Precision technology, biologicals and gene-editing: Positives for nature and agriculture

Agriculture’s challenges: Adapting to climate while protecting nature

Many advancements in farming practices over recent decades – such as improvements in seeds, irrigation, fertilizers, and pesticides – have boosted crop yields and helped feed a growing population without significantly expanding farmlands. However, challenges like climate change, water scarcity, diseases, and biodiversity loss continue to threaten progress in the agricultural sector.

Within the co-developed Janus Henderson x Berkeley Insight Collective curriculum, our investment professionals examined how a changing and warming climate can cause several direct and indirect impacts on the agricultural sector. A direct impact of warmer weather can stunt growth and production for some plants, while indirectly, a warmer climate can also modify weather and rainfall patterns – including unexpected rain during harvest seasons and droughts during growing seasons. Other indirect effects can be proliferation of diseases and pests as warmer weather allows them to expand their range, extend their reproduction time, and improve their survival during more mild winters due to less cold weather mortality.

Furthermore, certain agricultural practices such as monoculture and pesticide use can exacerbate biodiversity loss. For example, some pesticides kill pollinators, which play an integral role in pollinating certain crops. Similarly, pesticides and monoculture crops reduce soil biodiversity, which can increase the risk of disease spread and declining soil health. These factors can decrease crop yields, posing significant financial risks for investments in the agricultural sector.

Due to financially material challenges like environmental and health risks, the future of the agriculture sector will benefit from an increase in sustainable practices. Both consumers and regulators desire farming practices that will minimize health and biodiversity impacts due to pesticide exposure – supported by increased consumer preferences for organic products and the United Nations Biodiversity Agreement’s goal to halve excess nutrient and pesticide use by 2030.

Innovations for more Sustainable Agriculture

We believe companies in the agriculture sector offering integrated solutions to these challenges, such as reduced chemical fertilizer use and more resilient crop development, will be well positioned for future growth opportunities. As part of ongoing engagements with portfolio holdings, field visits to Iowa have allowed our investment teams to observe the practical application of integrated agricultural solutions. Companies such as Deere & Company and Corteva are leading this transformation, aligning innovation with sustainability.

Generative AI combined with big data is creating novel ways to identify risk as well as opportunities for agricultural and nature investment.  Equally, important gene editing along with precision agriculture present new solutions to established and emerging challenges in food production.

 

– Dr. Matthew D. Potts, Professor, UC Berkeley’s Rausser College of Natural Resources

Deere & Company’s advancements in precision farming technology significantly enhance the financial viability for investors by reducing costs and increasing efficiency in agriculture. Its technologies, such as those that use advanced camera and nozzle technology, minimize application of herbicides by precisely spraying only weeds which contrasts with traditional indiscriminate applications of pesticides. Integrating sensors, software, data analytics, and GPS enables precise planting, optimized fertilizer application, and their impacts on yield, potentially leading to more productive agricultural outputs. The incorporation of drone technology further improves crop monitoring, allowing for early problem detection. Overall, these innovations ensure optimal resource utilization, maximizing yields and minimizing unnecessary input costs, thereby promising higher returns on investment for stakeholders in the agricultural sector.

Corteva is innovating in the agricultural sector by developing integrated solutions that reduce the need for traditional fertilizers and pesticides through gene-editing and biologicals, thus presenting significant financial opportunities for investors. Its use of CRISPR technology in gene-editing facilitates precise DNA modifications to enhance crop traits like drought tolerance and pest resistance that already exist, exemplified by Corteva’s development of a multi-disease resistant corn. Utilization of precise gene-editing increases crop resilience and production efficiency by increasing within-species genetic biodiversity faster than would occur naturally through spontaneous gene mutations. The overall impact is improved resilience is increased crop yields.

Additionally, Corteva’s focus on biologicals, including biostimulants and biopesticides derived from natural organisms, aligns with the growing demand for organic and sustainable farming practices. These products not only reduce dependency on chemical inputs but also cater to a niche market of organic farmers, potentially commanding premium pricing. Examples like the pest spray, made from soybean oil, illustrate Corteva’s capability to innovate in ways that meet environmental standards while enhancing crop protection. Overall, these advancements position Corteva to capitalize on the increasing market trends towards sustainability and efficiency in agriculture, promising robust returns for investors.

Conclusion

Enriched by insights from the Janus Henderson x Berkeley Insight curriculum, our investment teams recognize the critical role of nature-based solutions in enhancing nature, biodiversity, and business production. As the agriculture sector and its investors are directly impacted by climate and biodiversity risks, innovative technologies to sustain food production while mitigating environmental impacts will be increasingly important.  Companies at the forefront of this transformation can offer significant opportunities for investors. Innovative agricultural technologies that enhance crop resilience and reduce biodiversity impacts are gaining traction, while advanced gene-editing techniques and biological products support sustainable agriculture and cater to the growing demand for eco-friendly farming solutions. Precision agriculture technologies that minimize resource use through targeted application and improve yield efficiency with data analytics are further revolutionizing the sector. We believe these advancements not only lead to significant cost savings but can further bolster the sustainability of farming practices. Well-positioned companies have the potential to capitalize on global trends toward sustainable agriculture, through investing in solutions that can enhance resilience and mitigate climate and biodiversity risks.

Janus Henderson x Berkeley Insight Collective – Content Series

This article is part of a larger content series showcasing the Janus Henderson x Berkeley Insight Collective. In upcoming instalments, we’ll explore the critical insights and learnings from the co-developed curriculum that aims to empower our investment teams to make more informed decisions on behalf of our clients.