In Today’s Ag Economy, Who Pays for Sustainable Food Production? No one.
It’s no secret that today’s $4 corn coupled with higher food prices are shaping investment decisions made at the kitchen table and in the board room. While U.S. agriculture aims to reverse the impact of climate change and defend its leadership position on the global market, analysts predict that margins will win when pitted against ESG commitments across the food supply chain. So, who will pay for the innovation we need to address climate change impacts?
If we look to farmers, they frankly can’t afford to bet the farm on sustainable alternatives relying on poorly established market mechanisms to capture promised value. Alternatively, consumers speak first with their checkbook and only secondarily with their conscience: cheaper wins over greener. According to Nielson IQ, “global warming and the environment” are among the top ten concerns of U.S. consumers, however rising food prices still holds first place. Access to healthier food is vastly lower in the middle and eastern parts of the U.S. where “food deserts” have become quite common, even in top producing states.
Debate over the need for greener, healthier solutions has quieted, but the question remains ‘who pays?’
I saw this dynamic firsthand nearly 15 years ago when green biofuels struggled to gain traction due to price and market skepticism. And this is generally true with food. Is a venture company today viable if it only addresses the values of farmers and consumers and not their checkbooks too?
Throughout my career in agriculture, technology adoption has depended on three main factors: consistent and reliable performance in real world environments, a positive or neutral impact on yield, and one other value-driver that pays for itself. Now more than ever, products must deliver compelling value first with environmental benefit second. For example, Groundwork BioAg’s transformation from a biological start-up to an integrated carbon company offers a roadmap to the future. The basis of their carbon program is their Rootella mycorrhizal inoculants, which consistently have delivered a positive yield improvement across millions of acres worldwide.
Recently, Mixing Bowl identified more than 1,200 biological companies offering more sustainable crop protection products. At the recent BioAg World Congress, it was estimated that of those, only a quarter have achieved a million dollars in sales. The message is that biological innovation is advancing, but “greenness” doesn’t drive a purchase on its own. Compelling and near-term value creation ensures real change occurs. That’s why efforts like the USDA’s $2.8 billion Climate-Smart Commodities program, are so important. Better yet, if a product is proven and pays for itself, farmers will adopt it.
Wisely, Groundwork BioAg proved their science first, made it easy for farmers to adopt, and offered a price point that more than paid for itself. Unique and passive access to carbon markets was the bonus. Since mycorrhizae transform transient nutrients into stable soil carbon, application of highly concentrated inoculants, like Rootella, opens the door for growers to access a new revenue stream with minimal financial risk or investment. After rolling out the program this spring, Groundwork BioAg’s Rootella Carbon enrolled more than 100K acres – demonstrating strong grower interest.
As an investor and advisor to many agtech start-ups, I am encouraged by the big ideas and creative business models focused on value. While investments may be lower in 2024 than in the past, investors [and farmers] are willing to bet on those innovations that offer a positive ROI as well as ESG impact. No one paid for “green” on its own 15 years ago; no one will pay for it today or 15 years from now.
Instead, we must ensure great products for customers – be they farmers or consumers – and monetizable sustainability benefits that come along for the ride.
Our legacy can then be a more sustainable and resilient food supply and environment, so future generations won’t ultimately pay the price.
Neal Gutterson is the Partner and Chief Technology Officer at Radicle Growth. Prior to joining Radicle, Neal led R&D efforts, specifically focused on bringing value to farmers through the discovery and development of innovation, at DuPont Pioneer and later Corteva Agriscience where he served as CTO. Before that, he spent 12 years at Mendel Biotechnology in a variety of executive roles from VP R&D to CEO. The common denominator throughout Neal’s career has been value creation for farmers and converting innovation into actionable companies, products and outcomes. Neal served on the Board of Directors for several organizations, including CGIAR, Grassroots BioTechnology, BIO, and the International Maize and Wheat Improvement Center (CIMMYT)
