Andras Forgacs of Modern Meadow, Robert Leclerc of AgFunder, and Mark Rosegrant of the International Food Policy Research Institute join Carol C. Adelman, senior fellow and director of the Center for Global Prosperity at the Hudson Institute, to discuss emerging technologies in the agriculture sector. The panel elaborates on cell culturing to create animal protein for food, agriculture investment through online marketplaces, and farming technologies such as precision farming and no-till irrigation.
Andras Forgacs on cell culturing to create food:
"…you've had yeast and various bacilli that have been used to make foods for centuries. And so this is just a way of making food—in this case, muscle meat, animal protein—using a different type of cell. And the benefits are significant in terms of environmental efficiency, not having to kill animals, and actually making products that have advantages in terms of nutrition, form factor, and whatnot."
Robert Leclerc on educating investors about agriculture technology as an investment:
"…aside from the regulatory component, the biggest hurdle on the investment side is education. …there's a bit of a disconnect between how big and important this space is and how little investment there is. And it's maybe even more surprising when you understand how attractive this asset class has been for performance. …for farmland, it's outperformed all other asset classes for the past twenty years. …If you're talking about agribusiness, the agriculture sector has outperformed all other sectors in the U.S. economy, except for tech, for the past fifteen years."
Mark Rosegrant on a hurdle to implementing new agriculture technologies:
"…in many—or even most developing countries, the regulatory and legal systems are a real impediment to getting new seed varieties and new technologies out there. It tends to be barriers against foreign investment, barriers to biotech and other types of new technologies, not even just GMOs, but other kinds of new seed varieties tend to be regulated too highly. So that really needs significant reform."
ADELMAN: Welcome to the Council on Foreign Relations' "Shaping the Future of Food and Agriculture." And I think we're lucky to have three very distinguished panelists today, and you have their bios, so I'm not going to go into all their wonderful achievements, but simply to say that Andras Forgacs—if I'm producing it as in the Hungarian...
FORGACS: Very good.
ADELMAN: ... practiced on that—is the cofounder and CEO of Modern Meadow and also Organovo and is—which is really leading the whole research and technology in tissue engineering.
And then we have Rob Leclerc, who's the cofounder of AgFunder, who came down from New York today, an online investment marketplace for agriculture. And Mark Rosegrant, director of environment and production technology, division with IFPRI, in the middle here.
And so I think what is wonderful is we have a great mix of science, biology, investment, and actually cutting-edge investment with crowdsourcing and e-investment, which we're going to be excited to hear from Rob about, and, of course, the ultimate king of everything, policy, the private and public policies that are going to put all that science to work.
So thank you, Hallie and the Council, for putting together such a great panel. This is a fun one to do.
So I'm going to just dive right in and start with Andras. And, Andras, I would love for you to educate us on what tissue culture technology is and what it means for increasing animal protein, which, you know, clearly—I think most people know why that is important, not only because of where the market is going, but for nutritional purposes, and how this can help ameliorate the other problems in agriculture production.
And in your TEDtalk of 2013, you said beyond medicine, biofabrication, which is—I guess that's what this is called—could be a humane, sustainable, and scalable new industry. So talk to us about that.
FORGACS: Sure, sure. So biofabrication, or cell culturing, or tissue engineering, is basically a way of taking cells, multiplying them in large quantities, and organizing them into tissues. And it's actually not a new technology; it's been around for quite a while. But with all new technologies, its first application was in a very high-value field, which is medicine. So for the last couple of decades, there's been a burgeoning field of medicine known as regenerative medicine, which if many of you have—if any of you have heard about doctors growing, you know, body parts, like ears and trachea and whatnot, skin for patients, they're using techniques from tissue engineering.
And so our thinking was, first, I founded a company that did tissue engineering. It's a company called Organovo, and it was a company that pioneered a certain approach to tissue engineering for medicine. And then we thought to ourselves, well, gosh, if we can make medical-grade human tissues that are good enough to test and develop new drugs, that are good enough to serve certain medical applications, could we also grow muscle that can be made into meat? And could we also grow skin that could be made into leather?
And this was the idea behind Modern Meadow. And our approach basically is we take cells, we grow them in large quantities, and we organize them into these tissues. And if you think about it, it sounds kind of radically new, but, really, there's a long history of using cells as your engine to grow things.
So in food, for example, you've had yeast and various bacilli that have been used to make foods for centuries. And so this is just a way of making food—in this case, muscle meat, animal protein—using a different type of cell. And the benefits are significant in terms of environmental efficiency, not having to kill animals, and actually making products that have advantages in terms of nutrition, form factor, and whatnot.
ADELMAN: And I think—I know when we talked before on this, one of my first questions was, well, does this fall into the GMO category? And I think—because clearly then you would be running into a lot of issues there. Could you address that, as well as what are the price issues? Because in reading up on this, it looked like there were some people that are thinking it's going to be high priced, $30 per pound or something, and...
ADELMAN: You know, so can you address some of those? And any other barriers that you guys worry about?
FORGACS: Sure. So it's important to emphasize that we're first focused on wearables. We're focused on making leather before we commercialize food. That said, we actually are making food, as well, kind of just in a research setting, and I've brought some samples of something we've recently developed earlier this year. It's a snack food concept we call steak chips. It's like a crunchy beef jerky.
And it's important to say that in the food side, we don't do any genetic modification. We take healthy natural cells from the most perfect animal you can imagine, we grow them in large quantities, we mix in a little bit of pectin, which is the fruit sugar that congeals jam, and then we add barbecue sauce or teriyaki spices or whatever spice we want to infuse, and then we bake it in a food dehydrator.
So it's an extremely controlled, very sterile, very—you know, just very highly auditable process, and it results in something that's very food safe and very shelf-stable, and also something that is nutritionally extremely sound. It's—these steak chips, for example, are a snack food, but it's 70 percent protein and very little fat.
And it's—again, we don't know if it's a product. It's just something we've done to kind of amuse ourselves. And we've had about 100 people try it so far. But they're all still alive and well, as far as I can tell.
But, again, it's—you know, that's pretty much the approach. There's no genetic modification involved on the food side.
And then as far as price issues, like any new technology, right now, we've got very expensive, kind of PhDs working on very small-scale to develop this, so the economic question right now at the development stage is almost meaningless. But, you know, we estimate that each steak chip that we produce is about $80, which is—it's probably the most expensive snack food that you'll have.
But we know that...
ADELMAN: $80 per ounce?
FORGACS: Yeah, exactly. It's more expensive than Kobe, but at scale, we know that it'll get down to pennies. And the question really just is, how do you get to that scale? And then there's also a question around the regulatory process. Could we—I mean, this is something we're trying to understand better—could this be considered as GRAS, generally regarded as safe? And we're just at the early days of really understanding the regulatory process. We don't know if that's the case. But if it's cells from a natural animal being grown in a, you know, natural set of ingredients, natural plus natural should equal GRAS. So we're trying to understand that process and whether it'll be seen that way by regulators.
ADELMAN: I'm sure if you went to the medical side, they would probably warn you that it will be regulated, because I doubt...
FORGACS: Well, that's different.
ADELMAN: Yeah, yeah. And what are the differences there?
FORGACS: If you're making a medical device, it has to actually demonstrate medical efficacy. And it has to be, you know, safe for the patient. Food has a different regulatory hurdle.
ADELMAN: Right. But you'd have to show the amount of protein in it and how much of the need that that met the requirement, and all that.
FORGACS: Food actually doesn't have to make any health claims. It just has to be safe.
FORGACS: I mean, just walk down your supermarket and look at the amount of junk food that's available there. You know, none of that has any health claims. It's quite—for the most part—not even good for you. But it just has to be safe. It shouldn't kill you in the doses that you would normally consume.
ADELMAN: But what's interesting now in the food industry, especially with beverages, beverage companies, you know, they're all coming out with, you know, an aim of lower calorie—lower amount of calories, so—whereas that would not be a problem in the developing world, it probably would be here at marketing here in the states, yeah.
FORGACS: Right, so this is actually much more nutritionally beneficial. It's 70 percent protein. It's very, very high-quality. But you're right. Many of the food companies right now are actually trying to make things that are less bad for you, because we know that salt, sugar and fat are bad for you, so many of the food companies are trying to be much more responsible in the way they apportioned those ingredients in their products.
But they're not making health claims. They're not saying that you eat this and it'll, you know, make you smarter or, you know, healthier or cure disease, for the most part.
ADELMAN: Right, yeah. Good, good. OK, well, thanks. And we'll have more questions, and then we're going to have, of course, time for lots of questions from our audience, as well. So, Rob, you talk about the lack of capital as really the overarching problem, gap, in agriculture production and increasing agricultural production and food supply.
And you've helped pioneer e-investment through crowdsourcing. So I would really appreciate if you could talk to us about, how does e-investment differ from traditional investment? And how big do you—what sort of proportion of e-investment as a percent of all ag investment either is happening now or could you foresee in the future? And that would be wonderful, yeah.
LECLERC: Sure. Sure. So...
ADELMAN: And anything else you want to talk about.
LECLERC: OK. So I'm just going to sort of step back and just—because I think we are a start-up and we also work with a lot of start-ups, so—and a lot of technology start-ups, so we sort of wear both hats sitting up here. We basically started AgFunder because we saw a large investment gap in agriculture. It's been very much underserved by the agriculture community. That includes agriculture technology, agriculture production, anything to the supply chain, really, and we had some personal experiences of that, where I was working in West Africa with a partner. We were developing agricultural projects there. And we really found it difficult to attract additional capital.
And so there was a group that we were working with, 1,500 out farmers that today do not have a job because we were unable to efficiently aggregate investors in the time—given the time and the resources that we had. And that for us was a big shame, because we worked very hard with this, and this was something that was great for the people there.
And so, you know, I saw this. There's got to be a better way of doing this. And we looked back, and we've seen how Internet marketplaces have been able to bring these great efficiencies and pull customers and demand where there was none before and create new liquidity in the markets. And so we saw that this—maybe this would be the best place for an investment marketplace in agriculture, because agriculture is so fragmented, there's no center of gravity in the sector, there's no Silicon Valley for agriculture, and so if we're going to improve the ability to invest and make this a more accessible asset class, it's probably going to be centered around technology.
And so in some ways you guys might have heard of the term crowdfunding. In some ways, yes, we are a crowdfunding platform. But more generally, we're an investment marketplace that will bring investors, whether it's individual investors, the gatekeepers that you know in the world of finance, but also foreign capital, for instance, wherever that foreign capital may be, and gravitate those investors towards opportunities that have investment-worthy aspects to them.
So that's sort of on—how we got started. Maybe—sorry, there was another—there was like another question in there?
ADELMAN: Oh, yeah, that was—what percent you think your e-investment either is now or has the potential to be out of all ag—but you've also explained to me before that there's gaps even in traditional investment, too.
LECLERC: Yeah. Yeah.
ADELMAN: But what—how big are—of the problem is...
LECLERC: Yeah, so—I mean, so how we...
ADELMAN: ... if you're trying to raise money for it?
LECLERC: Yeah, so how we raise capital today is, you—is very much a door-to-door sales process. And a lot of this was regulatory restrictions that limited the ability of an entrepreneur to go out and communicate with the investment community about what they were doing.
So literally, you could not advertise and solicit investment offering, or on the flipside of that coin, you had to have a substantial and pre-existing relationship with an investor for them to invest in you. Now, you can imagine trying to sell a car or a book or a television if you had to have a pre-existing—if Sony had to know you somehow first, and you could—you could imagine how difficult the rest of the economy would be to operate.
And so those restrictions recently came down, starting in—April 2012, more recently some new components of that were enacted in September of 2013. And now we're sort of really starting to transition from this door-to-door sales model of raising capital to more of a broadcast, multimedia, and multi-channel way of raising capital.
And so that could be something simple as if you were raising capital and the Wall Street Journal comes up and wants to hear your story, you can today mention that you're raising capital. And that may—because the Wall Street Journal is spread everywhere throughout the world, that may attract those investors that are exactly looking for your type of opportunity.
Prior to these new regulations, you could not speak about raising capital at all, and so (inaudible) was left up to the investor to maybe infer that there might be some opportunity to invest there. And so I think this very much changes everything.
And so if you ask me, what percentage will be done on an online forum? I think that most of the best deals will be done on an online forum, that everything else will be sort of done in a boiler room fashion, trying to get somebody to invest just on some sort of friend's in a friend's back alley kind of situation, but the best opportunities will be brought on an online forum, not only because it gives them an opportunity to attract investment, but they can also have an opportunity by making an event around their fundraising process.
And that is, they can connect with other stakeholders. That might be press. That might be customers. That might be strategic partners, channel partners, other technical partners. And so it creates a—it's an opportunity to bring all of those individuals around a table at one time, which can be very, very important for particularly early-stage companies.
ADELMAN: Do you see this growing to be a significant share of the market, even if you can't give me a percentage?
LECLERC: Sure, sure. I mean, our initial focus—we're taking a wedge into the agriculture market by focusing on the agri technology space. There was about $277 million of investment in ag tech last year. That has now grown to about $400 million by the first six months of this year, so it's...
ADELMAN: That's in the overall investments in ag tech or...
LECLERC: Yeah, in ag tech, yeah. So bio ag tech and what we'll call digital ag tech. And so that's a space that's growing, and that's our sort of wedge, really, into the market. But as we're doing this, we're starting to expand into agribusinesses in—we have a project in Guyana that we're working with. We're also looking at a project in China. We have—a couple of our projects have had operations with or in Africa. And so we can—we can sort of slowing build that out.
What we're seeing is really on the demand side, we have pension fund managers, private equity managers, all sorts of different investor classes that are coming to us, trying to access agriculture investment opportunities, and they really enjoy this format. They don't have to meet the investor unless they want to, and there's a lot of information online, and so it's—you asked the question, would you rather somebody knock on your door to sell you a television? Or would you rather search for it and do your research and buy it on Amazon when you're ready?
And so I think the question comes back to, I think it can take a significant portion of the market. And as we go upstream, you know, there's farmland investing, and that provides an opportunity not just to attract, you know, other private equity fund managers, but anybody in the investment world that wants to participate in this, where they might have been excluded before because of informational access.
ADELMAN: I'm thinking about buying a car. I only finally bought a car myself when I could go online and research it and compare and not have to go into the car dealership.
LECLERC: Exactly. Exactly.
ADELMAN: Where if you were a woman, you used to have to go in the back room, and they say, "You probably need to call your husband now." And, of course, I said—they told me to call you and let's pretend that, you know, you're telling me it's too expensive.
ADELMAN: But that has totally revolutionized buying a car, right—so...
LECLERC: Exactly. Exactly.
ADELMAN: Uh-huh. So you think you can really come into the traditional investors and make that more—yeah, that's very exciting, yeah.
LECLERC: Yeah, this is a bit of a disruption in the—if you think about what the role of the investment banker traditionally has been, it's been to aggregate capital and supply and be that pipeline or channel between—between the two. Really, in many ways, that's been set up. Relationships are important, but the specific structure was very much driven by regulations, which limited other more dynamic forms of communication and directly allowing those companies to connect with investors more intimately.
And so I think what we're seeing here with AgFunder—and there's other investment marketplaces in other sectors—is this is really the precursor to what you might call e-investment banking. And particularly, this is going to be very important, as in the globalization of private capital markets, because there's really no other way to do it. If there's somebody in Japan and they're looking at an opportunity in the U.S., and they can just turn on their computer, they can see it in full translation. And that doesn't mean that they just click an "invest now" button to invest $10 million or $20 million or $50 million, but they can go through a qualification process which doesn't waste everyone's time.
ADELMAN: Yeah, Dennis Whittle, who is the founder of Global Giving, which is a website you can go on and give philanthropy to development projects, not loans, but philanthropy, really talked about it being the democratization of philanthropy and the creation of ordinary Oprahs throughout the world. And so it's very exciting that—to see—to think about it that way in terms of investment.
LECLERC: Yeah, thank you. Thank you.
ADELMAN: Yeah, good, good. OK, Mark, we're going to move from animal husbandry and chips—wonderful chips, which we don't know what we're going to call them, but maybe this group could come up with a good name for you, too, in the process...
FORGACS: Looking for good ideas.
ADELMAN: From animal husbandry to grains to maize, rice and wheat, which Mark assesses and really does tremendous scholarship on this, and he works on policy changes for both the private and the public sectors at IFPRI, which is a wonderful policy research institute that I've known for years, having worked at AID.
So I know you have come out with a publication by IFPRI in 2014 in the spring on food security. And you talk about the eleven ag technologies that you recommend for food security in general, increasing yields and improving farmer's access to markets, et cetera.
So I just would be interested if you maybe want to talk about that, because to be able to boil that down to eleven is pretty good, but even then, do you—do you prioritize that as—what seemed to be the most important?
ROSEGRANT: Right, yeah, so, yeah, just let me speak about a few of the...
ADELMAN: And, again, anything else you want to introduce, yeah.
ROSEGRANT: ... key findings from that work and subsequent work we've done. Yeah, so we did look at a wide range of technologies. And taking a forward look at the potential over the coming, say, three decades, we looked at both sort of farming assistance approaches, including precision agriculture, integrated soil fertility management, no-till conservation, and—and advanced irrigation, but also at improved seed varieties that aren't as far along, including nitrogen use efficiency and drought and heat tolerance.
What we look at, then, is also to look at plausible adoption paths under improved policies investments and find that a combination of those up to their feasible potential could reduce hunger by almost 40 percent in 2050 compared to sort of a baseline without the rapid advancement of these technologies and reduce—also reduce area planted and harvested to these three big crops by about 20 percent, which would save a lot of land for—that otherwise would have been fallow or cutting down forests—forest areas, as well.
And we did find, you know, some things did come out very strong. I think one of the interesting results was that precision agriculture came out very strong on a wide basis, not just in the advanced country—agriculture countries like the U.S. or Brazil, but using smaller scale sensors and machinery in places like India, South Africa, China, and after that, countries in Southeast Asia are already you're finding the uses of these kind of smaller-scale precision agriculture which boosts yield significantly, but also then reduces run-off of nitrogen, volatilization of that into greenhouse gases, as well, as well as reducing water use, which is essential.
We also found that some of the farming systems are very important, including no-till irrigation and soil fertility management. The trick with no-till irrigation, no-till agriculture, is you have to maintain it for years in order to get the soil advantages that you need. Otherwise, if you're just doing a couple years and then policy changes and you go back and plow it under, you're not going to get those kind of long-term benefits.
We also found that the improvements are highest in most cases in Africa and South Asia, and that's really partly because they're quite far behind the technology frontier. So if you can boost them up, in some cases, leapfrogging or else these smaller scale versions of advanced technologies, the benefits are really very important.
Of course, these technologies aren't going to just happen. And the other thing we explored is what would be the policies and investments to support that. And one of the key things, of course, is to continue to increase in the amount of investment in agricultural research, crop breeding, and so forth, but also to target it more to some of the emerging stresses, like increased pests and diseases, which we know are going to increase under climate change, as well as drought and heat tolerance, which are also going to be key problems that will increase over the coming years.
Secondly, the extension services, particularly in developing countries, have to be dramatically improved to get these kinds of varieties out. There's basically a complete collapse of the old-style government public extension services in the developing world, over the last twenty years, too expensive and too inefficient. Can still make use of some of those—what's left there, but you'd have to go much more to NGOs and private sectors to do extension, but plus also use a higher tech extension, getting mobile phones into the atmosphere, radios, and a number of other more information technology-oriented extension. That's starting to happen, and it has to be pushed more.
To get that to happen, you also need sort of the old-style investment. You've got to improve rural roads in the developing countries with billions of dollars of additional investment, particularly, again, in Africa, South Asia, to connect farmers to the market so they get higher prices for their output, lower prices for what they—for their inputs, and also access to these kinds of technologies.
A fourth area I think that doesn't get as much attention is the—in many—or even most developing countries, the regulatory and legal systems are a real impediment to getting new seed varieties and new technologies out there. It tends to be barriers against foreign investment, barriers to biotech and other types of new technologies, even—not even just GMOs, but other kinds of new seed varieties tend to be regulated too highly. So that really needs significant reform.
And then another very important area is this broader economic policy, where there really has to be a push to keep and extend, you know, open trade and agriculture products. You know, that took a real hit during the price spike crises in 2008-2011, where countries started, in a sense, banning exports and taxing the imports, so that put a lot—so we lost a lot of confidence in the agricultural trade system at that point. That has to be restored and pushing on to get the WTO reforms, because it's going to be very important that developing countries have access to the markets, and particularly under climate change, where we see very rapid increases in imports of food to developing countries, even with significant success in technology. So those markets really need to stay open.
The other big-ticket item is to reduce subsidies on water, fertilizer, energy, and developing countries, and to put the savings there either into direct payments to farmers when they're really poor or, even better yet, into productivity enhancing investments.
ADELMAN: Yeah, thank you for that broad overview, really about every problem that's out there, so that's excellent. We just really have a couple of minutes, and I thought if I could—each of you could just give me a very quick answer on this. I would love to hear from what you know is going on in the field, just what you think is a project that has, you know, really worked? Even if it's in a small area of some of these problems we've heard of, maybe it's a public-private partnership. I'm thinking, like, you know, one of the examples everybody turns to is the CGIAR, you know, the Norman Borlaug project, which ended up, you know—and I think remains a really excellent example of, you know, both private sector, public sector coming together and academia.
So if you—you know, could give us some examples of some practical things that you think are examples that, you know, encouraged you or that you—are guiding you somewhat even in what you're doing. So you have to do this really fast. This is—we have a bell that's going to ring.
FORGACS: So I think there's a really exciting wave of innovation in food companies that's emerging these days. There's a kind of—you might call it Food 2.0 or whatever the right moniker is, but there's a lot of companies that are developing new ways of doing, you know, food. And we're focused on developing a better way to grow meat, but there's other companies that are also approaching the meat challenge using plant proteins, and they're doing great innovation in that. I'm aware of a few companies that do that, so Beyond Meat is developing a chicken that has a more authentic texture using soy. Impossible Foods is developing a hamburger that, you know, tastes very authentic, but is made entirely of plant proteins.
And then there's also other animal products that are being kind of approached using plant proteins or other technologies. Egg, milk and, you know, cheese—you know, so there's all kinds of alternatives emerging to traditional livestock, which is very resource-intensive, using plant agriculture or, you know, cell culture techniques, such as what we're doing.
ADELMAN: Yeah, thank you.
ROSEGRANT: Yeah. Yeah, a couple I could just feature real quickly are public-private partnerships you've mentioned. I think one really important example is the water-efficient maize in Africa project, which is mainly in Eastern Africa right now, but it's—that is a consortium that includes major international companies. Monsanto is a big player. But also international organizations, such as CIMMYT, which is a sister organization of IFPRI, that works on wheat and maize.
But very importantly, also, the national research systems of Eastern African countries and the private seed companies, as well, and that's really been in existence since about 2008, but it is generating very important new drought tolerant varieties that take sort of the best technologies and genes from Monsanto, but then breed them into plant types that are effective in Africa itself. And they've come up with varieties now that are getting 25 percent to 30 percent more yields under drought conditions.
And there's some movement now of getting them already out in the farmers' fields. It's one we're really—people sometimes, well, public-private partnerships don't work because of the different incentives involved, but this one really seems to be working.
ADELMAN: Yeah, great. Thank you for sharing that. Yeah, go ahead.
LECLERC: So one of the ones that stands out for me was actually a company that we listed. They raised about $7 million on AgFunder. They—it's a company called aWhere. They do remote sensing and they pull in remote sensing data and satellite data, and specifically they have climate prediction models that are very focused on the agriculture sector.
A couple of their major clients today are Syngenta, Monsanto, the Gates Foundation, and the value that these larger institutions have is, is that they can predict climate conditions, you know, two, three weeks out, and so they can start to allocate resources. Whatever those resources may be, if there's going to be a drought, maybe you need to provide more assistance in a particular area. You know how difficult it can be moving around in places with poor infrastructure, like Africa.
It could be that if you—you know that there's going to be a more fertile area, that you need to—as a Cargill or some sort of seed producer, you either want to pick up—you want to allocate your resources to picking up produce there or delivering seed. And they're at the point now where they're developing this API to actually allow this to filter down to the rest of the world's 500 million farmers.
And so they're working—they're starting to work with last mile providers for very simple apps, the apps that would run on a very text-based mobile phone, and so, you know, if you're a farmer in Tanzania who has a small hectare of land, to have some information on whether you should plant today, whether you should wait two weeks, or you should harvest early or wait, that could be the difference between, you know, losing your entire harvest or coming out with a bumper harvest.
And so for being able to use technology to provide tools to everyone, I think is a really exciting story with this particular company.
ADELMAN: Yeah, wonderful. OK, well, we'll turn it over to our wonderful audience. And if—this is on-the-record, just so you know, so you can raise your hand and someone will bring a mike to you. And please just state your name and your affiliation and then you can pose your question.
So we'll start right here. Oh, good. You got your mike.
QUESTION: Kimberly Reed, International Food Information Council Foundation, so we communicate the science between food safety, nutrition and health, kind of a very important thing to do along with what you're doing. My question is, do you have Expo Milano 2015 on your radar? And for those of you who don't know this, the World's Fair happens every five years. The next one is in Milan for six months. It's a themed World's Fair, and the theme for next year's event is Feeding the Planet: Energy for Life. So 20 million people will be engaged, and I hope all of you are.
ROSEGRANT: Well, thank you.
ADELMAN: Good to know. Great, we can...
ROSEGRANT: Yeah, we actually have been involved in planning some sessions, and we'll be there. So, yeah, thank you very much for that.
ADELMAN: Yeah, wonderful. Thanks. Thanks for that. Yes?
QUESTION: Witney Schneidman, Covington and Burling. I'd like to ask you, Mark, about mechanization in Africa and what you see as the major obstacles for more accelerated process. Is it financing, leasing? Is it small holders? Is it lack of extension services, all of the above? To hear some of your thoughts...
ROSEGRANT: Yeah, to some extent, you'd said all-of-the-above. But I think one of the key things is to get people willing to set up contracting services, because right now the individual farms are too small to—to handle mechanized agriculture, but the labor—agricultural labor is—the prices are going up, the wages are going up now, so they're for the first time really almost ever, there are some incentives to do that. So what you need to get is some financing for contract operators who would, say, have a small thresher that they would then work with ten one-hectare farms or much more, actually, over the course of a season, because individual farmers, aside from, you know, some of the really big farms that you can still find in South Africa or Zimbabwe and some other places, you're going to need that contracting services so that you'll be able to get a critical mass to be able to do that.
But I think it can happen now. And there's a few small companies who are working with indigenous companies there and some U.S.-based companies are starting to look at it.
ADELMAN: Good. Over here in the front row?
QUESTION: Thank you, all of you, for a very interesting panel. I'm Johanna Mendelson Forman, and I'm a scholar in residence at American University. And I'm particularly interested in the investment side as to who your clients are in terms of who was buying up the shares in these lands. Is it Chinese government investors? Is it Indians? Are you looking at companies with new potential to open up lands like Colombia, which has vast territory and is going into a peace process? Does any of this factor into your choice, since I haven't looked at your website there? I'd be really interested to know how that works.
LECLERC: Yeah, so our sort of wedge into the market, really, has been focusing more on the agriculture technology sides, in particular, agribusinesses that are operating rather than global farmland at the moment. That is a very large market and probably a little premature for us, given its size.
That said, you know, I can still look to say sort of, what kinds of investors are we seeing? We're certainly seeing private equity investors who don't specialize in agriculture technology, but feel that this is going to have a disruptive effect throughout the value chain, and it's something that they're looking to invest in, in $20 million to $120 million bite sizes.
There are a lot of venture capitalists who are starting to look at this space. Since Climate Corp sold in—or in late 2013, I think that was a catalyst that created a big explosion of interest, investor interest, and then also entrepreneur interest. You're not going to see a lot of entrepreneurship if they feel that there's no money available on the other end of that. So certainly, we're seeing a lot of traditional Silicon Valley VCs.
But then—I mean, you know, it's—it's also family offices and family businesses in the agriculture space. But, you know, bringing that back, we also have had several inquiries from large Chinese investors that are looking to agriculture technology, probably and most likely to bring it back to China, because there's a really large push in China to modernize their agriculture industry, and they're looking for edge advantages over what's there domestically. So it's really a broad, broad spectrum of—and even individuals. So.
ADELMAN: Andras, do you want to also comment on the investment angle of who you're seeing interested in this?
ADELMAN: Because you're in that field, as well.
FORGACS: Yeah, one of the real interesting developments is that this is a space that has in recent years become of interest to venture capital community, Silicon Valley and up in the Northeast, as well, and actually globally.
So some of the companies that I mentioned earlier are actually venture-backed. And one of our first investors—one of our first backers was Peter Thiel, who was one of the first investors in Facebook, and we're also backed by Sequoia.
And to the question about Asia, there is a real interest in new agricultural technologies in Asia, as well. One of the big—the more significant investors globally is Mr. Li Ka-shing out of Hong Kong. So he was one of the venture—well, he's not—he has a venture fund. He's one of the richest people in the world, but he understood from the perspective of Asia that there's a real supply-demand imbalance.
And the way that consumption is going in Asia, it's becoming environmentally devastating. And so he has a $10 billion foundation. And the endowment of that foundation has a venture arm. And so what they're looking to do is, part of the foundation is used to support medical research and biotechnology research. And then the venture arm that manages the endowment's money invests in technologies that can also address these problems from a private-sector standpoint.
So Hampton Creek Foods, for example, which is the plant-based ag company, is backed by Horizons Ventures, which is Mr. Li Ka-shing's venture arm. Impossible Foods, the plant-based hamburger, and us, and some other companies, as well. So there is an appreciation internationally that this is a big global problem-- how do you feed the planet, and how do you not wreck it in the process.
ADELMAN: Great. OK, over here in the second row, and then we'll get to the back, I promise.
QUESTION: Hi, Scott Moore. I'm an international affairs fellow here at the Council. So a very refreshingly, I think, optimistic kind of presentation of some issues that I think are too often kind of phrased in terms of crises. And I guess I'd just be curious to ask each of you to kind of expand on some of the things that you've said about the biggest barriers, you know, be they political or regulatory or what have you, to the approaches that you individually are pursuing. Thank you.
ADELMAN: So why don't we have all three of you comment briefly on that?
FORGACS: So there is a technology hurdle, but I think we've made great progress on that. People say that sometimes the biggest hurdle that we face is, you know, consumer perception hurdle that we're developing a fundamentally new way of growing meat, and this is going to take some time for people to adjust. So let me ask this audience. If you guys had a chance to taste brewed meat or cultured meat or sample these steak chips, how many of you would be actually willing to do that? Raise your hand. All right. So that's a relatively attractive, addressable market from my standpoint.
LECLERC: What about the leather? The leather?
FORGACS: Well, the leather—I mean, how many of you would be willing to wear cultured leather that doesn't kill an animal? There you go. I mean, that's almost universally appreciated.
ADELMAN: Yeah. Great. Great. Mark?
ROSEGRANT: I'd said it's going to be really the long-term political and policy commitment, that I think also the technologies will come, if there's enough investment both private and public, but what you see is a pretty fickle policy environment. So from about the 1980s until 2005, there was a big disinvestment in agriculture research, for example, and technology development on the public side.
The private sector kept things moving reasonably well. Then, all of a sudden, people got excited when prices skyrocketed in 2008, so you saw the big development agencies, plus the World Bank and so forth, coming with much bigger investments, both to help support private investment, but even more so on public investment.
But now you have prices that have slipped down another—you know, about 20 percent over this past year of people saying, oh, well, I guess the markets have adjusted and things are OK for now. But, you know, you can't—you can't generate the long-term growth that's needed and sustainable growth, as was pointed out, unless you keep stable long-term investment. If it's coming in and out with whims of every time there's a price spike or trough, it's not going to happen.
So I think maintaining that political will, both in developed countries and in the developing countries that have to implement these things ultimately is probably the biggest ask.
LECLERC: I'd say, aside from the regulatory component, the biggest hurdle on the investment side is education. So just as an example, agriculture represents about 8.5 percent of global GDP. Then you step over to the asset—if it's an asset allocation chart, and you—as a sector, you don't even see agriculture on that.
So there's a bit of a disconnect between how big and important this space is and how little investment there is. And it's maybe even more surprising when you understand how attractive this asset class has been for performance. I mean, for farmland, it's outperformed all other asset classes for the past twenty years. It's gold, real estate, bonds. If you're talking about agribusiness, the agriculture sector has outperformed all other sectors in the U.S. economy, except for tech, for the past fifteen years.
So there's real opportunities here, and there's long-term upward secular trends that are driving this market. And so for investors who want diversified, maybe anti-cyclical investment opportunities to add to their portfolio, agriculture is potentially a great place to look. But we found that there's a lot of education. Most investors don't have exposure to their portfolio. And so, you know, in some of what we do, by having an online platform with intrinsically a lot of information, that investors can start to get comfortable with that, see what investable opportunities look like in this particular space, and when they're ready, they can start to step in and feel like they're a little more buttoned up.
ADELMAN: Yeah, great. Lots of—I want to get in the back, the man with the blue shirt. And there's a mike coming your way.
QUESTION: Thank you. Rick Gilmore, GIC Group, which is an international agribusiness company.
ADELMAN: Sorry, I didn't recognize you.
QUESTION: How are you?
ADELMAN: It's good to see you.
QUESTION: And chairman and founder of Global Food Safety Forum. I'm going to cheat and ask the chair's indulgence for a question for two of your panelists. First, Rob, what you're describing, I believe, are private placements. And so I wonder how you—what—if—how you're going to factor in your strategy, if at all, for IPOs, things of that kind, and also how do you do your boots on the ground due diligence, even preliminary due diligence for these deals, which it seems inherently a problem with the e-commerce approach? I'm a firm believer in it, as you know, but I'd just like you to address that.
And, Andras, you tested how many would have a taste of your product, but I'm not sure if that's deterministic. Are you? Because we have now two more states that are going to hold referenda on COOL, which is the labeling issue. And just to be a contrarian, I would think if your product is subject to COOL, it's going to be a really Sisyphean task for you to market this.
FORGACS: Cool sounds good to me, but I don't...
QUESTION: You know what I mean by COOL.
FORGACS: Not exactly.
QUESTION: Not all of us do.
FORGACS: Not—yeah, could you...
ADELMAN: Yeah, why don't you—that's a good thing.
FORGACS: Yeah, could you just elaborate on what you mean by that?
QUESTION: Well, that's a labeling. It's labeling the origin and what—if it's subject to recombinant technology or anything of that kind, and it was defeated in the state of Washington. There's two more states that are going to be voting on it this election round. And it can be—under the jurisdiction of the state—as well as the federal government to have any product sold in that state be identified and subject to labeling.
FORGACS: Rob, do you mind if I answer that really quickly?
LECLERC: No, please.
FORGACS: Sure. So it's important to state that what we're developing in the food category is not genetically modified, not that there's anything wrong with that, but that's not the technology that we employ. That said, if there's a move to label what we do more clearly in the future when it does become a marketable product, I would be the first person for it, because we believe in full transparency and we believe in the full education of the consumer.
And in fact, our—you know, our facility, our kind of head office is located in Brooklyn, and that's where we do our research. And the reason why we're in Brooklyn is because we eventually want to become like an urban brewery where people can actually come and see how the sausage gets made, see how these products get made, so it's fully, fully transparent, which is not currently possible with traditional livestock industry. I mean, slaughterhouses don't invite consumers to come see what they do there.
So we're fully behind transparency. We want to educate the consumer. We believe that the more consumers actually understand how we do what we do, the more favorable our approach will be seen in contrast to the—you know, the status quo. So more transparency, more labeling is better, as far as I'm concerned.
LECLERC: And as far as IPOs and due diligence, we're—we've already spoken with a number of public companies that are—want to do a PIPE—private investment in public entity—haven't got there yet. But on the vetting side, that is important.
What we don't do is try to pick the winners. But do we like to go through a filtering process so that, at the end of that filtering process, ideally we have something in the order of the top sort of, you know, 3 percent to 10 percent of investable opportunities in the space.
It doesn't mean that every opportunity is right for every investor. And I think that's probably the case with most investments, where lots of investors will turn an investment down, but you're really looking for the right match of investors.
And so if we can have that top—you know, top 3 percent or top 5 percent of the market, and then let the other participants—the investors—do their job—and that's actually probably the harder part, is that last mile of doing that deep, deep dive, it probably takes significantly longer.
But we've brought them to a point where we've cleared out a lot of noise. We've provided a very consistent platform by which they can identify the investment opportunities, qualify those opportunities, and so it—and without them having to spend a lot of resources on sourcing. And so it lets them focus on the jobs that they're best at, rather than spending additional resources. So...
ADELMAN: Good. Over on this side, in the far back?
QUESTION: Irving Williamson, the U.S. International Trade Commission. All of you have talked about regulatory barriers. So I was wondering—excuse me—is it too early or time to be talking about international organizations, trying to work on this space and trying to develop some common standards or acceptable standards?
I think in particular the challenges of many developing country governments that they're not up to date on this stuff, the problems that you can have.
ADELMAN: Who would like—yeah, do you want to take that, Mark?
ROSEGRANT: I can start. Yeah, I think that's actually one of the really big ways forward, that if it can be done, is to get—so there would be much more harmonization or regulations across countries. It also, though, turns out to be one of the most—toughest things, because, you know, if you're—you know, you can have a variety—not even a GMO variety, but it's been tested and proven in the U.S., in Western Africa and Southern Africa, but then Kenya will also want to do all their own testing and even do due diligence on whether or not it increases farmers' yields, which of course is up to the farmers to make that decision.
So there's just all these excessive tests and lack of harmonization. And I don't see enough international effort to do that. So international organizations to work on that would be very important. And it's absolutely essential on the GM front, as well, if that's ever going to move in places like Africa. You have to be able to have these things, so, say, the regulation dossier from two or three other countries would be enough to allow at least commercial trials in other countries. It's absolutely one of the essential things that has to be done.
ADELMAN: Good. Right over here. Sir, yeah.
QUESTION: OK. Yes, Jerry Hagstrom from the Hagstrom Report and National Journal. I'd be curious about Mark's reaction to what these other two guys are proposing and whether he thinks it's practical in terms of the world that he serves of these small farmers, basically. And also, how do you differentiate between development—developments that are—can affect developed countries as opposed to developing? We're talking about things that the far spectrums here of new developments in agriculture.
ROSEGRANT: Yeah, let me—so I don't—for example, the kinds of products that you're talking about here, I think the key in terms of development perspectives is if it can get—replace enough of the demand, for example, for meat products, even in developed countries, that that would put less pressure on the overall system—agriculture system to supply that from, you know, more traditional sources.
So that's the—in terms of developmental perspective, it would be the successes in these advanced markets. And the question is whether it could expand enough to replace a significant amount of the amount. And if it does, that would be great, and...
FORGACS: Or just to prevent the doubling that is to be required in the next thirty years.
ROSEGRANT: Yeah, slow down—slow down the growth...
FORGACS: Yeah, because there's a doubling of animal products that's—you know, that there's demand for in the next thirty years. So the question is how do we satisfy that doubling with our traditional production systems?
ROSEGRANT: Yeah, great. And on the finance side, then—again, these—a lot of the technologies that start out in, say, the United States, do—can end up being adapted for the developing countries. So, again, to the extent that that kind of—e-finance can significantly push forward technology development, even if it's just initially in the U.S. or other developed countries, that also will have knock-on effects to developing country agriculture.
LECLERC: I might just add to that, I think—you know, over the next five or seven years, even people in early emerging markets will have a phone that's as sophisticated as the iPhone that we have in our pockets today, with GPS capabilities. And, I think, Google and Facebook are trying to connect the world.
That's going to place farmers in a really good position to walk around, GPS their farm, maybe get insurance products on them, give the investment community, the data—the actuarial data they'll need and an identity data that they'll need to be able to give farmers efficient loans. And so I think this is—this is all good for the whole stack.
ADELMAN: Yeah, and there is already an existing project in Kenya by the Syngenta Foundation, where the farmers get their crop insurance and the number of the policy comes over, then Meteorological Institution of Kenya sees if there's been a drought, and they automatically get their payment. I mean, I wish our own insurance could work that way.
QUESTION: I'm Mitzi Wertheim with the Naval Postgraduate School. This has been truly fascinating. My question is, what kind of education and training do we need to start giving our students today so they have the skills that you're going to need for what sounds like a very exciting kind of future? But this gets back to what you're dealing with, which is educating the public on this.
LECLERC: So, I mean, a lot of the stuff in agriculture technology are, I think, a precursor or Petri dish problems for general technologies. So you've got drones, satellite, big data, robotics, precision agriculture, and bio ag tech. So, I mean, I see sort of math, engineering. The sciences are really the best education that you can have going forward in this space.
And, in fact, again, focusing on some of the problems in agriculture, because let's say we were really interested in drones right now. And we—you know, one day we want to see drones drop off our packages at our doorsteps. That's going to be a while before that happens, because we are scared that that drone's going to fall out of the sky and hit little Susie in the head.
We're very much less concerned if that drone falls out of the sky and hits Bessie the cow in the head. And so these technologies are going to be developed in areas where they're fundamentally safer, where there's less people, and they're simpler environments. And so I think it's not only do you have the skill sets are, you know, the basic ones in engineering, but I think those engineers and scientists are going to be attracted to the agriculture space, because they're the first glimpses in really deploying these technologies into wider use.
FORGACS: Yeah, so we've been hiring a lot as a company. And for the time being, we're really focusing on technical skills. So it absolutely underscore that we're looking for people who have a broadly—well, you know, biotech or, you know, bio-engineering backgrounds. But what underlies that is science, technology, engineering, and math, but I would add one more—the arts—because we're a company that certainly on the material side we combine design with technology.
So people who know—who appreciate design, but know how to talk to scientists are a rare breed, and we really appreciate them, as well. So I'd say it's not just STEM, but STEAM that's important. And that's also true on the food side. I mean, at the end of the day, it can be amazing technology, but if it doesn't taste good, if it doesn't look good, if it's not just really desirable product, it's not going to be successful.
So at the end of the day, any of these new food innovations are going to succeed or fail based on their desirability. And it's the arts that really know how to create and satisfy desire.
QUESTION: Could this be—what Sputnik did to us in getting engineering back on the—on the education...
FORGACS: I hope so.
ADELMAN: OK. I think we have time for one more question. I'm sorry, but—please come afterwards. I'm going to call on the woman in the far back, because she's had her arm up the longest.
QUESTION: Andras, I'd love to know your personal motivation for having moved in the direction you went in. Is it more environmental sustainability, animal rights, market opportunity, some combination of the three? Do you work with organizations like the Humane Society or other organizations that promote the ethical treatment of animals? And how have vegetarians reacted to your endeavor?
FORGACS: Yeah, really good question. So I am primarily—there's many motivations of why to do this. You listed several—the environment, animal welfare, creative desire to create something better. I'm primarily motivated by the environmental considerations, but I also care a lot about the animal welfare considerations, as well.
And what motivated me to start this company was that I understood from a technology standpoint how that could be possible. And just anecdotally, you know, right after I founded Organovo, I was still on the board, I went into a stint as a venture investor. We made investments in the U.S. and in Asia. And at one point, I had to go to China to kind of figure out what was happening there with some of our investments.
And I was living there for about a year. And I saw that meat consumption was going up dramatically. Meat prices were going up dramatically. And the environmental kind of livability of cities like Shanghai and Beijing were deteriorating.
So I thought to myself, well, gosh, if we extrapolate these trends over decades, it's just going to be disastrous. If everybody in China eats the way we do in the United States and Europe, it's just unsustainable. And so that's what made me kind of put two and two together and figure out that the technologies we're developing at Organovo, you know, that kind of technology could be applied to fundamentally new way of growing products.
By the way, I should say, we've got two steak chips here, so if anybody does want to come up afterwards and split a chip with me, you're more than welcome.
ADELMAN: Wonderful. Well, listen, thank you. First, I want to thank our audience for really wonderful questions. So, please, those of you that still have them, come up, and I bet our panelists would be willing to answer. And thank you, panelists, for a really fascinating session.
And I would like to end on bringing the arts and what Shakespeare would have said about this session today. And I think he would have said, "There has been much throwing about of brain." So we'll end on that, on a very good note. Thank you.