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The next time you spot a two-for-one deal at the supermarket, spare a thought for how the store knew how many pallets of chicken wings or spaghetti sauce to order and how the food processor knew how many of each to make.
Matching that supply and demand was once guesswork, but increasingly, companies are using sophisticated software, artificial intelligence and cloud-based data analytics to put the two together in a more efficient way.
For investors, that’s one aspect of agriculture technology (agtech), which is creating opportunities as climate change and drought create urgency for better farm-to-table efficiency.
One company investors can turn to for a low low-risk way to play this emerging sector comes from a place they might not normally look. Telus Corp. T-T, the telecommunications giant better known for its internet and mobile phone services, is now applying its data management and analytics skills to this area as well.
“One-third of the world’s food is wasted because it’s in the wrong place at the wrong time,” says John Raines, president of Telus Agriculture and Consumer Goods, a $400-million-a-year business, whose revenue grew 37 per cent year-over-year.
“[We want] to improve the sustainability, availability, quality and ultimately, the affordability of food and consumer goods supply,” he adds.
Mr. Raines grew up in rural Missouri and is still involved in a family farm that grows corn and soybeans. He says Telus Agriculture and Consumer Goods is the third-largest provider of tools for consumer trade promotions in the world helping match supply and demand for those aforementioned buy-one-get-one-free deals. Its customers include nine of the 10 largest global agricultural companies and 70 of the top 100 consumer goods companies. Those names include Unilever PLC, Nestle SA, Tyson Foods Inc., Johnson & Johnson and Procter & Gamble Co.
The unit has made 11 acquisitions since 2019 in the software as a service area, employs 1,600 people, and does business in 50 countries. It was renamed in July to include consumer goods.
Along with its food processing and consumer packaging clients, Telus Agriculture and Consumer Goods is also aiming its applications at farmers.
“A farmer is trying to determine from a soil sample what type of seed to plant and how much to plant,” Mr. Raines says. “And then how to manage weeds and disease. We’re not trying to produce the seed. We’re not trying to sell crop protection products. We’re using analytics to help them do what they do much better, much more efficiently, and much more sustainably.”
The Telus software connects farmers and seed retailers via an app. It displays data on how much seed is needed for a certain acreage and how best to control weeds. It incorporates weather patterns, soil composition, seasonal rain, and sunshine. It helps determine application rates for fertilizer and pesticides and when best to irrigate.
If the unit’s growth continues, Telus Agriculture and Consumer Goods could see a spinoff in the latter half of the decade, Mr. Raines says.
If so, the spinoff would follow the path laid out by Telus International Inc. TIXT-T, which became a standalone unit in 2021. Telus International has $2.4-billion in revenue and helps companies such as Fitbit and Uber Technologies Inc. manage online content and customer service.
Telus Health, with $1.6-billion in revenue, is likewise being groomed. Telus Health helps doctors, dentists, and clinics manage bookings and organize records. In June, it paid $2.9-billion for LifeWorks Inc., previously called Morneau Shepell Inc., which provides mental health and employee-wellness services.
For Telus investors, the potential of these spinoffs may be one more reason to own the stock.
ETFs in the space
For those interested in a more targeted agtech approach, there are two exchange-traded funds (ETFs) to consider. Both are recent launches with overlapping holdings and both have sold off from their issue price.
BlackRock Inc.’s iShares Emergent Food and AgTech Multisector ETF IVEG-Q was launched in April. It has US$5.6-million in assets under management (AUM) and holds 39 companies in the technology and sustainable food production and packaging areas.
Global X Management Co. LLC’s Global X Ag Tech and Food Innovation ETF KROP-Q was launched in July 2021. It has US$7-million in AUM and 30 stocks including Canadian names such as Nutrien Ltd. NTR-T and Maple Leaf Foods Inc. MFI-T. Another large holding is Corteva Inc. CTVA-N, the chemical and seed company. The iShares ETF also holds Nutrien and Corteva.
Alec Lucas, a Global X research analyst in New York who oversees the ETF, says as the climate changes, it becomes important to make better use of expensive crop inputs such as seed, water and fertilzers.
“We look at agtech as increasing efficiency and output while decreasing inputs such as water and fertilizer.”
Deere, for example, offers many precision agriculture products and will begin marketing a driverless tractor later this year. The tractor collects data via sensors on such things as soil composition, weed concentrations and weather.
Mr. Lucas says tools that reduce labour needs, automate irrigation and make greenhouses smarter are in demand. Labour shortages are acute as the average age of farmers rises.
“The current environment is pretty powerful for boosting the long-term potential of agricultural technology,” he says.
Adam Mayers is a contributing editor to the Internet Wealth Builder investment newsletter.
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