This article is part of a series by Rajendra Ketkar, Mandala's Sector Specialist and Principal Consultant at RDK Global Consulting LLC , as he shares his perspectiveand insights on the Ag Industry – namely how Consumers and Technology are driving change in the industry.  Read Part I here.

New Technology:

Over the last 5-10 years, several new technologies have been developed and are staring to make inroads into the input ag system.

  1. Molecular or Marker assisted breeding and advanced breeding techniques
  2. Precision Agriculture – data analytics
  3. Microbial or Biologics
  4. Gene editing
  5. Robotics
  6. New crops

Molecular or marker assisted breeding:

Advances in molecular or marker assisted breeding are resulting in delivery of new varieties at a much faster rate than traditional breeding methods. We see many new fruits and vegetable varieties with improved taste, colour and texture for example; smaller watermelons, a variety of sizes and tastes of peppers etc.

One of our companies, Arcadia Biosciences has used TILLING, a breeding technique, to develop high fibre wheat varieties and reduced gluten wheat varieties which are being commercialized now. Other companies have developed “heart healthy”, high oleic oils in soy, corn and canola.

Precision Ag - Data Analytics:

The power of data analytics has led to a whole new area of improved crop management methods and farmers are adopting these as a way to optimize their inputs and maximize yields. Companies like Climate Corp (Bayer), Farmers Business Network and others are providing data analysis services to farmers to help them determine when to plant, when to irrigate, apply inputs etc.

Precision agriculture equipment is being used to apply inputs at variable rates in fields. Drones are being used to monitor fields for pests, crop growth status, and predict yield.

Both data analytics and precision ag has been shown to increase yields in fields by as much as 15% using the same inputs as the farmer may use in his general practice. This technology can be used by farmers to increase income and improve his overall farm operations.

Microbial or Biologics:

In the last few years microbials (or biologicals) have been gaining ground in the ag input market as biopesticides, biofertilizers and biostimulants. Because these products are considered “natural” they have gained more acceptance in the horticulture and specialty crop markets. In the large, broadacre markets like corn, soybean and wheat these products have not gained as much market share as in the specialty crops.

Most large companies like Bayer and Corteva have invested in this technology. However, we see that many small companies are growing with new and better products. Marrone Bio, Pivot Bio, Joyn Bio are just a few examples of companies growing in this field.

Gene Editing:

This has been the major innovation in the last 10 years which is expected to make a huge impact in the world of agriculture and life sciences. This area has been a major focus of research and funding by venture capital. The first products from gene editing will likely get to market in the next 4-5 years. All the major ag companies are investing in this technology either directly or via investments in smaller companies.

The regulatory picture for gene editing is somewhat unclear as Europe and other countries like India have decided to regulate products from gene-editing as GM crops while the US, Japan and Australia have stated that products from gene editing will not be regulated.

Robotics:

This is a rapidly growing field and robots are being developed and commercialized for almost all aspects of the farming operation. There are robots now available for planting, spraying and harvesting. There are autonomous driving tractors being used for tilling and other operations on the farm.

Most of the companies developing and marketing these robots are smaller companies. Currently the use of robots is on a smaller scale but in the next few years this will expand as farm labor costs increase.

New Crops:

New crops are emerging that increase the opportunities for farmers to become more profitable. In 2018, hemp was legalized in the US after many decades of being illegal. The increasing demand for hemp products like hemp oil, CBD and the use of seed as a protein source has spawned new research in breeding of new and stable varieties. Our company, Arcadia Biosciences, is developing new and stable seed varieties of hemp with characteristics like increasing CBD content, lower THC content and disease resistance. Farmers in many states of the US have increased their acreages of hemp as a cash crop. Acreage has increased from 77K acres in 2017 to over 400K acres in 2019 and is expected to reach over a million acres in 2020.

Other startups are developing new crops for oil production for use as biofuel. An example is a startup in St. Louis called Cover Cress that has modified pennycress.

Future Perspective:

The food – ag system is starting to look different now with the emergence of these technologies, changing consumer behaviour and the increasing demand for different types of foods. The next 20 years the ag input world and the ag output world is expected to look very different from the last 20 years.

On the input side, the new technologies are spawning a large number of companies around the world that are using these technologies to develop new tools for farmers. We can expect that smaller companies may play a bigger role in the future. The large ag majors will continue to be the major suppliers of seeds and chemicals.

In the farming systems we are seeing more farmers growing specialty crops to serve the urban demand for fresh vegetable and fruits. Farmers are growing more organic produce. They are also switching to different high value crops including hemp. Farmers are also looking to buy directly from input companies as some suppliers start to emulate the Amazon model in ag inputs for farmers. The development of output traits like high fibre wheat, reduced gluten wheat, high oleic oil crops by companies also means that if farmers grow these varieties they will need to maintain a tight closed loop system so that there is good identity preservation. These crops must be kept separate and therefore storage facilities and transport systems are being developed to maintain identity end to end from seed to end product.

In the output ag system too we see a proliferation of new companies introducing new products to the market to meet consumer demands. The success of brands like KIND bars, Belvita, Blue Buffalo (natural pet foods) and many others shows that the big companies in the output side are not being able to innovate as fast as the smaller companies. We are already seeing these companies make a big impact on the food system and we can expect this impact to grow in the near future.

The last few years have seen unprecedented amounts of investments into the food and ag sector. AgFunder estimates that in 2016 there was $4B in investment into the ag and food industry which grew to $17B in in 2018.

Conclusions:

The rapid changes in consumer behaviour coupled with the explosion of new technologies create a new world in the agriculture and food sectors. This creates opportunities for investments in a wide range of companies across the sectors - whether they are in the input system, farming system or the output system. Smaller companies are growing in this space and will likely have a bigger share of the market in the near future. The next 10-20 years will be a time of opportunity in this sector.

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