Will 2024 Be The Year Of Specialty Crop Automation?

A lot of spaces have been over-hyped in AgriFoodTech the last couple of years. CEA got $7B in investment and the unit economics for vertical farming facilities and SKUs is still far too high in many product categories. Alt-protein got similar amounts and Beyond Meat and Impossible Burger are facing massive headwinds, and both spaces are likely to see fundraising headwinds as the space looks to be trending closer to 2022’s $30B in venture investing than 2021’s $50B. Meanwhile, the next hype factor appears to be around ESG investing and carbon marketplaces with a focus on sequestration. Much of the investment to date has been into carbon marketplaces that are generally acknowledged to be hard to verify, hard to audit, and in some cases hard to even measure – what could go wrong as money pours in (but enough about Indigo Ag - solid piece from Shane Thomas in Upstream Ag Insights on the recent 95% reduction in valuation)?

In many cases, the investments in climate and ESG seem driven by food buyer specifications and general retail willingness to set targets they may or may not believe in strategically. This is a poor way for companies to make decisions. Even more problematic, the opportunity cost of these poor investment decisions is often overlooked. If we hadn’t spent $7B on CEA over 5 years, how much closer to solving food safety challenges might we be or how much further would spaces like biological controls be in terms of scale and commercialization.

That is not all – with the slow down to $30B in 2022, venture investing will now not be able to fund startups that in a $50B investment market space would have gotten funded. So not only do the bad investments hurt the companies that never should have received the money due to the hype factory, they also hurt the startups in other segments in the AgriFoodTech space. We can all hope that investors that were burned by some of the hyped categories have gotten reality checked in board rooms enough that next time they’ll do more due diligence and that startup founders seeking fame and fortune on a short timeframe will find those checks harder to get.

So what about an area the Western Growers Innovation team spends a lot of time on these days – automation? It’s a good question. Many startups have secured significant fundraising in the past couple of years and are starting to deliver robots to the marketplace that work at grower economics that work for all sides. There are still hundreds and not yet thousands of these machines in farming operations but there are some very positive signs beyond just the fundraising. At FIRA USA the messaging from startups was very focused on use cases, problem statements, and economics from the grower’s perspective. There are customer stories and solid answers to questions about support and which regions the product is available in. The space is maturing and individual startups are maturing as well.

Take a look at the top section of the 2022 Crop Robotics Landscape (in the graphic at the top of this article) developed by our friends at The Mixing Bowl to see some of the startups doing good work in the space. Here's the full version. If you're curious about the overall automation space, I also highly recommend the 2022 Specialty Crop Automation Report (hat tip to our friends at Roland Berger).

The demo area at FIRA USA 2023 in Salinas included 16 demos in vegetables, orchards, and vineyards and there were over 55 exhibitors. Over 2,000 attendees came to the show. There was not much hype and a lot of good conversations. It is becoming clear there will be a range of price points from Burro / Farm-NG ($15-25k) to Stout Industrial Technology / Carbon Robotics / Farmwise ($350-400k, $1.4M, $1M) that can do a variety of functions on farms. There are also a variety of pricing models emerging, from as-a-service to capital equipment purchase and everything in between (leasing and rental among them, as well as traditional support and maintenance (S&M) contracts emerging as an ongoing customer purchase for years beyond the initial capital outlay.

For products where the ongoing software is so important, it makes sense that S&M models are emerging - there's a lot of software to write and support in most automation startups. AI is helping push automation solutions to do more things to more crops and more weed varieties as the AI can learn faster for each new plant. Finally, international startups are entering the US market and US startups are entering global markets, and the search is on for effective partners all over the globe. Multiple sprayer solutions (GUSS and Robotics Plus) and autonomous solutions (Bluewhite, AgTonomy) are in market and prepared to scale. Frequent conversations about manufacturing partnerships and dealer partners suggest that the product set is rounding out with a complete ecosystem forming around it.

All of that said, it is still early and there is much that is being built that needs to be completely built for me to believe the automation space will have a break out year in 2024. I do believe that 2024 will be a good year for many automation startups that have taken the long view and built good products with a?team that can sell and support it, whether that’s direct sales or channel sales through equipment deals or other partners. I believe that geographic market entry in all directions will continue (i.e. Europe to US, US to Europe, and both to and from Australia/New Zealand) and growers will continue to trial and make buying decisions on quality economic data that justify the purchase more often.

I’m not prepared to say that 2024 will be the year of automation. There's no need for hype. The space is earning it’s results and doesn’t need any hype from me or anyone else to continue delivering good results. Here’s one prediction I can make with certainty – FIRA USA 2024 will be a great chance to monitor and measure the progress of all the innovators in the automation space as we visit Sacramento/Davis. This year’s show was great and we are confident we can make it even better in 2024 and then better again in 2025 when we return to Salinas.

Did I mention that starting in 2024 growers get in for free? That’s right, beginning with Davis next year FIRA USA will be free to verified growers. We think this is the best way to help get as many growers as possible to attend the show, and we recognize that growers are the key to making a show like FIRA USA work for automation vendors. They can talk to potential partners, and maybe even potential employees and investors, at lots of shows. We are working hard to make FIRA USA one of the best places to talk to growers, and ideally growers who are ready to try and buy if trials go well. That may help make 2025 or 2026 the Year of Automation – but it will also make 2024 a year of slow but steady improvement for automation solution providers. The year of automation? Maybe, but either way 2024 should be a good year for the players building automation startups and innovations the right way.