The Importance of Agriculture Innovation
Feeding the growing world population is a major geo-political challenge. But as is true of many such challenges, finding solutions presents a profitable growth opportunity for innovative companies in the agriculture sector.
Arable land and water resources are finite and contracting with climate change and other factors. In response, farmers must produce higher crop yields through soil health improvements and greater efficiencies in using fertilizers, water, and crop protection materials. Innovating ways to grow crops without damaging the environment is a revolution necessary to global food security. Biostimulants and soil enhancers are examples of innovations essential for improving soil fertility, texture, and quality as well as crop yields. Innovation in these product categories and related technologies is at the forefront of global efforts for transforming agricultural practices.
Soil enhancement is an important source of agricultural innovation. The global soil enhancement market has grown significantly, primarily due to increasing environmental and public health concerns with the use of chemicals and microplastics in the soil.
According to a report in the AgNews, the agriculture industry worldwide loses $27.3 billion annually due to saline soils. It has been estimated that 50% of arable land will be salinized. Global food production must increase while the arable land is shrinking.
Other factors are the demands for organic farming, chemical residue-free agricultural products, and government support. The market for soil enhancement can be segmented by product type (natural and chemical), solubility (water soluble and hydrogels), soil type (sand, silt, clay, loam, and peat), application (agriculture and industrial), and crop type (cereals and grains, oilseeds, fruits, and vegetables, among other products). Based on product type, natural soil enhancements commanded the largest share of the global soil enhancement market. The soil enhancement market is growing significantly across the globe. Organic farming and soil management drive demand for soil conditioners. The soil enhancement market is expected to reach USD 6.9 billion by 2023, supported by a CAGR of 7.6% since 2018.
Bio stimulant products are also capturing farmer interest because research and field testing have demonstrated encouraging results, including root growth, root diameter, soil water holding capacity, increased microbial activity leading to increased nutrient availability, and many more positive results. Bio stimulants are not fertilizers but show evidence of speeding up the process of fertilizer availability. This matters because fertilizer is currently in short supply, especially fertilizers of the synthetic variety. This shortage results from several factors, from water shortages and weather extremes to the current conflict between Russia and Ukraine, to name a few.
Over the past decade, bio stimulant producers have learned how to enhance crop performance and quality, under a wide range of growing conditions. The bio stimulant market is anticipated to reach more than USD 5.1 billion by 2027. Europe has the largest share at around 45%, North America and Asia have approximately 20% each, and Latin America has about 15%. France, Italy, and Spain are the main European countries producing bio stimulants.
The current inflation also affects agricultural producers by increasing the cost of crop protection materials, fertilizers, soil nutrition enhancers, and other agricultural inputs. Of course, higher costs put pressure on agriculture profit margins and raises the prices paid for cultivated products. This impact is easy to see every day in grocery bills and restaurant checks.
In the past few years, venture capital firms have invested in start-up companies to develop new agricultural products and solutions. These investments need runway to take off but should propel innovation in agriculture through the coming years. The efficacy of new products and their claims need to be compelling before farmers are willing to trial these products. They also need evidence of a suitable return on investment in these products beyond the reported benefits of use. So, the benefits will take a while to penetrate the agricultural market fully.
Given the distribution system for agricultural products, new ventures will need to establish effective partnerships with established agribusiness companies that have access to and credibility with farmers. Agriculture is a tough market to break into, especially without government mandates favoring new product technologies. Creating the right go-to-market strategy can help innovators shorten the time needed to develop markets for their products.
As innovative product solutions and technologies continue to penetrate the agriculture markets, there is likely to be consolidation within industry sectors for companies to achieve greater competitive scale and geographic market reach. This is a typical pattern followed across industries as they mature. So, companies serving the agriculture sector will pursue business combinations such as acquisitions, joint ventures, strategic alliances, and licensing arrangements to achieve their strategic growth ambitions.
This will help to ensure suppliers of agricultural goods and services continue to invest in innovation and remain competitive in operations and distribution. For farmers, ongoing innovation and strong competition among suppliers should enable them to remain economically healthy while protecting their farms from many kinds of environmental damage and providing food security for a growing world population.
CDI Global works with Food and Agriculture businesses throughout the world to achieve profitable growth through successful business combinations. CDI Global has extensive knowledge of the dynamic and innovative changes occurring in the global Food and Agriculture industry. With us as your partner, you will access the experienced resources for helping respond quickly and effectively to market changes, entering creative and powerful new directions, and putting you firmly on the path to extraordinary results. We advise clients on complex acquisitions and divestitures, fundraisings, and restructurings. Our professionals cover 30 countries and understand the challenges of cross-border and middle market transactions. If you are considering buying or selling in the sector, or would simply like to discuss your options, sign up now for a free, no-obligation consultation with our team of experts.
By: Jeff Schmidt, Executive Managing Director, CDI Global
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