AgTech: An all-in-one solution to world hunger, climate change and supply chain problems

By Kirsteen Mackay

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The buzz around AgTech is getting louder from vertical farming to precision farming. Is this a sector worth investing in?

Agricultural technology, also known as AgTech, agritech, or even agrotechnology, is a growing phenomenon. The idea of farming indoors may seem perplexing, as traditional farming has always had such a wholesome nature/nurture relationship between mother earth and human beings. But it’s no secret the world is facing many serious problems including poverty, war, hunger, and climate change.

Green shoots growing from the soil

Photographer: Roman Synkevych | Source: Unsplash

Unfortunately, the rise in industrial farming has exacerbated climate change and some argue seriously damaged human health. Plus, despite the rise in affluent living, starvation remains a real problem in many areas where traditional farming is impossible.

It’s for all these reasons that investment in AgTech has exploded in recent years.

According to the world hunger clock 798,400,000 people in the world are undernourished. In this day and age, this statistic is particularly hard-hitting considering how technologically advanced our planet has become.

Accelerating change in food production

The Covid-19 pandemic shook up the world to no end in 2020, highlighting the problems in our supply chains. And it made nations realise the importance of having a sustainable level of home-grown food.

While the origins of AgTech have been gradually developing in recent years, the pandemic accelerated its development. The supply chain issues, combined with historical unemployment rates and school closures, have raised the rate of food insecurity in the United States by 38%.

AgTech holds a possible solution to the world’s hunger problem, supply chain issues and as a key solution in tackling climate change.

Essentially, AgTech uses technology in agriculture, horticulture, and aquaculture with the aim of improving yield, efficiency, and profitability.This includes vertical farming, which is a way of utilising every inch of space in a warehouse, from floor to ceiling, to grow plants. Using technology to control the environment, temperature, soil quality, water distribution, nutrient levels etc, means it can also eradicate the use of dangerous pesticides which have greatly contributed to planet and health damage in recent years. Best of all, it can provide a guaranteed, year-round supply of fresh, nutritious food.

A multitude of investment opportunities in agriculture

The internet of things (IOT) is a network of computer linked devices communicating with one another. It allows crops to be cultivated in computer-controlled environments thanks to the data stored in the cloud. Innovation is constantly progressing in the tech used, such as better sensors and automotive practices. With this, comes the potential for new crops to grow in these environments.

So, keeping this in mind, AgTech investments can include the obvious vertical farming companies, the manufacturers that serve them and the technology companies that make it possible. But there’s also advancements in making traditional farming more sustainable, which can also be considered AgTech. Such as precision farming solutions, sustainable fertilisers, farm drones, and anything that helps simplify and improve agriculture.

The world’s population is also growing and to continue to sustain feeding at today’s level, we need to rapidly ramp up global food production. Doing so would cause untold damage to our health and planet and is really not an option. Sustainable solutions are a must and that’s why investment in the AgTech space is moving so fast.

Barclays Research analysts estimate a $50bn (£36.7bn) market opportunity in the vertical farming space.

McCain Foods invests $65 million in vertical farming

Privately owned family company, McCain Foods (famous for its frozen potato products) is aggressively branching into vertical farming via a $65 million investment in TruLeaf Sustainable Agriculture and its subsidiary GoodLeaf Farms.

GoodLeaf operates Canada’s largest commercial vertical farming operation, and McCain is getting on board to help steer its growth and expansion plans. This investment makes McCain the single largest shareholder in the company.

“With this investment, GoodLeaf Farms is embarking on an aggressive growth and expansion plan to build a national network of vertical farms that will bring fresh, delicious, nutritious and locally grown leafy greens to Canadians across the country,”

Growth and ambition

GoodLeaf operates a commercial vertical farm in Ontario. It’s a fully automated 45,000-square-foot facility, comprising a specialized system of LED lights and hydroponics. This is already serving the domestic market all year round. GoodLeaf’s offerings currently include five microgreens; Spicy Mustard Medley, Asian Blend, Micro Arugula, Pea Shoots and Micro Radish and three baby greens; Ontario Baby Arugula, Baby Kale and Spring Mix.

It intends to open another two indoor vertical farms by the end of 2021 and McCain’s investment will help make this happen. These new locations will serve the grocery and food service networks in Eastern Canada, and one for Western Canada. GoodLeaf’s produce is grown without the use of pesticides, herbicides or fungicides. This results in more nutrient dense and sustainably grown food source, providing a safe, local alternative to costly imports.

Barry Murchie, Chief Executive Officer of GoodLeaf said:

“From our start in Truro to our first commercial farm in Guelph, GoodLeaf has built a strong foundation for future growth… We want to be a global leader in vertical farming. Our first step to accomplishing that is ensuring we have a strong footprint in Canada, giving Canadians access to top quality, nutrient-dense, sustainably grown and pesticide-free leafy greens 365 days a year… We are driving a new way to grow food, with disruptive technology that brings consumers leafy greens from their own backyard. This is a fundamental game changer.”

Venture Capital is excited by AgTech

Here are some up and coming private start-ups in the AgTech space that have attracted venture capital funding. These are not publicly listed today, but that’s not to say they won’t be in the future. Most publicly listed companies start with private investment.

Plenty

The buzz around vertical farming began in 2017 when SoftBank, Alphabet’s Eric Schmidt and Jeff Bezos helped fund start-up Plenty. It’s now raised almost $500 million through venture capitalist funding since it was founded seven years ago.

Infarm

Infarm provides the modular infrastructure to create vertical farms. Each Infarm is a controlled ecosystem with the perfect amount of light, air & nutrients. Infarm has raised over $300 million in total funding.

Future Fields

Future Fields was founded in 2018 and recently attracted $2.2 million in a seed funding round. Its developing cell-based meats, which hopes to create a viable protein to counteract world hunger. The cellular agriculture industry is engineering cells to create brand new lab-based meat products that are indistinguishable from traditional agricultural products. This will allow humans to consume meat without damaging the environment, their health or their conscience.

eAgronom

European eAgronom raised €1.2 million for its farm management software in October. It also attracted a former Nike VP onto its board. The family company is based in Estonia and is branching out across Europe in helping farmers manage and oversee their farms with heightened efficiency.

Eden Advanced Technologies

Vertical farm manufacturer Eden Advanced Technologies is based in the Netherlands. It’s building fully automated urban farms. In January 2020 Eden Advanced Technologies raised €50,000 in a pre-seed round from the Dutch Student Investment Fund. Eden’s aeroponics farming module has the capability for up to 35 different crops from leafy greens and herbs to tomatoes, strawberries and beans etc. This all fits in well with the rise in vegetarianism too.

Pure Harvest Smart Farms

The unforgiving dessert climate of the United Arab Emirates means it’s not the best place for farming and that’s why AgTech has such appeal. The pandemic has shone a light on how badly this is needed and investment in the sector is soaring. The UAE’s Pure Harvest smart farms has raised over $29 million.

Augmenta

Augmenta is a French company with a plug and play device that scans and analyses crops. According to PitchBook Augmenta last raised $2.3 million in October 2019 through a seed round. The Augmenta device helps farmers automate fertilizer application and ultimately increase their yield through precision in the decision-making process.

Eden Green Technology

Then there’s Eden Green Technology runs a research center for testing new versions of its vertical farming technology, propagation techniques and experimental produce variations, in Dallas-Fort Worth, Texas. The pandemic ramped up its research and development and in doing so it committed to matching produce sales 1-for-1 with food donations to local non-profits. Its focus is selling its vertical farming technology to partners around the world.

Intelligent Growth Solutions Ltd

Intelligent Growth Solutions Ltd is a Scottish-based indoor AgTech and Commercial Lighting business. It was founded by a farmer and has attracted venture capital funding. Its crops are grown in microclimates that allow for good use of space.

Click and Grow

Click and Grow is a small San Francisco company that’s raised $17.9 million in funding. It manufactures smartpots that take care of plants automatically. These are for sale to the general public to grow herbs and plants at home.

woman wearing apron cutting a pizza on kitchen worktop beside Click & Grow Smartpots

Source: Click and Grow Digital Press Kit

Publicly listed AgTech companies generating buzz

The easiest way for retail investors to jump aboard the AgTech train is to buy shares in publicly traded companies. Here are a few gaining ground today:

AppHarvest: a supply chain saviour

AppHarvest (NASDAQ: APPH) went public via SPAC Novus Capital at the end of January. It then released its full year 2020 results in February. Its net loss was $17.4 million, compared to $2.7 million year-on-year. This is because it was in a pre-revenue state throughout 2020 and was scaling up to become publicly traded.

Since its incredibly successful IPO, AppHarvest now has a market value approaching $3 billion! It also has access to around $475 million in unrestricted cash to fund its evolving operations. Its plans include building further high-tech controlled environment indoor farms. It may also consider future acquisitions to enhance its growth.

AppHarvest is one such company hoping to create a climate-resilient domestic food system that will help prevent supply chain disruptions in the US. The company began harvesting its first crop in January this year, with both yields and pricing turning out to be better than anticipated. The extreme weather conditions in Texas gave AppHarvest further opportunity for sales as the freezing conditions halted deliveries from Mexico.

AppHarvest’s forecast for Q1 2021 is net revenue between $2.1 million and $2.6 million. While it expects an adjusted EBITDA loss of $14 million to $16 million.

For the full year 2021, it anticipates net revenue between $20 million and $25 million.

AppHarvest Founder & Chief Executive Officer Jonathan Webb says:

“Our favorable crop yields and market pricing currently support a 2021 sales outlook that is better than we expected in December 2020… In January 2021, we delivered our first harvest of tomatoes from our flagship 63-acre indoor farm and began shipping to select national grocery retailers. We remain focused on our mission to build a resilient domestic food system for the U.S. to support this outlook in our first year as a public company.”

Sustainable solutions

While vertical farming is exciting, it’s still in its infancy and limited by what it can produce. So, to make traditional farming more sustainable, there are many other solutions in the works.

EarthRenew (CNSX: ERTH) for instance, is creating sustainable fertilizers. It’s a Canadian AgTech firm that has developed an innovative and cost-effective method for farmers to convert livestock waste into organic fertilizer.

EQTEC (LON:EQT), is a UK bioscience company, which has developed patented gasification technology to process waste from feedstock including agricultural waste.

Aquaculture

Benchmark Holdings (LON:BMK) is driving sustainability in Aquaculture as the world’s growing population and depleted oceans present massive potential for this sector. Benchmark’s divisions cover genetics, advanced nutrition and animal health. All are focused on growth and quality. It has environmentally friendly products in the pipeline. And in 2020 it raised £43 million to take new products to market.

Benchmark’s CEO Trond Williksen said

“Our results reflect a mixed performance across our business areas with a strong performance in Genetics offset by the effects of the restructuring programme and the impact of Covid-19, especially on the global shrimp markets. Moving into FY21, our focus is on becoming profitable and cash generative. Following the restructuring, we are well-positioned in an exciting aquaculture industry, and we have significant potential to be realised in the years to come,”

Mainstream investments

Danone

Multinational food company Danone (EPA: BN) is working to develop and promote regenerative models of agriculture that protect soils, empower farmers and promote animal welfare. Its venture arm, Danone Manifesto Ventures, has invested in various sustainable agriculture projects such as Agricool (urban farming tech), Farmer’s Fridge (fresh fast-food vending) and Harmless Harvest (sustainably farming coconuts).

Ocado

London-listed Ocado (LON:OCDO) is invested in a vertical farming venture called Infinite Acres, through its partnership with 80 Acres Farms and Priva. It also has a 58% stake in Jones Food Company, Europe’s largest operating vertical farm, based in Scunthorpe. Ocado now has a market value of £16.5 billion.

Why invest in AgTech

As with all businesses, vertical farming comes with risks. In urban areas, real estate can be very expensive. It’s also important to be aware of how much energy they use, and does it come from renewable sources? But at scale, vertical farming should ultimately reduce both capital and operating costs. With time and research, this could present an incredible solution to a multitude of health, economic and sustainability problems.

AgTech is still a novel concept with limited commercial scope at the moment. However, the hope is that eventually AgTech can offer a scaled-up alternative to destructive industrial farming and allow localities to grow unlimited crops to match their needs.

Positioning farms where the food is needed, should drastically reduce food wastage and the enormous carbon footprint created through international food supply chains. There really are a multitude of reasons for this sector to be generating so much investment buzz.

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AgTech

Author: Kirsteen Mackay

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Digitonic Ltd, the owner of ValueTheMarkets.com, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.