Interesting Article About Investing in Agricultural Innovation

I have a rather large position in Clean Seed Capital, a Canadian start-up which has developed a very effective seeder: farmer-friendly and with the capacity to deliver four separate products at variable rates depending on field and seed requirements.  The company has no debt.  It has refined its technology and progressed to the point of having production facilities, distributors in the U.S. and Canada and a rather impressive set of test results.  Its management is honest, responsive and has "muddy boots" and strong connections to the community of working farmers.

Originally, I thought that the exit strategy would consist of being bought out by a larger enterprise with well established product lines and marketing/distribution networks.  My thinking is gradually changing.  In my view, this company has the potential to expand and prosper through strategic alliances with distributors such as Rocky Mountain Equipment.  You can check the company's progress by visiting its web site.

The following article is only one of many which has changed my thinking about CSE's future.

There’s a real risk that the biggest agricultural companies in the world right now might not be the same in 10 years’ time. That doesn’t have to be the case, but if you look at the data, it’s not hard to imagine it happening.

While a number of forward-thinking agricultural corporates are investing big money in technology, there’s a significant majority who are not. They are waiting on the sidelines, perhaps understandably thinking that it makes sense to follow a “wait-and-see” strategy.

“Wait-and-see” almost never works in technology. The big agricultural corporates need to start taking genuine risks in agtech, which means making acquisitions that move the needle. Buying up smaller players alone won’t cut it. Neither will in-house innovation. Only bold moves and visionary tech acquisitions will help the big agricultural firms avoid disruption, and in some cases even become the disrupters themselves.
Agricultural Giants Risk Being Left Behind in Agtech Boom

Investing in this beast is not for the those who are impatient or faint of heart:

• Today's environment of low crop prices and high input costs have had a major impact on farm finances.  Equipment sales have suffered as a result. The climate for the introduction of new products is not benevolent.   
• Farmers are very much from the "show me" crowd.  It will take time for the benefits of CSE's technology to be demonstrated and appreciated in the broader market place.  However, word-of-mouth is an especially potent tool and to date, the equipment has received a positive reception at farm shows and demonstrations have shown its ability to seed a variety of crop types in a variety of field settings.  
• There will always be competition; however, Clean Seed has been diligent about protecting its intellectual property. 

I made this investment with an initial 5 year time horizon.  My reasons:

• competent, experienced, responsive management with "muddy boots"
• the company's record of steady progress in development, manufacturing, and distribution
• zero debt and apparently, no difficulty in securing financing (with substantial funds from within the farming community)
• the need for cost effective machinery designed for precision agriculture
• the thought that the "farm cycle" will rebound over time (as it always has) and that will present a more attractive market for the company's product and services