Investing
How to increase the global food supply
A growing demand for more and better food, combined with supply constraints, are creating an immediate multi-billion-dollar opportunity for innovation and investment in agricultural technology.
The need is great and rising: Population growth and rising incomes are driving what is expected to be an exponential increase in global food requirements. As the world’s population approaches 10 billion by 2050, demand for agricultural output will rise by roughly 50% from 2013 levels.1
Desire, too, is increasing. As people’s income levels rise in many parts of the world, they want more and better quality food and more protein. Meat production is expected to double by 2050. Yet producing beef requires 20 times more land, and emits 20 times more greenhouse gases per unit of edible protein, than growing plants does. If cows were a country, they’d already be the third-largest greenhouse gas-emitting nation.2
In fact, sustainably meeting the demand for more food is one of the greatest challenges of this century.
Innovating
Hundreds of companies—from start-ups to global market leaders—are already involved in the agricultural technology (ag tech) industry seeking to develop and pilot solutions for more efficient food production.
Many of their advances focus on increasing crop yields, using technologies from big data to bioscience. Others are creating new ways of producing food altogether, such as indoor vertical farms or plant-based alternatives to meat. For example:
Autonomous vehicles, robots and drones may transform the farm landscape, creating efficiencies by reducing the manual labor traditionally required.
- Tractors and other vehicles may soon drive themselves while robots will weed and harvest fields. There is scope for even more efficiency if large farm equipment migrates to a sharing platform similar to the car-sharing platforms that consumers use.
- Drones can produce 3D maps to help farmers plan their seed planting patterns, manage irrigation and nitrogen levels in the field, spot diseases, identify water needs and even remotely shoot pods containing seeds and nutrients into the soil. The market for drone-powered solutions is estimated to be $325 billion.3
Bioscience and biotechnology offer many innovations aimed at improving crop yields, whether through improved pest resistance and climate resilience or more efficient resource use.
The industry now includes:
- Biologics—creating substances from biological material
- Biopesticides—controlling pests with micro-organisms or natural products
- Biostimulants—using agents to boost plants’ nutrient intake
- Crop protection—using chemicals and seed technology
- Vertical and indoor farming—growing without sun or soil in a fully controlled environment
- Next-generation fertilizers— using waste as an input, designed to regenerate and emit fewer greenhouse gases
Investing
Ag tech is rapidly developing, with opportunities to invest at many stages. The industry includes ag biotech, farm management software, farm robotics and equipment, bioenergy and biomaterials, novel farming, agribusiness marketplaces and midstream and innovative food.4
Traditionally, much of the investment in agriculture has been through internal research and development (R&D) efforts at agribusiness companies. But a survey of these executives showed that most would like internal R&D to account for only 40% of investment and would like half of investments to occur through external partnerships and mergers and acquisitions.5
Venture capital (VC) is one of the main channels for external investment in ag tech. The broad ag tech industry raised $16.9 billion in VC funding in 2018, a record-breaking year. Upstream ag tech opportunities (in areas that are closer to the farm rather than the consumer) grew by 44.3% from 2017 to 2018, reaching $6.9 billion invested in 809 deals.6
But investors also can find opportunities in the public markets. Many large cap public companies are involved in agrifood through specific divisions or by investing in start-up companies. These can include companies across industries as diverse as technology hardware and software, biotechnology, farm equipment, chemicals and agricultural products.
Be sure to speak with your J.P. Morgan Advisor how you might invest in ag tech—and the future of our world’s food supply.Footnotes:
1 “The Future of Food and Agriculture: Trends and Challenges, Food and Agriculture Organization of the United Nations, 2019.
2 Ibid 1; “What’s after what’s next? The upside of disruption: Megatrends shaping 2018 and beyond,” EY, 2018.
3 “Clarity From Above: PwC Report on the Commercial Applications of Drone Technology,” PwC, May 2016.
4 “Agfunder Agrifood Tech Funding Report: Year Review,” AgFunder, 2018.
5 Decker Walker, Torsten Kurth, Jonathan Van Wyck and Melissa Tilney,”Lessons from the Frontlines of the Agtech Revolution,” BCG, October 2016.
6 BCG, 2016.
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