Necessity is the mother of invention
Never has there been a more accurate statement for the current state of the agriculture sector. Rapid population growth, sporadic climate change, depleting resources and arable land, exclusive economic growth, and so on have ultimately lead us to the era of Ag-tech, the use of technology in agriculture to improve efficiency, profitability, and well-being. In order to tackle these challenges, innovation and technology are essential, necessary, inevitable, really any adjective that emphasizes the dire need for technological intervention to secure a planet for future generations. Investors worldwide are paying a considerable amount of attention to Ag-tech as it becomes clear where the future is headed. It’s agriculture’s time to shine in the financial arena and here are a few reasons why you should pay close attention as you position your portfolio.
Food. Investing in agriculture is investing in food. One way or another, your financial contribution to the agricultural sector will influence food, whether it’s production, security, trade, etc. It’s safe to say that food has always been necessary for mankind but never has it been so, well, relevant. And, no, we don’t mean food blogging.
You’ve heard it once and you’ll hear it again: food security. The world consumes, on average, 2,600 bushels of grain crop per second, that’s almost double what we ate in 1974. That amount could easily double to 5,200 bushels per second over the next 20 years. By 2050, the world population is expected to reach 9.7 billion and will require 70% more protein than is currently available. This means many more mouths to feed, which is unquestionably a growing priority among developed and developing countries. As it stands, traditional agricultural methods will not sustain the growing population. Innovators worldwide have begun to develop effective technology for finding ways to not only produce enough food but quality goods as well. NewLeaf Symbiotics, one of the many Ag-tech startups turning heads this year for their groundbreaking research, combine bacteria and seeds in order to generate higher yields and healthier produce. Simple economics show us that, with food security increasingly becoming an an international objective, it is possible for investors to help increase the amount of technology products available to farmers as they search for new ways to produce more food.
While population growth is the top reason why the agricultural sector is guaranteed to give you high returns, farmable land scarcity is a close second when considering agricultural investment. As arable land decreases daily, investment is essential for exploring new techniques to generate more output from land. All the technology in the world won’t mean anything without the proper land to cultivate. Being aware of land value will prove to be rewarding. These inevitable advancements will generate high returns for those quick enough to get on board.
Government Support & Policy Reform. When you invest in Ag-tech, you are not alone. Worldwide, governments and financial institutions are making great strides to lower risk and strengthen the confidence of investors in the long term. The last couple years have seen a surge of government participation in agricultural investment and positive change in policy infrastructure such as domestic and regional laws and regulations, implementation of trade agreements, and transparent regulatory systems.
By securing property rights, developing rural infrastructure and public services, and ensuring that their institutions are functioning, governments are aiding the development of emerging partnerships between the public sector, private sector and communities that aim to promote agriculture and rural development, poverty reduction, food security and nutrition. This kind of reassurance will make even the skeptic investors notice that these are not wobbly investments but rather long term geopolitical goals. For developing countries especially, it is in their best interest to make their countries more attractive for private-sector investment and financing to achieve higher productivity, increased food availability, employment creation, poverty reduction, technology transfer and access to capital and markets.
Increase in Trade. What is agriculture without a little trade? Or, at the rate the agriculture market is becoming globalized, a whole lot of international trade. Trade has now become a significant component of food security efforts and the broader agricultural development agenda and is seen as the only viable option to feed the world's population. Investment in agriculture production and trade address imbalances of supply and demand and make food available in world markets in order to satisfy the growing demand for agriculture.
While it may seem that a shifting trade landscape would create uncertainty for investors, investing in agricultural technology is overwhelmingly beneficial specifically because of the changes in commodity trading resulting from altering demographics, increasing average incomes, diet trends, low food stocks, high energy prices and hasty alterations in climate. As international trade continues to increase, and it will because of the demand of a growing population and more geopolitical support worldwide, technology and innovation will become fundamental. Ag-tech startups, such as Avenews-GT, are determined to streamline the trading process, currently handshakes, paper trails, and plenty third-party intervention, by allowing commercial sellers and buyers of agricultural produce to transact digitally on a holistic trading platform based on blockchain technology, which empowers more participation in the global market.
Diverse Investment Opportunities. Alright, alright, you’re convinced, investing in agriculture is a bonafide money-maker. So that bring us here: in what to invest? Be assured that whichever way an investor decides to invest, some of the best returns this decade will be from investing in agriculture, technology, and companies that keep us supplied with water, food, and energy. Lucky for us, there are a growing number of options to gain exposure to the agriculture sector.
There are some obvious choices, which drove growth in 2017, such as e-commerce, precision agriculture (in particular drones and robotics), and irrigation and water technology. These types of investments confirm that Ag-tech startups such as FieldIn, a software company devoted to helping specialty crops growers mitigate pests, have caught the attention of not just venture capitalists, who have increased investment by 80% annually since 2012, but also impact investors, individuals, family offices, institutions, and strategic players.
Recently, investment in more diverse, niche technology and services has also made headway. For example, data collection and processing, autonomous robots, rapid phenotyping, gene editing, agricultural bio-science, data-enabled agriculture, automation and robotics, supply chain and logistics, agricultural processing, bio-fuels, and alternative business models. Simply, there’s room for everyone.
Poverty Reduction. What’s better than seeing high returns on your investment? Making money while helping people. Investing in Ag-tech has a strong role to play in poverty reduction because it helps create markets for the poor, add value to primary agricultural products, lower costs of technology, and increase employment opportunities.
Consider this as you position your investment portfolio: it has been proven that investment in agriculture is more effective in reducing poverty than investment in non-agricultural sectors. As mentioned before, public investment and government intervention stimulates the positive conditions that can attract further private investment. These benefits include generating demand for food and other rural goods and services from poverty-stricken nations. This in turn creates more employment opportunities for poor rural people.
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