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The extraordinary opportunity in Asian Ag & Food Technology

October 9, 2019

Editor’s Note: Michael Dean is a founding partner at AgFunder and Executive Director of the GROW accelerator in Singapore.

It can be common to hear people, particularly in the West, talk about Asia as if it’s one country — the same happens in less enlightened discussions about “Africa.” Asia is, of course, a region made up of many different countries, diverse both geographically and culturally. It’s home to the world’s two largest populations, China and India, and the region has over 500 million smallholder farmers and the fastest-growing middle class on the planet. Wealth is accruing in Asia faster than anywhere else and at a faster pace than ever before.

Whilst it is an incredibly diverse region, one thing that all countries in Asia do have in common is an overriding need to produce sufficient food for their growing populations. And they need to do so in a way that is sustainable both in production and impact. Food preferences are changing too.

By 2030, the OECD predicts that Asia will be home to two-thirds of the world’s middle-class. This represents a 500% increase in just 20 years. By comparison, Europe’s middle class is forecast to grow just 2%, while in the US it will decline by 5% in the same period. This trend is reflected in consumption forecasts, with Asia set to account for 60% of global consumption, while the European and US share is predicted to drop from 64% in 2010 to around 30% by 2030.

This growth is already altering global food supply, and along with globalization, it’s eroding the traditional east-west supply channels, accelerating moves towards regional supply chains.
Technology is the only way we are going to meet these evolving needs and challenges
Technology will increase food production and quality, rationalize supply chains and improve access to supply between nations. The new Regional Comprehensive Economic Partnership (RCEP) — a free-trade agreement between the world’s three largest consumer markets of China, India and ASEAN as well as Japan, South Korea, Australia and New Zealand — will facilitate its widespread adoption.

Against the backdrop of a fast-growing and wealthier consumer market, delivering unprecedented demand for commodity crops, high-quality protein, novel ingredients and healthier diets, we believe the RCEP adds to an already compelling investment case for agri-food technology in the region.

So which technologies are going to drive production growth and satisfy consumer demands for healthier and more sustainably produced food?

With varying levels of wealth among the individual countries of Asia, clearly different technologies will have different impacts across the region. And while there are products and technologies developed for western markets that will have a direct application to the Asian food system, in many cases, it won’t be possible to just export them from Western markets to the region. Agriculture production methodologies vary widely between the two hemispheres and food and flavour preferences are also very different. From our new Asian base in Singapore, we are already seeing high-quality local teams laser-focused on solving local problems.

Here’s a few key areas we’re investing in and in full disclosure, the companies highlighted are portfolio companies of AgFunder and our new GROW Asia Fund

IoT and sensors are going to have a huge impact. Tiny hyper-spectral sensors detecting food quality and freshness (nanoLamda) while software platforms use machine learning to provide retailers with actionable insights on the ripeness, quality and display readiness of their produce to materially cut food waste (IntelloLabs). Sensors monitor the temperature and locality of produce as it passes through the supply chain whilst groundbreaking biome fingerprinting is being used to monitor food provenance and traceability to avoid fraud (Phylagen). Low power, long-range sensor protocols, when coupled with low earth orbit micro-satellites, will piece all this together so we can monitor and track products in real-time, anywhere in the world as it travels from farm to consumer.

Asia is the spiritual home of aquaculture and while the largest individual producers can be found in Norway and Chile, the vast majority of global production comes from the hundreds of thousands of smallholder farmers in Asia. Like their land-based counterparts, tools providing a detailed understanding of what is happening on their farm will lead to better decision making and therefore, improved yields (Wittaya). Like land-based producers, weather and disease also pose major challenges to the world’s fish farmers. Technologies focused on eliminating, or at least greatly reducing the manual application and use of antibiotics and antimicrobials in fish and shrimp farms will materially and positively impact on production levels and profitability of smallholders in Asia. 

We are very bullish that alternative proteins and cellular agriculture will ultimately provide viable and affordable alternatives to animal protein production. It seems like new plant-based meat products are hitting the market weekly and there is no doubt that quality, experience and flavor are no longer reasons to avoid them. It will be a little while before we see so-called cultivated meat on supermarket shelves, but there are a growing number of picks and shovels technologies that will accelerate its development and affordable production through the expression of growth factors from insects or algae to dramatically lower the cost of FBS-free growth medium (Future Fields; Back of the Yards). 

With such a large percentage of the world’s smallholder farmers located in Asia, technologies like digital marketplaces will benefit smallholders by providing markets for their crops and affordable inputs for their farms (DeHaat). Or they will provide access to affordable crop insurance (ViridisRS) that’s vital to raising yields and smallholder incomes. One of the biggest drivers of farm productivity and profitability is mechanization. Affordable access to machinery and equipment is taken for granted in the West but until now has been a pipe dream for many Asian smallholder farmers (Tractor Junction). 

Controlled environment agriculture

(CEA) is another area primed for huge growth in Asia. While we believe there is an enormous opportunity in Asian CEA, as a tech investor, it is the enabling technologies that are of most interest to us. It will be smart teams that are using innovation to ensure CEA project developers are successful (IGS) or to productively and cost-effectively grow high-quality, high-value crops that can’t normally be grown in tropical climates (SinGrow) who will drive improved food security and productivity in Asia.

You can learn more about our first dedicated Asia agri-food technology fund here.

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