July 8, 2019

Disruption on the Farm AgTech Balances Tradition and Technology

Farmers are tasked with the critical job of feeding billions more people while simultaneously battling challenges around stricter regulations, new consumer preferences, and environmental sustainability. With the rapid development of technology, they can now fight this arduous battle with more tools in their toolbox.

Agriculture has always had a relationship with technology, but it wasn’t until about six years ago that the intersection between ag and tech blossomed into a game-changing movement. Investment in agtech was relatively flat prior to 2013, and if there was interest, it centered on biotechnology and seed genetics. However, there was a significant shift that year. Agtech grew 75 percent to reach $860 million of investment across 119 deals. Agtech has continued to soar, receiving $16.9 billion in 2018—a 43 percent year-over-year increase, according to AgFunder.

“When I imagine agriculture in 20-30 years, I envision an incredibly high tech industry that would make a Semiconductor foundry look like a blacksmiths shop,” said Rob Leclerc, cofounder/founding partner of AgFunder. “Working backwards, we’re not going to get there in a stepwise fashion but rather through this wonderful and terrifying process of creative destruction.”


Adoption of agtech still lags among fresh produce farmers

Despite the fact that investment continues to increase, adoption within the U.S.-specialty crop sector remains slow. This is especially true with fruits and vegetables.

“We see technologies that, if given the chance, would add precision and reduce costs within an operation but they are not readily picked up because they come with an implementation costs related to integration with existing systems,” said Hank Giclas, senior vice president, strategic planning, science & technology at Western Growers. “Yes, this can be difficult. But in the long run, the implementation and deployment will pay off.”

Even crippling issues, such as the increase in labor costs and decrease in labor availability, have yet to move the needle on significant market adoption of labor management technologies, automation and mechanization. Seana Day, partner at Better Food Ventures and The Mixing Bowl, creates an agtech landscape map annually to guide the industry on the latest technologies being developed. Through her research, she has noticed that there has not been a significant market adoption of labor management, savings technologies or precision irrigation.

“I think a lot of the reluctance to adopt has to do with the difficulty in showing ROI in a new system and equally, the existing infrastructure isn’t designed for the new technologies to do all they promise,” she said.

However, other ag sectors have seen significant success in the adoption of technology. Take, for example, grains and oil seeds. Cost-saving technology delivering herbicide tolerance in canola and insect resistance in corn have provided farmers with productivity improvements through a combination of yield improvements and cost reductions.

“When I look at successes in other commodities, I think the big manufacturers and input companies have done a better job of integrating new tech and playing a collaborative role in the agtech ecosystem,” said Day. “This has resulted in more acquisitions of innovative startups, more pilots and better distribution of tech through their channels and demonstrated business value.”

Consumer experience top of mind for startups

Challenges with agtech adoption can also be attributed to direction of investment. In 2018, $10 billion was invested in downstream food tech companies that focus on improving the consumer experience. Upstream companies received $6.9 billion, with most of that capital going into vertical farming, alternative proteins, genetics and biotechnology. Only a small amount of capital has gone into solving problems on the farm or innovating in the “messy middle” where areas such as logistics, business process, packaging and post-harvest monitoring are still big challenges.

“I’ve been tracking this sector since the early days, and the thing that has surprised me the most is how difficult it is to align the real needs of the ag industry with the interest and risk-tolerance of the capital providers,” said Day.

The recent boom in downstream technology interest proves that agtech startups are no longer setting their sights on farmers. They are now targeting consumers.

“Six years ago, we saw startups trying to sell directly to farmers,” said Leclerc. “Now we see them going to the retailers and offering solutions that give the retailer more visibility into their supply chain or the ability to track key sustainability metrics that they can report back to the consumer.”

Retailers upping game in both ag and tech

Retailers are now getting more involved in the agtech and food production game. Understanding that consumers crave more information about where their food comes from, retail giants have recently taken steps to act as the direct line of communication between consumers and their food. This includes applying for a range of patents using drones to automate farming, creating technology that can help improve online food shopping and even taking food production in house.

“I think retailers are becoming increasingly aware of the importance of fresh produce as their key differentiator because it’s something much harder for online retailers to compete against,” said Leclerc. “I see most of the continued push coming from Walmart, Amazon, and Target, and specifically focusing on areas of health, nutrition, sustainability, and food safety as consumers look to distributors with aligned values.”

Amazon rolled out AmazonFresh, a grocery delivery service, nearly a decade ago and kicked it up a notch in 2017 when it acquired Whole Foods Market to provide more options for customers. To compete with Amazon in the battle to be a one-stop shop, Walmart is now growing foods from seeds—including its “Sweet Spark” cantaloupe that stays sweet year-round and its fruit-punch-flavored pickles called “Tropickles”—and has also applied for a series of patents targeting farm automation. Just last year, it announced a partnership with IBM to launch a blockchain-based, global food tracking network. Costco plans to venture into production and processing by bringing its poultry supply in-house, making it the first U.S. retailer to integrate its meat supply to the farm level.

WG playing role in revolutionizing food supply chain

Customer demand for more convenience, greater transparency throughout the food supply chain and an increase in local and organic food is rapidly changing the dynamics of the agriculture. To meet their needs, all stakeholders must work together—everyone from farmers and retailers to agtech startups and regulators.

Western Growers (WG) is leading the charge in uniting all players to achieve this common goal. WG recently partnered with agtech startup iFoodDecisionSciences and tech leader HarvestMark to roll out the Supply Chain Risk Management Solution, an industry-driven solution to take control of supply chain food safety and traceability issues as identified by the U.S. Food and Drug Administration. The program uses technology to advance food safety in three ways: 1) digitalize food safety paperwork; 2) provide item level traceability through the entire supply chain using blockchain-enabled technology; and 3) offer financial protection in the case of a contamination event. The anonymized data from this new program will benefit the entire industry, and ultimately consumers, and improve the supply chain reliability, transparency and responsiveness.

“The industry is desperate for breakthrough technology in not only food safety, but also mechanization,” said Giclas. “In response, our Center for Innovation & Technology is rolling up its sleeves and starting to do the fundamental work necessary to speed solutions in these areas.”

This year, WG’s Center for Innovation & Technology (the Center)—an agtech incubator located in Salinas, Calif.—launched a Crop Collaborative Initiative to increase the adoption of automation in agriculture. Under the initiative, nearly 30 growers, agtech entrepreneurs, venture capitalists, academic professionals, and leaders from technology companies are collaborating on innovative strategies accelerate field automation progress with a primary focus on field harvesting.

The Center is also hosting numerous Grower Trial Networks meetings throughout California and Arizona, where growers have the first look at cutting-edge innovations and can provide direct feedback to the startups creating those technologies. The Grower Trial Network is an organized group of WG members who will be trialing and evaluating technology coming out of the Center. The group is led by WG’s Future Volunteer Leaders and supported by WG board members and the Center’s sponsors.

“We provide an access point for the industry and I think people now recognize us as THE center of agtech for specialty crop sector,” said Giclas. “What started out as us going around looking for new technologies to advance solutions in the fresh produce industry has now transformed into us working to filter ag technologies that come through our doors.”

Startups balance tradition and technology

The Center officially opened in December 2015 with six startups; today, the Center houses nearly 55 companies. Over the years, it has facilitated countless relationships between WG members who are willing to try new technologies to improve operations on their farms and agtech startups who are developing solutions that meet that farmer’s specific needs.

For example, WG and SWIIM System formed a strategic partnership to provide members with a technological solution that is designed to help manage water use more efficiently. SWIIM, a resident of the Center, acts as an on-farm water accountant and allows agricultural water users to optimize water rights, monitor the crop water budget, conserve water and increase net income for agricultural operations.

Another water-focused startup, WaterBit, connected with Bonipak Produce/Betteravia Farms in summer 2017 to install its wireless precision irrigation solution that will enable the farm to limit redundant work, improve efficiencies and analyze its business more precisely. Bonipak Produce also worked with HeavyConnect to implement the startup’s food safety compliance app. HeavyConnect, one of the original six startups housed in the Center, simplifies operational complexity and regulatory compliance for the agriculture industry by leveraging the burgeoning capabilities of standard mobile devices.

Most recently, Wexus completed a landmark study for the California Energy Commission where it reached out to Rio Farms to pilot its technology to reduce the farm’s overall energy usage by providing actionable energy and cost data. After the project period, overall results established that Wexus helped Rio Farms successfully lower its average electricity usage.

In addition to the startups housed in the Center, agtech companies throughout the nation are making strides in bridging the gap between technology and tradition. According to Leclerc and Day, though 2019 will be a quiet year for agtech exits, some startups who show the most promise for the fresh produce industry and are worth watching include Pago for labor management, AgSquared for farm management, Verdant Robotics for mechanization and Hazel and Afresh Technologies for food safety.