What does the future of fertilizer tech look like?

Introduction?

The global?agrifood market is in a crisis. UN Secretary-General António Guterres described the situation as a “perfect storm”: the war in Ukraine, the COVID pandemic, and climate change are among the many global emergencies that are exerting stress on food supplies to untenable levels. Prices for grains such as wheat, for example, have?increased up to 25% this year, and are approaching levels similar to the 2008 financial crisis.?Analysts?predict that the high-price environment will persist for at least a six-month period, possibly longer.?

Almost every link in the agrifood supply chain – from transportation to energy to distribution channels – is scrambling to reconfigure itself into yet another new normal. Fertilizersare no exception. According to?a study from Texas A&M University, prices for?synthetic fertilizers increased up to 133% compared to last year.?Record fertilizer prices?could result in global agricultural output falling by tens of millions of tonnes, an amount that would feed hundreds of millions of people.?

Source:?Financial Times,?CRU Consulting

Synthetic fertilizer relies on raw materials of which?Russia was a major source, such as ammonia (23% of total global exports), urea (14%), and phosphate (10%). Even though?fertilizers are exempt from economic sanctions, prices have fluctuated as a result of broader disruptions in the market. For example, natural gas, a key input in fertilizer production: the high prices resulting from economic sanctions imposed on Russia for this category of goods have forced companies such as CF Industries to?shut down one of its fertilizer plants in the UK.

Other major sources of raw materials like Canada and the US are stepping up to meet this demand. In May, President Joe Biden announced that the US Department of Agriculture (USDA) will be doubling its initial?$250 million investment in domestic fertilizer production to?$500 million,?aimed to “lower costs and boost availability for farmers”. In Canada, major fertilizer company?Nutrien committed to boosting potash production?to 18m tons by 2025, an increase of 40% compared to their production in 2020. Similar announcements of increased fertilizer production have been made in?Nigeria?and?Brazil.?

Meanwhile, in the midst of this high price environment,?farmers have responded by slowing demand, resulting in?recent price drops?as fertilizer stockpiles accumulate in warehouses. The ups and downs of the fertilizer market to-date highlights that the future is far from certain. This article explores technological solutions to fertilizer production and distribution, and examines their potential impact on the crisis.

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Players in the tech-enabled fertilizer industry

Using our?FoodTech Data Navigator, we find that there are?227 companies within the fertilizer tech industry, which raised upwards of €1.2b in 2021 (see Figure 1 below). Their tech applications vary, and we place them into two categories. The first category includes startups and scaleups which focus on?delivering precise quantities of conventional fertilizer to minimize costs and maximize yield?or on facilitating its trade; in other words, these are precision farming companies such as?N-Drip?and digital farming marketplaces such as?DeHaat. The second category includes technologies?that challenge the dominance of synthetic fertilizer by developing new products such as upcycled fertilizer inputs, bio-fertilizers, and insect-based fertilizer.?

Figure 1: Funding raised for fertilizer technology (224 actors)

Source:?FoodTech Data Navigator,

These innovations may be niche today, but their adoption is becoming more mainstream. The?fertilizer market size exceeded €180b in 2020?and is forecasted to grow at a?CAGR of 2.6% from 2022 to 2030. The?organic fertilizer market was?valued at 8.6b in 2020?and is projected to reach 21.4b by 2028, growing at a CAGR of 12%.?Combined, both categories of fertilizer tech raised €1.3b in 2021, which is 5% of total agtech funding?since 2012.?

?The word of the expert – Bio-fertilizers technical overview

In order to shed light on the technical aspects of bio-fertilizers, we reached out to?Dr. Balaji Vasudevan, Chief Scientist For AgroBiosciences?at?UM6P Ventures,?a venture capital firm subsidiary of OCP Group, one of the the world’s biggest fertilizers manufacturers:

“Bio-fertilizers are biological preparations of efficient microorganisms that promote plant growth by improving nutrient acquisition and function as a key player in sustainable agriculture by improving soil fertility, plant tolerance and crop productivity. Bio-fertilizers segments include nitrogen fixing, phosphate solubilizing/mobilizing, zinc solubilizing, potassium solubilizing/mobilizing, sulfur oxidizing, plant growth-promoting, micronutrient chelation and solubilization microbes. They enhance soil productivity by fixing atmospheric nitrogen, solubilizing soil phosphorus, and stimulating plant development. Some key benefits bio-fertilizers?provide include soil enrichment with nutrients, not harmful to plants, beneficial for soil microbes, protects natural fertility of soil, protection against biotic and abiotic stress, eco-friendly, increasing crop yield and enhance soil health, generally cost-effective, keeps soil free from chemical pollution.”

For this article, we will look at a few case studies of companies leveraging various ways to manufacture non-chemical fertilizers, namely?Traditional bio-fertilizers (bio-based fertilizers),?Insect-based fertilizers?and?Upcycled fertilizers. Let’s take a look below.

Traditional bio-fertilizers

Source:?Pivot Bio

Bio-fertilizers are organic substances that contain or promote the growth of microorganisms in the soil that supply nutrients to plants.?For example,?Pivot Bio?is a US-based bio-fertilizer company that improves the microbiome of crops by taking nitrogen from the air and making it available for plants. Not only could Pivot Bio’s bio-fertilizer solution reduce reliance on Russian imports necessary for synthetic fertilizer, it also improves the long-term health of the soil. Pivot Bio has already?raised €515M in funding?and is the most funded company active in bio-fertilizer production.?

Another great example is?Terramera, a company that produces a range of products including biopesticides and a fertilizer made as a byproduct of cold-pressing neem tree fruit and kernels. In May 2021, the company was awarded $7.9m by the Canadian government to further develop its on-farm soil carbon quantification technology and counts Ikea GreenTech among its funders.?Anuvia,?one of the fastest growing companies in the US, produces bio-based fertilizers for large-scale agriculture.?It was recently awarded?$65m in Series D funding?to expand production capacity of its SymTRX line of bio-fertilizers.?

Insect-based fertilizers

Source:?InnovaFeed

Insect fertilizers?harness the power of insect organic matter to produce sustainable nutrient resources for plants.?In France,?InnovaFeed’s fertilizer is produced from insect droppings of?Hermetia illucens?phytophagous larva and is suitable for almost all crops. Compared to synthetic fertilizers that damage the soil microbiome in the long-term, this type of fertilizer is rich in?organic matter that will improve the absorption of nutrients and microbial activity for subsequent harvesting periods.?The company is set to open 10 production facilities by 2030 and among the fastest growing in the space.?

However,?Ynsect, also based in France, has the first-mover advantage in this field, being the first company in the world to have approval to sell insect-based fertilizer. Their?Ynfrass brand, which has shown to improve yield and drought resistance for field crops, vines, and flowers, is a result of years of development in partnership with specialist institutes. In the Netherlands,?Frassnor?is a newcomer (founded in 2020), but has already developed insect-based fertilizers for commercial use as well. They farm black soldier flies to convert food waste into high-end proteins and fats.

Upcycled fertilizers

Upcycled fertilizers transform?byproducts from manufacturing processes into organic fertilizers that both reduce waste and contribute to a more circular economy. For example,?Cinis Fertilizer, based in Sweden, is developing new ways to produce mineral fertilizer with minimal reliance on fossil fuels such as natural gas. Their product is a water-soluble Sulfate of Potash (SOP),?which upcycles waste from the pulp and paper industry,?with no hazardous byproducts. In October 2021, the company signed?an agreement with Swedish battery manufacturer Northvolt?to handle their sodium sulfate waste and upcycle it into fertilizer, one of the few companies in the world that have developed technology for this purpose.?

Fertilizer?upcycled from food waste is also growing in prominence given its relationship with the food supply chain.?Ecotone?produces ‘Soil Sauce’, an organic fertilizer that is made from recycled food waste. Using their patent-pending technology to separate plastic, metal, and glass, they convert the food waste into methane gas and liquid fertilizer. Similarly,?Upcycle & Co?transforms methane-producing food waste into fertilizer to simultaneously reduce carbon emissions while reintroducing nutrients back into the soil. They do this with only 3 components: biosolids, algae, and beer grains, with a supply chain that is 100% sourced from Southern California, where the company is based.

?Conclusion

There are?many promising players in the fertilizer industry harnessing technology to create more sustainable products for the world. However, like our analysis on?agtech-enabled wheat production, tech-enabled fertilizer production and distribution will not resolve the crisis in the short-term. Diversifying global commodity supply chains while strengthening localized food production is a longer-term project. Perhaps?what is most crucial about these players is the challenge they pose to the status quo of?undifferentiated fertilizer supply giants, who hold a large market share but are unable to offer flexible responses when supply crises occur. When they do, resulting price increases disproportionately hurt farmers, who have few alternatives from competitors.

The view of the expert

Once again, we turned to Dr. Vasudevan for his take on what the future may hold in terms of next-generation bio-fertilizers and therefore what we should expect.

“In terms of future bio-fertilizers, new approaches for next generation product development will come from new culture dependent methods, microbial consortia inoculation methods, artificial selection of microbiomes, generation of artificial microbial consortia (AMC) or synthetic communities (SynComs), customized/personalized microbial inoculants & crop prebiotics, and biofilmed bio-fertilizers.?Adaptation and success of next-generation bio-fertilizers will be directly linked and be highly dependent on new formulation and delivery methods that will prove to be eco-friendly and biologically safe.”

This is a market opportunity where innovative solutions can come in for more fair and sustainable futures. Recently, we see US-based companies doing just that: major fertilizer input producer Mosaic (who, along with Nutrien, supply almost the entire North American phosphate and potash fertilizer market)?partnered with Sound Agriculture, an ag biotech company that has developed a bio-fertilizer that activates the soil microbiome to make the existing field more productive. Together, they aim to improve on-farm efficiency and create healthier, tastier, and more sustainable food.

Those are the kinds of partnerships that we hope keep growing.

Do you want to learn more about the future of fertilizers? Access our Food Data Navigator?HERE?to discover all the companies analyzed in this blogpost, or get in touch?HERE?for a tailored consultancy.