Humans depend upon organized agriculture – and successful agricultural innovation – for survival. In today’s high-tech urban societies, most of us are alienated from the basics of farming or food production, we barely consider the long ‘field to fork’ supply chain that fills our supermarket shelves with food products.
There is a noticeable increase in interest in the agricultural sector, possibly because recent price rises and supply chain glitches during the COVID-19 pandemic, exposed the fragility of global food production and its vulnerabilities to extreme weather and geopolitical events. However, in most investment portfolios the areas of agriculture and food production remain overlooked.
Today the agricultural sector is undergoing a massive and rapid high-tech (known as Agtech) revolution. Astounding technological advancements are transforming it into one of the world’s fastest-growing sectors. Investing in agriculture is now comparable, in many ways, to investing in the parallel high-tech sector. This article will look at two important publicly traded companies in the Agtech sector, and a privately held innovative startup.
The Growing Importance of Agriculture as an Investment Sector
As an avid follower, with many years spent analyzing new trends and investment opportunities in the agricultural sector, when talking with other investors, it is a surprise that they seem unaware of agriculture’s essential role in global food security.
Why Agriculture Has Been Overlooked by Investors
One traditional view about agricultural and food stocks is that farming and food production is a low-margin and labor-intensive industry. There is also a common misconception amongst investors, that agriculture is only the province of commodities traders, but recently, investors with experience in the high-tech sector are finding inspiration in agricultural technologies which are adding value and scalability to the markets.
The Opportunities for Investors in Agtech
Investing in agriculture is an opportunity to support the industries that put food on our tables, and helps ensure social stability with a supply of affordable food. There’s a growing demand for technological advancements, as a new generation of tech-savvy farmers and growers are wanting, willing, and able – to integrate apps, digital platforms, and data-based crop nutrition and irrigation solutions into their daily operations.
The Rise of Agtech: Transforming the Agricultural Industry
The Emerging Agtech Boom:
The Agtech sector is already impacting agriculture in much the same way that high-tech has and continues to, impact industry and service sectors. Agtech is transforming agriculture by giving growers greater flexibility and adaptability in crop choices while improving yields and helping drive down operating costs. Over the next decade, expect to see established Agtech businesses gain a much higher profile, and to see an increase in the number of Agtech startups launching successful IPOs.
Key Innovations Driving Agtech Growth
New Precision Farming Methods:
Agriculture has always had an element of guesswork and risk-taking, with freak weather patterns, pests, and crop disease being every bit of an issue today as they were ten thousand years ago. Data analytics are allowing data-based decision-making for optimized planting, irrigation, and crop management, to maximize yield, crop quality and minimize waste.
IoT and Drones:
IoT (the internet of things) is transforming farming. Sensors and drones provide growers with remote, real-time monitoring of soil health and moisture, crop conditions, and pest levels. Growers can implement precision, data-based interventions often using robotics, drones, or self-driving agricultural vehicles to do the actual work. The IoT and drones function as a smart, 24-hour labor force.
Sustainable Farming Solutions:
Governments, agronomists and farmers – are keen to develop sustainable long-term agricultural productivity. Advanced fertilizer and fertigation solutions that reduce negative environmental impacts, are one example of Agtech farming solutions thatu combine sustainability with profitability.
Key Stock Picks in Agtech and Sustainable Agriculture
ICL Group (NYSE: ICL) (TASE: ICL):
The ICL Group is a global leader in specialty minerals, crop nutrition solutions and one of the largest fertilizer manufacturers in the world. Anyone considering investing in agriculture should study ICL’s advanced, sustainable Agtech solutions and its culture of constant innovation.
ICL has a wide array of crop nutrition products in its portfolio, but one particularly impressive product is its eqo.x a revolutionary sustainable innovation for controlled release fertilizers, a first-of-its-kind with a biodegradable coating, delivering up to 80% improvement in nutrient use efficiency. It’s also environmentally friendly and is ideal for straightforward open-field use.
ICL’s focus on sustainable fertilizer technologies puts it at the forefront of the global push toward zero hunger and food security. The war in Ukraine and the surge in fertilizer prices associated with the commodities crisis, revealed the importance of affordable and efficient crop nutritional solutions. All this makes ICL a particularly strong candidate as an innovative and eco-conscious investment in the Agtech space.
Agmatix (An ICL Startup):
Agmatix is an agro informatics company that is part of ICL’s AgTech digital solutions that is pioneering development of data-driven agricultural solutions. Farmers have relied on data for thousands of years, Agmatix uses data science and digital platforms to provide infinitely more accurate modern equivalents. Precise data-driven insights enable a holistic approach that optimizes soil health and reduces negative environmental impacts. Informed decision-making improves crop productivity, and makes global sustainability goals in agriculture attainable.
Agmatix is on its way to become a standard tool for regenerative agriculture and sustainability. It provides users with science-driven evaluations of regenerative practices that are unique to each environment, a user-friendly digital framework for developing localized regenerative methods is a powerful tool for agronomists. Agmatix is transforming operations at field level and policy levels.
2 John Deere (NYSE: DE):
Many investors wrongly assume that John Deere simply makes tractors, but they are one of the world’s largest and most innovative manufacturers of both farming and forestry vehicles, and a leading Agtech company in precision agriculture and smart farm machinery.
Next-generation John Deere vehicles have begun to revolutionize farming. Their new vehicle designs integrate a robust combination of GPS, IoT, and AI to enable precision agriculture. Fields and farmsteads are becoming the soil-based equivalent of smart factories. John Deere is set to offer labor-saving autonomous tractors that farmers can operate remotely via a smartphone and with drones and sensors.
John Deere technologies are geared towards reducing waste and improving productivity without negative environmental impacts. A strategy of investing in agriculture can include stocks like DE that provide exposure to high-tech agricultural machinery. John Deere is a company that has been pioneering new agricultural technologies since the 19th century and is centered around long-term growth in the emergent Agtech sector.
Why Investors Should Consider the Agricultural Sector
Agriculture is a vital primary sector; fundamental to human survival, whatever the state of the global economy, we require and need to produce food. Agtech is transforming this core sector and driving rapid growth and a myriad of new companies.
Environmental and Social Impacts
Investing in agriculture can create positive impacts that go beyond financial returns. There is a global impetus towards sustainable solutions and Agtech is enabling new methods of food production, ranging from vertical farming to alternative proteins that are reimagining agriculture and the manufacture of food.
Well chosen investments can directly promote environmental sustainability and contribute to global food security by helping to strengthen vulnerable rural communities, improve prosperity, stimulate social progress, and reduce urban drift.
Resilience and Stability
Perhaps the bottom line for investors is the inherent resilience and stability of the agricultural sector. Demand for food products is rising as the global population increases both in numbers and prosperity, agriculture is an eleven-thousand-year-old industry with consistent consumer demand. Spending on food products may fluctuate, but as long as there are people, there will be farming. Agriculture remains a reliable industry with the potential for stable, long-term returns.
Key Considerations for Stock Investors in Agtech
As the Agtech boom expands, the number of Agtech stocks will rise, when looking for investment opportunities in agriculture and Agtech begin with three core criteria:
1. Technological Innovation:
Start by evaluating a prospective company’s commitment to innovation. This includes their research and development into precision agriculture, specifically AI and data analytics, digital platforms, apps, and IoT, along with sustainable solutions. Seek out companies thinking a decade ahead – if not further.
2. Sustainability and Environmental Innovation:
At present, markets are favoring companies that focus on sustainability. Regulatory requirements and consumer expectations increasingly demand (demonstrable) eco-conscious practices. Check each company’s annual ESG report for a quick insight into their policies and achievements.
3. Proven Agtech Leaders:
Startups and IPOs can deliver astonishing ROIs, but if you’re new to investing in agriculture, it’s worth researching an investment strategy that’s built around established companies with a solid track record in Agtech. As noted in this article, John Deere and ICL Group are excellent examples of stable and high-performing Agtech companies.
Conclusion
Innovative Agtech solutions are transforming investor perceptions of the agriculture sector. Agriculture is rapidly maximizing next-generation technologies to supply a fundamental need – vital food products – to our expanding world. The agriculture sector already offers excellent investment opportunities and is likely to improve in the short-to-medium-term future.
If you’re planning to diversify your portfolio, or want to improve your knowledge of this key sector, Agtech stocks like ICL and John Deere are a great place to start. Both are potentially forward-looking investments in an agricultural sector whose technologies are creating unprecedented growth potential and global impact.
