In this episode of Voices of the Valley, Seana Day, Partner with Culterra Capital and Venture Partner with Better Food Ventures, joins Dennis Donohue and Candace Wilson to share her perspective about the need for digital systems to better utilize farmers’ time, information and resources.

“When we think about the role of technology and optimizing our assets, our resources, it just doesn’t make sense to me why more companies aren’t thinking about integrating those technologies…it’s always surprising to me how much loss or waste operators are willing to assume as just a cost of doing business,” Day shares.

Day also speaks about the growing need for a workforce trained in the unique environment of an agricultural organization and how important it is for those working in specialized roles to integrate with one another and the software that’s available.

“I’m looking at all of this information and it’s siloed,” Day says. “It’s so disconnected. It’s so analogue. It’s all done on pen and paper, and it takes forever. Making any kind of remotely real-time decision – let’s be honest, there’s a lot of risk. You leave revenue on the table. Your costs are inflated. There’s more risk than there should be because we’re not able to access information…to make those swift decisions.”

As Venture Partner, Day also offers insight into the three things that stand out to her when she’s assessing startups and what sets the two-to-four that are chosen apart from the hundreds that apply.

Click here to listen to this week’s episode.

Controlled Environment Agriculture (CEA) remains a very controversial and high-profile space. As one of the largest investment categories in AgriFoodTech, vertical farming and greenhouse startups have received over $7 billion in venture investment the past five years.

Companies like Plenty, Bowery and AeroFarms have received large investments in part because of the media’s over-hype of the entire space. Vertical farming, in particular, has been seen as a game changer for food production and positioned as a fully buzzword-compliant Farming 2.0 offering that meets all of the modern consumer’s requirements around sustainability, locally grown, traceability, and organic (or at least organic-equivalent) production.

But a funny thing happened on the way to the finish line after investors wrote all those checks. It turns out that vertical farming is not all green fields and unicorns – in fact, it turns out that almost all vertical farming products end up competing on the way to the customer with a lot of Western Growers members that have worked hard to optimize supply chains and relationships with the person buying food in stores and restaurants.

The lack of a clear go-to market strategy around products that taste great, are priced right, and are something consumers want to put in their shopping cart or on their plate is hurting a lot of well-funded vertical farms – and that should not be a surprise. There will be a few winners in vertical farming and green house operations, but there’s going to be a lot of bad investment outcomes as well.

All the investors and founders who didn’t understand the competitive dynamic of the food space now have a huge clean up on Aisle 10 (and 11 … and 12).

To read more from WG’s VP of Innovation Walt Duflock, visit his blog. 

Labor remains a top challenge for specialty crops, and it’s getting harder to find. U.S. farmworkers decreased by 70 percent in 70 years, regulatory costs increased 795 percent in 12 years, and U.S. H-2A labor increased from 48,000 in 2005 to 300,000 in 2021—which add transportation and housing costs. Innovation remains the best solution to turn manual tasks like planting, weeding, thinning, harvesting and spraying into automated tasks with mechanization and automation.

So what does the market look like in early 2023? Weeding is the leading robot category for the moment. Carbon Robotics, Stout AgTech and FarmWise are all delivering solutions that provide growers with quality economics. Carbon Robotics has raised $36.8 million and has a one-year order backlog for $1.4 million laser weeding robots that break even at two years or less with 3,000–4,000 acres of production. FarmWise has raised $65 million and is in multiple regions with a weeding-as-a-service option that is price competitive with labor crew economics. Stout AgTech just got a 10 percent investment from CNHI and has sold over 25 mechanical cultivators for around $350,000 each, and its machines can also return a payback to the grower of less than two years. In addition to these, Verdant Robotics just raised $46 million and Naio just raised $33 million, so increasingly the segment is finding capital to help scale out the number of robots in market.

Harvest Assist is also beginning to scale. The best use case for this is Burro, which helps table grape crews by increasing their logistics efficiency by moving harvested product back to the truck via use of an autonomous small platform tractor. The efficiency gains are often 15-30 percent and provide growers with a 6-12 month payback depending on usage and acre count. Burro sells $10,000 robots and has over 100 robots in market with plans to manufacture several hundred more in the coming year.

Spraying automation solutions are one of the emerging areas approaching quality grower economics. GUSS is one of the early leaders offers GUSS sprayer machines for vineyards and orchards, a smaller Mini GUSS for easier turning in smaller fields and Herbicide GUSS. Also delivering an on-the-ground spraying solution is Robotics Plus, which launched in the U.S. market this quarter. Both appear to offer quality economics for growers. In addition to GUSS and Robotics Plus, Rantizzo offers a drone-based spraying solution with competitive economics to tractor-based spraying options.

On the other hand, harvest robots are still in the relatively early stages of product development, testing and roll out. Harvest is proving to be harder to develop than weeding because each crop requires its own robotic solution and the end effectors that pick the fruits and vegetables have to be significantly more gentle with them then weeding robots, which can just destroy weeds. None of the harvest robots have yet gotten to scale, and most have raised $25 million or less (as compared to the weeding robots, which as mentioned above, have been successfully fundraising over the past couple of years.)

So that’s the state of play with specialty crop automation—if you’re looking for weeding, harvest assist or spraying solutions, there are good options with good economics available. On the other hand, if you’re looking for harvest robotics, keep an eye out for emerging players but they are likely a few years away from getting to market at scale.

D’Arrigo California will be celebrating 100 years of business in 2023, and Chad Amaral, Vice President of Sales and Business Development for D’Arrigo and newly elected Western Growers Board Member, has been with the company for 25 of them.

Amaral recently attended his first WG board meeting at this year’s 96^th Western Growers Annual Meeting. He described the experience of engaging with today’s agricultural leaders who are driving the association and moving the industry forward as nothing short of inspiring. For Amaral, WG has been integral to the agricultural industry and an important association to D’Arrigo, which has been a member of the association since the 1930s.

“In the short time that I’ve been able to interact, the association and board of directors have been extremely welcoming and supportive. My goal is to assist and contribute to the progress Western Growers has and will continue to have in advancing the various aspects of the agricultural industry,” Amaral said.

Born and raised in Salinas, Calif., Amaral graduated from Cal Poly San Luis Obispo with a degree in agricultural business and management. “If you’re from Salinas, you know agriculture is a big part of the community, so once I graduated, I knew it was something I wanted to get into,” he said. It wasn’t too long before he landed a job with D’Arrigo on the sales side, eventually rising up the ranks to become the company’s Vice President of Sales and Business Development.

“I started my role closely interacting with our customer base in the segments of wholesale, food service and retail and understanding their needs. As I’ve gained more responsibility, I’ve focused a lot of my efforts on having a better understanding of our business as a whole and looking for ways we can collectively interact and bridge gaps between different departments so we can work more synergistically,” he said.

While Amaral describes himself as having a Type A personality and appreciates structure and planning, he also recognizes that the agricultural industry is in the midst of a lot of change. “The world has become a small place in that the buying and supply community is shrinking. I think there’s going to be a need for more collaboration, and I’m looking forward to being a part of conversations that bring those segments of the business closer together and educating both sides. People operating in silos will be a thing of the past, and what used to be competitors in the past could become partners in the future,” he said.

As far as getting elected to the Western Growers board this year, Amaral said one of his major goals is not only contributing to a traditional history, but also coming up with solutions for the future. “When you think about the ag community, you think a lot about tradition and family-owned companies. Moving forward, I think there’s an opportunity to use and understand the history of agriculture and at the same time, evolve into something that allows you to be fluid and flexible so you can remain relevant in the industry.”

Amaral considers being a part of the WG board as an opportunity to acquire further insight into areas of the industry he hasn’t been exposed to previously while also gaining a better understanding in aspects that are pivotal to the evolution and advancement of agriculture, such as labor, water and innovation.

“The board members are established and reputable individuals within the industry, and I’m looking forward to learning from all of them and hearing about their experiences,” he said. “They’ve created strong foundations in agriculture, and being part of an incoming group, I want to build upon the foundations they’ve created.”

Civil Eats put out an interesting Op-Ed on January 23 entitled “Want an Agtech Revolution? Center Farm Workers’ Expertise. It’s primary narratives are: (1) Agtech robots are coming to take all the farmworker jobs; (2) Agtech startups are targeting farmworkers for replacement and will eliminate tens of thousands of jobs across rural America; and (3) farmworkers should be part of the discussion process around AgTech innovation. My responses: (1) no, and this is a large misunderstanding of the farm labor dynamic; (2) no, startups are positioning a market opportunity, not planning on killing jobs; and (3) yes, farmworkers are already part of the discussion in multiple ways. Let’s dive into each of these points.

Agtech robots are not coming to take all the farmworker jobs.

The first premise is that Agtech companies who are regularly raising capital from Silicon Valley investors, Agtech investors, and strategic investors, are openly targeting farm workers for replacement and will eliminate tens of thousands of jobs across rural America. Having helped many startups build pitch decks around automation, and having reviewed many others that make the same or similar pitches, I can tell you that this is not the case.

The reality is that automation startups are needed in Agtech because there is already a gap between the labor that specialty crop agriculture needs and the labor that is available, and that gap is only getting worse with time. Finally, the gap is going to increase even more and potentially accelerate if trends around organic growth and restrictions on the use of chemical inputs. Let’s take a look at some of the available data to back up this claim.

So how do I know that Agtech automation is not taking away any jobs? The first data point is to find out what has been happening to the available domestic farm workers over the last several decades. This graph from USDA tells the tale. From 1950 to 2000, family farmworkers decreased from 7.6 million to 2.1 million as many small family farms got sold and the family farmworkers that worked on those farm stopped working on those farms. At the same time, hired farmworkers (which includes those paid for directly by the farmer and those employed by farm labor contractors) decreased from 2.3 million to 1.1 million. In short, agriculture lost almost 70 percent of the farmworker labor force over 50 years.

The labor shortage has been an ongoing challenge for years. This reduction in farm workers is a big problem because specialty crops are some of the highest value crops and they require some of the highest amounts of labor to do a variety of activities — including planting, thinning, weeding, spraying, and harvesting. If there are less farm workers, there is less labor available to get all the work done on the fruits, nuts, and vegetables that represent a lot of west coast agriculture, which is much more labor-intensive than mid-west crops like corn and soy. So the labor problem is felt more severely in the western U.S., specifically California, which produces over $50 billion in ag products annually, with many of those dollars coming from fruits, nuts, and vegetable growers. If they can’t find enough labor to harvest, all the prior work to get things planted and grown goes for naught.

To respond to the shortage, increasingly specialty crop farmers have to rely on immigrant farmworkers. This labor comes into the U.S. via H-2A permits given by the U.S. Department of Labor. The growth in H-2A labor by U.S. farmers has been significant the past couple of decades.

Source: USDA, Economic Research Service using data from U.S. Department of Labor, Office of Foreign Labor Certification

The graph above shows the growth in the H-2A program by segment. The growth has been even more significant when you extend the time frame from 2005 to 2021. The overall growth in that time frame was from 48,000 to 317,000 H-2A workers — a 6x lift in 16 years. This growth was driven by the lack of available domestic workers inside the US and the need to find more labor somewhere outside the U.S.. For most U.S. farmers, the move to hire H-2A workers comes with a steep price.

When a U.S. farmer cannot find domestic workers and needs to shift to H-2A workers for part of their workforce, it adds significant costs to the cost of ag labor. First, the H-2A employer has to pay for housing for the H-2A workers. Many of the housing units in the Salinas Valley and other agricultural areas range from 400–800 worker capacity and resemble a college dorm or apartment floor plan. In the Salinas Valley, the cost for many H-2A housing complexes ranges from $10–15 million and they take years to get permitted and built. In Monterey County, where our ranch is located, H-2A housing complex permit applications have been some of the most divisive conversations in county politics the last couple of decades. Divide that cost by the workers housed each year and the number of months they are in the housing complex to get a feel for the increase housing makes to the cost of a farmworker. Then add in the transportation cost to and from the field where the work occurs, and for many H-2A complexes meals are provided daily.

So the domestic work force is declining and has been for decades, the growth in immigrant labor is increasing and has been for decades, and the increase in labor cost from H-2A program costs (housing and transportation) are combining to make the labor problem even more challenging for farmers. Just to throw one more wrinkle into the H-2A process, consider Shay Myers from Owyhee Produce. Shay applied for H-2A labor to help him harvest asparagus in early 2021 and when it became apparent that permit delays due to bureaucracy would prevent the labor from arriving in time and that the asparagus would be lost and have to be destroyed, Shay began a social media campaign to raise awareness of his problem and invite the public to come pick the asparagus since he would not have any labor to help.

Shay is a great story teller, ag advocate, and has a large social media following. His significant following helped the video get 2.4 million views, 460,000 likes, and 30,000 comments. This raised awareness of some of the risks of increased use of the H-2A program, and definitely helped people understand the impact on a significant farmer who was unable to do anything to solve the problem. So add that to the risk of H-2A permits — if not approved in time, using H-2A labor can still mean you don’t get your crop harvested.

So it is not the AgTech robots taking all the jobs — the jobs are not being filled already because domestic workers are not filling them. The jobs are already going unfilled because the domestic farm work force is shrinking and increasing usage of H-2A workers comes with significant cost increases and additional risks.

There is one factor that is pushing farmers towards automation, and it wasn’t even mentioned in the Civil Eats Op-Ed. The factor that helps put some numbers behind the ag problem is the growth in regulatory costs of farming specialty crops in California. Cal Poly SLO professor Lynn Hamilton has done extensive work on this topic and her findings give a very clear picture of the increase and primary causes. Between 2006 and 2017, the cost of regulatory compliance went up from $109/acre/year to $977/acre/year. Cal Poly Professor Lynn Hamilton led both studies. Professor Hamilton found that the increase was due primarily to health care (Obamacare — Affordable Care Act), food safety (Leafy Greens Marketing Agreement and Food Safety Modernization Act), and labor wage requirements (minimum wage and overtime rules). All 3 of these factors went from $0 in the first study to top 4 factors 12 years later.

This increase puts massive pressure on California farmers to try and stay competitive with farmers in other states and other countries. Together, the lack of domestic labor, increased use of more expensive H-2A labor, and regulatory cost increases all combine to put pressure on farmers to look for automation solutions. Many farmers have told me for years that if California continues to impose these high regulatory costs on farmers, the will be forced to look at acreage in other locations. So even for farmers that can adopt H-2A (and the increased costs of housing and transportation make this a tough solution for small and medium-sized farmers), the increased cost of labor is pushing farmers to look at automation solutions.

It is availability and cost increases of farm worker labor that are pushing automation in an attempt to close the labor gap. Compare the situation that farmers are in with the other end of the food supply chain. When McDonald’s and Panera faced a labor shortage, they responded by rolling out self-service kiosks in stores to help reduce the need for labor. That may look like robots taking jobs away, but as a frequent patron at both of those brands, I can tell you that many of the stores with kiosks also have Help Wanted signs on the door and my local McDonald’s has had a Help Wanted sign with $16/hour starting wage for months. Kiosks at these stores are not taking any jobs from anyone — they are attempting to fill a job gap that is an ongoing problem. Farming is in a similar situation.

And in case you think this labor problem is going to be “transitory” and go away soon, I would advise you to think again. I believe that the gap is likely to get larger faster for two reasons. First, the trend is for more organic growth and organic growing requires more labor because you are not allowed to use some inputs conventional growers use. So every time a farmer changes growing formats from conventional to organic, the farmer is or should be anticipating an increase in the labor required when the shift is made. Second, even for conventional growth, the pressure to reduce pesticide and other inputs via regulation is gaining significant momentum. If that happens, and regulation of pesticides is implemented, that will also create increased demand for more labor because the functions that the inputs that can no longer be used were handling now have to be completed by labor. So whatever increase in labor is already being forecast, it needs to be increased by the organic acreage shift and the potential increased regulation/restriction of pesticide usage. These last two factors will result in the automation push increasing further.

Agtech startups are positioning the labor gap as a market opportunity to secure venture capital, they are not planning on killing jobs.

Let’s turn to the second premise — Agtech startups are specifically positioning their companies as job killers. This is not at all what is happening. I’ve worked with a lot of Agtech startups on strategy and pitch decks. There are several points startup founders need to make to secure venture capital funding, including: (1) we are solving a real problem; (2) the problem is really big and getting worse; and (3) our product solves it and improves economics by x. The second point is where labor frequently comes up. This is known as the Total Addressable Market definition, and it helps convince (or not) venture investors that if a startup can solve the problem they can generate significant revenue and potentially a lucrative exit for the startup and investors.

In the case of automation startups, frequently the best definition of the addressable market is the cost of labor being used to complete the function currently. If you are building a weeding robot, you need to understand how the economics of your robot compare with weeding the same field with a human labor crew. The addressable market for weeding robots is the cost of labor crews that are currently performing weeding in specialty crop fields. To make that market look as large as possible, you can take weeding costs for every acre of specialty crops and define that as your total market. That point is true — if the weeding robot were able to capture 100% of the market overnight with global presence and had no competition, that would indeed be the addressable market for that robot. That would also get some serious grilling from any venture investor — oh, you’re just going to take over the entire market? And how are you going to sell the product and get it manufactured at scale quickly with a global footprint? And more and more to follow — not fun for a founder fundraising.

So the startup avoids that grilling by shifting the discussion to two key points: (1) here are the crops we are going to focus on; and (2) here are the geographies we are going to start in. That then ties to a go-to market plan aimed at a serviceable market opportunity that the startup can realistically target. In short, the startup is using labor as a total market to help investors see the opportunity for their startup. In fact, decks I have helped startups with use the graph above from Lynn Hamilton to help investors understand the urgency for their solutions. As I said in the Medium post from 2 years ago, the one place where your TAM keeps growing is labor solutions because the underlying cost of that labor is only increasing.

(Note — I did a deep dive on the labor as TAM topic almost 2 years ago — and there’s a link in the article for a deeper dive on TAM, SAM, and SOM for those that are interested. Here’s the post on Medium — https://medium.com/@waltduflock/agtech-riddle-when-does-tam-always-keep-growing-28151a42f69a)

Farm workers are already part of the Agtech discussion, and Agtech is already working in collaborative ways with farm workers.

Finally, let’s go to the third premise of the Op-Ed. There is an underlying sense that farm workers need to be part of AgTech discussions (as if they’re not currently). The good news is they already are, and I’ve got receipts and examples to share (you’re welcome, Civil Eats!) They are there directly with people like Hernan Hernandez, Executive Director for the California Farm Worker Foundation. Hernan has been part of the discussions of some of the largest AgTech grant activity, including the F3 grant that Ashley Swearingen led that received $65.1 million for economic development based on ag and AgTech in greater Fresno. Hernan was at the table the entire time and now has a target objective of retraining over 8,000 farm workers on new AgTech technologies over the next few years.

The farm worker community is well represented and will be well served by Hernan. Hernan is also working with an industry coalition on an NSF Engines grant that is similar to Fresno in that it would be measured by economic development metrics — this would be a $160M award and would provide significant funding for farm workers to get re-trained and get skills up-leveled to work with the new AgTech solutions. Even if our group does not get one of the 5 awards, Hernan has been a key part of the group and has represented the farm worker industry effectively.

F3 Grant announcement

Farm workers are also at the table with a $750,000 grant from California Department of Food and Ag to help deliver Next Gen Ag Workers (NGAW), which Western Growers won a year ago and the key goal of this project is to train 3,000 AgTech enabled workers for farmers, ag companies, and startups that need them. The first part of this project was identifying the largest gaps these groups had and then identifying curriculum that can help solve these challenges. The second part is getting the curriculum distributed statewide across 2-year and 4-year colleges. So between F3 and NGAW, there will be over 10,000 AgTech-enabled farm workers produced in the next 5 years. All of these jobs will pay these workers more for being AgTech enabled. Farm workers that are willing and able to take on new skills and new platforms will be rewarded with higher pay and better jobs.

So how does this play out in practice? Let’s take a look at Burro. They are building Burros for harvest assist to help table grape growers and farm labor crews get harvested product from the crew to the truck with efficiency gains of 15–30 percent. CEO Charlie Andersen has stayed focused on this one crop and this one functionality (Burro could work today on other functions and in other crops, but the decision was made to stay focused on one functionality and one crop, and I think it has served the Burro team and their grower customers well. Here’s an article from S2G Ventures, one of the investors that participated in Burros’ latest fundraising round.

I saw Burro working in a Central Valley table grape orchard several months back, and it was a great example of up-leveling skills in real time. One member of the harvest crew stopped harvesting and managed the Burros to optimize the efficiency delivered by Burro. The success metric was time to complete harvest per acre. The Burro team lead determined that 3 Burros per crew was the best ratio of robots to crew. This team lead is instantly elevated based on this new skill set.

Burros in their native habitat — in this case a table grape orchard in California.

I believe this will be the most common scenario — AgTtch enables workers to increase pay with new skills and new capabilities. This will not be for everyone, but for those farm workers that are willing to take on the new challenges and develop a deeper understanding of Agtech solutions, there will be many potential rewards.

So, I will close this post with the three points I made at the beginning responding to the Civil Eats Op-Ed:

1. AgTech robots are not coming to take away farm worker jobs — they are coming to help farmers close a labor gap that is large and getting larger every year for multiple reasons.
2. AgTech startups are not positioning themselves as taking away thousands of jobs. They are positioning the labor problems they help solve as a large enough market to get venture investors interested in writing checks.
3. Farm workers already are at the table and are part of the discussion. Hernan Hernandez and others represent the farm worker industry in many of the key funding discussions, and startups like Burro are focused on helping increase the farm worker crew efficiency with Burros, not replacing any farm workers.

One final thought — if anyone from Civil Eats would like to come out to Salinas Valley and see how growers and agtech companies are working together on a daily basis to improve growing operations, I would encourage that to happen and will be happy to set up tours with both groups.