Report: agtech investment peaks, but ‘mature’ businesses at risk

Despite record-breaking levels of investment, agribusiness companies require a change in thinking or risk lagging behind, the report argues.

Total agtech investment from global agribusinesses totalled as much as $25 billion in 2015 – an all-time high – and that figure is expected to rise this year, according to a new report from Boston Consulting Group (BCG) and AgFunder.

The report highlights technological advancements that are revolutionising the industry, which has promoted a wave of start-up activity in agtech backed by venture capital firms.

Such firms have increased their agtech investments at an annual rate of 80 percent since 2012, with investments totalling $3 billion in 2015, according to the report.  

But its authors struck a stark contrast between VC firms, which seek to profit on the latest agtech advancements and start-up activity, and mature agribusiness companies which continue to employ a “cautious approach”.

The investment strategy of these firms is “primarily defensive, evolutionary and conducted in-house”, and it requires a change in thinking on the part of agribusiness executives, the report argues.

A survey detailed in the report included 50 executives at leading agribusiness companies, and 15 venture-capital investors as a point of comparison.

It showed that 80 percent of the executives said their investments were primarily intended to “defend or enhance their core businesses” rather than create new ones.

In addition, nearly 90 percent of executives said existing products and technologies in their portfolios, achieving scale or strengthening existing channels to market; while just 10 percent was linked to building new capabilities.

The report argues that these existing agribusinesses would be wise to rethink their strategies, in part focusing on the latest technologies as opposed to existing ones.

“To emerge as the winners in this shifting landscape, companies must identify the most valuable technologies to pursue, given their capabilities, and think differently about their investment strategy,” Torsten Kurth, a BCG partner and report co-author, said in a statement.

Agtech investments are crucial in the current low-price environment, as lower commodity prices have driven down net farm income to 65 percent of the peak reached in 2013 and overburdened farmers seek precision technologies to boost production.  

The VC investments and start-up activity relates to advancements in a variety of non-farm technologies such as ubiquitous connectivity, data collection and processing, rapid phenotyping, gene editing and autonomous robots