Global Agriculture Challenges and Innovation Trends

The world will need to double its food production by 2050 to meet the demand in food consumption. India will be the most populous country by 2027. India requires a significant surge in food production over the next two decades. India is most endowed, with the world’s largest arable land, 1.75 times that of China and marginally higher than the USA. India has varied agro-ecological zones, with the most extensive stretch of tropical farmland with year-round food production combined with semi-temperate agriculture zones. India can be the food basket of the world. Indian policy planners realize the need for India to accelerate agriculture production to gain a quantum jump in marketable produce.

Ensuring the diversity of crops is embedded in the overall nutrition goal for all. India has lagged enormously in agriculture technology absorption with stagnant productivity in large acreage food crops, horticulture, and allied cropping systems. India occupies the top three slots in acreage grown for food crops while lagging in productivity. China, the most populous country, has twice the productivity of India for most food crops. Bangladesh has higher productivity in rice compared to India. India is also racing to reduce its carbon footprint, as agriculture is currently a significant contributor to the carbon footprint with the highest vulnerability to climate change.

Innovation Explosion in Global Agriculture

In the last two decades, the surge in innovation has exploded products in the farm input sector with improved genetics and farm productivity enhancement solutions. The rise in productivity is already evident in food crops and horticulture crops in several technology-rich countries. The applications have resulted from deep investment in research to create improved genetics, applying molecular discovery tools, and deploying data science to advance innovations to markets in farm input products contributing to a quantum jump in output. Molecular science advancements have demonstrated farm productivity enhancement over two times for several row, fodder, and horticulture crops in the last decade. Rapid sequencing and gene discovery with gene-editing technologies contribute to enhanced nitrogen use efficiency, disease resistance, and higher productivity with output traits in market preferred forms. These discoveries have also been delivered to farms with unprecedented speed due to regulatory clarity in disseminating technologies in countries embracing these technologies. Practical demonstration of these discoveries has attracted unprecedented investment in crop science in the last decade, with the USA, followed by China, leading the thrust for technology adoption. In Europe, the natural resource is well preserved, while gene editing and other biotech tools have not been applied due to general aversion to such innovations. Higher knowledge of the plant and environmental microbiome has provided newer tools to adopt novel plant nutrients and plant protection products to enhance productivity. The application of big-data-driven discoveries in developing unique seed traits, crop nutrition, and crop protection products has contributed to an unprecedented surge in productivity in Northern America and Northern Europe.

In Asia, China has leapfrogged with productivity increase in crops perceived as economically important. In horticulture, China has excelled in developing global dominance. In apple, China competes in productivity, duly adopting rootstocks and genetics from international sources and accomplishing productivity levels higher than other dominant apple-growing countries. China has also contributed to the highe st investment in agriculture research with the public and private sectors, contributing to increased investment in several facets of agriculture and food research, triggering improved farm input products such as seeds, crop nutrient solutions, crop protection solutions, and farming solutions for optimizing factor productivity.

Process innovations have contributed to high-quality protein for human and animal consumption from multiple sources. Cutting across the input and output sector, information technology and digital innovations combined with the advent of imaging technologies have enhanced the effective application of crop input optimally while providing better access to food for consumers with a highly efficient supply chain. While the impact of such technologies in predicting and preparing for increasing weather volatility is evident, the large-scale adoption of such technologies is effective in regions where there is no constraint of input such as seeds, nutrients, crop protection products, and farm mechanization.

In the last decade, global attention of venture capital and private equity investors have focused on deepening innovation in agriculture and food systems with the advent of computational biology, molecular innovations with cell and gene technologies for rapid identification of valuable genes, microbes, and biomaterials that can enhance crop productivity and produce value.

In addition, process technologies that can provide meat substitutes from plant and non-plant origins have taken center stage in the food arena. Global Venture Investors have focused primarily on advanced crop improvement innovations investing over US$ 23.8Bn during the last three years in plant biotechnology, computational biology, and molecular biology tools (gene discovery, high throughput selection, gene editing, plant microbes’ selection, pyramiding, et al.) and creating a new generation of processed food such as alternate plant-based meat substitutes (Figure 1). A breakthrough innovation in cell-based meat substitutes, has remained a favored investment by Venture Investors in the USA, Singapore, China, and Northern Europe.

Figure 1 - Global PE/VC ag-food Tech investment trend 2017-21 (US$Bn)
Source- Pitchbook

From 2010 onwards, corporate and private equity / venture capital investments in the US and parts of Northern Europe also focused on advancing big-data-driven tools for managing farm productivity with the convergence of farm-specific and environment-related data for farmers, making informed decisions in optimizing farm inputs with higher predictability of output. Early innovators such as Climate Corp (2013) were acquired by multinational companies that have taken these solutions to integrate with their product delivery strategies as complementary services to farmers. However, while the investments have ramped up in digital farm management and productivity enhancement tools during the last decade, they are currently on a declining trend as independent service providers have found it difficult to compete with large corporate houses which have very well imbibed such services in their profile (Bayer, John Deere, et al.).

A surge of early-stage companies engaging in biotechnology for crop improvement has proprietary platform technologies and food value addition, focusing on sustainability. They are fueled by a rise in private equity / venture capital investments and the interest of large corporate houses in investing in them. In addition, some large corporations have earmarked funds for external research, encouraged by the start-ups demonstrating high-throughput results in the frontier areas. with a total investment of US$ 2.4Bn in the first three quarters of 2021.

Pivot Bio secured US$ 430Mn, and Benson Hills secured US$ 150Mn, with a significant surge in valuations. Other key investment segments such as precision vertical farming (US$ 320Mn in Bowery farming) have thrived on urban demand for fresh produce and the investor interest to perceive large-scale urban farming opportunities in temperate and semi-temperate regions. However, investment in digital solutions for farm management and farm produce aggregation were not predominant focal elements. Overall, AgTech enterprises raised a record funding in 2021 in the USA, though the surge was not commensurate to the record surge witnessed in other technology- related investment segments. 2020 and 2021 remained banner years for start-up investment (Figure 2).

Figure 2 - Region wise trend AgTech share (%) in total PE/VC- 2017-21 investment 2017-21
Source - Sathguru analysis based on industry sources

In agriculture, biotech companies, engaged in novel plant breeding, genetically engineered crops, and plant-microbe-based input solutions, have received substantial funding of US$976 Mn just in the third quarter of 2021, with a total investment of US$ 2.4Bn in the first three quarters of 2021

Western farmers face challenges on two counts – pressure from produce buyers and governments who demand reduced greenhouse gas emissions and the impact of climate change that makes growing conditions unpredictable with varying yields. Investment in crop improvement innovations and value-added products is at a frenzied phase to find solutions to these problems. Innovations in nitrogen fixation, crop output enhancement, and alternate protein sources have demonstrated near-term impact and commercially scalable solutions. Food products such as alternate protein have found market demand, but the competition has caught up quickly to challenge early success companies to stay competitive.

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