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Significance of Technology in Agriculture
From traditional hand farming to use of tractors, high yielding seeds, and now to the use of technology such as artificial intelligence, sensors, robotics, etc. the scenario of the agriculture industry has evolved over the years. Agritech refers to the use of technology for farming that brings efficiency to the yield. It improves the farming process through various functions like analyzing weather, soil, temperature, etc. to not not only provide a large scale of production and profitability, but also focuses on the quality of the produce. In current times, special focus has been on using technology to ensure sustainable farming.
The world population is growing at an increasing pace and is expected to reach about 10 billion by 2050. As a result, there is a growing need to fulfill the demand for food. The Agritech market is projected to reach $42 Bn by 2027, growing with a CAGR of 12% from 2020–2027. It is estimated that the agtech market has generated approximately $280 Bn in revenue over the year 2020. Even with a single digit annual rate of growth, the market is expected to generate $345 Bn by 2025.
Key Industry Highlights
● Market Size: $19 Bn
● CAGR: 12% (2020–2027)
● Estimated Revenue: $280 Bn
● Deal Value: $6.4 Bn
● Key Players: AeroFarms, Provivi, Apeel Sciences, Agrobot, Prevenio, etc.
Agritech Gaining VCs Trust through Investments
The growing need for food, sustainable farming, and the need for automation has made investors realise the importance of the market. As a result, agritech is witnessing an increase in the investment activity, particularly since the onset of the pandemic which highlighted the vulnerabilities of the sector such as supply-chain breakdown, labour shortages, risk of infection,etc.
The Agritech sector has witnessed $1.5 Bn being raised across 153 deals, in just the first quarter of 2021. This has been the fourth straight quarter where at least $1.5 billion was raised. The biotechnology segment in agritech has absorbed maximum contribution from the VCs. Some companies within the segment that received significant funding include DNAnexus, Pairwise, Enko, with Caribou Biosciences receiving one of the largest deals of Q1 2021 equivalent to $115 Mn in its Series C round.
Acceptability Towards Agritech in Various Regions
Looking at different regions, North America is leading the agritech market. VC deals in the North American region have been more than 40% since 2014. In 2019, the region was estimated to have a revenue share of 38.6% of the market, followed by APAC and Europe. After USA, India had recorded the second-highest number of deals in agritech, with a total deal value of about $250 Mn in 2019. These trends are expected to continue as the governments are building infrastructure for rural development and making other such favourable investments that are boosting the agritech market in the region. Farmers in most regions have been resistant to change, however favourable results from the innovative products will ultimately motivate them to try them. In most nations, the growth of agritech has been comparatively slow as it requires huge amounts of R&D and investments. Despite these drawbacks, we expect the agritech market to receive greater acceptability from all around the globe as there is growing need for sustainable farming that can keep up the food levels with growing population without compromising on the environmental conditions.
Blooming Opportunities for Modern Farming
●Boosting Plant Growth through Pollination-Tech:
Pollination is the most important part of agriculture with about 90% of the flowering plants requiring it. The global pollination market size, which is estimated to be around $60 Bn in value, will prove as an emerging opportunity in the sector. Different types of plants require different levels of pollination. As the importance of pollination is realised, new startups are coming up with new techniques to facilitate artificial pollination through use of technology like IoT sensors, machine learning, lasers, etc. along with the development of rental bee colonies. Some companies working in this direction include The Bee Corp, ApisProtech, PowerPollen, Beewise, etc.
●Improving the Shelf Life of the Produce:
The longer distances and supply chain disruptions have put a special focus on improving the shelf life of the agriculture produce in order to reduce food wastage. The market size for post-harvest treatments is projected to reach $2.3 Bn by 2026, globally. While improvement in shelf-life of food products prove profitable for retail grocers, it is important to note that since each crop has different properties, unique treatments have to be formulated for each of them. This reduces the scope of adaptability of solutions. Some companies working to enhance shelf life of agricultural produce include Apeel Sciences, Hazel Technologies, Mori, etc.
●Solving Harvesting Challenges through Automation and Robotics:
Since harvesting is a labour-intensive activity, any shortage in labour could limit the operation capabilities of the producer. This has been a challenge in some areas, particularly during the pandemic. These challenges have paved an opportunity for automation and robotics in the agriculture market. The global agriculture robotics market is estimated to be $5 Bn in 2020 and is projected to reach $27 Bn by the year 2026. While the harvest robotics is still budding with most companies in pilot and pre-commercialization stages, the use of technologies like computer vision, 3D perception, and artificial intelligence (AI) is expected to drive the market through its use in both indoor and outdoor farming. Some companies that are engaged in building harvest robots include Tortuga AgTech, Agrobot, Tevel Aerobotics, etc.
A Fruitful Way Towards Sustainable Agriculture
Due to the growing population and the depleting resources, there is a greater need to focus on the agriculture market. Agritech is playing a significant role in ensuring that enough resources are produced to feed the entire population of the world, without compromising on sustainability. The use of modern technologies in the field has significantly reduced the amount of resources required for production. For instance, weeding robots reduce the use of harmful pesticides by 90%, shelf life extension has the capability to add 10% increase in sales. There are several such advantages.
While farmers in some areas who have been engaged in traditional farming might be a bit reluctant to these technologies as they involve huge costs for them, support from government, development of appropriate infrastructure, reduction in costs will encourage them to adopt these measures. Investors have started to realise its significance. This is evident from growing investor traction in agritech. The market has attracted $6.4 Bn in funding in the year 2020. We can say that the agritech market is a low hanging fruit that would benefit both producers and investors in the long run.
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This article has been co-authored by Tamanna Kapur, who is in the Research and Insights team of Torre Capital.