Aussie agtech could be a “cornerstone” of the post-COVID-19 economy… but only if we invest in it

In Australia, at least, it looks like the worst of the COVID-19 health crisis has passed, disrupting almost everything about everyday life as it went. As the country starts to re-open, and we consider the road to economic recovery, we’ve been thinking about what the future looks like for all kinds of industries — even those that, at first glance, aren’t on the frontlines.

Agriculture has always been a significant part of the Australian economy. But, with global supply chains disrupted, international agreements breaking down, and distribution lines disappearing, it’s not immune to the effects of the pandemic.

Back in October 2018, following a spate of agtech investments, we wrote about the industry’s potential, and the advantage the ‘lucky country’ has in this space.

Now, as the world changes beneath our feet, is Australia ready to take up that opportunity?

Where ag meets tech

When it comes to agtech, it’s not as if the industry itself is under any threat of disruption — at least, not in the same way traditional taxi or hotel spaces have been disrupted, for example.

As long as there are people, those people need to eat.

Instead, ‘disruption’ serves to shake up the way things have always been done, and potentially bring new opportunities and additional support to incumbents.

Sydney startup The Yield, for example, uses sensors to analyse crop microclimates, and help farmers maximise their output.

Recently, the startup secured $11 million in investment, in a round led by Yamaha Motor Ventures, and including follow-on investment from Bosch.

The capital itself is obviously welcome, founder Ros Harvey tells SmartCompany, and the investment shows Aussie agtech is on the radar of international giants.

But, there’s also unlikely synchronicity here.

“It’s also the access to capability,” Harvey explains.

Yamaha is a leader in robotics, she notes. And among The Yield’s corporate clients, there’s a demand for agricultural bots.

“For the robots to get a return on investment for the companies buying them, you need to be able to optimise when they can be used,” the founder says.

“We can double the amount of time that the robots can operate within safe environmental conditions.”

Kevin Baum, co-founder and chief of farm management software startup AgriWebb, is a US native, and originally a city boy, who has been drawn not only to the world of agriculture but all the way to Australia.

While a lot of time, money and effort goes towards “transient spaces” in tech, Baum says, the agriculture space is not only huge, it’s critical and it’s lasting.

“We’re talking about not just a huge and impactful and important industry, but also one that is just undergoing its digital transformation,” he tells SmartCompany.

And, Australia is at the forefront of that transformation, he says.

The sector has been through a lot lately, he notes. There was drought and there were bushfires, and now we have COVID-19.

But, Baum sees this latest economic shakeup as an opportunity to make the industry stronger.

“The things that make Australian agriculture unique are only going to accelerate with these macro changes happening around the world.”

“I think it’s going to be absolutely a cornerstone of helping to rebuild any economic impacts that come out of this.”

And, of course, technology has a significant role to play.

“It’s a huge opportunity that Australia needs to be excited about.”

Transparency is trending

Like in many other industries, in agriculture, COVID-19 has simply accelerated trends that were already underway.

Harvey notes four major challenges that were already facing producers: access to labour, managing distributed assets, a lack of capital and investment, and access to markets (that is, simply being able to sell a product).

“There’s a lot of concern, which is going to grow even further, about how food is produced, packaged and transported,” Harvey notes.

At the same time, Australian agriculture has a strong reputation, both overseas and domestically. The way the nation has managed this health crisis, especially compared to countries such as the US and the UK, will serve to bolster that reputation even more, Harvey suggests.

“Obviously COVID is a terrible thing. It’s been shocking for many families and for the economy more generally, but there’s also an opportunity,” she says.

“Australian producers should be optimistic about the future, and embracing technology to help drive sustainability, to increase traceability and the confidence in the way food is produced, and increasing our productivity,” she suggests.

“That’s all a key part of this journey, which bodes for Australia to be a very good position in terms of its future.”

The Yield founder Ros Harvey. Source: suppled.

And, that’s only the first part of the story. As an early adopter and innovator, the Aussie agtech industry also creates a strong export opportunity. Sure, it’s already exporting consumables, but exporting tech is arguably much easier.

“It’s cloud-based, it’s analytics, you’re able to sell it remotely,” Harvey says.

“It’s a very important part of the story.”

Sonya Comiskey is the founder of Southern Cross Beef, a Queensland-based meat producer focused on feeding Queenslanders. This month, the business launched its first line of tech-enabled beef products, using blockchain technology to ensure authenticity and traceability throughout the supply chain.

While launching a beef brand in the middle of a global pandemic wasn’t necessarily ideal, and certainly wasn’t in the risk assessment, “it has come with a timeliness to it”, Comiskey tells SmartCompany.

“Local food security, and the securing of local supply chains, has become a bit more important than it was before this, or more of a visible conversation,” she explains.

And that’s the sentiment at the very heart of her business.

“This is produced by Queensland families for Queensland families,” she says.

“Underpinning that we have the blockchain technology. What we say about the product is true and verified.”

“A very receptive ear”

This demand for transparency is nothing new. It’s been an ongoing trend, related both to governance and the anti-climate change movement, for years, if not decades.

But, Baum suggests situations such as COVID-19 shine even more of a light on the importance of protecting domestic supply chains.

“There have been crises throughout history that have highlighted how critical it is to have an understanding across your supply chain,” he says.

“In this situation, it’s only going to push those themes even harder.”

For Agriwebb, of course, that’s a big opportunity. The startup’s whole mission is to “deliver the digital future of agriculture”, Baum points out.

And a big part of that is in helping farmers manage changes in demand, whether that’s from the government, the supermarkets or distributors, or the literal end consumer.

As the pandemic throws the status quo out of the window, “suddenly, we have a very receptive ear right now”, he says.

As well as disrupting global trade and supply chains, the coronavirus has also shaken up routines closer to home. People are changing their habits, and that’s creating a ripple effect that, ultimately, could be beneficial to small-scale agriculture businesses.

There may be a realisation dawning that could accelerate the need for traceability, and demand for the tech behind it, even more.

According to Comiskey, it can be hard for Australian small-scale farmers to access meat processors.

The big national plants tend to only process for their own stocks. And, on the other end of the scale, there are small producers that often don’t have the best technology or equipment, and may not be accredited for meat grading.

But, if what Comiskey calls a “megaplant” goes down for any reason, you end up with farmers wasting money. When this happens in the US, some farmers end up euthanising animals.

“Something that’s going to come into focus, is that, maybe, we’ve got some problems with our food system,” she says.

“Obviously it’s pretty early days in everyone’s thinking around this, but I think we might see a return to small, localised food supply chains.”

It is indeed early days yet. But, with no vaccine to COVID-19 available, it’s feasible that the virus will mean people are cooking for themselves more, and thinking more carefully about their eating and shopping habits.

“That might then flow on, to see increased local butcher trade and increased import from local supply chains, and quality and security of produce,” Comiskey predicts.

Barriers to growth

The world is changing, the market is ripe. Aussie entrepreneurs have the expertise to see the ag sector soar, and to help prop up an economy in downturn.

But, did you really think it would be that easy? There are still significant barriers to growth here.

The biggest immediate challenge Comiskey is anticipating for the industry is one also touched on by Harvey: access to labour.

Many Queensland farmers lean heavily on seasonal workers, whether they’re backpackers or people coming through the Pacific Island seasonal workers scheme.

Of course, for the foreseeable future, international arrivals have been put on hold, and even the backpackers who are already here are restricted in their movements.

Harvey notes that a lack of physical and digital connectivity in rural areas could restrain the adoption of new technology.

Baum also suggests that there’s been a challenge around buzzwords, and the sheer volume of different tools, technologies and new businesses doing the rounds.

“They’re struggling to tie to the explicit value they’re providing to the producer,” he says.

As the industry integrates more, there’s a need for digital tools that can take all of that can provide actual insight into the benefit of tech, he says. That’s what will drive the “next big revolution”.

But, at the heart of it all, the problem for agtech startups is one all too familiar: access to capital.

A familiar gripe

As well as heading up Southern Cross Beef, the founder wears a second hat, as community officer at regional agtech incubator Ag Frontier.

Ag Frontier is working with startups creating data analysis tools for more efficient agriculture, and robotics that not only reduce the need for extra hands, but also improve worker safety.

“This is their chance to really step up and shine,” she says.

There is a massive opportunity here. But we won’t be able to take that opportunity without government support, and cold hard cash.

It’s not an unusual story, and it’s happening across all kinds of sectors. In fact, when SmartCompany explored the future of Aussie fintech earlier this month — a sector that arguably couldn’t be more different to agriculture — the overriding sentiment was exactly the same.

Agtechs already struggled to secure capital pre-pandemic, Comiskey says. Now, the pool has dried up even more.

“We need to make sure that, as government and industry, we’re incentivising and creating opportunities for that kind of investment,” she says.

“Otherwise we’re going to fail where we really could have been throwing some fuel on the fire and getting some traction.”

She stresses that the problems Aussie startups are solving are not exclusively Australian ones. There are global challenges being taken on, and there are global opportunities attached.

“But, without investment, it won’t happen,” she says.

Despite having recently closed her own funding round, Harvey agrees.

There’s recently been a surge of support for early-stage support for agtechs, offering seed funding opportunities, she notes, “which is very welcome and important”.

But, as those businesses grow, it becomes increasingly difficult to secure the cash they need, which drives founders to head overseas, often to the US, where capital is more readily available.

While The Yield bagged investment from global giants, there are some US investors that are constrained to their home market. So, promising Aussie companies become US companies.

While Harvey sings the praises of Australia’s R&D tax incentive scheme, and the acceleration commercialisation grant programs, she says “there’s a gap”, particularly around Series A and B funding.

“Once you get past series B and you’re revenue positive, then you’re in a different capital market,” she adds.

“But there’s a bit of a hole in the middle … There is a need for looking at ways that we can creatively, as an Australian community, address that.”

There’s no easy answer here, but both the government and the private sector will likely have a role to play.

The industry itself, as a whole, already has its eye on global domination.

“If we’re going to achieve that we need agtech,” Harvey says.

“But we also need to be able to export the knowledge products, which are embedded in technology,” she adds.

“Then we get a double win — a win for the ag sector, and a win for our technological capability — and we don’t lose that capability offshore.”

NOW READ: Aussie unicorn Culture Amp cuts 8% of jobs as it feels the pinch of COVID-19

NOW READ: Interview with an angel: Why early-stage startup funding is still up for grabs, and how to get your hands on it