Organic agriculture

Organic Agriculture

The next time you are out on a walk and notice a humble honey bee buzzing from flower to flower, take a moment to stop and appreciate the importance of the busy little insect. Because its work is at the heart of all organic agriculture.

According to the FDA, “About one-third of the food eaten by Americans comes from crops pollinated by honey bees, including apples, melons, cranberries, pumpkins, squash, broccoli, and almonds, to name just a few.” Pollination is essential to agriculture; without it, many plants cannot produce seeds and fruit, and our dinner plates would look very sparse indeed. 

Unfortunately, honey bees are in trouble. 

[The world needs to double food production by 2050. Here’s how investing in Precision Agriculture can make that happen.]

Beekeepers in the U.S. have been sounding the alarm for years, reporting sharp declines in honey bee colonies for over a decade, and the winter of 2018/2019 saw the biggest decline on record. This sharp decline in honey bee colonies is thought to be caused by several factors, including shrinking crop diversity, habitat loss, insecticides, and parasites. In particular, a widely used group of insecticides called neonicotinoids are coming under increased scrutiny as mounting research demonstrates the toxicity of the chemicals to honey bee populations. 

Farmers apply neonicotinoids to their fields in an effort to prevent pests such as aphids, but end up unintentionally damaging honey bee colonies, which in turn damages crop yields and the surrounding ecosystem as a whole.

Declining honey bee populations in the U.S. are symptomatic of an ongoing conflict in modern agriculture that pits short term profitability against long term sustainability. Spraying a field with herbicides may kill weeds one year, but the weeds that sprout the following year will be herbicide-resistant, and the farmer will have to invest in new and increasingly complex chemical concoctions to stay on top of the evolving weeds. 

In response to the industrialization of modern agriculture, a thriving movement has emerged that emphasizes quality over quantity. Organic agriculture is a process of producing food that focuses on environmental sustainability. The Rodale Institute, a leading organic agriculture nonprofit, considers organic agriculture to be a “vision for working and living in harmony with nature. The result is healthy soil, which grows healthy plants, which make for healthy people. By abstaining from synthetic inputs and encouraging natural systems, organic farmers help create a better future for people, animals, and the environment.”

For those interested in the investment potential of this growing market, there are a few important points to understand.

What is Organic Agriculture?

In the context of the U.S., “organic” is a labeling term that food producers affix to products to indicate that their products comply with the organic standards of the U.S. Department of Agriculture (USDA). The USDA’s organic standards are lengthy and cover many agricultural processes, including crop production, livestock/poultry production, and product handling/labeling. (Learn More: Why logistics matter in agriculture.)

Before a food producer can apply an organic label to their product, USDA inspectors must first certify that the producer is in compliance with the relevant organic standards. In general, the USDA’s organic standards require that food producers use natural processes to produce food. 

With crop production, for instance, one of the organic standards is that the land cannot have had synthetic synthetic fertilizers or weed killers applied to it for at least three years before harvesting an organic crop. The organic standards also mandate that organic livestock and poultry have access to the outdoors year-round, and may only be temporarily confined due to poor weather or concerns over the animal’s health.

Making the transition to organic or going organic from the get-go can be a difficult, expensive endeavor for food producers. It is undeniably cheaper to produce food using synthetic chemicals and industrial processes. 

Environmental benefits aside (which are substantial, if difficult to value monetarily), going organic offers food producers access to a rapidly growing market. Young adults are increasingly focused on food quality when they shop, with a recent YouGov study noting that 68% of millennials surveyed responded that they are willing to pay more for higher quality products. 

For a young consumer with health and environmental concerns on their mind, the choice between an organic tomato costing $2.25 and a non-organic tomato costing $1.50 may not be as obvious as one would assume. In this space, there is significant opportunity.

Why Invest in Organics?

Consumer demand for organic food is booming in the U.S., but domestic supply has not kept pace. The development of precision agriculture has helped, but the shortcoming largely boils down to the fact that producing organic food is more difficult and expensive than producing food via conventional agriculture. 

In an effort to facilitate the transition to organic from conventional while satisfying their customers’ growing demand for organic food, large food companies are increasingly partnering with small producers. Established brands like Annie’s (owned by General Mills) are partnering directly with domestic farmers, eliminating many of the hurdles new organic producers face in bringing their products to market. 

With a consumer base willing to pay more for products they value, and with the support of established companies that recognize organic’s potential, the organic agriculture market is primed for substantial growth and expansion in the coming years.

According to research from the Organic Trade Association, sales of organic products in the U.S. reached $52.5 billion in 2018, up 6.3% from 2017. Sales of organic foods accounted for $47.9 billion in 2018, an increase of 5.9% over 2017 food sales. This increase in organic food sales far exceeded the 2.3% growth seen in non-organic food sales during the same period. 

Figures from 2019 look equally healthy, with Category Partners and Organic Produce Network reporting that sales of organic fruits and vegetables increased by 5.1% between 2018 and 2019, while sales of conventional fruits and vegetables increased by about 1.9%.

These trends demonstrate that consumer interest in organic products is strong. Young consumers are more concerned about their health and the health of the environment than any preceding generation, and these consumers are on the cusp of becoming the most dominant group with respect to consumer spending. 

Organic agriculture represents a unique opportunity in the investment landscape because it offers the potential to serve an undersupplied but growing market with products that are increasingly seen as ethically and environmentally superior to similar products available at lower prices.

How to Invest in Organics

But, for investors, organic agriculture as a category is almost too broad. It’s a trend that impacts almost every aspect of the food and ag industry, but it’s something that very few companies are dedicated entirely to. Every company in the space has an organics program, making it very difficult for investors to get in on this trend directly without investing in a very broad group of companies.

However, investing in a mutual fund or ETF that offers exposure to the organics market can be a good way for investors to access this growing segment of agriculture without having to invest in many companies directly. A search on Magnifi suggests that there are a number of funds available today for those investors interested in investing in organic agriculture.

Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Try it for yourself today.

This blog is sponsored by Magnifi. The information and data are as of the publish date unless otherwise noted and subject to change. This material is provided for informational purposes only and should not be construed as individualized investment advice or an offer or solicitation to buy or sell securities tailored to your needs. This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and should not be construed as investment research or advice. Investors are urged to consult with their financial advisors before buying or selling any securities. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. Past performance is no guarantee of future results. This content may not be reproduced or distributed to any person in whole or in part without the prior written consent of Magnifi. [As a technology company, Magnifi provides access to tools and will be compensated for providing such access. Magnifi does not provide broker-dealer, custodian, investment advice or related investment services.]


Precision Agriculture

Precision Agriculture

The world is facing a food crisis. Not in some distant future, but today, as a growing global population and rising quality of life are demanding more and more production every year in order to feed all of humanity.

According to the United Nations, the global population is on track to increase from 7.3 billion in 2015 to nearly 10 billion by 2050, requiring that food production must double worldwide in that time to keep up with demand and combat hunger, which today impacts more than 1 billion people worldwide. This fact is the result of decades of insufficient investment in agriculture and food security, leaving millions at risk due to rising food prices, economic swings and climate change.

[Save the world while feeding the world: Investing in Organic Agriculture]

In order to achieve true food security in the world, it’s time to start investing in agricultural research, natural resources, local infrastructure and more, per Korea’s UN representative Park In-kook. “Food prices, already high and volatile, could spike again as droughts, floods and other climate-related events affected harvests, and States must develop responses for both the short-term and the medium-term. Agriculture had to adapt to changing weather patterns caused by climate change, and social protection and safety nets had to be strengthened to ensure adequate access to food for those in need.”

And it’s not just any food that’s needed to solve these problems, either. Rising incomes and quality of life worldwide also mean increased calls for proteins, sustainable foods, organics and other nutritious, high quality options.

For those interested in the investment potential of this rapidly-growing sector, there are a few important points to understand.

What is Precision Agriculture?

At a high level, so-called precision agriculture is simply “the application of new technologies to agriculture. It involves using innovations such as Big Data, GPS and more to increase crop yields and profitability while lowering the levels of traditional inputs needed to grow crops (land, water, fertilizer, herbicides and insecticides).”

It’s all about using less and growing more.

According to Grand View Research: Precision farming, also known as site-specific crop management or satellite farming, is a farm management concept that uses information technology to ensure optimum health and productivity of crops. The precision farming technique largely depends on specialized equipment such as sensing devices, antennas and access points, and automation and control system. It also involves maintenance services and managed services. Additionally, it incorporates a broad range of technologies such as bio-engineering, robotics and automation, imagery and sensors, and big data.

For example, a farmer outfitted with a Big Data analytics platform and a tracking device on their tractor could precisely analyze both when to plant certain crops and how to lay out their fields for maximum production. The system could also manage the application of fertilizers for best effect and tell the farmer when to water and for how long. All of these tools would help increase the amount of food the farm is able to produce while simultaneously lowering the farmer’s costs associated with fertilizers (inputs), fuel and time spent managing their operation.

This type of data can also be used to monitor and optimize a farm for changing weather conditions, soil characteristics, pest problems and more, guiding the farmer’s day-to-day management decisions or taking them entirely off of their shoulders.

In addition to Big Data, as described above, some of the applications for precision agriculture currently under development include:

  • Robotics: Farming is traditionally a labor-intensive, time-consuming line of work. Farmers are famous for their long hours, starting early in the morning, and typically can’t even get away much during the year given all of their responsibilities, from planting to harvesting and much more. Plus, much of the labor force that the agriculture industry relies on is temporary, moving from job to job during the season. Changes to immigration laws, demands for higher pay and more have made hiring a challenge for farms of all types. That’s why robots have shown so much promise in the field. Imagine the convenience of a robot picker that can go out into the field at all hours, informed of the optimal picking time by local data, and manage the entire harvest by itself while the farmer and their crew sleeps. The same applies to specialty robots that can precisely apply fertilizers exactly where and when it’s needed or monitor and empty pest traps automatically.
  • Drones: The FAA is currently reviewing new rules that would enable agriculture operators to use drone to monitor and oversee their crops, delivering eye-in-the-sky functionality that doesn’t truly exist in the industry. For farmers, this means the potential to manage vast tracks of land, including both farms and ranches, without ever even having to drive out to the field. Instead, they could keep an eye on everything from the air conditioned comfort of their home or office. The same goes for fertilizer application and other real-world tasks. This would boost farm efficiency and help drive down costs by eliminating the need for costly, in person oversight work.

Why Invest in Precision Agriculture?

Simply put, the agriculture industry is well behind the times when it comes to the use of technology. Farming is a very traditional industry that has functioned well for generations, producing enough food to keep up with demand while also providing a living for the farmers themselves.

But the growing world population and emerging risks of climate change are changing the math behind agriculture. Efficiency and scale are needed now like never before.

Enter the power of technology to help make this happen.

And it has created a growing market of providers at the same time. According to Grand View Research, the market for precision agriculture companies is expected to reach $10.23 billion by 2025, racking up a compound annual growth rate of more than 14% in that time.

Major factors driving this growth includes farm mechanization, rising labor costs, population, smart farming techniques, and government initiatives to adopt modern agricultural techniques.

Per Market and Markets: Precision farming is gaining tremendous popularity among farmers due to the increasing need for optimum crop production with limited available resources. Further, the changing weather patterns due to increasing global warming have impelled the adoption of advanced farming technologies to enhance farm productivity and crop yield. Precision farming has the potential to transform the agricultural sector, making traditional farming activity more efficient and predictable. Increasing global food demand, extended profitability and crop yield, and crop health monitoring for higher yield production are the major factors fueling the growth of the precision farming market. Also, government initiatives in many countries are helping farmers to use optimized agricultural and technological tools to improve their production levels.

How to Invest in Precision Agriculture

Of course, as an emerging and fast-growing sector, investing directly in precision agriculture companies can be risky and many are still private. A search on Magnifi suggests that there are a number of different ways for investors to get involved in precision agriculture without opening up their portfolios to undo concentrated risk in this new and growing industry.

Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Try it for yourself today.

This blog is sponsored by Magnifi. The information and data are as of the publish date unless otherwise noted and subject to change. This material is provided for informational purposes only and should not be construed as individualized investment advice or an offer or solicitation to buy or sell securities tailored to your needs. This information covers investment and market activity, industry or sector trends, or other broad-based economic or market conditions and should not be construed as investment research or advice. Investors are urged to consult with their financial advisors before buying or selling any securities. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. Past performance is no guarantee of future results. This content may not be reproduced or distributed to any person in whole or in part without the prior written consent of Magnifi. [As a technology company, Magnifi provides access to tools and will be compensated for providing such access. Magnifi does not provide broker-dealer, custodian, investment advice or related investment services.]