With population growth outstripping food supply and climate change affecting crop yields, many commentators are forecasting a "food crunch". With that in mind we are seeing more and more interest in the agricultural technology (or agtech) sector. Whilst farmers generally have been early adopters of technology, the agricultural sector has lagged behind other industries in terms of innovation - however, this is beginning to change. Not only are large corporates taking an interest in agtech, but we are also now beginning to see the rise of dedicated food and agtech investment funds.
The trends so far this year have been in the following areas:
- Product Innovation
- Food Efficiencies
This is mainly focussed on biotechnology, bio-engineering and other laboratory based innovations. Whilst we are seeing advances in selective breeding, genetic modification and DNA analysis, the main trends in this area are in the development of alternative proteins.
For example, earlier this year Impossible Foods raised $114 million in debt financing. The company plans to use this investment to launch its flagship product, the Impossible Burger (a plant based burger), in Asia. There have also been a number of investments this year into start-ups developing pea protein (Cargill entered into a pea protein join-venture and Goldman Sachs recently joined a $65 million investment into pea protein start-up Ripple).
A number of start-ups are also looking at lab grown or "clean meat", which is a market that is forecast to reach a global value of $20 million by 2027
Investment and innovation is not limited to the human market. Earlier this year, AgriProtein raised $105 million to tackle the twin problems of food security and waste disposal in the aquafeed market. AgriProtein uses waste to produce sustainable protein for use in animal diets.
Innovation is focussed on yield improvements and covers a whole range of technologies, from farm management software to sensors and internet-of-things, robotics, drones and data analytics.
There has been a lot of investment and M&A activity in this area. Last year John Deere acquired Blue River Technology for $305 million. Blue River has created autonomous "see and spray" robots which use artificial intelligence to recognise plants, spray herbicide on weeds and fertilizer on crops. In the UK, Ashfords client the Small Robot Company is currently raising £1 million in order to develop a suite of agricultural robots which will undertake the feeding, seeding and weeding of crops autonomously.
Robotics has one of the widest use cases (from everything from meat and food production, to planting and harvesting) in the sector. This area will become more important as the price of robotics comes down (and we are also seeing interesting lease models which potentially make this cheaper).
Artificial Intelligence (AI) and data analytics have long been used as buzzwords in other industries, but are also now being used in agriculture. The agricultural industry has access to a raft of data from a number of different sources - from macro data such as weather and climate to data at the field level (with the introduction of senor technology and connected farms).
AI and machine learning allow us to make sense of the data and can enable farmers to anticipate poor harvests or disease outbreaks, and may also help them to make incremental improvements to their operations that have a huge cumulative effect overall.
The last area in which we are seeing a lot of activity is in food efficiencies, which covers the disintermediation of the supply chain, food safety, waste reduction and efficiencies in supply chain logistics. Companies in this market are utilising technologies such as distributed ledgers, indoor and vertical farming and biotechnology.
Earlier this year, the French supermarket Carrefour announced that it was using blockchain technology (the technology behind cryptocurrencies such as Bitcoin) to provide total traceability of its meat and dairy products. Using similar technology Provenance, a company based in the UK, is developing a centralised database to provide greater transparency by tracing the origins and histories of food and other products.
In supply chain, a number of companies are developing vertical farm technologies. For example, Balderton Capital recently invested $25 million in Infarm, a startup that has developed vertical farming technology for grocery stores, restaurants and local distribution centres to bring produce closer to the consumer.
With food waste representing between 31-40% of the US' post-harvest food supply, waste reduction is another big trend. In this space we are seeing everything from companies developing products to protect and prolong the shelf-life of produce after harvest to companies providing services and market places to sell imperfect or surplus produce.
The above is just a glimpse of what is happening in the food and agricultural industry. New technologies have a huge potential to disrupt the agricultural industry. More than in any other industry, these technologies are all about finding new efficiencies and these efficiencies can save farming and agricultural businesses time and money. Better still, used correctly these advances and other new technologies will help us face any food crunch.