Future Farms Have Finally Arrived with Big Tech BackingDec18

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Future Farms Have Finally Arrived with Big Tech Backing

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Future Farms Have Finally Arrived with Big Tech Backing

Summary: Agricultural technology (agtech) financings have risen strongly over the last half decade and large-scale projects are finally coming to fruition with some of the biggest names in farming and technology, from DuPont to Google, backing them. Investments in newly cost-effective machine learning, virtual imaging, and hi-tech sensors are dominant among precision farming ventures, while indoor farming has finally begun providing fresh ingredients to urban and climate-restricted areas where crop production was long an impossibility.

With more than 9 billion people predicted to populate the planet by 2050, finding better and smarter ways to grow food is essential, especially since approximately 40% of the world’s crop load is lost (and so wasted) as a result of disease.

Indian agtech startup Imago AI is working toward leveraging phenotypic data from client firms, including DuPont Pioneer, to implement computer vision and machine learning processes that can fully automate the laborious task of measuring crop output and quality — eliminating the need for old tools like calipers and weighing scales, toward the goal of developing higher-yielding, more disease-resistant crop varieties – reducing the time it takes to measure crop traits by up to 75%. Essentially, what would take a farmer two days to manually measure the grades of their crops using traditional methods, Imago’s image-based AI can do it in just 30 to 40 minutes. In the most simplistic terms, the technology could suggest the best seed variety for a particular place and climate, based on a finer-grained understanding of the underlying traits. Since it can take seed companies between six and eight years to develop new seed varieties, anything that increases efficiency in the intermediate stands to be a major boon.

Going beyond phenotypic data and seed selection, in-depth soil analysis is also a growing trend in agtech. WinField United, a branch of Land O’Lakes Inc., began offering a crop model in 2018 that uses remote sensing. The farmer simply plugs in information such as the soil type, how much fertilizer was used, and what day it was planted. The software models the crop and gives the farmer information on when to expect the crop to be at a particular growth stage, and what the expected yield will be, Laney said. This type of technology can reduce costs by $15 to $20 an acre.

A split-field trial of Omnia precision farming software across three UK farms last season, conducted by Hutchinsons Crop Production Specialists, compared Omnia’s advanced approach with normal farm practices in winter wheat. It revealed that precision farming does pay, with an average yield increase across all three sites of 0.6 tonnes per hectare (ha). The extra yield equates to £99/ha, based on a wheat price of £165 per tonne. While farmers generally acknowledge that they can raise their yields by varying inputs across a field, such as raising seed rates in areas with poorer germination, many feel the process is not efficient enough without proper technology, and the cost of implementing such technology outweighs the benefits. However, the annual cost to utilize Omnia is only £5/ha, a fraction of the trial’s proven benefits. A subscription enables farmers to generate input application plans using different layers of information, including crop biomass data – from drones, machine-mounted sensor and satellite – maps showing differing slug and blackgrass pressure.

GroGuru, an innovator in precision agriculture and site-specific soil monitoring, announced this month that it has launched its 100% wireless underground system for precision soil monitoring and management. The GroGuru Wireless Underground System, or WUGS, allows farmers of annual field crops, like corn, wheat, cotton, and soybeans, to ‘permanently’ install soil sensors below the till depth. The GroGuru WUGS solution has a battery life of five years, which will allow farmers to get season-to-season and beginning-of-season soil sensor data, without the need for trenching cables into the field every year, which often creates variations in the data.

Even more crucial than increasing yields and lowering costs at traditional farms, efficiency can be gained by cutting down on transportation costs for agricultural products. According to research published in American Scientist, it takes 10 calories of petroleum-based energy to create a single consumable food calorie. Obviously, this level of relative inefficiency results in extra monetary costs to the farming industry, but perhaps more importantly, creates externalities at odds with global commitments toward reducing carbon emissions.

For years, vertical farming, building greenhouse structures upward instead of using land to farm horizontally, has been the most logical solution to bringing fresh produce to cities and climates that cannot sustain local crop production. It also offers advantages since the artificial environment can be manipulated; altering the color of lights in grow-rooms can change the smell, taste and even the vitamin content of tomatoes. For more efficient growth, switch on the red light; to develop shorter plants with higher levels of antioxidants, use more blue; and for a long-stemmed plant with fewer branches, turn on the dark red. The barrier, as with all new technologies, has been making it happen, and making it profitable.

That may be about to change.

Last year, MRP highlighted Deere & Co., DuPont, and Softbank’s investments of up to $305 million into startups and technologies in indoor farms as a huge step toward bringing agtech into the next generation. That wave of investment continues today with Bowery Farming’s latest funding round, led by GV (formerly Google Ventures), worth $90 million. Bowery has already opened two growing facilities in New York City, a key urban site which could strongly benefit from locally-sourced crops, and plans to use its latest funding on even more sites within the city through 2019. Bowery’s pesticide-free produce is currently used at Whole Foods, New York City restaurants, and Sweetgreen, a vegetarian franchise restaurant.

NYC lacks farming land due to its large-scale urbanization, but another key area set to benefit from indoor farming is the Middle East, a region of growing wealth, but not a lot of arable land and freshwater sources. The United Arab Emirates, for instance, imports 90% of its food supply. The aforementioned Softbank has been one of the first firms to seize on this opportunity. Plenty Inc., which was a recipient of a $200 million investment by Softbank’s Vision Fund last year, plans to start selling locally grown produce, including kale and other leafy greens, to communities in Abu Dhabi and Dubai early next year. Plenty will be competing with a $40 million joint venture by Crop One Holdings and Emirates Flight Catering who plan to eventually produce three tons of leafy greens, harvested daily, using 99% less water than outdoor fields, following completion of their new 130,000 square foot facility. Orbis Research expects the Gulf Cooperation Council (GCC) region’s vertical farming market to reach $1.21 billion by 2021 at a compound average growth rate (CAGR) of 26.4 percent from only $380 million in 2016.

Total financings in agtech reached more than $10 billion for the first time in 2017, triple its total from only five years ago. Going forward, these investments should lay the groundwork for a digital revolution in farming and agriculture like never seen before. Investors can gain access to agtech, as well as the food and beverage industry, via the VanEck Vectors Agribusiness ETF (MOO) and Invesco Dynamic Food & Beverage ETF (PBJ), respectively.

We’ve also summarized the following articles related to this topic in the Technology section of today’s report.

AgTech

• $1.2bn GCC vertical farming boom seen by 2021
• GV leads $90 million investment in Bowery to grow its indoor farming business
• Agriculture 4.0: How digital farming is revolutionizing the future of food
• The billion-dollar agritech start-ups disrupting farming

Markets

Yield Curve

Share prices can rise even after dreaded yield curve inversion

The recent dip of the US five-year Treasury yield below the two-year rate has reignited fears of an overall curve inversion, which is usually seen as a precursor for an economic downturn. But while, according to research by the Federal Reserve Bank of San Francisco, “every US recession in the past 60 years was preceded by a negative term spread”, the actual timing is much harder to predict. Historical evidence suggests it can take anywhere between six months and two years from when long Treasury yields drop below short-term interest rates for GDP growth to turn negative.

Research of central banks’ rate-raising cycles showed that share prices can even continue to rise for another year, as they did, for instance, after the US curve inversion in 2006. It then took a further six months before the recession set in. Yet, even as the overall stock market pursues its upward trajectory, defensive sectors can already start to outperform their cyclical counterparts — although this pattern has been more apparent in Europe than on the other side of the Atlantic. FT

IPOs

IPO Values Are the Other Thing That Sank in 2018

U.S. stocks closed at their lowest level since April on Friday, on mounting concerns about the economy. U.S. futures are bouncing this morning, while stocks are trading mixed in Asia. Euro Stoxx 50 futures are trading up 0.2% ahead of the European open.

The volatility this year hasn’t just been bad for the listed stocks — it’s also been an ugly period for initial public offerings in Europe. Everything turned against European stock issuers this year: growth started slowing, global markets collapsed, U.S. President Trump’s trade tweets, Italy’s struggles and Brexit spooked investors. Plus, investors just aren’t sticking around: no other major region in 2018 has seen such a mass exodus of equity investors, with European stock funds losing about $67 billion in outflows this year.

Europe welcomed just $35 billion worth of new European company listings this year, a drop of 37 percent compared with last year. That’s making 2018 the second-weakest year in terms of IPOs by value since 2013 (yes, it’s hard to imagine, but 2016 was even worse), data compiled by Bloomberg show. B

Politics & Policy

Cannabis

Gardner Amendment to Address Marijuana Reform?

Marijuana businesses in Colorado and across the country are anxiously awaiting a move by Sen. Cory Gardner, R-Colorado, this week that could completely transform the way they do business.

Gardner plans to introduce an amendment today that, if passed, would let cannabis businesses open bank accounts in states where they’re legal. It would exempt retailers from federal prosecution while still keeping cannabis a Schedule 1 drug, meaning it would remain illegal in the states that haven’t legalized marijuana for medical or recreational use.

“It would be monumental,” Cannabis Trade Federation CEO Neal Levine said. “It would fix our tax problem. It would open up a lot of new options for commercial banking services, and it would end the threat of the (Department of Justice) kicking in our doors and seizing our assets.”

The Strengthening the Tenth Amendment Through Entrusting States (STATES) Act is a bill Gardner and Sen. Elizabeth Warren, D-Massachusetts, introduced together this summer. Its purpose was to have federal laws basically mirror state laws when it comes to cannabis. The bill hasn’t moved much since it was introduced, so Gardner wants to attach it to a criminal justice reform bill working its way through Congress during the lame-duck session. PDP

Finance

China

China Sees Bankruptcies Surge; Bondholders May Get Less Back

China’s effort to cut the burden of insolvent companies weighing on its slowing economy has kicked into higher gear, with a slew of bankruptcy filings that’s set to enrich the case history of debt resolutions for bond investors.

Local courts have accepted or plan to accept at least five bankruptcy applications from firms that defaulted on publicly issued bonds since early November. That’s roughly on par with the number seen over the previous four years. The new pace may continue: China’s top planning body called on Dec. 4 for local officials to clean up the debt of firms with excess production capacity or insolvent balance sheets by 2020.

The bad news is that some bondholders may find they’re going to get less back from defaulted issuers than they anticipated. The good news: there’s likely to be swifter resolution once court procedures take over from ad-hoc work-out negotiations. And the process will give both creditors and debtors the chance to gain experience in restructuring obligations, little more than four years after China began embracing the concept of defaults in the world’s third-largest bond market. B *

Construction & Real Estate

Homebuilders

Homebuilder confidence hits 3½ year low as housing crunch worsens

The National Association of Home Builders’ monthly confidence index tumbled four points to 56 in December. The December decline took the sentiment index to the lowest since May 2015 and missed the Econoday forecast of a one-point increase. It followed a breathtaking plunge from October to November and brought the full-year 2018 average for the index to 67, one point lower than 2017.

In December, the index component measuring current sales conditions fell six points to 61, and the gauge of sales expectations over the next six months dropped four points, also to 61. The buyer traffic tracker fell two points to 43, its lowest level since March 2016. Any reading over 50 signals improvement.

NAHB’s index is often seen as an early read on new-home construction and sales. Indeed, the November sentiment plunge was followed by a new-home sales report that was the lowest in nearly three years.

Still, there are hints that green shoots may appear in the housing market in the new year. Consumer demand for purchase mortgages has been strong, and real estate agents have reported some post-Election Day bounces in traffic and interest. MW

Services

Plant-Based

McDonald’s Exec: “We’re Keeping Our Eye” on Meatless Burgers

The iconic hamburger chain McDonald’s could start serving up high-tech meatless burgers alongside its Big Macs and Chicken McNuggets. That’s according to Lucy Brady, the fast food giant’s senior vice president of corporate strategy, during Fortune’s Most Powerful Women Next Gen Summit in California this week. In reference to high-tech meatless patties like the Impossible Burger, Brady said that “plant-based protein is something we’re keeping our eye on.”

It’s not clear whether the burger chain would spring for an off-the-shelf vegetarian burger, like those made by Impossible Foods, or develop its own in-house. With the fast food market’s race-to-the-bottom pricing, a home brew option would probably be attractive: an Impossible Burger patty typically retails for about three dollars.

If it did add a meatless burger to the menu, McDonald’s wouldn’t be the first fast food chain to experiment with vegetarian cuisine. Burger King has offered a MorningStar Farms veggie burger for years, and White Castle debuted an Impossible-branded slider this year that Eater hailed as “one of America’s best fast-food burgers.” Futurism

Technology

AgTech

$1.2bn GCC vertical farming boom seen by 2021

A growing importance is being given to vertical farming across the GCC and is generating interest and increased investments from regional and overseas players, according to a new report. Orbis Research said the region’s vertical farming market is expected to reach $1.21 billion by 2021 at a compound average growth rate (CAGR) of 26.4 percent from only $380 million in 2016.

It said the UAE is leading this change and has upcoming projects facilitated by the government as well as private players to help increase food security in the region. These include the UAE Ministry of Climate Change and Environment allotting space for 12 vertical farms to be built by Shalimar Biotech Industries, and the world’s largest vertical farm for Emirates Airlines by Crop One Holdings Inc.

With around 90 percent of food being imported in the UAE, territorial problems of water scarcity and small percentages of arable land, vertical farming is becoming increasingly vital to ensure food security within the region, the report added.

Mariam Al Mehiri, Minister of Future Food Security, also plans to create a “Food Valley” or a technology hub, dedicated to the development of food and farming automation.

The report comes ahead of AgraME 2019, a platform for the latest technology to be showcased to the regional agribusiness market. ArabianBiz

AgTech

GV leads $90 million investment in Bowery to grow its indoor farming business

Vertical farming company Bowery Farming today announced the close of a $90 million funding round. The round was led by GV (formerly Google Ventures) with participation from Uber CEO Dara Khosrowshahi.

Bowery has opened two growing facilities near its headquarters in the New York area since the company began operations in February 2017. The funding announced today will be used to open new facilities in additional not-yet-named cities by the end of 2019 and to support advances in company tech and innovation. Bowery produces pesticide-free produce that is used at Whole Foods, New York City restaurants, and Sweetgreen, a vegetarian franchise restaurant that closed a $200 million funding round last month.

With global populations rising and more people living in cities than at any other time in human history, indoor farming has risen in popularity. The onset of climate change has also inspired companies like Bowery and others in cities like New York and Tokyo to explore growing food in or near urban centers to ensure a low carbon footprint. VB

AgTech

Agriculture 4.0: How digital farming is revolutionizing the future of food

Technology is changing the world, and farming is catching up. The introduction of everything from automated farm equipment to a wide array of Internet of Things (IoT) sensors that measure soil moisture and drones that keep track of crops have changed the business of agriculture. Some experts even call this movement “Agriculture 4.0″—a term used by the World Government Summit.

A digital farm is more efficient and sustainable than its counterparts of the past. On a smart, digital farm, crops are likely grown using precision agriculture, tractors might be self-driving, the harvest could be determined by digital imagery of the fields, and the farmer is typically working with an agronomist to provide technology know-how.

At Purdue University in West Lafayette, IN, the Agronomy Center for Research and Education (ACRE) is constantly assessing better ways to farm to increase yields and improve efficiency, with sensors collecting 1.4 petabytes of data daily.

Land O’Lakes is sending out technology specialists from its subsidiary, WinField United, to show co-ops such as Crafton Farms in Tennessee better ways of farming.

And indoor farms such as Plenty in San Francisco and Jones Food in Europe are farming on vertical racks in massive indoor facilities that significantly reduce the carbon footprint needed to grow food. TR

AgTech

The billion-dollar agritech start-ups disrupting farming

Growers in the US have traditionally relied on a distribution system where they had little access to comparable data and opaque pricing of everything from seeds to fertilisers to pesticides. But the combination of falling prices amid bumper crops, consolidation of agricultural groups and the US trade war with China has forced them to seek ways to shore up revenues.

An increasing number of US farmers are exploring alternative ways of purchasing seeds and chemicals as well as data and insights. With 7,000 members — accounting for 28m acres of farmland, about 3 per cent of the US total — FBN provides extensive crop, seed and other agronomic data, plus a marketing and ecommerce platform for grains, offering more price transparency for fertilisers and pesticides. It has in effect become a social media platform for the exchange of farming knowhow.

Backed by investors such as Google’s venture capital fund and Temasek, Singapore’s state investment fund, the California-based company is among a handful of agricultural start-ups looking to establish themselves as independent businesses, rather than be swallowed up by larger agricultural groups.

Traditional agricultural businesses do not offer their farmer customers comparable crop data, whereas FBN offers members who pay $600 a year aggregated numbers on efficacy and yields of various seeds, fertilisers and pesticides in different soil types and geographies, helping them make buying and planting decisions. FT *