition of the land, the crops, existence of pathogens, cutting the amount of time otherwise needed by humans to perform the analysis.

 

  • Smart sensors bring precise monitoring of farms, capable of measuring everything from solar radiation to stem diameter.

 

  • Data analysis, backed by the cloud, is helpful for predicting patterns and optimising all stages of the production process. In certain cases, AI and robotisation can interpret data to tell us how to apply fertilisers and pesticides.

 

  • Blockchain makes it possible to track the whole supply chain, bringing more transparency to consumers.

 

shutterstock_smart farming

A smart farm in action.

 

A strict control of resources can result in increased production, water saving, better crop quality, reduced costs thanks to automation, better pest detection, and improved sustainability, reducing the environmental impact by saving land and water resources.

Public company example: John Deer – develops world-class agriculture technology including autonomous tractors.

Vertical farming

Vertical farming or indoor farming is the practice of growing crops in vertically stacked layers, often indoors in a controlled environment, optimising plant growth, soil techniques and robotisation. The indoor farming technology market is projected to reach USD40.25 billion in 2022.

The main benefit of vertical farming is that the output gathered is enormous compared to traditional farming, and large amount of space can be saved for the same amount of crop. In that sense, crops could be grown in relative proximity to the population that consumes it. Some specialised LED lights have resulted in over 10x the crop yield compared to traditional farming methods. Additionally, indoor plants are resistant to weather disruptions, resulting in fewer crops lost due to extreme occurrences.

Drawbacks of vertical farming is the high energy usage of artificial lighting and the capital costs to build a facility. Thus, it makes it more difficult to find buyers for the products as most buyers find it too expensive.

 

Appharvest

AppHarvest operates large scale tech-controlled indoor farms in the US. Source: AppHarvest.

 

Public company example:

AppHarvest – the company became public in 2020 on the Nasdaq through a SPAC. The stock trades at just USD3 per share, a fall from a high of USD35, as investors are unconvinced due to a lack of profitability.

Rethinking supply-chains

Another important pillar of the AgTech revolution are companies aiming to reroute agriculture value chains to alleviate the environmental impact and reduce the costs of processing and delivering products. With an estimated 30% of the food produced globally lost or wasted somewhere along the food supply chain, reducing food waste is critical. Some companies are helping find buyers for products that may not meet perfection standards but are still consumable. Other companies are creating large marketplaces linking farmers directly with farmers, therefore cutting out middlemen.      

Solutions:

  • Reducing inefficiencies along the value chain
  • Farmers directly to consumers, reducing waste
  • Farming locally, reducing international importations, costly to the environment

 

Public company example:

Pinduoduo is the largest agriculture-focused marketplace in China. Its mobile-only e-commerce platform connects farmers and distributors with consumers directly through its interactive shopping experience. In 2019, nearly 12 million farmers supplied their fruits and vegetables directly to Pinduoduo users.

Investing perspectives

Some areas of AgTech have less barriers to overcome than others. For example, farmers have been using tractors for a long time and adding more tech to them doesn’t seem too far-reaching. Conversely, vertical farming appears riskier as the significant capital investments required may only yield financial rewards many years later.

There exist several listed companies revolutionising farming. The short list below offers a snapshot.

Stocks Agtech

There are also exchange traded funds (ETFs) focused on agriculture, such as the iShares MSCI Global Agriculture Producers ETF. However, the holdings vary from fertilisers, smart farming, and food processing companies, and are not specifically AgTech.

Naturally, there are also plenty of startups in the AgTech space. One interesting unicorn in California, Imperfect Foods specialises in delivering fruits and vegetables that could otherwise go to waste due to their imperfect shapes. It has raised over USD229 million.

Conclusion

There are plenty of opportunities worldwide in the AgTech space with many companies re-inventing farming and food supply-chains. The challenge will be to develop sound technologies that have the potential for scalability to reach profitability. Public markets offer access mostly to smart farming solutions through well-established players, while vertical farming is believed to still be in its infancy. Much of the commercial merit for the smaller players in the AgTech is still in testing mode, and thus risks are high that many of the newcomers will not succeed.

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