What’s Driving Record-High Investment in Sustainable Agriculture

What’s Driving Record-High Investment in Sustainable Agriculture

The challenges confronting global agriculture and food systems are currently on the rise, prompting both private and public investors to explore sustainable agriculture as a potential transformative investment area.

Despite the economic downturn that followed the outbreak of COVID-19 in 2020, agriculture investments saw a resurgence in 2021.

The AgFunder AgriFoodTech Investment Report highlights that total venture capital investments into AgTech and FoodTech companies topped $ 51.7 billion in 2021 — a record high and an 85% increase over 2020. In comparison, annual investments before the pandemic amounted to just $ 22.1 billion in 2019 and only $ 12.3 billion in 2017.

What are the drivers behind investing in this fast-growing market? How is climate change affecting its growth? What technologies are on the rise in sustainable agriculture? In this article, iFarm dives into these questions and attempts to answer them.

How climate change threatens fragile agriculture (and vice versa)

In 2021, agrifood systems were confronted with some of the most threatening challenges to date, including massive fires, severe weather conditions, an invasion of desert locusts, and new threats such as the COVID-19 pandemic. Given all this, agriculture can be seen as the most climate-sensitive sector in the economy.

According to a study by Ariel Ortiz-Bobea, associate professor at Cornell University, since the 1960s, anthropogenic climate change alone has led to a 21% loss of agricultural production, "a slowdown that is equivalent to losing the last 7 years of productivity growth."

In his report, Levi Stewart Zurbrugg, senior investment analyst at Saturna Capital, also highlights the astonishing impact of climate change on food production: "For each degree Celsius increase in global temperature, production is expected to fall by 6% for wheat, 7.4% for corn, and 3.1% for soybeans."
According to UN estimates, economic damage to farmers in 2008−2018 exceeded $ 108 billion. Most damage to the world’s rural economy is caused by droughts.
Floods, heatwaves, droughts and other extreme weather events will become more severe and frequent, experts predict. Floods alone have increased by 134% percent since 2000 compared to the two previous decades.
Cornfield flooding from heavy rain and storms in the Midwest

Cornfield flooding from heavy rain and storms in the Midwest

Source: Shutterstock.

The spread of disease and pests influenced by high temperatures and precipitations have another devastating effect on agriculture — food waste. This is especially relevant for developing countries, where most food loss occurs in the production, handling & storage stages because of outdated technologies and poor infrastructure, highlights Levi Stewart Zurbrugg. Food waste has a huge environmental impact, accounting for 8−10% of global greenhouse gas emissions (UNEP Food Waste Index 2021).

Undoubtedly, conventional agriculture is both one of the areas most affected by climate change and one of the top contributors to it.

The industry generates significant amounts of greenhouse gasses like methane and nitrous oxide. The latter is a byproduct of organic or mineral nitrogen fertilizers, while methane is produced via enteric fermentation during livestock digestion. Methane and nitrous oxide make up 17.3% and 6.2% of all global greenhouse gas emissions, respectively, mostly from agriculture.
Agriculture constitutes roughly a quarter of human-induced greenhouse gas emissions. It is the second biggest contributing factor after the energy sector.
In spite of governments' support for renewable energy projects like clean hydrogen to achieve net-zero carbon emissions, the share of renewable power in energy is relatively low. It was only 28.3% in 2021, which is slightly less than in 2020, though almost 30% higher than a decade ago.

What is sustainable agriculture?

Conventional farming makes use of 70% of freshwater and half of the world’s vegetated land. To minimize environmental impact and carbon footprint, as well as to ensure food supply and security, the world is searching for, developing and investing in sustainable approaches to agriculture.

Modern sustainable agriculture strives to lower the use of natural resources in food production with high-tech solutions.

Such sustainable agriculture technologies as advanced chemical and biological agriculture, adaptive genetics and precision AgTech (farm management software and efficiency-enhancing hardware) are ripe for investment.
Hardware for sustainable indoor farming iFarm StackGrow
Leafy greens and microgreens farm with iFarm StackGrow technologies.
Source: iFarm.
Precision AgTech, combined with controlled-environment agriculture (CEA) technologies, allow producers to grow crops indoors by controlling and adjusting the microclimate and providing plants with the necessary nutrients throughout the growth cycle.

Farmers who rely on controlled environment agriculture technologies have credited it for its resiliency, aiding them in the face of climate change. CEA protects crops from extreme temperatures, drought and flood cycles, as well as from increasing pressure from pests and disease.

Applied indoors, these high-tech farming technologies use 95% less water and 99% less land than conventional farming.

"It appears that the future of agriculture lies in fully-automated, even more precise high-tech indoor farming, driven by artificial intelligence and machine learning, with robots and drones forming an integral part of operations. As a matter of fact, the global agricultural drones market raised $ 1.5 billion in 2022 and is set to achieve a market size of $ 29.9 billion in 2032.", says Max Chizhov, iFarm’s co-founder. "Research and development will drive the industry forward, ensuring minimal environmental impact and high affordability."

The big challenge for indoor farming is the energy consumption required to run climate systems and lighting. However, renewable energy sources like solar, geothermal, wind, biomass from plants, and hydropower can be perfect for minimizing the environmental impact. Per the latest 2021 CEA Census Report, 37% of farmers use renewable energy sources.

Another way to reduce the energy consumption is by applying precise, efficiency-enhancing hardware like iFarm StackGrow for vertical farms.

Get in Touch with iFarm to learn more

Investment in sustainable agriculture and farming technologies: current and forecasted

In 2021, upstream startups working on technologies and solutions related to farming and food production, between farm and retail, raised a total of $ 18.2 billion in funding across 1,846 investments.

On the other hand, downstream ventures that have more direct consumer contact received $ 32.1 billion over the course of 1,241 deals, based on data from the AgFunder Agrifoodtech Investment Report.

Grand View Research, Inc. stated that among all indoor farming models, the vertical farm segment is expected to exhibit the fastest CAGR in the coming years, whereas greenhouse facilities held the dominant market share in 2022.
Grand View valued the global indoor farming market at $ 34,246.5 million, with a forecasted CAGR of 12,9% from 2023 to 2030.
Investing in sustainable agriculture and high-tech farming solutions is the best way to accelerate the positive trends in food production and make a huge impact in confronting climate change.

Investing in sustainable agriculture: business considerations

To calculate a sustainable indoor farming business model, it is crucial to take into account the particularities of the local market, the costs and sources of energy, average wages in the country, facility size and condition, among other factors.

Read this article to learn more about the economic considerations of sustainable indoor farming and the vertical farming business. You can also test your ideas and get a better understanding of the CapEx in your region and possible payback period with the iFarm Cost Calculator. It’s free to use!

For a precise and tailored calculation of crop assortments that are in demand in your locality, kindly reach out to the iFarm team. Additionally, we will compute the sales channel ratios for HoReCa and retail in your area. Our financial model incorporates varying prices and packaging formats.

Contact iFarm to discover precise indoor farming

technologies on the cutting edge of 

sustainable agriculture today

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