Even before the onset of the 2020 coronavirus pandemic, agriculture faced a number of headwinds, from hurricanes and ill-planned disruptions to crop cycles to retaliatory tariffs that cut exports. When Covid hit, it highlighted existing problems and created new ones, including supply and demand shocks to the food system and labor shortages. Then, the Ukrainian invasion delivered another blow, roiling global food markets. These issues highlight the huge need for investment in agriculture, especially technologies that increase the efficiency of the industry. “There’s a lot of traction in this space, and you’ve had a number of events focused on food security since the pandemic started,” said Kristin Irwin, executive director and senior analyst for sustainable growth and resource optimization. Auburn Highmore. Analysts say there are plenty of ways for retail investors looking to expand their portfolios to include some recession-safe investments and profit from emerging trends. Your best bet may be to focus on large established companies that have invested in innovation and acquired smaller companies that are moving the industry forward. ‘A huge opportunity’ “It’s a huge opportunity, but it’s become more difficult to get funding, especially this year,” Irving said. There has been an increase in deals and venture capital investment in this space since 2020. That year, venture capital invested $3.4 billion in 422 deals, double the $1.7 billion invested a year earlier, according to Crunchbase data. In 2021, more money went to fund agtech startups, with 440 deals and $4.9 billion. This year, investment has slowed slightly. As of October 17, there were 321 deals and nearly $3.5 billion invested in agtech, according to Crunchbase data. That’s because the stock market has been volatile all year, but it’s still in a bear market — not a good time for an investment company to go public. Last year was one of the busiest IPO markets in two decades, according to Renaissance Capital. The company said the third quarter of the year had dried up — one of the slowest in decades — leaving 2022 on track to raise the fewest earnings in more than 30 years. Rising interest rates are also putting pressure on companies that need to borrow money to grow. Leveraging M&A to Grow Several large players in the industry have a proven track record of investing in innovative technologies and acquiring smaller companies. “Large conventional farming has been investing in smaller startups, and that’s helping drive the portfolio forward,” said Steve Hansen, managing director and equity analyst at Raymond James. “There are a lot of ways to get smaller, more nimble, faster-growing companies on board, but it’s a tougher environment for them right now.” Ag is one of the few we’re confident they can remain profitable in 2023 one of the companies. “Executive Director and Senior Analyst, Oppenheimer Kristen Owen One example is Deere & Co, an agricultural manufacturing company and one of Owen and Hansen’s top picks. This year, the company eventually became a majority shareholder in Kriesel Electric, a manufacturer of batteries The Austrian company. Kriesel’s advanced battery technology will help Deere develop off-highway vehicles — such as tractors and other agricultural equipment — and move toward a zero-emission future. Equipment. The deal is worth $249.2 million. Owen said: ” You’re going to see more of these big companies getting into the venture capital space and providing opportunities for these new technologies. Last year, Deere also acquired Bear Flag Robotics, a Silicon Valley agtech startup developing autonomous farming equipment, for $250 million. “As our customers face demands with limited resources, we must continue to provide solutions solutions that enable them to do more with less,” said a Deere spokesperson. “Automation and autonomy, and innovation in sustainable land management are key steps in achieving this goal, creating opportunities for them to unlock more sustainable and profitable chartable operations. Investing in partners who can help us drive these solutions will continue to be a priority for us. Shares of Deere are up more than 11% this year, but are about 17% below their all-time high. Agricultural machinery maker AGCO has also made several investments or acquisitions in new technology in the space over the past few years. 5 In January, it acquired JCA Industries, a company that develops autonomous software for agricultural machinery. This follows an agreement in December 2021 to acquire Appareo Systems, another software engineering, hardware development and electronics manufacturing company. In 2021, AGGO It also acquired precision livestock company Farm Robotics and Automation. AGCO’s stock has fallen less than 1% since the start of the year. One of Irving’s top picks in the space is Trimble, a mid-sized software company that provides precision farming products , using technologies like GPS-enabled tractors and satellite imagery to help farmers use their fields efficiently. The company is also part of a bandwagon of funding new technology — it invested $61 million with CNH Industrial in autonomous tractor developer Monarch Tractor. Shares of Trimble are down about 36% since January. Corteva, Hansen’s top pick, has risen more than 33% since January. The agricultural company bought Spanish microbial technology company Symborg in September, which Produces biostimulants and biofertilizers for a wide variety of crops and agricultural systems to improve outcomes. “They are really at the forefront of innovation, both internally and through acquisitions,” he said. Investment Incentives Of course, high inflation brings to the U.S. economy pressures, and prompted the Federal Reserve to raise interest rates sharply, raising fears of a recession next year. While this has created headwinds for many industries, agriculture is some distance from these pressures because of the importance of food and organic materials in other industries, Examples include corn and soybeans in ethanol. “The key drivers of space tend to operate almost on their own biological rhythms,” Hansen said. He added that there is economic sensitivity to some inputs such as fuel costs and commodity prices, but drives crops The actual supply and demand fundamentals of prices have nothing to do with the actual economic cycle. In addition, grain stocks are at or near ten-year lows, an issue that suggests more growth is needed. Because of this, his company is very optimistic about the health and potential of the agricultural sector next year. Constructive. Some areas of the industry are also experiencing tailwinds that will benefit them for years to come, Owen said. “There is no doubt that we have invested less than a decade in the agricultural economy and now we are going through a series of events. , these events are sustaining the economy and really incentivizing investment in the space, which should really benefit investors,” she said. “Ah is one of the few companies that we are confident they can sustain profitability through to 2023. That includes sustainable moves in fertilizer and energy transition to renewable diesel, which requires corn and soybeans. “You have these tailwinds continuing to support the industry, which is different from the macroeconomic view,” she said. Looking Ahead Given the growth in the new agricultural technology market and the number of companies, there is likely to be a large number of companies going public in the coming years, giving retail investors the opportunity to invest directly. Part of the reason for the drying up of public offerings in this space is the decline of the special buyout market, which has is a popular way to go public in recent years. Such companies, called SPACs, raise money through an initial public offering and then select a target to go public through a merger. They are popular in 2020 and 2021 because, compared to the traditional IPO process, It’s usually easier to go public. The market has dried up as stocks plunge and regulators are looking into many deals in 2020 and 2021. Now, offerings have stalled — there were no SPACs in July, and SPACs have cleared more than 100,000 so far this year. $12 billion. Because of this market, many companies are taking longer to go private, delaying potential public offerings by a few years. “More and more companies are likely to go public in 2024 and 2025,” Owen said. “