By Joseph Moss, International Banker
The world’s population is expected to increase by two billion in the next 30 years, from 7.7 billion in 2019 to 9.7 billion in 2050, according to the United Nations (UN). This steep growth rate over the next few decades means that there will be more mouths to feed. And with global poverty and hunger having accelerated in recent years since the outbreak of the global COVID-19 pandemic, the need to address food production has rarely been more pressing than it is today. Technology will play a critical role in delivering production-efficiency improvements to enable farmers to handle this additional demand and continue providing nutritious products to the planet from the same global area of arable farmland.
This is where agriculture technology (AgTech) will flourish. If much of financial technology (fintech) is focused on boosting inclusion within some of the most financially underserved parts of the world, AgTech is concerned with solving an even more profound need: the need to feed people. AgTech is the use of technology to boost agricultural production, maximise crop yields and improve sustainability. And much in the same way that fintech users can now conduct the bulk of their financial lives through a few taps of their smartphones—and, indeed, often all within the same app—AgTech is similarly providing farmers and other agribusiness stakeholders with the opportunity to engage in a new form of “smart farming”.
“Fortunately, we are currently witnessing the rise of one of the most important industries of the future: sustainable agriculture technologies, or AgTech as this sector is commonly called,” Gjoko Muratovski, global design expert and consultant at the Stanford Institute for Innovation in Developing Economies, wrote in a January 2021 Forbes article. “By bringing big data management technologies, smart sensors, artificial intelligence systems and predictive analytics into farming, the AgTech sector can make agriculture far more efficient, precise and resilient in the face of environmental challenges and severe weather. And this is not the only benefit that this emerging sector can provide.”
AgTech is thus transforming agriculture from being labour intensive to something far more innovative and attracting more global investment dollars than ever before. According to PitchBook’s annual “Agtech Report” for 2021, venture-capital firms invested a decade-high $10.5 billion across 751 deals in AgTech start-ups last year, a deal value increase of more than 58.6 percent year-over-year. The biggest deals included $430 million for California-based company Pivot Bio, which makes alternatives to nitrogen fertilizer, and $321 million for indoor growers Bowery Farming. “There’s been a step-change in investment opportunities in the sector, which is being driven by increased availability of new technologies which can be applicable,” Mark Lynch, a partner at Oghma Partners—a corporate finance-advisory company in London, told Bloomberg in December.
The rush to leverage AgTech solutions is now on in both the private and public sectors. The Queensland government, for instance, believes AgTech development and adoption are vital to the profitability and responsiveness of the Australian state’s agriculture supply chain. “Primary producers are among the most efficient in the world, with a long history of innovating to feed, clothe and protect our growing world population,” explains the Queensland Department of Agriculture and Fisheries. “To keep pace in the changing natural, social, and economic environment, transformational approaches are needed for the agriculture sector to remain productive and competitive”.
One such “transformational approach” within the AgTech sphere, for instance, involves the use of robotics, a technology that is now massively disrupting antiquated agricultural methods by replacing human labour to perform a number of tasks. Tortuga AgTech is a Colorado, US-based AgTech firm that helps growers by providing them with labour through the use of robots. “Our robots perform a variety of labor-intensive tasks on the farm, with an emphasis on harvest. Our approach saves the grower money while helping them survive a global labor shortage and other existential challenges,” Tortuga explains. “While doing so, we capture never-before-possible plant-level data that turns into revolutionary information for growers. This information leads to better operational, agronomic, and commercial outcomes on farm.”
Similarly, California-based Verdant Robotics has thus far raised $21.5 million, offering its robotics-as-a-service to farmers. The main tasks it performs under this umbrella include spraying and laser weeding as well as building AI-based crop modelling. “Farmers told us not to give them more data, but to figure out what to do with the mountains of data they already have, or better yet just go do it,” Verdant’s co-founder and chief executive officer, Gabe Sibley, told TechCrunch in February. “They want a complete solution that takes action in real-time and keeps farmers in control—all while improving profitability and automating dangerous, back-breaking fieldwork.”
Another highly anticipated AgTech innovation is the internet of things (IoT). This technology refers to the global ecosystem of physical devices that can collect and share data, such as remote sensors to gather vital data on weather patterns, soil moisture and livestock numbers. By adding drones and even satellite technology, many important factors that influence crop health can be monitored, including temperature and rainfall, thus informing farmers on how to make better decisions about crop sowing and harvesting. And by obtaining reliable data on weather patterns, farmers can make more educated predictions about future weather forecasts, which, in turn, can help them be more prepared.
Artificial intelligence (AI) represents perhaps the other key technology involved in the AgTech revolution and is often adopted in concert with other technologies, such as IoT and big-data analytics. AI is expected to be of value especially in precision agriculture, a new approach to farm management that prioritises the use of digital technologies to make better and more efficient farming decisions. “Precision agriculture powered by AI could become the next big thing in farming,” explains digital-consulting firm Intellias. “Precision farming combines the best soil management practices, variable rate technology, and the most effective data management practices to help farmers maximize yields and minimize spending.”
Special mention should also be given to controlled-environment agriculture (CEA), which remains in the early-growth phase but is nonetheless generating considerable excitement. With its focus on cultivating plants in indoor environments, CEA aims to drastically expand the landscape—quite literally—in which food can be grown virtually anywhere. Indeed, revolutionary methods such as hydroponics, which enables plants to grow without soil, mean that food can even be grown in dense urban areas.
An October 2021 report from MarketsandMarkets Research suggests that the “smart” agriculture market will grow from US$12.9 billion in 2021 to US$20.8 billion by 2026; it is expected to grow at a CAGR (compound annual growth rate) of 10.1 percent during the forecast period. “The smart agriculture market has been witnessing significant growth over the past years, mainly owing to the advancement and implementation of technologies like artificial intelligence (AI) and internet of things (IoT) in smart agriculture and rising pressure on food supply system, owing to rapid[ly] growing population,” the report states. “The agritech startups are bringing innovations. They are integrating AI, IoT, data analytics, and remote sensing technologies to provide immediate solutions for farmer[s’] problems. These technologies helped create channels during COVID-19 restrictions that allow farmers to choose their market and sell their products at better prices.” According to PitchBook, AgTech companies “are expected to continue drawing substantial investment amid demand for environmentally friendly agricultural practices and an increasing awareness of climate change and food security issues.”
Investors are seeking convenient ways to access this burgeoning growth sector. The Global X Agtech & Food Innovation ETF [exchange-traded fund] (KROP) seeks to invest in companies advancing innovation and the use of technology in the agriculture and food industries. This includes companies involved in the provision of AgTech related to precision agriculture, agricultural robots and automation, controlled-environment agriculture (for example, vertical farming and hydroponics) and agricultural biotechnology, as well as those involved in food-innovation activities tied to protein and dairy alternatives and food-waste reduction.