The Other Five
Democratization of information will drive many ag trends this year.
Continuing on from last week’s issue, here are the other five ways that technology will impact ag the most this year:
6. More informed decision-making on sustainability practices. We are at the front end of a potentially large carbon trading business. Big corporates are hungry for carbon credits to satisfy growing Wall Street and Main Street pressure to improve environmental and sustainability records. That should make it a sellers market because many farmers aren’t ready to make the changes to ensure carbon sequestration and credits will be short on supply. But expect that to change this year as more information becomes available on the sustainability practices which will generate the highest return for farmers when yield losses are weighed against the value of carbon credits. We also should see more technology around soil sampling and aerial imaging which provides more accurate measurement and validation of carbon sequestration and defends corporates against accusations of greenwashing.
7. Less focus on scaling, more on specialization. While scale has always been the best way to improve farm profitability, we may be reaching a nexus where smaller specialized farms can be just as viable. Some of this is being driven by the increasing price of land and the capital limitations of the families which own the bulk of U.S. farmland. But a larger factor is the increased demand for locally-grown food and organic-certified food. This trend will be most pronounced in farming areas close to larger urban centers where consumers are far more willing to pay significant premiums for products from local farmers. The growth in e-commerce and direct-to-consumer platforms during the pandemic will also help the more market-savvy farms capture more margin and improve profits.
8. Improved provenance and traceability. Forget about crypto. The biggest initial value of blockchain will come in smart contracts for commodity businesses like ag. These contracts make it feasible to track a farm product through the supply chain and verify its value. This will allow farmers to receive higher payments for grain/produce/animals which have an acknowledged higher value in the marketplace. It will also satisfy the need for food brands to have evidence of a product’s farm source or farming practices used to produce it. The challenge will be logistics - keeping certain products separated from others in elevators/warehouses/processing plants. The added cost of storage cannot outweigh the added value of the product to make it viable.
9. Better decisions on technology adoption. The flood of new technology into ag will continue in 2022. Farmers need better tools to assess the value of technology adoption. Expect to see more software which can measure the value of precision ag products in different applications. These tools will weigh the upfront cost as well as the ongoing cost of the technology against its financial benefit to the operation. The ROI will come in two main areas: yield boosts and labor/time reduction. With labor shortages becoming more pressing, expect to see more interest in autonomous tractors and robots.
10. Changing farm banking relationships. Farm lending is changing with the introduction of faster, more efficient methods for assessing forward risk. This will happen as more data is collected on the farm and analyzed using AI-driven models to estimate forward revenue and income. These models will get better over time and help banks make lending decisions across entire sectors. Credit decisions will be less about relationships between the banker and the farmer and more focused on metrics used to measure risk. Also expect to see more discounted credit rates for farms which follow verified sustainability practices or adopt technology with known ROI value. And we will see more online ag loan marketplaces which match lenders with farmers based on risk and loan size.
Briefly
We knew 2021 could be a decent corn year, but earlier in the season when many areas were burning up not many would have predicted a record 177 bushels per acre nationwide. The final number of 15.1 billion bushels was 3.3 percent over 2020, with 16 states posting state records in output, and Iowa itself producing an astounding average of 205 bushels of corn per acre. Credit that to some timely rains and continued development of drought-resistant genetics.
Fertilizer prices continue to rise at an alarming rate. Anhydrous jumped 4% in the fourth week of January to reach an all-time high $1,492/ton, up from $1,433/ton the prior week. UAN28 rose 3% to an all-time-high of $601/ton, UAN32 rose to a record $699/ton, and 10-34-0 increased to $817/ton. Urea was the only fertilizer price to fall, down to $910/ton. This will be a good year for growers to lock in rights to more hog and poultry manure.
Deals
Zero Acre Farms a startup creating an alternative to vegetable-based oils, has raised $37 million in a Series A round which was led by Lowercarbon Capital and Fifty Years, with participation from S2G Ventures, Virgin Group, Collaborative Fund, Robert Downey Jr.’s FootPrint Coalition Ventures and Chef Dan Barber. The new funds will go toward continued research and commercialization of its unique microorganisms and fermentation process.
Florida-based vertical farming operation Kalera unveiled plans to go public on Nasdaq via a SPAC. The plan is to merge with Agrico Acquisition Corp. in a deal that values the firm at $375 million. Like many other vertical farming companies, it faces stiff headwinds in the public markets. AppHarvest, which merged with Novus Capital Corporation to get into the public markets, has lost over 90% of its value in the last 12 months.
Next week: We’ll dive deeper into the budding opportunities in the carbon trading business. Subscribe below to Modern Crop to get the next issue in your inbox and stay on top of news and trends impacting the business of farming. You might also be interested in our other ag-focused newsletters Demand Insights and Protein Insights which cover important developments in consumer food demand trends and livestock production.
If you have a new farm-focused tech product or service to talk about or other news to share, contact us at moderncrop@dekenmedia.com. You can also find us on Twitter: @moderncrop.