New Age Farm-to-Table: AgTech’s Impact on a Sustainable Future
By: Owen Gerard, CFA
Imagine yourself situated in a picturesque rural landscape, with rolling hills, verdant fields, and a bright blue sky overhead. You take your seat at a beautifully hand-crafted wooden table surrounded by your family and friends ready to enjoy a succulent meal from a bountiful harvest provided by the local land. The menu would showcase the very best of the farm’s seasonal produce, with dishes that are both simple and elegant, and bursting with flavor. Perhaps a colorful combination of heirloom tomatoes and crisp greens, drizzled with sweet honey, or a hearty stew of pasture-raised beef and root vegetables. The farm itself is a thriving, sustainable operation, with lush crops growing in healthy soil, livestock grazing in the pastures, and a bustling garden filled with fresh herbs and vegetables. The air is filled with the sweet scent of ripe fruit, fragrant flowers, and nature’s subtle air of freshness.
Except this farm is not a farm.
This farm is our forebearers’ settlement from thousands of years ago when daily livelihood was wholly reliant on the land and environment. The evolution of agricultural communities from one of daily subsistence to modern outfits that must meet the demand of a globalized food system has produced significant challenges in balancing productivity with sustainability.
The twenty-first century farm-to-table concept attempts to replicate a natural connection to the land that was so instinctual to generations past. Recent mechanical, biological, and chemical advancements have massively increased the efficiency and output of growers over the past 100 years. But modern agriculture’s chemical-driven focus on yield maximization has been balanced with an almost counterculture feeling from growers and consumers focused on a more holistic approach to production of food to feed the world’s 8+ billion inhabitants. Over the decades this mindset has gone by many titles and monikers: organic, climate friendly, origin tracing, non-GMO, nutrient density, carbon neutral, and environmentally sustainable. Today, the major selling points of each of these approaches is captured in “regenerative agriculture,” which focuses on improving physical and biological soil health through holistic, sustainable agricultural practices. Such farming practices emphasize the use of natural methods to address soil health and increase yields while also promoting biodiversity and reducing carbon emissions.
Significant investment across the agriculture ecosystem is helping drive this agenda forward as new technologies, tools, and techniques are being introduced by startups and legacy players alike. This supporting cast of advanced products and services is helping to generate appreciation for each step in the value chain for being exactly that – creating value. For example, precision agriculture tools such as drones (Rantizo), sensors (Semios), and predictive analytics (Pattern Ag) are enabling farmers to collect data on their crops and soil health, which they can then use to make informed decisions about their farming practices. These technologies help farmers to optimize their use of resources, reduce waste, and improve soil health, all of which are key components of regenerative agriculture.
In addition to precision agriculture technologies, agtech companies are also developing innovative solutions for soil health (Continuum Ag), such as biological inputs (Sound Agriculture), which include microbes, fungi, and other microorganisms that can help to enhance soil health and fertility. Seed and input technology companies are also continuing their research and development push while incorporating groundbreaking seed traits and environmentally sustainable fertilizers ( PowerPollen, Pivot Bio). These inputs are often used in conjunction with cover cropping and other regenerative practices to improve soil health and promote the growth of healthy, resilient crops.
The roadmap for development and implementation of varying innovations is likely to result in continued co-mingling of verticals within the ag value chain. These movements will overlap, displace, compete, and complement with both legacy and startup companies in the space. All of this combines to force industry players to shape a nimble strategy for future growth and relevance.
Riding on the tailwind of a strong agriculture economy, deal making activity was frenetic in 2021, subdued in 2022, and had a noticeably frosty to start 2023. CNH Industrial has made a big splash with acquisitions of Raven Technologies1 and Augmenta Ag2 over the past two years. Deere & Co acquired Bear Flag Robotics and made a strategic investment in GUSS (NCP, Inc. acted as the exclusive financial advisor to GUSS) prior to the glamorous unveiling of their fully autonomous 8R tractor at last year’s CES conference. Not to be left behind, AGCO and Kubota jumped into the autonomous fray with acquisitions of JCA Industries and Ag Junction, respectively.
But as pockets of the agriculture economy begin to show signs of stress we are hearing a decidedly more cautious tone than just twelve months ago. Large industry incumbents are focusing on fortifying their existing market position and are scrutinizing new market opportunities more closely. Further upstream agtech startups are wading through an abnormally dry (not quite a “drought” yet) capital market when it comes to fundraising activities and without doubt the IPO market remains virtually shut. In 2022 there were 1,200+ VC-funded agtech deals totaling $12B+ deal value3 but activity was concentrated in a handful of massive deals. All of the fundraising activity of 2021 and 2022 translated into just 17 exits in H1 2023 totaling less than $700M.4 The long-term nature of agtech and regenerative agriculture product development may mean that as the glut of start-ups continue to mature and see proof of concept, we can expect to see another wave of consolidation.
As large ag equipment players and startups alike continue to digest the M&A activity of the last few years, we expect the market to become increasingly selective about deals that align with this new strategic direction. Any assets that don’t provide clear and immediate value-add to the supply chain, labor challenges, or ESG initiatives will likely be slow-played or benched entirely in favor of tighter acquisition criteria.
Overall, agriculture technology companies are helping to drive the adoption of sustainable agriculture practices by providing farmers with the tools and knowledge they need to make sustainable, profitable farming decisions. By working together, these companies are creating a more sustainable and resilient food system that benefits farmers, consumers, and the environment.
Throughout our fictitious meal – our forebearers, and our new age farm-to-table patrons – feel a sense of connection to the land and the people who work it, knowing that every ingredient laid on the plate was grown or raised with care and respect. And as you savor the last bite of your meal, you feel a deep sense of gratitude for the abundance of the earth, and the beauty and simplicity of a life lived close to nature.
- https://www.cnhindustrial.com/. ↩︎
- https://media.cnhindustrial.com ↩︎
- PitchBook Agtech Overview published March 17, 2023. ↩︎
- Analysis of Crunchbase data as of June 30, 2023. ↩︎
