March 11, 2011 | Robert Puro

In 2011, according to the USDA, net farm income will rise by nearly 20%.  Gross farm income will reach $400 billion, and for the first time in history total farm production expenses in the US will exceed $300 billion.

These numbers stand as a testament to the enormity of the agriculture market in the US.

However, numerous short-term and long-term challenges and problem areas exist that, whether they are addressed or not, will invariably impact the growth or contraction of the agriculture market both in the US and Worldwide.

And everyone knows what problem areas are code for: OPPORTUNITY.

OPPORTUNITY to develop sustainable products that have the potential to yield enormous profit, preserve farmland and water resources for ongoing and future use, and protect the environment.

OPPORTUNITY to address the following nagging problems that will only grow more acute:

• Potentially irreversible topsoil losses
• Rapidly depleting phosphorus reserves
• Growing enough food for a world population that will increase by 2.6 billion people in the next 40 years
• Inefficient on-farm nitrogen usage that contaminates water systems and the atmosphere
• Greenhouse gas emissions from fertilizer, methane, and carbon dioxide
• Freshwater sources that are stretched way too far
• Food waste resulting supply chain lapses
• And many, many more

To take advantage of these opportunities and solve these problems will require a combination of private and public investment dollars as well as the continued growth of a sustainable agriculture startup ecosystem that today is in its infancy.

Overview of the sustainable agriculture marketplace

The number of U.S. venture investments in sustainable agriculture startups increased to 11 in 2009 from five in 2000 according to data from research firm VentureSource.[1] Equity investment flowing into the sector rose from $40 million in 2000 to a peak of around $120 million in 2007.  Paul Matteucci, a venture capitalist with U.S. Venture Partners in Menlo Park, CA recently remarked: “Sustainable agriculture is a space that looks as big or bigger than clean tech.”[2] For reference, clean tech venture investment totaled $5.6 billion in 2009.[3]

Current impediments holding up the surge in investment into sustainable agriculture startups include a dearth of domain expertise among venture capitalists and equity investors and the absence of a major equity exit to rally around.

To spur investment and reach the point where startup companies focused on sustainable agriculture are more readily viewed as viable opportunities by VCs, agricultural investment advisors like Janine Yorio of NewSeed Advisors are emerging to build connections between sustainable agriculture entrepreneurs and investors.  To further stimulate the ecosystem for sustainable agriculture investment, Yorio has set up the Agriculture 2.0TM conference series, which brings together investors, entrepreneurs, and business executives to learn.

According to a press release for next month’s installment of the Agriculture 2.0 conference, participants will include: JR Simplot Company, Dow Chemical Company, Paine + Partners, Kleiner Perkins, US Venture Partners, Venrock, Mindful Investors, Physic Ventures, Khosla Ventures, John Deere, Tropicana, International Finance Corporation, Ceres Partners, Capital Innovations, The David and Lucile Packard Foundation, The Federal Reserve Bank of Chicago, American Capital, Passport Capital, TIAA-CREF, Chess Ag Full Harvest Partners, Adveq, and more.

That’s a pretty impressive list of participants that speaks volumes about the growing excitement and prospects for the sustainable agriculture marketplace.