Field perimeter food safety is a farmer problem that needs an AgTech startup solution …
As customers increasingly demand safer foods, industry regulators and large food producers are increasing the amount of food safety requirements that farmers need to comply with on their way to the customer. A lot of the current regulatory framework around food safety was set up in 2007. After an e. coli outbreak that got 200 people sick, California farmers worked together to create the Leafy Green Products Handler Marketing Agreement (LGMA) focused on delivering safe leafy greens and food safety programs that gave consumers confidence that the food they buy and eat is safe. The LGMA is a collaborative effort with University researchers, industry scientists, food safety experts, government officials, farmers, shippers and processors working together to establish food safety culture on farms. To give you a feel for the complexity involved with modern food safety programs, here’s a 90-page set of Commodity Specific Food Safety Guidelines that the California LGMA approved in April 2019.

Another large part of the food safety regulatory framework came in 2011 when Congress passed the Food Safety Modernization Act of 2011 (FSMA), which empowered the U.S. Food and Drug Administration (FDA) to impose new regulatory requirements on food producers and handlers, expand requirements for and inspections of food imports, and to issue mandatory recalls of food. These rules affect farms supplying almost all fresh produce sold in the United States. The rules established by LGMA and FSMA combine to govern virtually all fresh produce production in the US.
So by now you should be asking one question — how much does all of this cost the farmer? Fortunately, the USDA asked that same question, and put a great research document together with a lot of details. Large farms that sell over $3.45 million in annual produce sales account for 58.6% of US farm produce and incur annual compliance costs of about .3% of sales (at least $10,000 annually). Farms with annual produce sales between $500,000 and $700,000 are estimated to incur annual costs of compliance of about 4.2 percent (~$25,000 annually). Small farms (annual sales between $250,000 and $500,000) and very small farms (annual sales between $25,000 and $250,000) are estimated to incur annual costs of 6.0 percent and 6.8 percent, respectively ($22,500 for small farms annually and $9,350 for very small farms annually). It should not be a surprise that small farmers spend the highest % on compliance because they have the smallest ability to be efficient with their compliance efforts. That said, those are real numbers at any size farming operation.

No single vendor can solve every food safety problem (nor should they try). I’ll spend some time in later posts on some of the solutions that are available for different compliance requirements. For now, let’s drill in on one specific problem. From the dirt the product grows in to the water that goes on it to the product itself, consumers are demanding food that goes on their table be safer and that as much information as possible be provided to them when buying the food. This desire for safer food that is free of things like e. coli and listeria has resulted in testing requirements for ag products. Many farmers have extended testing to all 3 segments — soil, water, and product — regularly throughout the season, from early growth through harvest. For example, Rava Ranches farms some spinach on our ranch and they do multiple tests in every field regularly during growing season. Take a look at the food safety efforts they are making as they grow a lot of spinach for some large customers.
One of the sources of the test failures is external (or foreign) objects that enter the field and end up on the product or in the soil (and in some cases the object arrives via irrigation, which is why the water is frequently tested as well). A large occurrence of foreign objects comes from animals that enter the field through the perimeter from neighboring fields, open spaces, or rivers where animals come for water and food. The best way to keep these animals out of the fields is to stop them before they enter. As part of their food safety efforts, the Rava Ranches team (like many farming operations) puts white PVC pipe traps on the field perimeters of their fields to keep animals out of the fields. These traps are meant to catch rodents before they enter the field. Below is a picture of a single trap. Now imagine one of these traps placed every 5 rows on a specialty crop field that is 200+ acres, and imagine that some large operators have thousands of acres of farming, and you get a feel for the scope of the problem for farmers.

Let’s look at the details of what perimeter field traps require to be set up properly. First, the traps and PVC pipes have to be purchased, assembled, and installed on the field perimeter. Then, they have to be monitored for animals that are caught or traps or trap containers (the PVC pipe) that get damaged from weather, tractors, or pickup tracks. If an animal is caught, it needs to be disposed of and the trap reset. Finally, the caught animals must be reported to the local agencies so they can aggregate all the reports and watch for hot spots with a larger than expected rodent presence. The activity is fairly straightforward and the rules are laid out in contracts and compliance requirements that are trained on for all of the employees that will be working with the traps and food safety reporting.
So how much does just the field perimeter trap system cost to operate and maintain compliance? Obviously, it varies based on geography (highlands or lowlands; is the field near a river where animals come for water), crop type (how attractive it is to rodents), and labor costs. In Monterey County, estimates are that efficient farmers with large acreage operations (i.e. 5,000+ acres) can handle as many as 1,000 acres of specialty crops with 1 full time employee. This is not a minimum wage employee. It’s a higher-level cost than that. The rough cost per employee that manages the traps is $50,000/year ($25/hour for a 2,000 hour year). At 1,000 acres of coverage, this works out to $50/acre/year just for trap maintenance and reporting. That number does not include any of the setup costs of purchasing the traps and pipe and installing them on the field perimeter.

There are two additional factor in the financial model for AgTech startups to consider. First, labor costs have been increasing for many agriculture activities the last several years, and that trend shows no sign of stopping and in fact may be accelerating. So if your current target price to compete with is $50/acre/year you can expect that the actual cost incurred by the farmer will go up by 5–10% per year. It is quite likely that the price increase of labor would not be something that would be expected to drive the price of this solution up (i.e. AgTech startups should not run financial models to capture the labor price increase with a comparable increase in their solution price — that is a recipe for a lot of unfriendly conversations with farmers). That said, it would make the economic attractiveness of the solution a lot higher as the labor price goes up. Second, the $50/acre/year is for large farming operations. The number for smaller farmers could be significantly higher (recall the compliance figure difference by farm size above). As always, the key to successfully selling the solution is to listen to your customer and collect the actual data.
The actual solution could take many forms, including drones, in-pipe sensors, in-field or above-field cameras, or any combination of the above or alternate technology components. Full disclosure: I worked with a drone solution startup for a few months and did some testing on our ranch. It turns out that there are still some drone technology shortcomings that greatly hindered the drone solution. Specifically, hot conditions and windy conditions had a large negative impact on performance and battery life, which made it much harder for drones to deliver an adequate solution. At this point (November 2019), I am skeptical that a drone solution can be developed at the needed economics without some significant innovations in drone technology.
When considering the design and pricing options for the solution, remember that the solution does not need to replace the people monitoring and reporting on the traps. In fact, it would be better to treat the solution as something that augments them and makes them more efficient. If your solution makes them twice as efficient so they can cover 2,000 acres/year, that effectively reduces the price per 1,000 acres to $25,000/year or $25/acre, and depending on their acreage total leaves some margin for the AgTech startup that offers the new solution that increases the efficiency.

Doubling the efficiency is a significant effort. Obviously the math adjusts based on the efficiency modeled and then actually delivered. How much of the efficiency the solution is able to capture is an open question, but you need to model it so that the farmer’s math is simple. Whatever savings the efficiency gains provide less the cost of the solution is the real number the farmer will focus on — the net savings. The net savings need to account for testing costs for the new solution so it can get to scale and handle large amounts of acreage.
So there is a summary of the problem statement around field perimeter traps. Farmers are paying $50/acre/year (a cost that is sure to increase annually) just to manage, refill, repair, and report on perimeter traps. Any solution that can reduce that dollar amount and/or increase the efficiency of workers managing the traps can help the farmer improve economics. The solution is likely to include a high volume of images and potentially some heat-sensitive sensors so that animals can be confirmed to be in certain traps (and not in others). It’s also likely that an as-a-service or subscription offering will make the most sense since it minimizes capital expenses and labor the farmer must source and pay to manage the service. It’s also quite likely that the type of gate below is not going to be the right answer for field perimeters for specialty crops (as always, Ace Reid’s Cowpokes are a constant source of clarity …)

The food safety problem around field perimeters is a large market opportunity. The 2012 Census of Agriculture produced by the USDA’s National Agricultural Statistics Service put the acreage total for all irrigated specialty crops at 8.76 million across 139,026 farms. The acreage total for vegetables is just under 3 million across almost 37,000 farms. At $50/acre/year, you can do the math on that market opportunity (and of course work it down to the savings you are producing to get a far more accurate TAM — you can’t take all the revenue off the food safety costs, only a portion off the savings you deliver). If you know of or are developing a solution that can help farmers increase their efficiency around monitoring and reporting on field perimeter traps, please let me know. This is a big cost item, and anything that can help reduce the cost of managing the traps at scale is worth evaluating for a farmer (or a farmer’s supplier).
(If this is the first blog post of mine that you’ve seen, you can click here to see the “front door” or home page of the blog, with all the relevant context and my other posts conveniently available for you to visit if they are of interest. Thanks for reading!)