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Commentary: The Sector of Agriculture That is Booming

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You don’t have to look very hard to find signs the farm economy is not is good shape.  High yields and trade wars have sent commodity prices tumbling, low milk prices are forcing dairy producers in large numbers to go bankrupt, and pork producers are losing money on every hog sent to market. USDA net farm income estimates are for income levels to be half of what they have been. Yet, there is one sector of agriculture that is booming — and booming to the tune of billions of dollars.

Ironically, this sector of ag produces virtually nothing. Profit levels are inconsistent, and the number of farms involved is comparatively small. So why is this sector such a hot prospect? Future potential is what is attracting a large number of venture capitalists to the area of agricultural technology.

Recently over 600 people, mostly investors, flocked to Indianapolis for the Forbes Ag Tech Expo These investors shelled out $700 for the chance to learn about Indiana agriculture and to mingle with the inventors of some of the most cutting-edge technology in production agriculture today. There were programs on traditional corn and soybean production, as well as on new types of farming that do not use soil and grow plants under LED lights in warehouses. There was also a trade show featuring a wide variety of proven and unproven devices.

This was the 5th such Forbes ag event, with the previous 4 held in Salinas, CA.  Just down the road from Silicon Valley, Salinas is the capitol of the green salad sector of agriculture. For the past decade, the venture capitalists who funded the  boom and launched the digital revolution have been pouring billions of dollars into the vegetable industry, which is in desperate need of technology.

Bruce Taylor, of Taylor Farms, said they are one generation from have no labor force, “The children of migrant workers do not want to work in the fields. So when our current labor force gets old and retires, we will have no workers.  We are desperate for an automated solution; ag tech promises that.”

In row crop states like Indiana, the need is different. It is diminishing resources that threatens agriculture: less land; less soil fertility; restrictions on herbicides, pesticides, and fertilizers; a declining labor pool; and a future demand curve for food that is expected to grow. Here again, advances in technology may hold the key to solving some of these issues. One venture capitalist estimated there is a pool of about $10 billion dollars for investment in ag technology.

Unlike other sectors of agriculture, big companies are not dominating the ag tech sector. The recipients of these venture investments are small startups with few resources and simply a good idea. Thrive, a venture and innovation platform, told me it currently is funding 60 different ag tech startups. Most of these will fail, but the ones that survive will then get sold to one of the big ag firms, who will bring the technology to market.

So if you are looking for a group of people who are bullish on the future of agriculture, here they are. The inventors believe they have the next big thing, and the investors are willing to bet big bucks on it. Meanwhile, the farmers of today are hoping they are right because the solutions to some of the biggest challenges facing them today may lie with a young entrepreneur and a venture capitalist who backs him.

By Gary Truitt