What does a water win look like?

Prime Future 106: the newsletter for innovators in livestock, meat, and dairy

"The crux of the issue for water is getting the right amount of water to the right place at the right time, at a reasonable price. Ish.

So let's say there are two sides of the water issue:

1. Ensure water supply

2. Reduce water demand

My hypothesis is that the first is more of a collaboration problem; the second is more of a technology problem."

Last week we started a conversation on water as the ultimate unsolved problem in ag.

Today we turn to the intersection of technology & innovation and the reduction of water demand in feed, livestock, and meat/milk production.

Let's start with the fact that WaterTech is still a relatively small category.

You hear all the time about venture-backed startups in alternative energy working to solve the problem of reduced dependence on petroleum, or reducing carbon & GHG emissions.

But rarely do you see press releases about companies raising venture capital to go solve problems related to water, even in ag.

Why is there such a gap? Is the innovation not there? Are the founders not there? Is the capital not there? Is the market too small?

Water doesn't even have its own category in the comprehensive annual report on AgTech published by AgFunder, that’s how small the category is relative to other innovation categories within AgTech.

Let’s anchor back to the Meatingplace summary of Tyson’s water usage:

"The meat industry’s largest corn buyer, Tyson, says irrigated corn feed accounts for 91% of its supply chain water consumption, as opposed to 7% for raising animals and 2% for plant operations (31B gallons in FY 2019)."

Let's reasonably assume these proportions are not just true of Tyson, but are representative of the entire meat value chain. Let’s break it down accordingly.

The bulk of water demand to produce meat is in growing feed.

So it makes sense that if you look within agriculture, most innovation is in irrigation technology specifically with the march towards precision irrigation via sensors to collect data and analytics to turn that data into better insights and ultimately better decisions. The same precision progression every industry is making.

Though I couldn’t find any good stats on water tech investment for ag specific solutions, consider this:

“Water experts analyze 101 funding deals (from 2009-2017) that account for over US$704 million invested by venture and private equity growth capital investors in water start-ups.”

But $704 million over a decade is laughable compared to the $5 billion that went into alternative meat startups in 2019 alone!

Technology is, of course, not the answer to everything. There are massive elements of political and societal will at play here, of bringing people and groups with divergent objectives together to accomplish shared objectives. But in an environment where people aren't great at coming together to solve problems, more of the burden will shift to technology solutions.

And yet, here's how Agthentic & Upstream Ag Insights authors framed the adoption challenge in their excellent report on adoption of precision irrigation technology:

"Adoption remains low because there has been too much attention given to the technology, and not enough given to the psychology of farmers. It is not the technology that needs to be better. Instead, far more attention must be given to farmer psychology, and the go-to-market strategies, business models, and water policies that can drive the change and impact we need to see."

So you have relatively low investments in irrigation tech and relatively low adoption of that technology. The bright spot is the expectation for the precision irrigation tech market to grow at ~12% CAGR.

But the technology that directly reduces demand for water isn't the only path to reducing water demand.

My hypothesis is that water efficiency gains in raising livestock are largely made indirectly, as a byproduct of live performance gains.

This popped up on LinkedIn recently:

And California dairies are rapidly adopting systematic & process changes to reduce their need for increasingly high-cost water:

The amount of water used to produce each gallon of California milk has decreased more than 88% over the past 50-plus years, primarily due to improved feed crop production, use of byproducts as feed, and water use efficiency.

Much of the water use efficiency bucket is in reusing water from clean water to cool & refrigerate milk, then to wash cows, then to wash barn floors, then to irrigate (with the added benefit of some 💩). This approach is also common in hog operations.

If the water efficiency equation is total pounds of output (meat or milk) divided by total water usage then we can either decrease the denominator or increase the numerator to improve water efficiency.

Let’s say that decreasing the amount of total water used is the direct route while increasing the total output is the indirect route.

My hypothesis is that much of the improvements in water efficiency have been made indirectly through general improvements in livestock performance and feed efficiency as a result of the many levers producers rely on from genetics to health & nutrition to improvements in production systems & practices that lead to increased pounds of meat and milk produced per animal or per pound of feed.

If that’s true, it raises the question, going forward will indirect gains in water efficiency be enough?

Considering the efficiency gains made in recent decades, can enough incremental juice be squeezed from future efficiency gains to make a meaningful dent in the water required to raise livestock?

(those are not rhetorical questions, I’m genuinely asking)

And then there's processing.

This Meatingplace article is a fascinating outline of water usage in plants from live plants to the kill floor to carcass cooling and beyond. It also describes how much of the low-hanging fruit in packing plants is in improving processes within the plant, updating equipment, and training employees.

Can we boil this down to putting the right systems in place and aligning incentives for individuals within the system?

(Though I recognize that’s a vast oversimplification and managers who’ve made the hard decisions for multi-million CapEx projects to reduce water usage would be the first to say so.)

But how do you get credit for a water win, other than a random ag fact in a social media post?

The challenge with water is that it's really hard to contextualize reduced water demand in a way that turns it into a commercial win for row crop farmers, livestock producers, or packers.

So the business impact of water-reducing initiatives & innovations has to be felt in reduced production costs.

For example, increasing soil organic matter by 1% can increase soil's water holding capacity by 3.7%. If 58% of soil organic matter is carbon then doesn’t this sound like a multi-purpose win for carbon sequestration, water efficiency, and reduced cost to irrigate?

Saving water for saving water's sake isn't enough of a carrot, and no that doesn't make anyone a boogeyman - it's the real world.

If you want behavior change, there has to be a compelling reason for behavior change and that typically comes in the form of a carrot, a stick, or some combo.

And IMO, the most effective carrots and sticks are found in the P&L of the business.

My expectation is that agriculture will see more water innovation in the next decade, because we have to.

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Shout out to those of you who recommended water resources! I’m excited to dig into some of the books you suggested.

Also 12/10 recommend listening to this Future of Agriculture podcast episode about the economics of water (straight forward overview of a complex topic), and this Future of Agriculture episode with water innovator Matthew Pryor.

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