Small Business Labs

The Rise of Fairy Tale Farms

The New York Times article How 'Fairy Tale' Farms Are Ruining Hudson Valley Agriculture covers the growing trend of wealthy urbanites from New York city buying Hudson Valley farms as second homes.

This has raised the cost of farmland and made it much harder for those farming the land to find affordable places to live.  

It's also resulted in inexperienced, new farm owners wanting a working farm due to tax benefits and bragging rights when they're back in the city.

But they don't want to own a real farm. 

Instead, they want a "storybook version of a farm, minus the manure and the noise, and one that fits within their agendas and schedules."

Key article quote describing one farmer's discussion with new farm owners:

"... when she described rotational grazing practices to the owners, which involve moving clusters of animals around the pasture using portable fencing, they were put off by the idea, saying they preferred for the livestock to dot the landscape. "We walked around the property, and they were talking about their vision of, basically, a petting zoo.""

I grew up in a small town in Kansas and have owned two small farms for many years.

Here's my advice to new, part-time, urbanite farm owners:

1. Find an experienced and capable farmer to lease your farmland.

2. Lease the land under a crop or revenue sharing agreement. This aligns the farmer's incentives with yours.

3. Make sure the lease terms allow the farmer to make a reasonable profit. You're much better off in the long run if your farmer-partner makes decent money from your farm.

4. Leave all farming-related decisions to the farmer.  

The last point is very important, and not one many of the new Hudson Valley owners are following. 

Farming is hard, challenging, and complex work. And unless you're a real farmer, you have no idea what's involved.  

So leave the farming decisions to a real farmer.

The trend toward increasing numbers of small and part-time farms existed before the pandemic. We first wrote about it in 2007.

But it's been accelerated by the pandemic due to growing numbers of people wanting to move to desirable rural areas like the Hudson Valley.  

This is leading to even faster growth in the number of small farms.  

See our Small Farms section for more on this topic.

What is the Internet of Plants?

Emerging Tech Brew's Behold: the internet of plants covers the rapidly growing precision agriculture industry. Key quote:

"And just like bamboo, these companies are growing fast: According to Pitchbook, the precision agriculture market reached $7.8 billion in 2021 and is expected to nearly double to $13.9 billion by 2026."

According to Pitchbook, precision agriculture companies fall into four categories:

• Farm management software: Software and other devices that help with farm operations, including data collection.
• Robotics and smart field equipment: Advanced machinery that helps automate or optimize fieldwork.
• Field IoT: Internet of things sensors and software used to monitor and analyze crops, water, weather, and pests.
• Drones and imagery analytics: Tools used to gather crop health information, such as disease and pest detection. They also utilize predictive analytics to help guide decisions and maximize productivity.

The Emerging Tech Brew article covers several interesting ag-tech startups. But our favorite is SupPlant, which recently raised $27 million in funding. Key quote on their products:

"The company uses five different sensors—deep soil, shallow soil, trunk, leaf, and fruit—placed in and around a fruit tree to gather real-time data on plant stress, growth patterns, weather conditions, and soil water content. The data gained from one tree is then extrapolated to all trees within an average of 20 acres, giving farmers insight into ideal crop irrigation for the days ahead."

   
Precision farming means less use of water and fertilizers, higher crop yields, and better land management.  And due to the disruptions being caused by climate change, all of these benefits are needed.

See our small farms section for more on ag tech.  

John Deer's Autonomous Farm Tractor

Farming equipment maker John Deere recently announced the release of their first fully autonomous tractor.  

The tractor combines Deere's 8R tractor, a chisel plow, six pairs of stereo cameras, and an AI system to perceive its environment and navigate.

Tractors with the ability to steer themselves are not new. Decades ago, I drove a tractor with an "autopilot" function that kept the tractor on a straight line during tilling and harvesting on my family's farm.

The autopilot was helpful, but the tractor still required human operators to make turns, avoid objects in their path and maintain the necessary location precision to till or harvest a field.

But the Deere tractor does all this and more by itself (see the movie below).

Autonomous tractors will reduce the need for hard-to-find farm labor and significantly increase efficiency. Farms of all sizes will no doubt quickly adopt this technology.

Top Rural and Small Town Trends for 2022

One of our favorite sources of information on small businesses in small towns and rural America, Small Biz Survival, released their 2022 Top 5 Rural and small town trends list recently.

Despite around 60 million Americans living in rural areas (that's about 1 in 5 Americans), there's limited coverage and information on the trends and shifts impacting rural areas of the U.S.

This is why information sources like Small Biz Survival are so important and valuable.

Two of the five trends really jumped out at us because they're related and the pandemic has accelerated them:

1.  New Residents are Arriving:  Small Biz Survival points out, "this isn’t an explosive exodus from major tech and population centers, but the more subtle diffusion of opportunities to a broader swath of places."  The shift started years ago as remote work became possible.  But Covid has resulted in what's being called "Zoom towns" as remote workers seek more space, lower costs and access to the many amenities of small town life.  

5. Economic Barriers are Falling: The expansion of rural broadband and remote work, coupled with the Internet making it easier and cheaper to start and operate a small business, has made rural and small town businesses more viable and competitive.

The combination of these two trends means small towns and rural areas are much more attractive places to start a business than they were even a few years ago.  

This creates a positive cycle of greater economic vibrancy in small towns and rural America, leading to more people wanting to move and start businesses in small towns.

Thanks to these trends, the next decade is looking to be very positive for rural America. 

See the article for the other trends and more details on the ones covered above.

Below is an overview of the trends by the authors.  Register here (it's free) to see a more detailed presentation of the trends and related materials.

2022 Rural Trends from SaveYour.Town

 

COVID-19 Accelerating the Trend Towards Vertical and Indoor Farming

The interest and investments in vertical and indoor farms has been growing steadily for several  years.

This is due to the advantages of indoor farming. By taking plants out of their outdoor environments and moving them inside to a controlled environment you can eliminate the problems associated with drought, pests, weeds and extreme weather.

You can also locate farms closer to urban areas, which means fresher produce for consumers and lower transportation costs. 

But COVID-19 has added another advantage.

Urban farms provide greater levels of food security because they don't rely on far away crop production and related supply chains.

MIT Technology Review's Inside Singapore's Huge Bet on Vertical Farming covers the island nation's decision to invest heavily in indoor vertical farming.  A key reason is control over food production and its supply chain.

One of the leaders in vertical farming is Berlin-based Infarm.  They recently raised $170 million in funding and signed a major agreement to supply produce in Japan. 

Another vertical farming firm, Plenty, recently showed a 2 acre vertical farm could grow as much produce as a 720 acre flat farm, and match the costs of a flat farm.

The main reason they can be cost competitive with traditional farms is vertical farms use much less water and pesticides, have higher crop yields thanks to the controlled environment and have reduced supply chain costs.  Vertical and indoor farming is also more environmentally sound.

And with COVID-19 showing that food supply chains can be unexpectedly disrupted, food security programs like Singapore's will lead to greater investment and use of vertical farming.

Because of these reasons, expect vertical and indoor farming to become increasingly common.  

Farmers Business Network Raises $250 Million

Farmers Business Network (FBN) provides a data and analytics platform that helps farmers - and especially family farms - with everything from seeds and planting advice to pricing and marketing.

They recently raised $250 million and the company is valued at $1.75 billion.  According to their press release:

FBN is an advocate for family farmers and ranchers and is committed to the premise that true price transparency levels the playing field for farmers – regardless of geography or size – and also enhances competition at the manufacturing, wholesaling and retailing levels. By providing timely and transparent pricing on crop protection products, biologicals, seeds, technology and services, as well as ecommerce purchasing and financing options, FBN arms farmers with the tools they need to make the best decisions for their business, their families and the planet.

FBN says they have 12,000 members, covering 40 million acres of farmland across the U.S., Canada and Australia.

They make money by cutting out middlemen and selling directly to farmers.

According to the U.S. Department of Agriculture, there are over 2 million family farms in the U.S.  They categorize them into 3 groups:

• Very large family farms (101,265) gross over $500,000
• Large family farms (86,551) gross between $250,000 and $500,000
• Small family farms (1,925,799) gross under $250,000

Not surprisingly, small family farms - despite having an oversized presence at farmers' markets - only produce about 15% of U.S. farm products. 

And many of them only survive because the farmer has other sources of income. Family farms are also under financial stress due to trade wars and the impact of COVID-19 restaurant and cafeteria shutdowns. 

So any help family farmers can get is appreciated.

FBN is another example of the rapidly growing role platforms and ecosystems are playing for small businesses of all kinds.  And increasingly, the platforms target specific vertical or niche markets.

Insect Farming Company Ynsect Raises $150 Million

Ynsect, a Paris-based producer of insect protein used in fish farming and pet food, recently raised $125 million. 

The company is using the money to expand in the U.S. and build the world's largest insect farm in Northern France. They plan to grow mealworms, which are larvae of the beetle species Tenebrio molitor (not that you care) at the plant.

       

Key quote from CEO of Ynsect from the TechCrunch article Tech investors see bugs as a big business as Ÿnsect raises $125 million on why insects are a good protein choice:

“By offering an insect protein alternative to traditional animal and fish-based feed sources, Ÿnsect can help offset the growing competition for ocean fish stock required to feed two billion more people by 2050, while alleviating fish, water and soil depletion, as well as agriculture’s staggering 25 percent share of global greenhouse gas emissions,” says Hubert. “Our goal is simply to give insects back their natural place in the food chain.”

We've covered the use of insects as a food source in the past.

And while insects are popular snack foods in parts of the world, most people continue to be hesitant to embrace eating bugs. So using bugs to feed fish, pets and livestock makes a lot of sense.

Insect farming is another example of the many changes happening in the food industry. See our Small Farms section for more on this.

Modern Homesteading and the Trend Towards Greater Independence

The trend towards desiring greater levels independence - and the autonomy, control and flexibility that comes with it - takes many forms. 

Since we track the future of work, we spend most of our time researching the growth of independent work (freelancing, independent contracting, self-employment, etc.).

But there are other aspects to this trend. For example, the growing FIRE (Financial Independence, Retire Early) movement is all about independence. 

Another example is modern homesteading, which the Small Town Homesteading blog defines as:

Homesteading is a lifestyle of the pursuit of self-sufficiency and sustainability. It is often characterized by subsistence agriculture, livestock production, home preservation of foodstuffs, and it may or may not also involve other tasks such as; the small scale production of textiles, clothing, and craftwork for household use or sale.

Data on how many people are pursuing this lifestyle is non-existent. But according to the book The Modern Homesteader:

Dreams of self-sufficiency, independence, and tranquility continue to pull in a new generation of modern homesteaders.

We believe the movement is growing, although it continues to be small.

We also think that much like the digital nomad movement, most followers are "armchair homesteaders" who will never become real ones.

Instead, they will do things like raising chickens in their back yards or spinning yarn. 

For those interested in modern homesteading, there are a number of events you can attend to learn more. We're going to try to go to the DIY Homesteader Festival, which is being held outside of Winnipeg, Canada this August. 

We've never been to Winnipeg and figure if we're going to go, August is the month to do so. 

Modern homesteading is an edge community that has formed, in large part, around the desire for greater independence. This makes it interesting to us. 

Young Farmers: Educated, Female and Pursuing Sustainable Farming

The National Young Farmers Coalition's report Building a Future with Farmers covers the demographics, issues and needs of young farmers (those under the age of 40).

The quick summary is young farmers are quite different than old farmers. 

The Young Farmers Coalition's study numbers on who these young farmers illustrates this. 

Modern Farmer's article on the study nicely covers the demographics of young farmers: 

The demographic picture of the survey is interesting: 60 percent are women, 69 percent have degrees beyond high school, 75 percent didn’t grow up in a farm family, and 75 percent describe their farms as “sustainable.” (63 percent described their farms as “organic,” though due to the cost, many have not been certified as such by the USDA.)

These stats are dramatically different from the demographics of older farmers. They are mostly male, grew up in a farm family, tend to be high school educated and are much less likely to be running a sustainable or organic farm.

Young farmers also tend to operate small farms of less than 50 acres and are more involved in direct selling to consumers. Older farmers tend to have larger farms and use the traditional farm product distribution systems. 

Young farmers are important because the average American farmer is old. According to the report:

Farmers over the age of 65 now outnumber farmers under 35 by a margin of six to one, and U.S. farmland is overwhelmingly concentrated in the hands of older farmers.

But the good news is for only the second time in the last century, USDA data shows that the number of farmers under 35 years old is increasing. 

The shift to farm-to-table food and the growing consumer interest in sustainable and organic farm products is creating new opportunities for small farms. 

The St. Louis Federal Reserve Bank study Harvesting Opportunity: The Power of Regional Food System Investments to Transform Communities nicely covers this topic. 

It's not just young farmers who are recognizing the growing trend towards sustainable and organic farms and farm-to-table food. The tech startup Farmers Business Network just announced they raised an addition $110 million. 

According to an article in Tech Crunch on the funding, one way they're going to spend this money is:

FBN is further building out a marketing product that promises to connect farmers with thousands of possible buyers who may want their specific specialty crops and who will pay a premium to know more about the source.

We believe the trends and shifts driving the increase in the number of small farms and young farmers will continue to grow. 

Indoor Farming Startups Raising Plenty of Money

The indoor farming startup Plenty recently raised $200 million in venture funding.

The round was led by Softbank's Vision fund and also included investments by tech billionaires Jeff Bezos and Eric Schmidt.

The advantages of indoor farming are clear. By taking plants out of their outdoor environments and moving them inside to a controlled environment you can eliminate the problems associated with drought, pests, weeds and extreme weather.

Plenty, like most indoor farming startups, grows plants vertically.

This means the farms can produce more food in a smaller footprint than traditional outside farms.

They also can more easily use sensors and data analytics to optimize growing conditions. 

This, combined with being indoors, means no pesticides or herbicides and reduces water requirements. The food is also grown close to population centers, so it's delivered fresher and with lower supply chain costs. 

The major downside of indoor farming has historically been higher prices. 

But the various indoor food startups are all claiming they can deliver their indoor food for the same cost, or even cheaper, than outdoor grown organic food.

One reason is the use of LED lighting systems. This allows indoor farms to dramatically cut the cost of lighting while also improving crop growth and increasing yields. 

Plenty has plenty of competition. Aerofarms, BrightFarms, Bowery Farming, Freight Farms, Green Sense Farms and many others are all developing indoor farming systems. Most of these have venture capital backing.

And as our recent post The Rise Of Smart Farms shows, the agtech sector in general is booming. 

This is good news, because most news on traditional farming is not good. In particular, climate change and drought is taking a toll on many traditional farms around the world. 

But things like indoor farming and the efficiency gains from agtech in general make us very optimistic about the future of farming.