Innovation Needed in Agriculture and AgTech
Innovation is needed within the agriculture industry to ensure we can sustainably feed an estimated 10 billion people by 2050. We have already seen a lot of innovation within food in terms of alternative proteins and burgeoning adoption of plant-based meat with brands such as Beyond Meat and Impossible Foods. While these new alternative products will play an important role in sustainably feeding a growing population, change is also needed within the traditional agriculture sector.
Farmers in the U.S. are struggling financially even though food prices have been increasing. For every dollar a consumer spends on food, farmers receive only 14.6 cents, on average. The average median income for farmers is negative and the majority of farmers work off-farm jobs to subsidize their income. In light of these challenges, we set out to understand what trends are impacting the agricultural sector as well as where innovation is most needed and most likely to occur in the next decade. After speaking with AgTech investors and industry experts, we identified three key areas to consider for the future of AgTech investing.
Services for new, younger farmers and liquidity in farmland real estate
There is a lack of young farmers and the young farmers that do exist need more support. The average age of a farmer in the US is 57.5 years old and roughly a third of farmers are over the age of 65. Only 9% of farmers are 35 years old or younger and 65% of them are working multiple jobs to keep things running. There are several barriers to entry to farming including the fact that it is so capital intensive and farmer’s net worth is usually tied up in their land. As current farmers age, there will be a lot of farmland changing hands in the next 10–15 years. We’re already seeing innovation in increasing the liquidity of farmland with startups such as Farmland Finder, Farm Together, Acre Trader, Go Stewards, and Tillable trying to facilitate investments in farmland and make it easier to rent farmland. New solutions are needed to support new farmers, reduce the upfront capital needed to start a farm, and help farmers increase profitability.
Digitization for smallholder farmers
While the U.S. leads in terms of digital adoption in agriculture, there is a lot of room for digitization internationally. Smallholder farmers play a significant role in the world’s food system, producing 70% of food consumed worldwide. However, lack of access to capital poses a significant threat.
Digitization and disintermediation are already happening outside of the US, but there are opportunities to provide additional value and leapfrog older farming practices and the challenges associated with those practices. Some startups are already taking advantage of this. For example, Agrofy is an online marketplace in Latin America connecting buyers and sellers of a wide range of agriculture products from machinery to financial services. Hello Tractor is focused on improving food and income security throughout sub-Saharan Africa by operating a farmer equipment marketplace.
Innovation for grocery stores and restaurant operators
Perhaps not surprisingly, there is also a need for innovation and additional digitization for grocery stores and restaurant operators. The COVID-19 pandemic brought food supply chain issues to the forefront with consumers frustrated with empty shelves at grocery stores while farmers were forced to throw away perishable food due to supply chain disruptions. Grocery stores and restaurant operators will need to be able to quickly adapt to new shifts in channels and better detect and adapt to shifts in demand. Foodshed.io connects farmers with additional produce to grocery stores while Full Harvest is developing a marketplace for foodservice customers to purchase food that does not meet retail quality but is still edible. We expect there to be continued innovation and digital adoption related to the food supply chain.
