- July 1, 2017: Vol. 4, Number 7

Man vs. Malthus: The search is on for a second Green Revolution

by Reg Clodfelter

Unfortunately, the time has come for another round in the fight between Mankind and Thomas Malthus. Malthus, a patron saint of pessimists, is an 18th century English philosopher who famously predicted in 1798 that mankind’s exponential population growth will always outpace its ability to grow more food — limiting both absolute population growth and advances in standard of living.

In the decades following Malthus’ death in 1834, mankind kept catastrophe at bay by rapidly increasing total agricultural acreage, allowing food production to keep pace with a world population that expanded from roughly 900 million in 1800 to 1.6 billion in 1900. In the 20th century, facing an eventual quadrupling of global population, mankind needed to lean on its ingenuity more than ever to keep its dream of Promethean expansion alive, and it was saved by the genius of Norman Borlaug.

With funding from Land Grant Universities and the Rockefeller Foundation, the Nobel-prize winning Borlaug developed high-yield varieties of grains that, when combined with good irrigation and pesticides, massively increased the yield potential of our most essential crops in a matter of decades — sparking what became known as the Green Revolution.

But the advances possible from Borlaug’s breakthroughs peaked around the turn of the century, leaving us searching for answers.

“The Green Revolution is essentially over,” explains Joel Bourne, journalist and author of The End of Plenty, adding that the massive increases in yields sparked in the 1950s and ’60s have basically stopped. Wheat and Rice have not seen yield growth in 10 years, and while an enormous amount of private sector investment into corn yields has them growing at 1 percent to 2 percent per year, it is not enough. The UN estimates that global population will reach 9.7 billion by 2050 (an estimate revised down from as high as 11 billion) requiring an increase in grain production of 70 percent to 100 percent depending, among other things, on the level of increase in protein consumption in the developing world.

Innovative technology, highlighted by genetically modified plants and data-driven precision agriculture, has some proclaiming that a sequel to Borlaug’s Green Revolution is on the horizon, or even here already. But it is unclear if the current crop of new technologies will boost yield enough to fill the yawning gap between supply and demand that is rapidly approaching.

While Borlaug’s advances were funded through the public and nonprofits, much of that funding has dried up over recent decades. This has left an opening for investors to thoughtfully approach a potential supply and demand arbitrage, and to make a positive impact while doing so.


It is becoming increasingly clear that the old arrows in mankind’s quiver will not be as sharp this time around. The Food and Agriculture Organization of the United States estimates that while global population will grow 35 percent by 2050, available acreage will only increase by 4 percent, resulting in much less total acreage per capita. Genetically modified crops have not proven to be the panacea some hoped they could be, either. While GMOs have been very effective at simplifying the farming process, allowing individual farmers to work more land, they have struggled to produce the massive yield gains per acre that will be necessary in the coming decades.

Despite these shortcomings, there may be a new weapon in the fight against Malthus. Exciting new breakthroughs in AgTech are giving some people hope that the answer may be to make today’s farms look more like the Jetsons than the dust bowl. Automated drones and satellite imaging, coupled with tractor-mounted fertilizer sensors and applicators, have allowed farmers to apply different rates of fertilizer at different locations across fields, depending on the crops’ needs. This “variable rate technology,” as it is known, has the potential to boost crop yields by 18 percent according to Profiles in Innovation: Precision Farming, a report by Goldman Sachs. Farmers not using this technology are over-fertilizing 40 percent of their fields while suffering yield loss on 10 percent of the fields, according to the report. Beyond fertilizer, GPS sensors can help farmers track soil variability, nutrient requirements and moisture levels, making it easier for them to tailor their agronomical work to smaller subplots in their field.

Companies such as John Deere have been flirting with automated vehicles even before Google. Beyond the obvious benefits of automated tractors, fleets of smaller, self-driving tractors could potentially boost yields by 13 percent, according to Goldman Sachs, by reducing soil compaction, which has become an issue with ever-larger farm equipment. Other new technologies have ranged from robotic apple pickers to biometric livestock collars and breakthroughs in symbiotic, soil-based mycorrhizal fungi.

“I spoke with a guy that called it postmodern agriculture — this is cool — and this is something that only the venture capital community and investment community can do,” says Bourne.

AgTech venture capital, which raised $3.2 billion in 2016 and a record $4.6 billion in 2015, according to a recent report from AgFunder, combines deep pockets with a willingness to take on risk that can be essential for many of these high-tech breakthroughs. These advances, if applied globally, could produce a 70 percent boost in yield in step with the increase in global population, by Goldman Sachs’ assessment, but not everyone is as optimistic that precision farming is the silver bullet.

“All of this innovation, like having robots in the field or having drones fly over, that’s all great, it makes everything more efficient, it makes farms more profitable, but is it a green revolution? Not in comparison to what Borlaug did,” Bourne adds, pointing out that, at this point, that technology is mostly available to farmers in developed nations whose crops are just as likely to feed livestock or make biofuels as they are to feed people.

Many U.S. farms, especially large ones, have already begun adopting these technologies. More than 70 percent of farms over 2,900 acres already use GPS mapping, and 30 percent to 40 percent use variable rate technology, according to the United States Department of Agriculture. While those numbers are impressive, and will almost certainly continue to rise as the technology becomes cheaper and more effective, the United States produces only 20 percent of the volume of global agriculture trade, according to Agriculture Investment Primer and Implications for Investors, a report by Real Assets Portfolio Management.

For precision agriculture to boost global crop yields 70 percent, the technology will need to be adopted globally, and would likely need to become much cheaper first. Doing so could be an aim of venture capital going forward, but VC is not the only way that investors can be part of a coming Green Revolution.


AgTech venture capital, while a favorite of Family Offices in recent years, is not the only avenue for investors to bet on mankind’s ability to rise to the challenge of a rapidly increasing demand for food. Obviously, the farms themselves are seeing a boost in profit with the increased production possible from precision farming. GPS mapping is already boosting net returns to U.S. corn farms of average size by nearly 2 percent, and variable rate technology has boosted their net returns by 1.1 percent, reports the USDA. But while increased profits are a good bellwether for the value of precision farming technology, profit is not the only bonus it can provide to investors.

“Since about 2000, the below trend line crop yields have been much less frequent — and I think that’s a result of these new technologies, better seed quality, etc.,” explains Eric Rama, head of agricultural research at MetLife Agricultural Finance. “So, from a lender’s perspective, adopting these new technologies really mitigates the downside risk that exists in farming.”

While agriculture mortgages are not really within reach for Family Offices (the space is almost entirely dominated by large institutional investors), smaller investors can invest in Ag REITs and ETFs, which will also benefit from the downside protection possible from precision farming, assuming the underlying assets adopt the technology.

“These technologies will mostly benefit the farmers who are willing to expand and continue minimizing unit cost production, likely exacerbating the consolidation in the industry,” adds Rama.

Increased mechanization in agriculture has been leading to consolidation in the industry for decades. As cost has risen and profit per acre has decreased, larger farms have been able to take over. During the first Green Revolution, from the 1950s to the 1990s, production costs rose from about half to more than 80 percent of gross farm income, writes Peter Rosset in Lessons from the Green Revolution. This consolidation of U.S. farmland could continue in the second green revolution, especially if it is focused on the introduction of expensive technologies, and it may require investors in farmland and ag-based securities to take a more active approach to managing their investments.

It is also important for investors to be thoughtful about the real-world application of new AgTech if they want to avoid the pitfalls of the recent past.

“Frankly, there is a lot of Silicon Valley hubris that can turn off people in ag,” explains David Chen, chairman at Equilibrium, a global asset management company that invests in agriculture as well as other real assets. Chen adds that some in AgTech and big data are a little out of touch with what problems in agriculture really need to be solved.

Many investors may not be very familiar with daily issues that farmers, and everyone in the agriculture value chain for that matter, need solved, but getting one’s hands dirty will be essential to making prudent investments in a rapidly changing field.


If there is one lesson from the first Green Revolution that should not be overlooked, it is that increasing food supply does not reduce the number of hungry people by itself. From 1970 to 1990, the total food available per person globally rose by 11 percent, while the estimated number of hungry people fell from 942 million to 786 million — certainly a success. But much of that total is due to rising incomes in China. On a more granular level, places such as South America saw per capita food supply rise nearly 8 percent over the same period, but the number of hungry people also rose by 19 percent, according to Lessons Learned in the Green Revolution. A similar effect was observed in Southeast Asia, highlighting the fact that while increasing food supply is necessary for feeding more people, global politics, trade and economics will play just as big a part in avoiding the Malthusian trap.

It is also important to remember that Borlaug’s breakthroughs, funded by nonprofits, took many years of research to slowly increase feedstock through plant breeding,

“What most people who aren’t in the industry don’t appreciate is that venture capital has a very different timeline than nonprofit research,” notes Chen, adding that venture capital is geared more toward applied innovation and productization, and is less equipped to handle the 10-year window that some research requires.

Creating products that can be adopted globally will be essential to boosting total crop yields, but doing so while making a profit presents a unique challenge, as most farmers worldwide do not have large expendable incomes. Another oft-forgotten avenue is reducing demand, specifically demand for meat. A pound of beef can take between two and seven pounds of grain to produce, depending on how the livestock is raised, which can have a multiplier effect on demand as more and more people make meat a significant component of their diet.

While it may not be investors’ responsibility to end global hunger, there is an opportunity to invest with great positive effect if that is a priority. Family offices in particular are suited to this type of impact investing, as a desire to align investments with a family’s values can play into the fiduciary responsibility in a manner rarely possible for institutional investors.

“I think that investors who are willing to risk some capital are incredibly important in this day and age, because there are big problems out here that are crying for big solutions,” concludes Bourne. “Farmers want transformative technology, so the opportunity is out there not only to make money — but to do good.”

It seems foolish to bet against mankind now after two centuries of defeating Thomas Malthus’ prediction. But the fight is not over, and the next round is likely just beginning.

Reg Clodfelter is a freelance writer based in Berkeley, California.

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