Daniel Kieser: Investors need to seriously chew over synthetic food

An animal-free beef burger tastes like real beef. Photo / Supplied

Opinion

In the past few decades, we've seen social media disrupt the news industry, electric technology disrupt the automotive industry and online market places disrupt the retail industry.

So far, the agriculture sector has remained unscathed. Fertiliser, genetic modification, irrigation and robotic engineering, to name just a few, have helped turn productive land into even more productive land - enhancing primary production, rather than disrupting it.

This year a Top Gear clip from 2011 again featured on social media, showing a Nasa "cloud machine" - technology that can create a rain cloud from nothing more than energy and air. Surprisingly, most comments questioned its validity.

I, for one, think the point was lost - being not to argue whether the machine worked, but rather to imagine the possibilities.

One of the biggest risks faced by any crop farmer, and therefore any investor with interests in the sector, is the availability of water.

Australian almond producer Select Harvests' share price doubled when a California drought pushed up the global price of almonds, but when the drought finally broke, its price fell more than 70 per cent. PGG Wrightson is a domestic example, its share price fell 50 per cent in the lead up to the drought of 2013. How different it might have been if rain-producing clouds were possible.

Last month's capital raising exercise by Impossible Foods was another event that seemed to escape headlines and social media columns. They've already raised more than US$700 million ($1.01 billion) to create animal-free beef that apparently can't be distinguished from real beef in a blind taste test.

Its "Impossible Burger" is vegetarian, with no hormones, antibiotics, cholesterol or artificial flavours. It is also said to use 75 per cent less water, generate 90 per cent fewer greenhouse gases and require 95 per cent less land than usual beef-based burgers.

Their meat alternative is already on US restaurant menus and making its way to Asia. How might this change the long-term outlook for meat producers such as Silver Fern Farms?

Fast food chain KFC also recently announced its intention to launch a plant-based chicken product in the UK, as part of its mission to reduce calories per serve by 20 percent in the coming years. This will make KFC the first large fast-food chain to offer a vegetarian fried chicken meal – and if they're interested in plant-based chicken now, who's to say they won't be interested in cultured chicken meat when that becomes commercialised?

The production of synthetic produce is happening at a rapid rate and should be heeded by investors. Bolt Thread is using yeast to produce animal-free silk, Modern Meadow is producing animal-free leather, Finless Foods is producing artificial fish, Supermeat is producing artificial chicken and Perfect Day is close to producing cow-free milk.

If investors value companies on the assumption they will continue in perpetuity - referred to as the "terminal value", this factor usually accounts for half of a company's share price - investors would do well to consider the true longevity of their agriculture investments.

As Winston Churchill said: "We shall escape the absurdity of growing a whole chicken in order to eat the breast or wing, by growing these parts separately under a suitable medium".

How right he was.

• Daniel Kieser is managing director at Shareclarity.