Consumers, entrepreneurs, scientists and farmers are igniting the biggest transformation in the methods and outcomes of food production since World War II - helping to design a system that is healthier and more sustainable for consumers and more profitable for farmers. This movement offers a promising opportunity to advance prosperity in farming communities and give rise to a rural renaissance that is deeply needed in America.


Rural areas constitute 97 percent of our country’s land mass and are crucial sources of water, food, energy, and recreation. But despite the importance of rural areas to the vitality of the whole country, rural communities have generally been left behind in the prosperity generated in the new economy. Most of the economic growth of the last decade has been concentrated--with few exceptions--in a small cohort of urban hubs while the rest of the country has lost ground. Meanwhile, Covid-19 has exacerbated the stresses facing rural communities and has had significant negative impacts on unemployment, mental health, and economic outlook in rural areas.


Agriculture is deeply embedded in many rural communities and holds exciting potential for transforming social and environmental outcomes. There is so much innovation happening in the agricultural sector, from the availability and utilization of data, to tools for managing soil health and the development of infrastructure for carbon markets. Farmers are constantly innovating on their farms and experimenting with new ways to control pests, improve yields or conserve water. With the right tools and financial backing, this creativity and entrepreneurship that is inherent to the agricultural industry has the potential to improve farmer profitability and revitalize rural areas.


Earlier this year we published a proposal that charts a path that policymakers can follow to avoid the issues that arise when policy lags behind food and agtech investment and innovation in three key areas--one of which is rural renaissance. Farmers feed our nation, and for them to be best positioned to do so, we must develop a system that supports sustainable economic growth in rural communities through rural connectivity, soil health, and farmer profitability.


Rural Connectivity

The amount of information available to farmers today is revolutionizing the way they manage their operations. Data is being utilized by farmers to gain granular insights on weather, crop health, and disease, and to access innovative financial and risk management tools. For example, our portfolio company Sentera designs remote sensing, analytics and IoT solutions for the ag industry, enabling farmers to integrate in-field real-time data with digital ag platforms. These technologies enable farmers to improve yield and profitability while reducing risk to their operations and their environmental impact. For the food system at large, digital technologies can accelerate the modernization of the food supply chain making it more resilient to disruptions. But without high speed internet connectivity, these tools cannot work to their full potential.


The digital divide is an issue that has plagued policy makers for decades. The federal communications commission estimates that 18 million Americans lack high speed internet access although another analysis suggests it might be as high as 42 million. Lack of connectivity is particularly acute in rural areas with one-quarter of rural Americans living without access to broadband and 1 in 5 rural businesses only using basic digital tools. With Covid moving so many business, educational and social engagements online, the essential nature of internet access has become apparent. The effect of this trend on agriculture is considerable--the USDA estimates that 25% of farms have no internet access.


Universal broadband is essential for the future of our food system as well as for the growth and equity of our economy in general. For rural communities, the returns on investment in broadband infrastructure would be considerable even just through the more widespread use of precision agriculture tools. According to research by BroadbandNow, expanding broadband services to rural areas would generate $65 billion annually through increased crop yields for farmers. Which is why we are part of the American Connection Project, an initiative spearheaded by Land O’Lakes to foster long term digital inclusion in support of thriving rural communities. The American Connection Broadband Coalition currently consists of over 100 companies and organizations across finance, healthcare, food production and more. The objectives are threefold: To raise awareness about the critical nature of connectivity, advocate for meaningful policy reform and investment, and take action to provide connectivity options. Land O’Lakes, with support from the coalition, has installed more than 2,800 free, public Wi-Fi locations in communities across 49 states. Land O’Lakes is also launching the American Connection Corps to recruit college graduates to go back to their hometowns and work with local institutions to roll out broadband, and familiarize residents with the technology.


But this is just the beginning of resolving a much larger systemic issue. Federal assistance and incentives are needed to ensure accessible and affordable broadband for all Americans. The federal government should incentivize telecommunications companies to fill the gap in poor infrastructure and bring broadband to rural areas. Improved mapping is needed to enable accurate broadband deployment as well as better coordination on the federal level and with states and localities to effectively deploy resources.


In the recently released American Jobs Plan there is a provision for $100 billion over the next 8 years to deploy broadband throughout rural America. Also included is a commitment to “future proof” broadband infrastructure in unserved and underserved areas and reduce internet prices for all Americans. Execution will not be easy but partnering with companies and organizations that have vested interest in this issue, knowledge and experience on the obstacles and opportunities, and the ability to facilitate the distribution on the ground will provide the best chance for success. And it is an effort that will certainly pay off.



Soil Health

Soil degradation is one of the most considerable threats facing our agricultural industry and our future food security. The USDA NRCS has estimated that the total cost of erosion due to agriculture is $44 billion. But this is not only a financial burden. The planet has lost half of its topsoil in the last 150 years. More than one-third (nearly 100 million acres) of agricultural land in the US corn belt has completely lost its carbon-rich topsoil. Healthy soil not only makes farms more climate-resilient but it can keep costs down for farmers and taxpayers in numerous ways. Without healthy soil our agricultural lands not only lose productivity, they become environmental and health hazards--the dust bowl being the most stark example in the US of what can happen with pervasive soil erosion. On the other hand, soil that is rich in nutrients and organic matter has the maximum crop production potential at the lowest cost and provides countless ecosystem services.


To put it simply, without soil there is no outdoor food system. What is encouraging, are the incredible innovations in soil health management technology that are emerging. Sensors, drones, and smart irrigation systems powered by IoT technology are transforming the way on farm decisions are made and how inputs are applied. While these technologies can offer farmers an unprecedented amount of information and personalized advice on best practices, farmers still need financial support to take the risk of adopting new management strategies.


Fintech is a promising area for innovation and can go a long way towards making sure farmers and agricultural operations have access to the right financial tools. Our portfolio company, Growers Edge, designs risk management and lending solutions for farmers to help them invest in new technologies and reduce the risk of adopting new sustainable practices. Companies like Growers Edge are using data to design solutions to enable farmers to receive financial support for taking on good farming practices and promoting soil health--but federal programs designed to direct funds at conservation programs and soil research could really turn these currently peripheral practices into the standard for farm management.


The Farm Bill, an omnibus bill that is the primary federal agricultural and food policy tool, contains a number of programs that support conservation practices. But sustainable agriculture research is still underfunded. The farm bill’s conservation programs have also received a relatively small portion of funding, accounting for 7% of the 2018 farm bill. Farmers are looking for ways to protect natural resources while also improving their bottom lines and many of the programs are substantially oversubscribed. In a poll conducted in 2018 with more than 2,800 farmers in 7 states, three-quarters said they want to see policies that offer incentives to take steps to reduce runoff and soil loss, improve water quality and increase resilience to flood and droughts, while two-thirds of farmers said that farm bill programs that provide greater financial incentives for unfamiliar agricultural practices would make them more likely to adopt these practices.


The private sector is stepping in with partnerships and programs to fund research and incentivize sustainable practices. Clif Bar and Organic Valley are funding open-source university research into scaling up organics, General Mills is funding regenerative agriculture pilots and has invested more than $5.5 million to advance soil health in the US, Dr. Bronners has spent $3 million on sustainable crop financing, and Danone North America is helping to cover costs for farmers transitioning to organic.


But increased government support and/or coordination could drastically improve adoption. The USDA should work towards developing or supporting datasets that de-risk and demonstrate the profitability of implementing climate-friendly practices. Additionally, both crop insurance and USDA financing mechanisms should be examined to enable more flexibility when financing agricultural operations. Lastly, by creating a climate task force that brings together stakeholders including private sector partners, the USDA could effectively move technical assistance to farmers implementing these technologies and applying new risk management and financing tools.


Farmer Profitability

Farmers are unbelievably resilient but there is only so long any farmer can be expected to persevere if profitability remains elusive. While corn and soy prices are high in the current environment, we know that yield per acre is the dominant theme rather than profit per acre. The focus on yield that has pervaded modern agriculture since the industrial revolution has enabled massive and efficient commodity markets at the cost of farmer profitability. The US lost more than 100,000 farms between 2011 and 2018, farm debt is projected to increase to $441.7 billion in 2021, and more than half of all farmers have lost money every year since 2013. On paper things seemed to look up in 2020 but that is almost entirely due to the federal government paying over one third of farmer incomes. The lack of profitability has led to farm consolidation and the decline of rural areas centered around agriculture, not to mention the ultimate risk to our food security if it is not profitable to grow food in the US. Shifting from an emphasis on yield per acre to profits per acre can change the conversation around what it means to have a “successful” farm operation.


Market solutions that enable farmers to get paid for beneficial ecosystem services could improve financial viability and environmental outcomes. While environmental benefits used to be fairly intangible, technology is enabling the measurement of these positive externalities. For example, one of our portfolio companies, Trace Genomics, harnesses soil science and machine learning to enable data-driven, evidence-based soil management recommendations for farmers. Among other things, this “soil intelligence” can allow farmers to quantify the nutrients in the soil and understand its carbon holding capacity in order to maximize their profits while pursuing carbon-smart practices that work for their operation.


Soil carbon sequestration is increasingly looked to as a key strategy in the effort to remove carbon from the atmosphere. Technologies that enable soil carbon measurement open the possibility for carbon markets that can both improve farmer profitability and environmental outcomes. Today there are a number of promising carbon markets being developed for farmers by the private sector but there are also significant obstacles to participation, including a lack of access to reliable information about markets as well as to qualified technical assistance providers and credit protocol verifiers. The USDA could help standardize carbon market activity by providing grants to eligible soil science companies working on baseline carbon measurement and promoting a holistic approach that does not solely use a practice-based lens but supports a market that is outcome based.


The Growing Climate Solutions Act, introduced by Senators Braun, Stabenow, Graham, & Whitehouse would create a USDA certification program to solve technical entry barriers to farmer participation in carbon markets so farmers can be rewarded for climate-smart practices. The bipartisan bill, which has 43 co-sponsors, was unanimously approved by the Senate Agriculture Committee and could move to the floor over the next few weeks. S2G has supported this bill along with over 60 leading agricultural and environmental organizations. This Agricultural bill serves as an excellent example of government collaboration with the private sector to further innovation and provide key services and support in the implementation of climate and farmer friendly solutions.


Innovation is happening at breakneck speed creating opportunities for extraordinary growth for the farming sector as well as rural America at large. But there is a critical role for policy to play in ensuring the success of this innovation. Public-private partnerships and policy designed inclusively, in collaboration with stakeholders, can propel technological innovation and private sector solutions forward to truly transform opportunities for rural connectivity, soil health, and farmer profitability. Farmers are our best entrepreneurs. Let’s invest in them.




A Rural Renaissance is Underway, It Can Be Accelerated By Policy

A Rural Renaissance is Underway, It Can Be Accelerated By Policy

ABOUT THE AUTHOR

Aaron Rudberg

Managing Director

Aaron is excited about investing behind entrepreneurs that are helping farmers build more profitable businesses and meet the demands of the changing consumer. He has worked in the investment business his entire professional career, and brings experience as an entrepreneur and institutional investor.

MORE ARTICLES