The Gaps and Opportunities for Agribusiness Technology in Latin America

Editor’s Note: Ciro Echesortu is the agtech program director of NXTP Labs, an accelerator program for Latin American agribusiness technology startups. Echesortu reflects on the recent AgTech Week in Argentina and the potential for innovation across Latin America’s agrifood industries.

During the first week of August, we participated in Argentina’s first Agtech Week, a series of events distributed in Buenos Aires, Rosario and Córdoba; Argentina’s main cities and agribusiness hubs.

It seems a long way since NXTP Labs, one of Latin America’s most active accelerators and venture firms, launched the first Agtech Acceleration Program (then titled ‘Agrotech’ to identify with local ‘agro’ slang for agribusiness) in the region in 2016 with a group of no more than 10 startups with little-to-no funding and only early adoption from farmers.

Agtech Week culminated in Congreso Aapresid (Argentine Association of Direct Sowing Producers) with an audience of over 5,000 farmers in Córdoba listening to use cases of Blockchain and other frontier technologies by both local and international entrepreneurs and technology companies. Last year we also helped develop Pulse, an innovation hub in Piracicaba, Brazil, together with Raízen, Brazil’s largest ethanol producer, to develop pilots with agtech startups.

Despite this initial interest from local institutions and farmers trying to understand the implications of new technological developments  — most of the initial interest in Blockchain, for example, starts with ‘which cryptocurrency should I be invested in?’ — technology is yet to disrupt the agribusiness value chain.

Latin America is a relevant player, representing 16% of the world’s Food & Agriculture exports, particularly in Bananas (+60%), Beef (+30%), Coffee (+45%), Corn (+30%), Poultry (+30%), Soybeans (+50%) and Sugar (+50%).

If global agricultural production needs to grow by 60% by 2050 to meet global demand, Latin America’s production needs to grow by 80%, according to its market participation and growth potential. This implies a bigger focus on yield increases, versus arable land expansion or higher crop intensity — the main driver behind growth in production during the last few decades. Plus, Latin America’s productivity growth (1.9%) is behind the average OECD country (2.4%).

In some aspects, Latin America has pioneered agribusiness technology adoption. An aspect engrained in Argentina’s Aapresid farmer association is the adoption of direct sowing practice [no till], which reduces soil erosion; now at 81% of Argentina’s arable land (compared to 23% in the US, and 10% in Europe).

Coupling high technology adoption with market share, local companies have seized an opportunity to grow globally under the shadows of global leaders in their key markets.

Recently, Syngenta acquired Strider, a precision farming digital tool that operates in six of the 10 largest agricultural operations in Brazil with 40 employees. In effect, Strider closed key contracts with large-scale farmers in Brazil that Syngenta would have otherwise had to do over a year or two. This was more of a quick go-to-market digital strategy.

Additionally, John Deere acquired PLA, originally from Las Rosas, Argentina, that manufactures sprayers, planters and specialty products, with 450 employees and selling in four continents. Earlier this year, John Deere announced its acquisition of King Agro, a family-owned business with approximately 180 employees and an extensive 30-year history of developing various carbon fiber products. King Agro reduces the overall cost of spraying by amplifying the sprayer’s radius.

As a venture firm focused on technology opportunities in Latin America, NXTP Labs is looking for new technology firms capturing large market opportunities where local entrepreneurs may have a competitive advantage. Latin American agribusiness is relevant in the global food export market, and it already has examples of successful entrepreneurs in both the tech and agribusiness sectors to serve as role models.

When analyzing specific sub-sectors within agribusiness, we have identified opportunities in:

• Logistics – 55% of post-harvest is lost due to problems in storage, packaging, and distribution – in the US its 31%
• Financial services – 50% of LatAm’s population doesn’t have access to financial services
• Insurance represents 0.03% of Latin America’s GDP (versus 0.06% of the US’s)
• Traceability – certificates of origin suffer from public nationwide corruption scandals, see JBS and BRF’s case)
• Data Collection at scale that may serve as the bottom line for these services to develop.

Some of our portfolio companies are already developing these solutions. Some examples are:

Traceability: Bovcontrol works with milk producers to monitor from farm to fork the different treatments they make on dairy cows.

Insurance: S4 Agtech analyzes satellite imagery to develop an index that helps insurers optimize their risk aversion according to real-time productivity data.

Finance: PagoRural is developing a non-banking financial service for farmers to access credit when buying their seed; and Agrofy, an Ag-specific eCommerce site is on its way to finance its marketplace products purely online.

Logistics: CargoX is helping Brazilian freight companies optimize their fleet.

Data Collection: Satellogic produces high precision nano satellites; while Kilimo and Auravant are helping farmers aggregate these images, process them, and integrate them with production data to turn it into actionable insights. 

VC Investments in Latin America surpassed $1 billion for the first time in 2017, doubling the amount committed to startups in 2016. Ag & Foodtech globally have surpassed the $10 billion mark globally, according to AgFunder.

Latin America plays a key role in the food and agribusiness value chain and is yet to set its footprint with prominent agtech players that can leverage regional advantages to become dominant global players. Its market is less integrated and lacks the venture liquidity track record of the United States. However, several sub-sectors provide an edge for local entrepreneurs to develop local solutions for problems shared by farmers, processors, and distributors in the region. Some of them have started to catch the attention of key regional stakeholders.

We have scouted approximately 520 agtech startups across the region, more than half of them launched in the past three years, and less than a quarter have institutional funding, so there is a lot of innovation and investment opportunity coming our way.