Amy Duffuor is co-founder and general partner, and Rodrigo Barrios Labarthe is rice investment fellow at Azolla Ventures, an early stage investor in tech that could avert catastrophic climate change.
The views expressed in this article are the authors’ own and do not necessarily represent those of AgFunderNews.
Rice is a staple food for over half of the people on the planet. It ranks as the third most widely grown cereal crop, cultivated across about a hundred countries, with Asia accounting for 90% of the world’s total production. Nearly 900 million people depend on rice for their livelihoods, with smallholder farmers playing a central role in the industry.
Yet despite its outsized prevalence, rice cultivation has mostly retained its traditional ways, still relying on age-old practices such as manual transplanting, animal-powered plowing, and minimal mechanization.
Close to 90% of rice is farmed in lowland areas in flooded paddies to increase productivity and weed control, creating a rich anaerobic environment for methanogens (methane-releasing bacteria) to thrive. Lowland rice is primarily grown across Asia, where China, Indonesia, Thailand and Vietnam are top producing countries.
Upland or dryland rice, where rice is cultivated in dry soil, creates around half the volume of emissions per kilogram produced but additional fertilizer and pesticide requirements, and far lower productivity, make it less attractive for smallholder farmers. Upland rice is primarily in the Americas, Sub-Saharan Africa, and some high-elevation areas in Asia.
Rice: responsible for almost half of the world’s cropland emissions
Because of the enormous economic, cultural, and nutritional significance of lowland rice cultivation, the sector is a major contributor to climate change and is both a casualty and perpetuator of climate disruption.
Rice farming is responsible for almost half of the world’s cropland emissions, translating into 1.5% of global greenhouse gas pollution. Rice paddies also make up 11% of nitrous oxide and 22% of methane emissions across agriculture. Rice is thirsty, too, lapping up about 40% of global anthropogenic freshwater use, which creates added pressure for farmers as water cycles become far less predictable around the globe.
Indeed, flooding, drought, and intruding salinity from rising seas threaten the conventional rice production system. Global rice yields consistently underperformed compared to expected harvests for 2023–2024, with the trend expected to continue through 2025. Climate change is reducing available land for rice cultivation, and in regions where rice cultivation remains feasible, relying on current practices will significantly impact the climate, leading to serious consequences for land use, biodiversity, water resources, and energy demand.
A dearth of venture investment
Despite the critical importance of rice cultivation, the sector has seen very little venture investment, however.
There are several drivers behind these capital gaps, such as high fragmentation in the grower base for lowland rice. Rice, compared to other commodities like soybean and wheat, is far less consolidated, with some estimating around 50-60% of global volume being cultivated in parcels smaller than 2 Has.
It also predominantly serves domestic demand, with 90% of production staying within the same country, and usually within a 50–100-mile radius. The crop is poorly integrated into global supply chains, and many farmers rely on small local distributors to gain access to inputs like seeds and fertilizer. They also rely on community mills which process the grain to sell to the final consumer. This creates challenges for companies to access a large part of the market, as well as achieving margins that will support long-term profitability.
As a result, a large part of investment in rice cultivation has been publicly funded.
Venture capital can provide an important bridge to funding novel technologies that can maintain or increase rice yields, while reducing emissions. With the right partners and financing in place, allocating early-stage capital to mitigation technologies throughout the production cycle can help de-risk the sector for future investments, integrate smallholder production into higher value-added supply chains, and secure rice as a viable staple crop while mitigating its negative social and environmental impacts.
But where should venture investors start?
Leveraging technology to decarbonize rice cultivation
There is urgency to decarbonize rice cultivation, and investors should explore diverse technologies to reduce large-scale emissions. Solutions ranging from improved crop genetics, optimized irrigation, and sustainable fertilizers combine the best aspects of lowland and upland cultivation, while genetically modified and hybrid rice varieties can reduce methane emissions and improve yields.
Deploying the following strategic interventions has the potential to improve yields and reduce emissions without raising costs for farmers:
- Gene editing (CRISPR) and RNA sequencing techniques could help identify genetic traits that improve plant resilience and yield while reducing methane emissions and enhancing carbon sequestration.
- Switching plants to more efficient photosynthetic pathways to dramatically increase yield, nitrogen efficiency, and drought tolerance. One example of this is the C4 Rice Project which aims to engineer rice to perform C4 photosynthesis—a more efficient process used by crops like maize that concentrates CO₂ in specialized leaf cells.
- Methane-inhibiting bacterial additives encrusted around seeds help balance out the paddy methanogens by introducing methanotrophs (or methane-metabolizing bacteria).
- Direct-seeded rice (DSR) reduces water and methane emissions by planting seeds directly into rice paddies.
- Photomorphogenesis exposes genes to light in efforts to develop favorable characteristics, enhancing plant growth.
- Alternate wetting and drying (AWD) is a water management practice that reduces methane and nitrous oxide emissions while maintaining yield. By only flooding paddies during key stages in development (such as during the plant’s flowering stages), growers can control weeds and provide sufficient moisture for healthy yields with significantly reduced methane emissions.
- Shifting away from conventional fertilizers, produced via the energy-intensive Haber-Bosch process, by scaling solutions like green ammonia or direct-application bacterial additives which can help improve nitrogen absorption and reduce input dependency.
Most of these technologies tackle the main emission source, methane, accounting for more than 60% of the total footprint of the crop. Reductions in this space can happen at different stages of the cultivation cycle. One of our portfolio companies, Biolumic, uses photomorphogenesis, or early exposure of seedlings to UV lights, to create more resilient plants, which can achieve up to 30% increase in yield with less reliance on water.
Other companies such as Rize (backed by Breakthrough Energy Ventures) and Mitti Labs, have focused on aggregating farmer catchments to implement sustainable practices on farms and give them access to better market prices and lower input costs.
Their focus has been predominantly on AWD, a relatively cheap practice which involves monitoring water levels on the paddy to reduce excessive use, potentially leading to a reduction of up to 70% of total methane. On the other hand, companies such as NetZeroNitrogen are focusing on improving nitrogen absorption with the use of bacteria-rich solutions, to reduce fertilizer dependency and tackle nitrous oxide emissions.
Conclusion
While rice cultivation significantly contributes to greenhouse gas emissions and consumes vast amounts of natural resources, innovative solutions can help mitigate these effects. Advances in crop genetics, sustainable water management, low-carbon fertilizers, and microbial technologies offer promising ways to enhance yields, reduce emissions, and preserve environmental resources.
But technology is no silver bullet. The fragmented nature of the rice market requires collaboration and strong distributor partnerships to ensure that capital and expertise go where they’re needed the most—farmers and their communities.
While much national and international funding has poured into improved rice genetics over the decades, overall funding for rice production improvement is dwindling. Other innovative solutions that promise to decrease emissions and boost yields have seen virtually no support on any level, creating an opportunity for venture capital.
To drive meaningful change, it’s crucial to empower farmers to adopt proven technologies, including expanding access to better financing and collaborating with local and global partners to foster systemic improvements in a fragmented agricultural ecosystem. Innovative farming techniques with a boost from venture capital, present a compelling value proposition for farmers, ensuring that rice remains a vital food source while minimizing the environmental impact of traditional farming methods.
