AgTech, the technology applied to agriculture, can be a good investment opportunity because it is a sector destined to grow over time. Truth&Business talked about it with Shehriyar Antiahead of thematic research of Pgim Investments.
In such a volatile context, what are the factors that could prove to be decisive in the food sector?
To face the challenges of the future, technology and innovation they will have to play a crucial role in finding new ways to grow and produce food. Innovation and the adoption of modern technology are already taking place throughout the food value chain. It is important for investors to recognize that it is the tech startups that global incumbents are driving change at every stage. The basic inputs for agriculture are simple: seeds, sun, water, fertilizers, pesticides and work. The term AgTech often refers to the exploitation of technology to create more efficient farming methods that reduce the need for these inputs, thereby increasing productivity and sustainability.
What do investors need to know, also in the light of such a dynamic context?
For investors, the AgTech landscape is quite fragmented and many startups find different ways to apply technology to agriculture. Which can offer interesting opportunities for venture capital. In emerging markets, many farms are still small-scale. For example, over 80% of crops in India take up less than ten acres of land. An Indian startup called Gramophone is an example of smart agriculture which can help small farmers. Accessible by mobile phone and used by over two million farmersGramophone provides customized analyses regionally to guide farmers in the whole life cycle of crops. From seed selection to optimizing the use of nutrientsup to the management of harvests and even the sale of crops.
What if we wanted to give some examples of AgTech today?
Precision agriculture is an advanced example of AgTech. THE built-in sensors in crops they monitor variables such as temperature, humidity and levels of key nutrients (such asof nitrogen) in the soil and in the air. This real-time data is fed into the software predictive analytics to determine when and how much water, fertilizer or fungicide introduce in specific areas of the field. Today’s agricultural machinery is almost unrecognizable from its predecessors just 20 years ago. These are GPS-equipped machines that can be nearly autonomous, adapt to specific field conditions, and perform multiple tasks using one range of sensors and machine learning. They also allow for more precise application of fertilizer and other inputs, reducing their use by up to 60% and minimizing deleterious environmental impacts. For example, cameras and tractor-mounted sprayers use AI to distinguish between weeds and crops and spray herbicides only where needed.
Is the European or US context better?
A handful of global players, such as Cnh in Europa, Kubota in Japan and John Deere e Agco in the US, they are supplying to large farms seeders, sprayers and other self-contained machinery. Since most of their new sales involve smart machinery, these manufacturers are also adding software upgrade fees as an ongoing revenue source to stabilize their prices. Cash Flows of the raw material cycle. Currently the United States are a leading market for autonomous machinery. However, with the modernization of farms in Brazil e Argentina, Latin America has also become a huge growth market. There is ample room for technology to penetrate this sector, where agribusinesses are updating to keep up.
The topic of cultured meat is often talked about. But does it offer opportunities or are there risks, perhaps underestimated?
Although cultured meat receives a great deal of media attention and has raised over $1 billion in venture capital, the sector remains in a uncertain stage for investors. There are still a few products available outside of a lab: Singapore it is the only country to have approved a chicken product grown for retail sale. The market is very crowded and highly fragmented, with over startup cent. Some simpler forms of protein are closer to efficient mass production, and while consumer adoption isn’t entirely certain yet, adoption by food companies may be sooner. The Israeli startup Remilkwhich produces milk proteins, whey and casein, has a partnership with the food giant General Mills to produce lactose-free cream cheese of non-animal origin.
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