War and COVID-19 are boosting Canadian agriculture tech – but policy needs fixing

Sean O’Connor and Kyle Scott are the managing directors of Conexus Venture Capital and Emmertech.

Despite the bleak year in the capital markets, the Canadian agricultural innovation sector, or “agtech,” is on pace for a record year with $121-million of venture capital raised.

The largest source of that recent momentum has come from macroeconomic trends: how, during the pandemic, our entire food supply chain was turned on its head, and the uncertainty as to whether the global market could access Ukrainian grain amid a war with Russia.

As those challenges subside, Canada is trying to expand its role as a global food supplier. And the innovation required to do so thrives through periods of uncertainty.

Domestically, despite much governmental support for agtech, Canada is facing disruption, particularly with respect to how government policy is intervening with farmers’ autonomy. The recent announcement on limiting nitrogen usage has created a whole new source of disruption for agtech.

The Liberal government has been searching for ways to get farmers to reduce their use of nitrogen fertilizer – which produces greenhouse gas – by 30 per cent. The proposed nitrogen-reduction policy shows how Canadian farmers have largely lost their voice regarding how food actually gets to our tables. As Canada looks to achieve its carbon-emissions targets, it’s important that our farmers are a key part of any conversation that will impact their way of life.

Reducing fertilizer usage without agtech innovation is simply deciding Canada will grow less food, which means (1) higher grocery prices for Canadians, and (2) more people in less-developed countries suffering from food insecurity.

A Canadian farmer doesn’t wake up looking to use as much fertilizer as possible; nitrogen is one of their biggest input costs and overusing it is as detrimental to a crop and soil as underusing it. These farmers are often generational stewards of their land, many of whom helped pioneer environmentally conscious practices such as no-till farming.

Fortunately, cooler heads prevailed in recent discussions with policy makers about mandating a reduction of nitrogen in Canadian farming. The result avoided the catastrophe of neutering our farmers’ freedom to run their businesses, but found a middle ground that will struggle to make any meaningful impact: there will be incentives provided to farmers who can reduce their fertilizer usage, but no mandated reductions.

That remains a point of friction between our farmers and policy makers, and fixing it is where we see the biggest opportunity to further fuel Canadian agtech.

The solution for reducing the environmental impact of farming in Canada will only come through direct collaboration with farmers, with a heavy focus on incentivizing their adoption of agtech. The focus of policy should be to make it easier and cheaper for farmers to adopt or invest in new cleantech technologies.

We need to reduce the risk a farmer faces when trying a new innovation that will reduce the amount of nitrogen, fuel, glyphosate, or any other inputs that can cause unwanted environmental effects when not used efficiently. That will help support our most innovative farmers as we’ve supported innovators in other cleantech industries for decades now.

Until the recent boom, Canadian agtech investing has lagged behind that of other countries by a significant margin. Although the U.S. has nearly nine time the population of Canada, in 2021, $6.59-billion was invested in US-based agtech companies while only $177-million was invested in Canadian companies.

As the economy continues to be affected by growing macro uncertainty, there is significant momentum in Canadian agtech and we would be well served to capitalize on the upside through systemic collaboration and thoughtful incentivization strategies developed with the federal government that spark further growth in a critical and winning sector.