The combined assault of extreme weather, inflation and reduced access to fuel and fertiliser in the wake of the Covid-19 pandemic and Ukraine war has meant that 345m people worldwide face acute food insecurity, according to the World Food Programme — 400,000 of them at catastrophic levels.
Food insecurity can not only cause death and damage people’s physical, emotional and cognitive development — it can also provoke civil unrest and violence.
This is happening in a world where the UN Sustainable Development Goals pledge to eliminate hunger by 2030. Reluctantly, the UN has accepted that the “unprecedented wave” of hunger stemming from the war in Ukraine will make that difficult to achieve.
But the struggle must go on — ways must be found to produce more food in better ways.
“How do you find something that can help fight food insecurity and be more sustainable for the long term?” says Adam Bergman, global head of agtech investment banking at Citigroup in San Francisco. “Because with the growing global population it's going to be very challenging to feed 10bn people by 2050 and not use more land, water, chemicals, fertiliser and other inputs. We'd struggle to do it and not have a huge impact on climate change.”
Enthusiasts even think a new revolution in agriculture could be coming.
“The potential of digital technologies to change the food system are immense,” says Julian Lampietti, global engagement manager for the agriculture and food practice at the World Bank in Washington.
Computer chips might seem to have little to do with fields and plants. But digitisation can bring down transaction costs and harness data to create efficiencies and produce food in a more environmentally sustainable and equitable way.
“Think about the problem of connecting 600m farms to 8bn consumers,” Lampietti says. “For every tonne of wheat or rice sold, only something like 10% of the value of that actually goes at the farm gate to the producer. The rest is moving it around and getting it on to the plate, so to speak.”
Unlike with previous agricultural advances, the latest innovations are taking place at multiple points along the agrifood value chain.
“Digital technologies have attributes that can shrink those transaction costs tremendously and make the whole system a lot more efficient,” says Lampietti. “Real prices of food have come down for 100 years, partly due to technological evolution. They cannot come down necessarily any more at the farm level, without just running the farmers out of business or destroying the planet by mining every last resource.”
Instead, he argues, it is time to tackle the inefficient way food gets from the farm to the consumer, using digital technology in ways that are replicable around the world. Done well, this could also mean getting more money into the hands of farmers.
Who pays?
However, cutting edge digital innovations are not cheap. So getting them from the drawing board to the farm, especially in poor countries, presents a financing challenge.
The industry has found that implementing agtech advancements, particularly in regions with limited technological knowhow and energy supplies, is very difficult and often fails to generate returns for investors.
Because of agtech’s high cost and risk, experts agree that the burden must be shared between the public and private sectors. The hard part is working out how to do that successfully.
The sums required are awesome. The research project Ceres2030 found that an additional $330bn is needed before 2030 to fill this gap, with around $190bn of that to come from countries affected by food insecurity and $140bn from donors.
“And that is not happening, that amount of money is not being spent, so it’s basically about $33bn annually more than what’s currently being spent — there is a massive investment gap,” says Carin Smaller, founder of the Shamba Project and co-director of Ceres2030. “The big question is how do we finance that, where do we find the money?”
Currently, much of the financing comes from grants and loans. Smaller believes grants are central to fighting hunger because they can reach “the poorest of the poor”, in economies still too weak to attract capital markets funding.
She goes further: most of the funds to bridge the food insecurity gap “must come from public investments. It’s really hard to tap into capital markets for the kind of agricultural investments we need, in the countries that we need, because the chance of a return is so low.”
Bergman at Citi says there has been heavy private investment in foodtech innovations, but it has slowed down. “However, there's still a tremendous amount that needs to get done. One of the things that's really needed is more money coming from the public sector.”
But though public money is very important, it’s never going to be enough. “The public sector has to be smarter at how it raises [additional] money from private, concessional or commercial loans,” Smaller argues. “And that’s where the World Bank and the IMF come in, but they’re not doing very well. They’re not succeeding in bringing institutional investors in.”
In this difficult field, the multilateral development banks have to steer between two perils. If they take on too much risk at generous pricing, they could crowd out the private sector from profitable investments it would otherwise undertake. But if they are too cautious, not enough will get done.
Smaller argues the World Bank must be willing to take more risk, go to riskier countries — and allow the capital markets to take tranches of debt that are lower risk.
This is the category of techniques known as blended finance. “It is not about incentivising the private sector, it’s about using the public money to go where the private money won’t, in a way that makes that public sector investment attractive to private sector coming in,” says Smaller. “That is the real trick of blended finance.”
So far, that trick has not worked in agriculture. “Even where there is blended finance, it’s minuscule, it hasn’t worked,” says Smaller. “The banks have been trying it for decades, governments have been trying it for decades — it often fails. It’s risky. Because you want to be careful that your use of public money is not helping companies make more profits, but really going to help people.”
Incubating the new
But if public money is indispensable at some parts of the implementation chain, private capital is equally vital at others.
The sharp end of innovation, where new technologies are devised and brought to market readiness, is difficult to finance with money from government coffers and non-profits alone.
Public sector funding can help get projects started but it can be hard to scale up this way, as public money often runs out.
Venture capital and private equity, whether impact-motivated or not, are the natural sources of capital.
“The role of the private sector is really to do the development,” says Lampietti. “They need to figure out how to turn those data into something that the farmers can access and use in a friendly format. They’re the ones that are best placed to invest and take the risks around which are the best ideas.”
Georgie Thomas, environmental, social and governance associate at Cibus Capital, a private equity firm, believes investing in food security is an opportunity to create profitable, successful companies.
“Gone are the days where we have to sacrifice those returns for doing good,” she says. “We’ve seen it in our companies — they’ve been able to reduce their costs through moving towards practices that are better for society and better for the planet.”
Cibus invests in disruptive technologies, such as robotics that help with reducing pesticides and labour. Farms that can lower their need for pesticides become more resilient to volatility, Thomas says.
Getting tech to the front line
How to make agricultural technologies work in the areas where they are most needed is one of the thorniest parts of the food security problem.
Efficient tools or apps are all well and good, but if they can’t be deployed in the neediest areas they are more in the ‘nice to have’ bin than a necessity.
Vonnie Estes, vice-president of innovation at the International Fresh Produce Association, is particularly interested in combatting food waste. In developing countries, this does not occur in consumers’ homes so much as in the supply chain, where transport is slow and cold storage scarce.
Technology can help track how old food is and what to sell first. “There is a market for almost every quality of food, but there is this huge mismatch of really good food that will get to a market that only sells at bottom prices, and food that doesn’t sell,” she says. “We can solve that mismatch through cell phones and even barcodes. A lot of the time it’s not that food is scarce; it is that we have a distribution problem.”
Technology that links markets with growers to cut waste is already beginning to happen in certain African countries, like Zimbabwe.
“If you were to try and scale up this technology, say in India, you would have to understand the local conditions and talk to the local farmers first, but the technology should work,” Estes adds. “You would just have to spend time getting growers on their phones using the app, getting retailers connected and having a business model where it’s not a burden on any one party, making sure that it actually works and people make more money and waste less food.”
Another technology that can improve food security is solar power for small irrigation systems, drinking water pumps for humans and animals, and refrigerators.
An innovator in Nigeria called Cold Hub has developed cold storage units for farms. Because solar has become so much cheaper over the last decade, it can now be used at scale in urban areas and to support poor rural communities. Fruit, vegetables and animal and dairy products can now be kept for longer. Even batteries have become significantly cheaper. —J.C.
Opening up
Apart from providing money, the public sector can foster new technologies in other ways. Regulatory sandboxes allow new technology to be tested in controlled environments. Public sources of open data such as satellite imagery can help market participants monitor and predict yields and soil moisture.
Lampietti says the Obama administration in the US made huge amounts of land data open source, a major asset for companies around the world. Although such data is still costly to process, it encouraged innovation.
Fertiliser companies are learning where to put machinery that works best with each type of soil. Agriculture is at least 20 years behind all other industrial sectors in adopting digital technologies, Lampietti adds. “Data is going to be key to helping drive the efficiency in the system, and it’s going to be key for us to be able to reward the farmers fully for the things they do right,” he says. “We know how much carbon you’re sequestering, we know how much biodiversity you’re producing, so we can reward you and the market can reward you.”