Market turbulence or not, North American investors plow into farm tech

By Rod Nickel and Carey Gillam
WINNIPEG/KANSAS CITY, Sept 15 (Reuters) - North American
investors are pouring money into agriculture technology despite
turbulent financial and commodity markets, as cutting-edge
advances that enhance farm production bring opportunities for
profits.
Investment in this technology, which spans plant and soil
technology to drones, amounted to $2.06 billion in the first
half of 2015, on pace to smash last year's record $2.36 billion,
according to AgFunder, which matches startups with investors.
Technology that reduces reliance on chemicals and
fertilizers is one area of interest. The most widely used
herbicide, glyphosate, was classified this year by the World
Health Organization as a probable human carcinogen, and farmers
also face scrutiny for over-applying fertilizer.
"Biologicals," which use natural sources such as bacteria,
are especially attractive. In this field, researchers harness
soil and plant microbes and bacteria for products that protect
plants from disease and drought.
Biological solutions face fewer regulatory hurdles and are
more environmentally friendly than chemicals while still
yielding crop production benefits, agricultural experts said.
"This kind of capability is really what we believe is
necessary for the future of food production," said Sonya
Franklin, director of microbial traits at Monsanto (NYSE:MON) Co MON.N ,
the world's largest seed company.
Some companies in the sector could see revenue growth of 20
percent per year for five years, said Todd Solow, a partner in
Norwest Equity Partners of Minneapolis.
Norwest's sale of agriculture technology company Becker
Underwood to BASF Corp BASFn.DE for $1.02 billion in 2012 came
after its revenue increased four-fold to $246 million from the
time of Norwest's 2004 purchase of a controlling stake.
"If you have differentiated technology and can prove to the
market that you have yield-enhancing capabilities, you have the
potential for very significant growth," said Solow.
That kind of return has attracted the interest of Bank of
Montreal BMO.TO , which is looking to help companies raise
funds prior to any initial public offerings (IPOs) and
facilitate mergers and acquisitions.
"There are all sorts of new technologies being developed in
and around crop nutrients, crop efficiency, seed efficiency,"
said Greg Pearlman, head of Bank of Montreal's food and consumer
group. "We think this is a hot area."
Monsanto, together with Syngenta AG SYNN.VX and the Bill &
Melinda Gates Foundation are investors in North Carolina-based
AgBiome LLC, which recently raised $34.5 million for research
and the launch of a new biological fungicide.
"The industry has an ongoing need for new and innovative
products. We have a lot of people to feed in the coming
decades," said Dan Tomso, AgBiome's chief science officer.
Another company with large interests in agriculture,
Canadian fertilizer-maker Agrium Inc AGU.TO , bought stakes in
two plant technology companies in 2014.
"In the last two years definitely it's picked up in the
number of companies willing to talk about joint ventures or
all-out acquisitions," said Brent Smith, vice president of
Agrium subsidiary Loveland Products.
A recent deal in the sector was last month's $160 million
purchase by U.S.-based Intrexon Corp XON.N of Oxford
University spin-off company Oxitec, which specializes in
controlling insect damage to crops.
Venture capital firms have also been attracted to the
sector, with funding up 2 percent from July 2014 through June
2015 over a year earlier despite a 16 percent dip in the broader
"clean tech" sector, according to professional services firm
PwC.
Massachusetts-based Symbiota LLC, launched two years ago
with $7.5 million from Flagship Ventures, is testing products to
help crops yield more with less water and fertilizer, while
fighting disease.
"The potential for this space is absolutely astronomical,"
said founder Geoffrey von Maltzahn.
At the ground level, farmers are paying more to grow more.
Mark Nelson uses modern technology on much of his Kansas
farm, but he said the costs are high.
Still, he sees improved yields from the latest farming
advances. "It's not our father's agriculture anymore."