2020 will go down as the “Year of Net Zero.” Corporate commitments to deliver net-zero emissions by 2050 doubled, and all eyes are on our biggest green-house gas emitters—namely, our food systems.
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Agriculture is caught in the cross hairs as a major polluter (contributing about 18 percent of total global emissions), an essential industry already hit hard by climate change, and, increasingly, an industry that could help in the fight.
Big shifts are underway for farmers as the larger food companies, for the first time, are starting to reward them with a piece of the elusive “green premium.” In 2020, firms like Cargill, Anheuser-Busch, General Mills, and Walmart started paying farmers to adopt greener practices. Anheuser-Busch committed to buying 2.6 million bushels of “sustainably grown” rice in 2020, at up to a 27 percent premium.
Cargill said it would shift 10 million acres to regenerative practices, paying farmers for the green shift and offering complimentary training. The move kills two birds with one stone. It lowers food companies’ own supply chain emissions while encouraging them to offer differentiated, sustainably sourced food to their end customers—at a premium, of course.
Farmers are taking note. While always stewards of the land, they’ve faced a continuous squeeze over the decades with the real price of food declining, the price of labor increasing by 40 percent, and the price of agricultural inputs increasing by 15 percent since 2010. These forces allowed little flexibility in farmer margins to bear the cost and risk of switching to greener products and practices. But with food companies increasingly offering premiums and upfront risk capital, farmers are starting to see the calculus differently.
The big question remains: what technologies will unlock the ability for farmers to profitably capture the green premiums?
New eyes in the sky (and the field)
Farmers have been leveraging data from satellites, ground sensors, drones, advanced imaging, AI, and other sources for years to make informed decisions about their farming practices. Recently, advances in imaging and AI models have unlocked a whole new level of insight: firms like Arable, Aker, and Taranis offer high-resolution low-cost insights that can identify a 2-inch tall weed or a tiny pest.
The new level of specificity allows farmers to implement precision agriculture: early, targeted action that dramatically reduces the overall use of synthetic chemicals. Instead of a plane spraying an entire field with a pesticide, precision insights allow the farmer to spray only the specific part of the field where the pest is detected. This not only reduces pesticide costs for the farmer, but also is key to unlocking the “green premium” paid by food companies for crops grown with fewer synthetic chemicals.
Robotics: Advanced AI closing the loop
Beyond analytics, farmers have called for technologies that can “close the loop” on the precision insights generated—ones that can not only identify the issue, but also take care of it quickly, at scale. New field-zipping robots utilize AI to navigate muddy fields, identify weeds, pests, and even ripe fruit and then take care of the task at hand.
Aigen, a new start-up in the space, zaps tiny 2-inch weeds with an electrical shock from a drone. Abundant Robotics and Harvest Croo have learned how to navigate, identify ripe fruit, and, hardest of all, pick the ripe crop without damaging it. As farmers face steeper labor and input costs, robots will be key for farmers to be able to implement precision agriculture profitably.
Greener inputs and micro-environments
What goes on beneath the soil is also increasingly becoming key to unlocking green premiums. Innovation is sprouting greener fertilizers, pesticides, and fungicides made with fewer synthetic chemicals and lower greenhouse gas footprints. Companies like Anuvia 1 have leveraged waste to create a greener fertilizer additive that delivers more carbon and nutrients to the soil.
All eyes are on carbon removal solutions these days. Some of these new biotechs, along with regenerative agriculture practices, have been shown to remove carbon from the air and sequester it in the soil. Rates and permanence vary, but certain biotech products estimate they can store two-four times more carbon in soils they’re used on. This innovation isn’t just good for the planet — it’s also a landmark new revenue stream for farmers. Farmers that adopt these practices and biotech products are starting to get paid for the additional carbon they’re sequestering through the voluntary carbon markets. But these markets are nascent. Locus Agriculture was the first to get a farmer paid, generating an additional $30 to $45 per acre for the farmer, according to Locus. Regulatory tailwinds from the Biden Administration could help accelerate adoption through their proposed Carbon Soil Bank that would pay farmers directly for carbon sequestered in their soil.
We’re just heating up
Momentum is building to help farmers make the shift to greener practices. Consumer and regulatory pressure push large food companies to increase their Willingness to Pay (WTP) on the demand side, and technological innovation is driving down costs of implementation on the supply side. But the transition is still in its infancy.
Food companies need to expand out these green premiums, taking them from pilots to scale, so farmers can count on the financial incentive to change their practices. Enabling technologies still need to come down the cost curve. But as more Net Zero pledges pop up, we’ll see increasing pressure on, and opportunity for, farmers to be able to make the green switch.
Julia Reichelstein is an investor at Piva Capital, a venture capital firm based in San Francisco, where she invests in visionary entrepreneurs solving the world’s greatest challenges with breakthrough technologies and innovative business models.
Illustration: Dom Guzman
Piva Capital invested in Anuvia.↩
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