Harvesting innovation: 5 companies cultivating a greener future with AgriTech

The global agri-food system plays a pivotal role in sustaining human life, yet it operates with many inefficiencies and causes an unsustainable strain on the planet’s environment and resources. 

The US$10 trillion global food industry feeds a population of 8 billion people, and these figures are set to exponentially rise by 2050 as the population also increases. The United Nations forecasts a 60% increase in total food demand and a 73% upswing in the demand for animal protein in comparison to 2010 levels. 

Current food production practices contribute to one-third of the world's greenhouse gas emissions, consume 70% of freshwater resources, and are responsible for 80% of global deforestation. In addition, geopolitical instability, protectionist government policies, and unpredictable weather patterns thanks to global warming have exacerbated a worldwide food crisis. The need to invest in a resilient food system that serves as a climate change solution is now more pressing than ever.

AgriTech, short for Agricultural Technology, is an umbrella term for the convergence of technology, data, and scientific innovations applied to various aspects of agriculture. This field encompasses a wide range of technologies and solutions designed to elevate the efficiency, sustainability, and productivity of farming practices.

Technological advances in AgriTech have been used to innovate indoor crop production. Crops grown in glasshouses, polytunnels and vertical farms can now be grown using methods that promote better use of space, minimise water usage, lower carbon emissions, remove the need for chemical fertiliser and improve biodiversity. This has been made possible all thanks to controlled environment agriculture (CEA) farming. 

CEA farming is a method of cultivating crops in a precisely regulated environment, typically indoors or in greenhouses. This approach allows for tight control over factors like temperature, humidity, light, and nutrient levels, optimising plant growth and crop yields. 

CEA often utilises advanced technologies such as hydroponics or aeroponics to provide plants with the ideal conditions for growth, independent of external weather or seasonal variations. It offers the potential to produce high-quality, consistent crops year-round and is seen as a promising solution to address issues like food security, climate resilience, and resource efficiency in agriculture. 

Livestock farming is equally being confronted with a series of challenges. Farmers have to tackle climate change impacts, rising feed costs, disease outbreaks, and growing concerns about sustainability and animal welfare, in turn driving demand for innovative and sustainable farming practices.

Animal feed additives are essential components in commercial livestock farming. These additives include substances and ingredients that are incorporated into livestock diets to enhance animal health, productivity, and product quality. In a competitive sector like commercial farming, they play a pivotal role in ensuring the efficient and profitable production of meat, milk, and eggs. 

Additionally, there is growing recognition of the importance of feed additives in improving the sustainability of animal farming because they can reduce the environmental footprint, including the emission of greenhouse gases and phosphorus. 

Feed additives in animal farming effectively reduce greenhouse gas emissions, especially methane, by improving digestive processes. They also manage phosphorus efficiently, cutting its surplus excretion. This not only curbs environmental pollution but also minimises the need for extra phosphorus supplements, offering financial benefits. 

The global AgriTech market is projected to surpass US$75,872.5 million by 2032, with a CAGR of 13.1% from 2022 to 2032. 

In light of challenges in our food system, technologies like controlled environment agriculture make crop production more sustainable, while innovations in livestock farming, such as feed additives, improve animal health and reduce environmental impact. With a looming increase in food demand, investing in these technologies is crucial to address sustainability issues in our food systems. Here, we look at 5 small/mid-cap companies leading the way to address these issues. 
 

Anpario

Anpario(ANP) Follow | ANP, is a manufacturer and distributor of natural feed additives for animal health, nutrition and biosecurity. Anpario’s portfolio is divided into four categories: Health and Performance, Toxin Management, Feed Quality, Hygiene and Insect Control. 

The company’s strategy to offer sustainable and environmentally friendly products which help customers transition away from using antibiotics and some of the harsher chemical treatments puts Anpario in a good place to take advantage of current and future trends. For example, UK sales of antibiotics to treat food producing animals have halved since 2014, and, FDA data shows sales of medically important antibiotics for use in animal agriculture have dropped 25% overall since 2010 in the US. 

The trend to reduce antibiotic use and demand for anti-viral feed mitigants has seen strong sales growth of higher value products Orego-Stim® and pHorce®, particularly in the US.  

Ultimately, in light of these trends continuing and the regulatory environment surrounding feed additives tightening, Anpario is confident in the long-term profitability of the company.

Financially, Anpario said its overall sales fell 7% to £15.3m in the first half of 2023. Gross profit decreased by 3% to £6.7m, reflecting lower volumes sold despite the increase in gross margins from 41.9% to 43.9%, which it achieved by passing on raw material price inflation in prices, combined with declining logistics costs. Looking ahead, Anpario expects improved gross margins due to lower raw material costs and increased sales volumes, while the benefits of cost-saving measures in H1 2023 will become more obvious in late H2 and 2024.

Light Science Technologies 

Light Science Technologies Holdings(LST) Follow | LST, is a UK-based company bringing together controlled environment agriculture (CEA) and contract electronic manufacturing (CEM) to accelerate the advancement of agricultural technology for global markets.

Today, as more indoor growers see its positive effects on controlled crop production, the smart farming market is forecast to be worth US $56.96 billion by 2029, growing at a CAGR 18.5% until the end of this period.

Addressing the Controlled Environment Agriculture market, Light Science is LST's grow lights and sensor technology business, with targets including indoor, vertical, glasshouses, polytunnels and medicinal farming markets. Factors underpinning market growth include increasing water shortages across the globe, government policies, climate change, and an increasing global population.

In September, Light Science Technologies received a grant from The Department for Environment, Food and Rural Affairs and the UK Research and Innovation for a sustainable potato farming project. The project is set to involve a range of commercial potato growers across England and will test out a range of regenerative cultivation methods that could reduce the environmental damage caused by producing potatoes.

In the same month, Light Science acquired UK-based Tomtech Limited for £500,000 in cash. Tomtech designs, manufactures, and installs monitoring and control systems for commercial greenhouses and polytunnels. The acquisition will bring new controlled environment agriculture (CEA) revenue streams to Light Science, complemented with AI opportunities. This should grow revenues with a proportion of recurring sales on maintenance contracts. As a result, Light Science's group earnings should see an immediate boost in the current reporting period.

Financially, Light Science noted a 22% revenue increase to £4.4 million, compared to £3.6 million in H1 2022. Margins remained consistent at 20.9%, up from 17.7% the previous year. Pre-tax losses decreased by 37% to £0.8 million. Light Science's Contract Electronics Manufacturing division was its main revenue generator and normalised the company’s gross margins.

 

Ocean Harvest 

Ocean Harvest Technology (OHT) Follow | OHT, is a producer of animal feed supplements from seaweed blends. The company’s seaweed blends contain a variety of nutrients and bioactive compounds that aims to improve animal performance - such as increasing immunity and growth - whilst reducing the environmental impact of argiculture, with a range of products targeted at domestic or farm animals. 

Ocean Harvest’s products boast immense environmental advantages with a recent life cycle analysis of Ocean Harvest's OceanFeed line of products revealed that it has a significantly lower CO2 eq footprint in its manufacture than other common ingredients in animal feed. OceanFeed can therefore be a CO2 net negative, as 1 tonne used as an additive can reduce CO2 eq emissions from the feed chain by over 10 tonnes.

Having successfully listed on AIM in April this year, raising gross proceeds of £6.0m, Ocean Harvest has been quickly gathering momentum throughout 2023. The company won 10 new customers in the first 6 months of the year, including a "top five" swine producer in the US and one of the UK's largest feed pre-mixers. 

Ocean Harvest also expanded its seaweed supply chain to new regions such as East Africa and the  Philippines, giving it access to materially larger volumes of biomass.

Financially, The company saw revenues rise 66% to €1.6m from €0.95m in H1 2022. Gross margin jumped 150% to €0.56m and 36% from 24% last year. Period-end cash balance was €4.8m. We expect its revenues to continue their upward trajectory as demand for sustainable and natural animal feeds increase in line with net zero targets.

Eden Research 

Eden Research(EDEN) Follow | EDEN, specialises in developing and commercialising sustainable crop protection and plant health solutions.

Recently, Eden Research has been making strides towards authorisation of its crop protector Ecovelex™, which applied for authorisation in the UK following a recent application in the EU. Shortly after, Eden Research received its first order for Ecovelex™ in the UK. Ecovelex™ is made to replace banned chemicals and utilises plant-derived chemistry, offering a sustainable solution for farmers to meet consumer and regulatory demands.

According to a 2022 report by the Research Institute of Organic Agriculture, in Europe, 17.1 million hectares were managed organically in 2020, up from a measly 1.4 million 30 years ago. Once regulatory approval for Ecovelex™ is received, Eden is in a strong position to capitalise on this market trend. 

Among its other products on offer, Eden also has two commercialised eco-friendly crop protectors, its flagship biofungicide Mevalone, and Cedroz. These two products are well-positioned, as growers are having to meet pressure on improving crop yields while also being conscious that high levels of pesticide residue are now a focus for the consumer. Recently Eden has seen a regular cadence of approvals for these crop-protects across the globe. 

 Eden neared its entrance into the Latin American market with Mevalone in June, when it appointed a new product distributor for the biofungicide for leaves in Columbia. 

This news came shortly before Eden received authorisation for Mevalone in New Zealand, a prominent wine-growing nation with grape growing conditions that can foster outbreaks of Botrytis, a disease responsible for high amounts of crop loss.  In May, Eden obtained regulatory approvals for Cedroz™ in California, as well as for Mevalone® and Cedroz™ in Florida.

On the financial front, the company experienced a boost in revenue in 2022, reaching £1.8 million, up from the previous year's £1.2 million. Adjusted EBITDA was a £1.7 million loss, which showed some improvement from last years £2.0 million loss. Cash position at year-end was £2.0 million, a decrease from the previous year's figure of £3.9 million.

Plant Health Care 

Plant Health Care(PHC) Follow | PHC, makes peptides derived from natural proteins derived from plants to help farmers protect their crops - as it describes them "vaccines for plants". At present, pesticides, made up of harmful chemicals, can have a negative impact on the environment. The main environmental concerns related to pesticides are soil, water, or air pollution.

In addition, the effects of exposure to pesticides on humans is a continuing concern. Exposure of the general population to pesticides occurs primarily through eating food and drinking water contaminated with pesticide residues, which has been linked to cancer, effects on reproduction, as well as adverse effects on the immune and nervous system.

Plant Health Care’s commercial business is driven by sales of Harpinαβ, a protein that acts as a powerful biostimulant, promoting the yield and quality of crops. During the first half of 2023, the Group continued to see the accelerated adoption of Harpinαß in Brazil as sales to sugar processors increased. 

Harpin revenue in South America and Mexico increased but fell in North America. This meant overall Harpin𝜶β revenue decreased by 15% to $2.8 million,  due to severe drought in the Midwest and delayed purchases by growers.

In the first half of 2023, overall revenue edged up by 1% to $5.6 million from $5.5 million in H1 2022. Brazil saw a  48% revenue increase, however, US sales fell by 56%, leading to depleted inventories within the channel. This decline hints at promising sales anticipated for the latter half of 2023. As of June 30, 2023, the available cash stood at $5.7 million.