What You Need to Know About the Biotech Revolution in Agriculture

Think about cutting-edge technological breakthroughs and your thoughts may turn to the Silicon Valley tech start-ups creating hot new consumer apps.

But don’t overlook the technological revolution that’s taking place in one of civilization’s oldest industries: agriculture. Right now, advances in agricultural biotechnology have the potential to reshape our world for the better.

Medical and health biotechnology — notably pharmaceuticals derived from biological sources, rather than synthesized from chemicals or manufactured materials — may score more headlines, but they are only one part of the biotech revolution. The rapidly growing field of agricultural biotechnology is changing our approach to crop science, energy production and more.

Investors taking note

Those breakthroughs are increasingly drawing attention of investors who see potential growth — and profitable returns — in ag biotech start-ups.

For many years, this sector was dominated by a handful of large seed and chemical companies, like DuPont, Monsanto and Dow Chemical, who had the resources to pursue extensive research and comply with federal regulations governing genetically modified organisms. But in recent years smaller firms have begun to enter the space, bolstered in part by private venture capital.

A May 4 New York Times article notes the increase in early-stage venture capital investments for agriculture-related ventures:

Some 499 agricultural technology companies attracted $4.6 billion in investments last year, nearly double the $2.36 billion in 2014 and way up from about $500 million in 2012, according to AgFunder, an organization that helps connect investors with agricultural companies.

Companies based in the United States raised just over half that total, or $2.4 billion.

The NY Times points toward the launch of the AgTech Accelerator, based in North Carolina’s Research Triangle Park with $11.5 million in initial funding, which aims to help smaller biotech firms by providing office space, management help and assistance in connecting with potential funders. The article notes that ag giant Monsanto has its own venture capital effort.

Meanwhile, various state governments, research universities and regional economic development groups are working to provide “supportive tax environments in capital formation, technology transfer, and funding for a workforce to facilitate research, development and manufacturing,” a study from the Biotechnology Industry Organization (BIO) reports. Taken together, these trends suggest the sector is ripe for a greater infusion of capital to drive further expansion and development.

Benefits of agriculture biotech

Of course, agriculture has always led the way in biotechnology, even before it went by that name. For centuries, agricultural practitioners sought to develop better crops and livestock through hybridization, selective breeding and other methods.

A Texas rancher who culled weak cattle from his herd a century ago was employing a form of biotechnology to develop stronger and healthier herds; likewise, the farmer who cross-pollinated seeds to create more disease- and pest-resistant crops.

Those traditional methods for agriculture took place on the farm and in the fields, based on trial and error, careful observation and lore passed down through the generations.

The new ag biotech is more lab-based and scientific in its approach, taking advantage of 21st century technology and data capabilities to achieve breakthroughs in plant improvement; food production and processing; manufacturing of organic pesticides, herbicides, fungicides and fertilizers; animal health improvements; and more.

This cutting-edge arena of biotech development is bringing big benefits to the world, in a variety of ways:

· Genetic engineering: By introducing targeted genes from another organism into a plant’s DNA profile, researchers have opened up new approaches to developing strains of plants that are resistant to disease and pests, have greater nutritional value, or bear fruit that ripens more slowly (increasing the shelf life for shipping and sales). Those developments will help to increase both crop yields and offer consumer benefits.

· Vaccines: Biologically based vaccines may be the key to combatting a wide range of diseases that affect both humans and animals. The benefits of biovaccines are that they may prove to be less expensive, safer and more effective than traditional synthesized vaccines.

· Environmental protection: Biotech crops that generate greater yields will allow for more production on less acreage and with fewer inputs. That’s a plus for the environment, since it will relieve the pressure to increase arable acreage and protect existing natural ecosystems.

· Bio-based energy sources: Recent years have seen greater attention paid to alternative energy sources like solar and wind power. But biofuels have a long history as a promising source of cleaner, renewable energy. You’re likely already familiar with ethanol, a fuel made from corn, but there are a wide range of biomass products (such as algae, sawgrass, wood pulp and other biodegradable waste) that may be converted into usable energy sources.

In addition, don’t overlook the job creation and economic development benefits of a growing agricultural biotechnology industry. In the United States alone, ag biotech has created tens of thousands of high-paying jobs. A 2014 Battelle study developed for the Biotechnology Industry Organization breaks down the employment numbers for various bioscience fields. That study found that in the agriculture biotech sector, an estimated 1,800 businesses were employing 76,404 Americans in 2012, with jobs well distributed across the United States.

Like most bioscience jobs, these positions pay higher than the average worker salary — the average annual wage for ag biotech workers was $75,828.

And don’t overlook the larger scale benefits of biotech developments around the world. Among the most significant beneficiaries of these technological breakthroughs will be developing countries, where a safe and nutritious food supply is not assured, energy is scarce and environmental degradation is all too common.

Advances in biotech will open up new opportunities for improved living standards worldwide, as the Battelle/BIO study aptly summarizes: “Indeed, the promise of bioscience-based solutions to global grand challenges in human health, food security, sustainable industrial production and environmental protection provides an optimistic picture for the biosciences as a key economic development engine.”

Project Invested does not provide investment advice; the above article is an informational look at a critical and growing sector. If you’re interested in investing in the biotech sector as part of your diversified portfolio, talk to a professional investment advisor who can help you understand the risks and opportunities involved.