With commodity prices down, input costs up, high interest rates and weather woes, agriculture seems to have a dismal outlook for the foreseeable future. Uncertainty is on the minds of many in the industry as agriculture starts a downward cycle. AgriThority® Board of Advisors acknowledge the potential tough years ahead but see a few bright spots.
Agriculture Investors
Agtech investments are continuing to come largely from impact and ESG funds, so naturally those companies were driven to target sustainability because of their investment, according to Adrian Percy, Executive Director of the NC Plant Sciences Initiative at North Carolina State University and Venture Partner of Finistere Ventures LLC. These funds will drive the innovation in the near term. University financing and quite a few educational grants are still out there for research, training, sustainability and regenerative agriculture.
“Despite much of the investment fund activity seen in previous years moving out of the space, the capital markets are doing well globally, and new capital might come into the market because of the need to reallocate out of traditional markets,” says Jim Schultz, Managing Partner, Open Prairie. However, many investors are leaving agtech, and some noted funds aren’t seeing the required ROI. Despite the tight investment market, many agricultural companies are still growing, but the bottom line could still be improved. Nutrient use efficiency is still a big opportunity, but growers must be able to see real ROI.
“Investors want to make sure companies are focusing on profitability,” Schultz says. “ROI—That should be the bright spot.”
Percy says organizations that are good at creative investing and partnerships will be successful even with the tough outlook.
LATAM Volatility Impacts
The agriculture industry has seen a shift to LATAM, which is a more volatile region, according to Valdemar Fischer, former Chairman of Syngenta Group LATAM. The current government increasing taxes, national debt increasing and the current exchange rate is driving the volatility in Brazil, especially. This volatility can cause companies to have to make more staffing and structural changes to protect their profitability.
Despite the volatility, Brazil is allocating resources to help new biostimulant and gene editing technologies get registered with new legislation. “Hopefully it sets a precedent,” Percy says. Biologicals have seen more support from growers in Brazil because they are seen as a cost reduction and are used in a preventative way, according to Fischer.
Political Uncertainty
With a hotly contested election in the U.S. in November, politics could greatly affect the agriculture industry, and many companies are deferring decisions until after this election, according to Schultz. But the U.S. isn’t the only country with political uncertainty. Europe also faces uncertainty in politics and regulations that affect agriculture, according to Christophe Dumont, Managing Director of Kincannon & Reed – Global Executive Search.
Agriculture has always been an industry that goes through cycles, and despite the next few years taking a downward turn, there are still many needs and bright spots. Reach out to AgriThority® today to discuss opportunities for strategic and scientific business, market, and product development expertise that will help prepare your innovation for investment and for success.