Technological disruption can skyrocket any industry. You only have to look at Amazon to see what the potential impact of using technology to disrupt a whole sector. Netflix is another example of using smart technology to change the way we view entertainment.
It was inevitable then, that sooner or later, technology would begin to disrupt the food and farming industry, which is currently worth around $177 billion in the US alone.
The collective term for the increased use of technology in agriculture is, appropriately, AgTech. And today, we’re going to take a comprehensive look at exactly what it is and why it could well change the state of the US food industry over the next few years.
So, what is AgTech?
The aim is simply to improve the quality and efficiency of farming and agriculture through the adaption of hardware, sensors and digital software in order to make businesses more effective and more profitable.
Essentially, it’s a no-lose scenario, and that’s proven by the growth of tech in the industry. Customers get a better service at a lower price, and businesses make more profit.
It’s also worth noting that the industry must continue to improve to meet future targets. In fact, studies have shown that agricultural output needs to increase 70% by 2050 if it’s to meet the needs of the global population.
Funding has gone through the roof
In a world where several industries have already fundamentally changed as a result of tech (retail and entertainment are just two) agriculture was actually lagging behind, especially when you consider its importance to the USA.
However, in the last few years, this has definitely changed.
The key moment for the market is widely considered to have been Monsanto acquiring Climate Corporation back in 2013 in a $1bn deal. Until then, the idea of seriously investing in AgTech wasn’t one given a lot of thought.
Since that breakthrough, investment in agricultural technology has grown from strength to strength.
As early as 2014, investment in the technology had already surpassed that of the tech for both the financial market and the renewable ‘cleantech’ sector.
In 2017, Forbes reported that the total investment in the industry topped $1.5 billion, a new record and demonstration that the flood of funding into AgTech is likely to continue.
And it’s not just US-based investors. Japan’s Softbank’s Vision Fund led the recent $200 million Series B to bet on indoor farms, with their investment into Plenty.
Why are more investors choosing to fund AgTech?
Because the opportunity is so huge.
Global net farm income is around $120 billion, and farm assets in total are approximately $2 trillion.
Figures from Forbes showed that over the past six years more than 132 AgTech companies have sought funding.
The potential for funds to profit hugely from the AgTech sector is obvious. It’s in their interest to get involved.
So which areas of the industry can be enhanced by digital technology?
Field technology is one good example. By using in-field hardware sensors to keep a record of things like moisture, temperature and electrical conductivity, farmers can get better growth results with less water and nutrients, making them more efficient.
Machine technology has also improved. Farm machinery can make use of digital to measure things like yield and soil/seed ratios in real time. By doing this, farmers can optimize the growth of every single plant, achieving a much higher yield at every harvest.
Satellite imagery is another invaluable technology for farmers, as it allows them to take an instant birds-eye view of key farm metrics: crop health, soil conditions, the effects of weather, harvesting timings and so forth.
Essentially, AgTech can provide farmers with instant information that under previous systems would have had to have been sought out manually: the time saving as a result can be worth millions to even smaller farms.
So what are some examples of companies that use digital to improve themselves?
Rather than look at hypothetical benefits of AgTech, we think it’s better to actually look at some of the companies out there that’re already making use of technology to improve the industry:
This company specializes in software and hardware for vineyard managers, and is already being used by seven of the top ten US wineries, according to Forbes.
The hardware and software allows vineyard managers to track harvests, to keep a handle on field and weather conditions and even to measure grape maturity, ensuring a higher quality of wine.
This startup based in Israel makes use of the cloud in order to boost crop yields. How? By using in-field sensors to ensure the correct amount of water is delivered to each plant.
As a result, the farms are able to hugely cut down on the amount of water and energy used to become much more efficient.
This startup makes use of satellite imagery and precision technology to enable local farmers to identify, map and manage variability in their farmland.
By being more certain about their environment, the farmers are able to optimize where they use their resources to get the best results.
One of the biggest typical expenses within the food industry is recalls. It’s estimated, in fact, that the average price of a recall costs businesses around $10 million on average: a HUGE expense in some cases.
By making use of data technologies to track every aspect of the food chain, FoodLogiQ cuts down the cost of recalls by ensuring that the correct foods are recalled every time.
This AgTech company has already proven their credibility to the extent that Whole Foods, Subway and Chipotle have all become heavy users.
One of the trickiest aspects of farm management is allocating resources correctly. In a high-pressure environment, it’s vital that farmers don’t waste time and energy on the wrong areas of their farm.
Mavrx is software that allows farmers to visualize their entire set of fields immediately, and to see exactly where resources need to be allocated at any one time.
Results have been effective enough to raise $22 million in funding from Bloomberg Beta, Crosslink Ventures as well as other major capital funds.
Pathogens are, of course, a major concern for any food company. Bad PR in this area can be enough to ruin a food supplier.
Sample6 is an AgTech company that has claims at being ‘the world’s fastest food pathogen detection system’, able to detect bugs within 6 hours of testing.
It’s a bold claim, but Sample6 has already raised funding from VC Acre Venture Partners (Campbell Soup’s fund) and Sam Kass, Barack Obama’s former personal chef and a major food policy adviser.
Or Sustainable Water and Innovative Irrigation Management, as they’re otherwise known.
SWIIM aims to improve efficiency for any large-scale water user – such as farms and utility companies – to better manage their usage.
Not only does this make the company more financially effective, it also helps them meet their environmental obligations.
As you can see, the uses of technology within the agricultural sector vary substantially. Tech can be deployed in a variety of different ways.
The only aim is to make the US’s food industry more efficient, to offer a better service and to help companies within the sector grow as a result.
Other signs of positivity for the future
A notable positive sign for the industry has come with the increase of multiple ‘mini-clusters’ within the AgTech field.
Whenever an industry starts to breakout, there are always area of ‘fastest growth’. (Think of Silicon Valley.)
In states like Iowa, Missouri and Tennessee, mini clusters of startups focused on the technology are becoming visible, and a larger number of international start-ups are beginning to focus on ensuring they have a mainland presence in the US.
The technology is also beginning to become more common internationally.
Israel is a market leaders, with more than 450 AgTech startups in operation, and countries like Ireland, New Zealand and Brazil are beginning to host accelerator funds with the aim of promoting growth within the industry.
All in all, it looks like growth will continue within the AgTech industry for the rest of 2018 and into 2019.
Iconic has been following the AgTech revolution for a while now… but our interest has really increased lately as we work with exciting AgTech startups like Growers and Smart Spectrum.