Optimism in Agriculture

While it seems that the typical ag press report these days focuses heavily on weak markets, Bloomberg reported this week that there is “optimism in agriculture despite shrinking wallet size.” It says that investments by companies and venture capitalists in agricultural technology reached a record of as much as $25 billion globally in 2015 “and that figure will probably grow again this year.”The sources of the new estimates are Boston Consulting Group and AgFunder which connects investors with agricultural companies and proposals online. The investments included are a broad range of products including R&D, purchases, partnerships, equity stakes and technology centers. Early-stage funding from venture capital firms reached $3 billion globally, up from $900 million in 2013 and $400 million in 2010, the groups said.“The total dollars were impressive,” said Decker Walker, Boston Consulting Group’s managing director in the Chicago office and one of the report’s authors. “It is striking that it’s happening at a time when farmer income is declining.” However, the report tends to focus more on larger farms who tend invest more heavily in advanced technology.The company noted that while slumping grain, meat and dairy prices have eroded agriculture incomes generally, more farmers are turning to precision-agriculture methods to help increase efficiency. “Companies including Deere & Co. are joining the race to create new products for the market that Goldman Sachs Group Inc. estimates could be worth $240 billion by 2050,” Walker said. In addition, USDA recently noted that the new technologies are helping to boost profits for many farming operations.Perhaps the most interesting aspect of the report is Wallker’s comment that “There is clearly some optimism despite the shrinking farmer wallet size.”The report covered technologies encompassing everything from granular data analysis that enhances planting decisions to drones that provide field views around the clock. The report is based on a survey of more than 50 executives from seed, fertilizer, meat, grain and farm-equipment companies as well as 15 venture-capital investors.It suggested that the current surge in technology may be coming later in agriculture than in other industries because past challenges have included a lack of connectivity on vast, remote farms. The perception that agriculture being a “sleepy industry” that’s slow to adopt technology is changing, Walker said.USDA earlier reported that about 80% of large U.S. farmers are using GPS devices to steer their tractors, while 70% to 80% use yield mapping to determine the most productive areas of their land. The new, private report estimated that crop protection and seed companies have invested the highest percentage of revenue in “agtech.”In addition, it notes that agribusiness investors are often “cautious” and “defensive,” meaning they are geared to boost core businesses rather than create new ones, according to the report. As a result, almost 60% of the venture capital firms said they expect their investments in start-ups to lead to sales to larger agricultural companies, rather than disrupt the big players, Walker said.Overall, the report suggests that U.S. agriculture continues to be highly focused on increasing efficiency and competitiveness and in expanding its markets—in spite of the widespread anti-trade sentiment that has been one of the stronger themes in this year’s political fights. This optimism and investment trend also runs counter to the popular criticisms of ag technology that have been featured in urban dailies recently.Given the expected growth in global food needs in the coming decades, it is certainly not surprising that the sector would turn increasingly to technology to fill those needs. The fact that it is doing so against both economic and social headwinds makes the recent trends especially important and encouraging, Washington Insider believes.