How to get investing down on the farm
Cows with Fitbits, selfdriving tractors and robot weed killers: technology and artificial intelligence are revolutionising agriculture – and professional investors are buying into companies helping farmers to optimise their businesses.
Over the long term, they believe the application of technology across the broader economy represents an enormous opportunity for growth.
Agricultural technology is a small niche in that overall investment approach, but, as the world’s population continues to grow, agriculture needs to keep pace, and technology can help to increase productivity and efficiency.
Henry Boucher, manager of the Sarasin Food and Agriculture Opportunities fund, said while agricultural tech and mechanisation has changed enormously through history, it still lags behind other sectors, and the companies working on changing that have the potential to do very well in the long run. Wage costs of farm workers, especially in picking soft fruits, are a significant expense, he said. Using mechanical handlers – robot pickers – could both limit that expense and reduce waste, another major problem in the overall food chain. The fund’s largest holding is in the tractor company p y John Deere, , which has been using driv driverless technology technolog in its tractors t for fo some time. t Although only on a small part of the overall o business bus now, now the company’s com tech forays will become increasingly important, Mr Boucher said, and it recently invested in a new AI venture.
The project, called “See and Spray”, uses facial recognition tech, similar to that found in smartphone cameras, to scan crops and spray pesticides and herbicides only when it sees bugs or weeds, reducing costs and the environmental impact.
Tim Day, co-manager of the Smith and Williamson Artificial Intelligence fund, said the same technology was also being used on livestock – scanning herds of cattle, for example, and detecting cows that look unwell.
“We are looking for ways to give our investors exposure to the application of tech and AI across the broader economy and agriculture is a really interesting area,” he said. “All of this technology is applied to get more out of less, as we struggle to feed a growing population. It’s going to become more and more important.”
Data analysis is also helping farmers to optimise the way they work, he said. The computer giant Microsoft is getting in on the game, working with farmers in India. The company analyses weather patterns, helping to determine the best time to plant crops. This, he said, aimed to boost yield and therefore profits.
Rosemary Banyard, who manages the Sanford DeLand Free Spirit Fund,
Want to back Great British heritage? You could buy into Worcester’s inspiration for The Archers. Just don’t put all your eggs in one farmer’s basket.
Rush Farm, where the hit BBC radio show was recorded in the Fifties (right), is offering £1 “community shares” until Dec 10, accepting investments worth £100 to £100,000. Stockwood Community Benefit Society, set up to manage the deal, targets a 5pc dividend.
Around 300 such schemes have raised £82m from 100,000 supporters since 2013, according to investor group My Community. They buy local assets such as pubs, green spaces, or in this case, an organic farm with renewable energy and education schemes for young people.
But community investors face risks absent from traditional fund investing. Phil Billingham, director at advice firm Perceptive Planning, said: “All investments are easy to get into – you need to look at how to get out at a fair price.”
Investors in Stockwood can withdraw their shares, essentially asking for their money back, but can only sell or transfer them to Stockwood.
Mr Billingham said: “Public secondary
markets, like the London Stock Exchange, are fairly traded; anyone can buy what’s on offer. But if you can only sell back to the company you bought from, they dictate the price. Your need to sell is not their need to buy. You can’t trade this like a fund.”
Stockwood estimated this year’s profit to be £179,000, rising to £209,000 in owns a company that produces 2020, a pre-tax “Fitbits” for cows. The company, profit margin of Avon Rubber, is a manufacturer with 58pc. But if in two principal business arms: one financial difficulty makes respiratory and protection it can suspend equipment for the military and the withdrawals or other makes milking equipment cut share value. for dairy farms. Aside from making
Access to your equipment used in the milking cash is subject to process, the company has branched 180 days’ notice out into monitors for cattle, where and protection is apparatus resembling a Fitbit is scant; you have attached to a cow’s neck or leg. This no recourse to the then monitors the animal’s general Financial Services state of health, if it is lame, and Compensation most importantly, if it is ready for Scheme, insemination. This, Ms Banyard said, which can means farmers are less likely to miss usually protect out on the animal’s cycle and can investments up therefore mitigate the loss of money to £50,000, or incurred when the milk yield or the the Financial number of calves born drops. Ombudsman Mr Boucher said that one Service, which Dutch nutrition company, DSM, is can force redress producing a new form of cow feed of up to £150,000. under the project name “Clean Cow.”
Stockwood The feed is designed to make the has paid a 5pc cows burp less, he said. Cows are dividend to 300 huge producers of CO2, and cattle shareholders, farmers of the future run the risk who in total put of facing fines and taxes because of in £1m, in each laws on carbon emissions. “Clean of the four years Cow” is designed to hedge against since launch. this potential financial burden, said But a return is Mr Boucher. not guaranteed, Retail investors looking to tap into shares will never agritech may find it difficult, as much increase in value, of the innovation goes on in the and you may private company space. get back less There are however, a number or nothing. of specialised funds with
Mr Billingham exposure to agriculture and/ said: “If it’s OK if or technology: Sarasin Food and you don’t get your Agriculture Opportunities, Smith money back, fine. & Williamson Artificial Intelligence If it makes you i and RobecoSAM Sustainable feel good, take A Food Equities. the 5pc dividend, Mr Boucher said: “Do not get and don’t worry carried away with the theme – there about the capital, is an exciting benefit in agritech, but as long as your there is no magic company that will other investments revolutionise farming sitting on the
Is the future of agriculture fertile territory for returns? Harry Brennan and Laura Miller separate the wheat from the chaff
Adrian and Anne Parsons are offering a stake in their farm, above; a cow wearing a Fitbit-style monitoring device, below