Welcome back to the Agri Fintech Newsletter!
This will be the second of my revised format where each issue will walk through these 3 sub headings:
🧐 Thoughts [What is a "Greenium" and where to find it]
🗞 Relevant News [Agrolend, Fresh Supply Co, Gavea Marketplace, Heavy Finance, Ocean Protocol and Dimitra Tech ]
🖼 Company Profiles [Subjimandi ]
What is a 'Greenium'? (And where to find it!)
What is the return on investment for sustainable agriculture?
This - at least to me - appears unclear and one oft cited obstacle to employing climate smart practices in food production is the uncertainty over return in investment.
In order to address this, many programmes offer a 'greenium', or green premium, as some sort of incentive. This could be for example:
1️⃣ Premium paid for sustainable produce or;
2️⃣ Discount in financing costs to make this transition;
3️⃣ Direct Grants, or reimbursable costs; or
4️⃣ Warranties to manage technology risk.
This discussion doesn't focus on Carbon Programmes as that is just too big to cover in one Issue, although could be embedded in some of the 'Greenium' opportunities out there.
Let's have a glance at these opportunities.
Premiums
A recent Barclays Bank research piece caught my eye, which cited a £165m opportunity for a sustainably sourced Christmas dinner in the UK. 🦃
But how do headlines translate to opportunity for those making a transition?
One example is the recently launched Planet+ platform by Bx, which supports growers in transition to planet positive practices, including regenerative agriculture. It then assists growers to connect the produce at a premium into dedicated brands, who are looking to reduce emissions and secure sustainable produce.
Co-Founder Antony Yousefian references that "brands are achieving a premium in the range 50-200%. .......We want to ensure this margin or value goes directly to growers who deliver the impact for brands".
Obviously, this would help producers capture some of the gains and incentivise investment in sustainable production. Capturing these price signals is essential for investor confidence.
There are several of these types of initiatives around, including from the main 'BIF' operators, the new ABCD of digital agriculture, an acronym I just made up.
🅱️ Bushel have the Carbonview project, in collaboration with Bayer.
ℹ️ Indigo offer Market+ Source
🄵 FBN's Gradable platform allows buyers to source environmentally friendly grain also. (More on FBN below).
There isn't much publicly available information on the exact premiums available for sustainably sourced grains, but that is kind of understandable as these programmes are nascent. But I think we have to get to a point were some referencing is available - don't you?
🔑 I think Antony's point above about delivering impact for another brand is critical. Why? It puts the emphasis on a shared commercial opportunity.
Who pays? The market pays for this type of 'greenium', which could be a mix of buyer premium and/ or embedded carbon incentive.
Reduced Loan costs
The recently announced FBN Regenerative Agriculture Finance Fund serves as a good example of a direct financial incentive for implementing sustainable practices.
This takes the form of a reimbursable finance cost (0.5% per annum) once the practice conditions are met. FBN hope to expand this particular programme 20x to $500m over 3 years from the pilot fund size of $25m.
The underlying objective of the pilot fund from FBN is to develop robust credit models for sustainable agriculture at scale. This was alluded to in a recent AgFunder article which hints at other investors seeking “liquid, environmentally friendly” assets, which suggest the $500m fund will be for capital markets investors.
It will be fantastic to see this progress and pave the way for other similar funds. In fact, as you may have gathered, these type of transactions are one of the reasons I am bullish on the Agri Fintech thesis - The why now is sustainability!
Who pays? It is not clear in this specific example who pays for this rebate, but I assume that is the role taken on by the EDF, which is a charitable organisation. It is likely investors will fund this rebate in future to gain exposure to this asset class.
Reimbursed costs (aka Grants)
Jayce Hafner, the FarmRaise CEO, believes there are $5bn in these incentives annually from the USDA, available for farmers to adopt on-farm conservation practices. (BTW - If you don't know FarmRaise, you probably should, they help farmers apply for this type of assistance in the US).
These programmes are not a free ride - they require upfront spend by producers making this transition, which gets reimbursed later and some require cost share between 25-50% of project costs.
The benefits of this approach are clear, and Jayce advises "This funding de-risks farmers' transitions to conservation farming practices.... including cover cropping, holistic grazing, no-till, water and energy efficiency improvements, renewable energy projects, and conservation buffers".
Who pays? What I like about this approach, also employed by Ambrook, is that the incentive is quite transparent and clearly based on government funds.
Warranties
Finally, I think these are worth a mention although they were not specifically on my list when I started.
Growers Edge have quite a unique product in the market which allows producers to adopt new sustainable technologies via a Nature Conservancy supported Crop Plan, which is currently offered via Iowa based FCS, a farmer cooperative.
In my mind this product at least minimises the risk of adopting these technologies and makes sure the promised benefits of the 'greenium' doesn't actually end up costing money. (We've all been there at some point! 😅)
Who pays? The producer pays for protection. Strictly, this is not an incentive, but it is one form of risk management, which is why I have decided to include it.
Summarising
I think these initiatives are fantastic and represent early examples of changes I expect to see going mainstream in the next 2-3 years or sooner.
But, in researching this piece, I have arrived at the end with even more questions, particularly around the premium paid for sustainable sourced goods. Is there enough clarity around this?
🤔 I would love to spend more time quantifying these premiums so please let me know who I should talk to about this.
News
The latter half of January 2022 has continued with more funding announcements 💰with a blockchain theme and one 🚀 partnership.
⦿ Agrolend, another Brazilian Agri Fintech startup, raised a $14.5m Series A, which was led by Valor Capital with participation from SP Ventures and Continental Grain Co.
⦿ Fresh Supply Co, a company bringing off chain data to blockchain for agri lending in Australia has raised a sweet $3.6m (A$5m) Series A from SproutX according to Crunchbase. I have no further detail on this one unfortunately.
⦿ Gavea Marketplace, a blockchain based venue for trading commodities, run by a former Director of BTG Pactual raised $4m seed round also in Brazil. BTG have been facilitating a lot of finance in the Agri Fintech sector in Brazil, including Traive Finance and A de Agro for example. Interesting move.
⦿ FarmRaise, mentioned above, raised $7.2m in a Seed round led by Susa Ventures.
⦿ €15.8m in loans were granted by Heavy Finance across 471 projects between June 2020 and December 2021 according to a recent update from this emerging Europe based Agri Fintech targeting equipment.
And a partnership that absolutely blew my mind 🤯
▶︎ After writing about data monetisation a few issues back, Dimitra Technologies have partnered with Ocean Protocol to help 100m smallholders monetise their data.
Company Profile
I love featuring companies and giving some of our rising stars a shout out in the Newsletter. One company I came across on Twitter was Subjimandi, a platform developing standarised grading for food produce in India.
The Team unfortunately decided to wind down their platform and did so gracefully. I have really admired their effort to learn in public and their maturity to admit that timing was not in their favour or, possibly, that the market was not ready for them. 👏👏👏
If you click on one link in this Newsletter please make it this one of the Team at Subjimandi which Vivek put together for his core team who are now seeking other opportunities in the Agtech sector.
---
Thanks for tuning in, I really do appreciate every single open and read, especially if you got this far. 😊
Please do subscribe and share this on LinkedIn or Twitter and make sure you send me your stories and feedback.
Niall
Welcome back to the Agri Fintech Newsletter!
This will be the second of my revised format where each issue will walk through these 3 sub headings:
🧐 Thoughts [What is a "Greenium" and where to find it]
🗞 Relevant News [Agrolend, Fresh Supply Co, Gavea Marketplace, Heavy Finance, Ocean Protocol and Dimitra Tech ]
🖼 Company Profiles [Subjimandi ]
What is a 'Greenium'? (And where to find it!)
What is the return on investment for sustainable agriculture?
This - at least to me - appears unclear and one oft cited obstacle to employing climate smart practices in food production is the uncertainty over return in investment.
In order to address this, many programmes offer a 'greenium', or green premium, as some sort of incentive. This could be for example:
1️⃣ Premium paid for sustainable produce or;
2️⃣ Discount in financing costs to make this transition;
3️⃣ Direct Grants, or reimbursable costs; or
4️⃣ Warranties to manage technology risk.
This discussion doesn't focus on Carbon Programmes as that is just too big to cover in one Issue, although could be embedded in some of the 'Greenium' opportunities out there.
Let's have a glance at these opportunities.
Premiums
A recent Barclays Bank research piece caught my eye, which cited a £165m opportunity for a sustainably sourced Christmas dinner in the UK. 🦃
But how do headlines translate to opportunity for those making a transition?
One example is the recently launched Planet+ platform by Bx, which supports growers in transition to planet positive practices, including regenerative agriculture. It then assists growers to connect the produce at a premium into dedicated brands, who are looking to reduce emissions and secure sustainable produce.
Co-Founder Antony Yousefian references that "brands are achieving a premium in the range 50-200%. .......We want to ensure this margin or value goes directly to growers who deliver the impact for brands".
Obviously, this would help producers capture some of the gains and incentivise investment in sustainable production. Capturing these price signals is essential for investor confidence.
There are several of these types of initiatives around, including from the main 'BIF' operators, the new ABCD of digital agriculture, an acronym I just made up.
🅱️ Bushel have the Carbonview project, in collaboration with Bayer.
ℹ️ Indigo offer Market+ Source
🄵 FBN's Gradable platform allows buyers to source environmentally friendly grain also. (More on FBN below).
There isn't much publicly available information on the exact premiums available for sustainably sourced grains, but that is kind of understandable as these programmes are nascent. But I think we have to get to a point were some referencing is available - don't you?
🔑 I think Antony's point above about delivering impact for another brand is critical. Why? It puts the emphasis on a shared commercial opportunity.
Who pays? The market pays for this type of 'greenium', which could be a mix of buyer premium and/ or embedded carbon incentive.
Reduced Loan costs
The recently announced FBN Regenerative Agriculture Finance Fund serves as a good example of a direct financial incentive for implementing sustainable practices.
This takes the form of a reimbursable finance cost (0.5% per annum) once the practice conditions are met. FBN hope to expand this particular programme 20x to $500m over 3 years from the pilot fund size of $25m.
The underlying objective of the pilot fund from FBN is to develop robust credit models for sustainable agriculture at scale. This was alluded to in a recent AgFunder article which hints at other investors seeking “liquid, environmentally friendly” assets, which suggest the $500m fund will be for capital markets investors.
It will be fantastic to see this progress and pave the way for other similar funds. In fact, as you may have gathered, these type of transactions are one of the reasons I am bullish on the Agri Fintech thesis - The why now is sustainability!
Who pays? It is not clear in this specific example who pays for this rebate, but I assume that is the role taken on by the EDF, which is a charitable organisation. It is likely investors will fund this rebate in future to gain exposure to this asset class.
Reimbursed costs (aka Grants)
Jayce Hafner, the FarmRaise CEO, believes there are $5bn in these incentives annually from the USDA, available for farmers to adopt on-farm conservation practices. (BTW - If you don't know FarmRaise, you probably should, they help farmers apply for this type of assistance in the US).
These programmes are not a free ride - they require upfront spend by producers making this transition, which gets reimbursed later and some require cost share between 25-50% of project costs.
The benefits of this approach are clear, and Jayce advises "This funding de-risks farmers' transitions to conservation farming practices.... including cover cropping, holistic grazing, no-till, water and energy efficiency improvements, renewable energy projects, and conservation buffers".
Who pays? What I like about this approach, also employed by Ambrook, is that the incentive is quite transparent and clearly based on government funds.
Warranties
Finally, I think these are worth a mention although they were not specifically on my list when I started.
Growers Edge have quite a unique product in the market which allows producers to adopt new sustainable technologies via a Nature Conservancy supported Crop Plan, which is currently offered via Iowa based FCS, a farmer cooperative.
In my mind this product at least minimises the risk of adopting these technologies and makes sure the promised benefits of the 'greenium' doesn't actually end up costing money. (We've all been there at some point! 😅)
Who pays? The producer pays for protection. Strictly, this is not an incentive, but it is one form of risk management, which is why I have decided to include it.
Summarising
I think these initiatives are fantastic and represent early examples of changes I expect to see going mainstream in the next 2-3 years or sooner.
But, in researching this piece, I have arrived at the end with even more questions, particularly around the premium paid for sustainable sourced goods. Is there enough clarity around this?
🤔 I would love to spend more time quantifying these premiums so please let me know who I should talk to about this.
News
The latter half of January 2022 has continued with more funding announcements 💰with a blockchain theme and one 🚀 partnership.
⦿ Agrolend, another Brazilian Agri Fintech startup, raised a $14.5m Series A, which was led by Valor Capital with participation from SP Ventures and Continental Grain Co.
⦿ Fresh Supply Co, a company bringing off chain data to blockchain for agri lending in Australia has raised a sweet $3.6m (A$5m) Series A from SproutX according to Crunchbase. I have no further detail on this one unfortunately.
⦿ Gavea Marketplace, a blockchain based venue for trading commodities, run by a former Director of BTG Pactual raised $4m seed round also in Brazil. BTG have been facilitating a lot of finance in the Agri Fintech sector in Brazil, including Traive Finance and A de Agro for example. Interesting move.
⦿ FarmRaise, mentioned above, raised $7.2m in a Seed round led by Susa Ventures.
⦿ €15.8m in loans were granted by Heavy Finance across 471 projects between June 2020 and December 2021 according to a recent update from this emerging Europe based Agri Fintech targeting equipment.
And a partnership that absolutely blew my mind 🤯
▶︎ After writing about data monetisation a few issues back, Dimitra Technologies have partnered with Ocean Protocol to help 100m smallholders monetise their data.
Company Profile
I love featuring companies and giving some of our rising stars a shout out in the Newsletter. One company I came across on Twitter was Subjimandi, a platform developing standarised grading for food produce in India.
The Team unfortunately decided to wind down their platform and did so gracefully. I have really admired their effort to learn in public and their maturity to admit that timing was not in their favour or, possibly, that the market was not ready for them. 👏👏👏
If you click on one link in this Newsletter please make it this one of the Team at Subjimandi which Vivek put together for his core team who are now seeking other opportunities in the Agtech sector.
---
Thanks for tuning in, I really do appreciate every single open and read, especially if you got this far. 😊
Please do subscribe and share this on LinkedIn or Twitter and make sure you send me your stories and feedback.
Niall
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