How agritech innovation is revolutionizing farming

Published on December 13, 2024 by Vijay Krishan Gupta

Global agritech market

Agritech uses advanced technologies such as drones, satellite photography, internet of things (IoT) sensors, biotech, artificial intelligence (AI), big data and blockchain to enhance yield and profitability.

Active government support for technological advancements in agriculture and increasing technology investments in developing countries contribute to the revenue growth of the agritech market.

The global agritech market was valued at USD9.1bn in 2020 and is expected to reach USD22.6bn by 2025, growing at a CAGR of c.20%.
In 2023, North America led the agritech market with 62.2% of total revenue, followed by Europe and APAC. The value of the North American agritech market rose to USD9.3bn from USD7.5bn over 2022-23 and is expected to grow at a 23.8% CAGR to USD14.3bn over 2023-25.

Agritech market dynamics

Market drivers

The agricultural sector is focusing on the development and use of advanced technologies to increase yields, produce more nutritious crops and promote long-term sustainability.

Increased productivity: Modern technology such as advanced tractors and agrobots reduce the time and effort farmers need to expend on farm activity, increasing productivity.
Crop protection and health: Technologies such as AI and machine learning-based surveillance systems enable farmers to quickly identify breaches, collect critical farm data, analyse growth patterns and optimise crop yields and health.
Improved supply chain: The track-and-trace system is being increasingly adopted, as it provides greater visibility and control across supply chains, reducing inventory shrinkage.
Reduced wastage: Agri scientists leverage agritech to predict yielding capacity of a type of soil for a given crop, eliminating guesswork and leading to increased productivity, cost savings and reduced wastage.
Sustainability: Agri specialists leverage drones to identify a field’s most infected areas, helping farmers ascertain the optimal mix of pesticides to control pests while reducing chemical pollution.
Less reliance on human labour: Robotics and automation can cultivate acres of land, offsetting the shortage of qualified and skilled workers facing large-scale agricultural businesses.

Market trends

Autonomous farming machinery: Farm automation technologies automate crop and livestock production cycles through their precise global positioning system (GPS) controls, computer vision and sensors and are expected to create USD50-60bn in additional value by 2030.
Livestock monitoring: Chips and body sensors can detect illnesses, prevent infections and trigger environmental adjustments in barns, improving living conditions and reducing consumer concerns.
Drone farming: Drones help survey crops and herds over vast areas quickly and efficiently with a relaying system that helps ferry real-time data to other connected equipment. Additionally, by reducing costs and improving yields, drones are expected to generate USD85-115bn in value over the coming years.
Hydroponics and vertical farming: Indoor vertical farming, primarily hydroponic or aeroponic, enhances crop yields, minimises environmental impact and drives market growth by using nutrient-dense water or systematically sprayed roots.
Crop monitoring and aerial imaging: Sensors deployed to monitor soil conditions could communicate via low-power wide-area networks, directing sprinklers to adjust water and nutrient application. Hence, the use of more sensors would enable smoother connections between soil, farm equipment and farm managers and could unlock USD130-175bn in value by 2030.
IoT soil sensors: IoT soil monitoring technology measures soil temperature, nitrogen, phosphorus and potassium (NPK), water content, photosynthetic radiation, water potential and oxygen levels, enabling farmers to optimise crop yield, quality and resources.

Market growth opportunities and outlook

Demand for technological solutions: Growing demand for agritech services and solutions is fuelled by the technology's potential to tackle issues such as climate change, food insecurity and water scarcity.
Venture capital (VC) driving innovation in the market: The application of smart sensors, predictive analytics and automation tech throughout the crop production lifecycle is capturing investor interest.
Public market investors: ESG-focused investors are adding sustainable agriculture to their investment universe, broadening the potential investor base and promoting market innovation through the introduction of new mutual and exchange-traded funds.
Transition to more sustainable food systems: The economic impact of climate change prompts global consumers and investors to adopt sustainable food systems, with Europe and North America leading with a 9% adoption rate.

Agritech deals dropped from the peak of USD13bn in 2021, but investment in 2023 was higher. Startups brought in USD1.4bn across 181 VC deals in 4Q 2023, including large rounds for farming marketplace FBN and Bowery.

Key investment drivers
- - Changing buying habits of millennials
    
    These relate to changes in the taste, nutrition and sustainability of the food they consume, leading to diverse ways of producing food – through genetics, fermentation or vertical farming.
- - Increasing vertical farming
    
    Consumer preference for locally grown, ultra-clean and pesticide-free produce is driving vertical farming investors, as the process conserves land and water and reduces use of pesticides and chemicals.

762 agritech startups raised a total of USD5.7bn in 2023, representing a 46.4% decrease in funding and a 4.4% decrease in deals from 2022
178 agritech startups raised a total of USD1.3bn in 1Q 2024, representing a 9.7% decrease in funding from 1Q 2023 (USD1.4bn)
- Of this, Perfect Day raised USD801.5m, followed by Inari (USD609m), Oishii Farm (USD184m), ProducePay (USD380.9m) and Locus Fermentation Solutions (USD172m)
Global agritech private equity (PE) investment
- PE firms are increasingly focusing on investing in agriculture, particularly in produce and agritech. PE firms invested USD9.7bn in agriculture as of 1Q 2023, a 2.6x+ increase from 1Q 2013, according to Crunchbase estimates.

Conclusion

Agritech significantly improves the productivity, sustainability and effectiveness of the agricultural sector, paving the way for a sustainable and food-secure future.

Increased crop yields: Agritech boosts crop yields by optimising crop output via using precision agriculture methods, such as data analytics and remote sensing. For instance, precision agriculture can raise crop yields by up to 20%, according to a study by the University of California.

Water conservation: Agritech can conserve water by creating drought-resistant crops and adopting less water-consuming irrigation technologies.

Lower greenhouse gas emissions: Agritech can reduce greenhouse gas emissions by developing carbon-neutral farming techniques and minimising the use of synthetic fertilisers and pesticides.

Improved food safety: Agritech leverages sensors and data analytics and can significantly enhance food safety, leading to a 50% reduction in foodborne sickness in the coming years, according to the United Nations Food and Agriculture Organization.

Empowered farmers: Agritech aims to empower farmers by enabling access to information, markets and financial services. For instance, it could boost incomes of small-scale farmers by up to 30%, according to the World Bank.

Advancements in technology would create additional opportunities for agritech, ultimately fostering a more sustainable and food-secure future.

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About the Author

Vijay Krishan Gupta

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Vijay is an assistant Director at Acuity Knowledge Partners’ Investment Banking division. He brings over 10 years of work experience in secondary research and analysis. He is currently leading a research team for a US-based middle market boutique investment bank, providing support on quantitative and qualitative research across sectors. He has extensive experience in handling strategic research assignments including industry research, company analysis, thematic reports, economic updates, and financial analysis. He also plays an active role in training and mentoring team members. He holds an MBA degree from Lal Bahadur Shastri Institute of Management, New Delhi, India.