Five AgTech Innovations that are Increasing the Value of Farmland Investments
Introduction
As the global population continues to grow, and as per capita income rises globally, the availability of high-quality food has increasingly attracted the attention of investors. The amount of arable land is limited, putting more pressure on each individual acre of farmland. In turn, farmland operators are increasingly looking for ways to optimize their businesses to extract the most value out of their land. AgTech solutions are helping them achieve their goals.
What is “AgTech”?
AgTech, short for “agricultural technology,” represents the hardware and software innovations being developed to improve farm productivity. This includes tools that help boost crop yields as well as programs and devices that improve farmland operations.
AgTech is still relatively new. It has not received the same media attention as “PropTech,” “CleanTech,” “FinTech,” or other industry-disrupting solutions. Prior to 2012, there had been very little venture capital investment in AgTech innovations.
That has started to change, especially with more institutional investors looking to buy farmland. Institutional investors are bringing more sophistication to the industry and in turn, are willing to experiment with AgTech innovations that help boost their returns.
In 2021, VC-backed AgTech startups closed more than 440 funding deals totaling more than $5 billion. This is up from $3.3 billion in 2020. VC investment in AgTech is off to a strong start in 2022, as well. AgTech companies have secured more than $1 billion in VC investments in the first two months of this year alone.
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Why is AgTech Important to the Future of Farmland?
Farmland is an industry that, by and large, has not evolved in decades. Most operators are still running their businesses just as they always have, which is just as their families did in generations past. However, as farmers age and begin to sell their farms, there is a new breed of operators who see the value that AgTech brings to the table. Bravante Farm Capital is one of them.
AgTech innovations are valuable for several reasons.
First, AgTech can be used to inform decision-making. Farmers can utilize data to make better decisions based upon what will drive a farm’s productivity and enhance returns.
AgTech can also be used to help reduce the negative environmental impacts associated with crop production. AgTech solutions can help optimize water, chemical and land use which in turn, leads to more sustainable crop production.
Finally, farmland is a finite resource. Farmland operators will need to maximize the value and productive capacity of arable land in order to keep pace with demand as global consumption rises.
Top AgTech Innovations Impacting Farmland Investments in 2022
New AgTech innovations are being developed on a daily basis. Below is a look at the top five innovations that are having an impact on farmland today.
Satellite Imagery
A farmer is inherently limited with what he can see at the ground level. Satellites, especially those that utilize infrared technology, provide an entirely different view. Satellite imagery, while not new in concept, is significantly more advanced today than in decades past. Images are clearer and provide more compelling data for farmers. This data can now be integrated into the other AgTech innovations being utilized on a farm.
The advantage of using satellite imagery is that it provides a big-picture view of what is happening on the ground. The images can cover a large area in a short time, allowing farmers to compare what is happening at one end of the farm vs. the other.
Satellite imagery can be used for a host of purposes, from evaluating land prior to acquisition to crop site suitability. It can be used to monitor crop health, predict yields, and estimate crop production by acre. At a more granular level, satellite imagery can be used to detect weeds and/or pests. This data can be used to dispense herbicides and/or fertilizer automatically and more precisely. In turn, this optimizes chemical utilization and overall productivity.
Satellite imagery has also been said to help farmers cut their water use in half. Saving water is especially critical in areas where droughts are common. Water conservation can have a direct impact on a farm’s profitability.
Drones
Drones, or UAVs (Unmanned Aerial Vehicle), can also be used in conjunction with satellite imaging. Drones can be used to “navigate” a farm at different levels above ground. The two primary ways drones are used in agriculture today are related to crop spraying and field mapping.
Crop Spraying
The efficient application of fertilizers, herbicides, pesticides, and seeds has always been a challenge for farmers. Spraying too much in one area both wastes money and potentially threatens the quality and quantity of the crops. Spraying too little puts the crops at risk of being overgrown with weeds, becoming malnourished, or becoming vulnerable to pests – things that all result in lower crop yields. Drones can be used to help spray farmland more precisely.
Field Mapping
Drones can also be used to provide insight about farmland conditions. Drones equipped with the proper sensors can track everything from the physical characteristics of the land to how much heat is radiating from a certain part of the farm. Accurate field mapping allows farmers to optimize their land, adjusting from season to season down to the centimeter.
Data collected by field mapping can also help farmers improve their crops in real-time. For example, infrared lights can help identify crop malnourishment up to two weeks before physical signs start to indicate there’s a problem.
Air and Moisture Sensors
It has become increasingly popular to use various sensors to improve farmland productivity.
Air sensors, for example, can be utilized to determine the temperature difference at different distances above-ground. On a cold night, it might be 5 degrees on the ground but 30 degrees 30 feet above ground level. With this information in hand, a farm operator can then deploy technologies like wind machines to mix the air in the fields to achieve a more optimal temperature at the ground level. In many instances, these sensors can be tied to cellular service. Farm operators can receive alerts that allow them to adjust equipment in real-time to improve growing conditions.
Moisture sensors can be used in a similar manner. Moisture sensors gauge groundwater moisture at various depths, such as 2-, 4-, or 6-feet below ground. Having real-time information about moisture levels helps to optimize irrigation. Farmland operators can assess whether they are over- or underwatering crops. Too much or too little water can inadvertently stress the crops. Prior to moisture sensor technology, farmers would instead rely on a person manually turning water vales on and off. One small mistake could result in an entire block of crops being ruined. Moisture sensors provide an important control in that regard.
Moisture sensors are especially important in areas that have a limited or controlled water supply. For example, in an area with a shared or controlled water supply, water must be used judiciously. Moisture sensors help farmland operators use water more efficiently. Prior to the advent of moisture sensors, most farmers struggled to know exactly how much water their plants actually needed.
Air and moisture sensors are often used in conjunction with each other, and often in concert with satellite technology. Air sensors can measure wind speed. They can also be used to identify air “turbulence” at the ground level. For example, there could be pockets of air that move across the farm that impact a crop’s water retention. The moisture sensors can help detect this water retention. Satellite imagery can help determine whether the wind is bringing pockets of air to other parts of the field, creating an energy imbalance due to water vaporization.
Accelerometers
Accelerometers are another type of sensor, but in this case, the AgTech innovation is intended to help farmers with preventative maintenance of their equipment. Accelerometers are most often used on moving components and motors. They can detect slight variations in movements and identify vibration inconsistencies. This helps farmers gauge when maintenance might be required. In turn, farmers can be proactive with maintenance rather than waiting for a valuable piece of equipment to die – a costly problem that can disrupt farmland operations.
For instance, an accelerometer might be attached to a spray nozzle at the end of a fertilization beam to assess how well it is working.
Accelerometers may also be used for poultry, livestock, and other animal monitoring. They can be attached to a cattle’s tag, for example, to monitor its activity, behavior, and general wellbeing. This is particularly helpful when animals have been exposed to a stressor, such as extreme heat.
The accelerometer can provide vital information about early signs of illness—a signal that allows the farmer to change an animal’s environment. Similarly, if there’s a disease outbreak on a farm, these sensors help limit animals’ contact with it, thereby preventing spread of the disease.
In short, accelerometers can be used as a risk-mitigation tool that ultimately save farmland operators valuable time and money.
Brix Meters
There are many factors that contribute to a fruit or vegetable’s quality. Some metrics are straightforward, like shape, color, or size. Others, such as flavor, texture, and aroma, are not only more subjective—but also more difficult to measure.
This is where “Brix” meters prove especially useful.
In agriculture, “Brix” is used a value to represent the sugar content in fruit and vegetables. The Brix scale was developed in the 1800s and is equal to the percent of dissolved solids in a solution. For example, a 10g sample that measures 5 Brix would have 5g of sugar.
A refractometer, more commonly referred to as a “Brix machine,” helps measure the Brix in produce. It uses laser technology to provide on-the-spot Brix measurements. For example, a Brix machine helps a farmland operator sort their oranges. Depending on how much sugar an orange contains, it will either be exported, sold domestically, marketed as “choice” or used to make orange juice. This allows farmers to extract the most value out of every piece of fruit, quickly and efficiently.
Challenges Faced by the AgTech Industry
If these innovations are so disruptive, one might wonder, why aren’t more farmers adopting AgTech at scale? There are a few reasons for this.
One reason for the slow uptick in AgTech is that these technologies require significant capital investment, and that capital must be patient. Federal agencies, including the EPA, USDA and FDA have stringent regulations pertaining to food cultivation. Any technology that impacts food production must be registered with these federal bodies, a process that can take years. Not all VC investors have this level of patience.
Moreover, data collection can be challenging. If a farmer is going to invest in AgTech, they want some certainty that the innovation will be valuable. With AgTech, unlike other industry-disrupting technologies, it can be difficult to decipher what impact a product has given that crop yields can already vary quite dramatically from year to year. For example, was it an AgTech solution that helped boost crop yields or was it the unusually favorable weather that year? It can be tough to say.
In that same vein, the field trials that AgTech companies rely on are easily disrupted. For example, bad weather can wipe out a field trial, requiring a repeat of a year’s worth of data collection. Some farmers are not willing to give AgTech companies more than one year to prove their technology or system.
Finally, infrastructure and supply chains are already well established and can prove difficult to disrupt. AgTech innovations have therefore been primarily limited to farm-level operations.
Conclusion
With the current generation of farmers aging, we expect to see more farmland trade hands. As this happens, there is a unique opportunity for the next generation of farmland operators to strategically employ AgTech solutions. Doing so has the potential to increase crop yields and in turn, boost the profitability of farmland for investors.
Of course, AgTech innovations should be deployed strategically. Farmland operators must be careful not to fall for a sleek marketing pitch that results in them over-investing in a product that does not merit that capital commitment. It is a balance that farmland operators must achieve, but those who do so will find that this combination of “old” and “new” technology can be married with great success.
Are you interested in learning more about farmland investments? If so, contact us today. Our team would be happy to share more insight as to the technologies we are utilizing to maximize returns for investors.
