PABLO RICAUD

Mexico 2022 | AGRICULTURE | VIP INTERVIEW

TBY talks to Pablo Ricaud, President of Rising Farms, about Mexican agriculture, the climate crisis, and applying technology from overseas.

What is your perspective on the state of the agriculture sector in Mexico?

It has a reputation of having issues, mainly because it has become stagnant compared to other countries. We have one of the best climate in the world and a strategic proximity to the largest market in the world, namely North America. There is a lot of work to do to bring sophistication and innovation to the industry and bring it to the level where it deserves to be. Most agricultural operations in Mexico are sporadic, and lack financial planning, market strategies, and know-how, which makes the industry unstable. The challenge is to bring know-how, innovation, and structure. Most of these companies do not operate as corporations that focus on talent, processes, or financial planning, which is what enables a business to reach the next level and cater to the type of customer you want to have in North America, Mexico, and even Asia.

How is Rising Farms creating solutions for the current climate crisis?

We aim to solve the climate crisis that the planet is facing in our own way. 70% of freshwater in the world is already being used in agriculture, which is highly inefficient. This crisis needs to be attacked at its root. Not by making open field production more profitable or better, but by replacing it altogether. The answer, we believe, is to do more with less leveraging controlled environment facilities and technology to do way more with less resources. Numbers just don't add up for the world to be able to sustain itself with how we produce and consume our food today, namely, inefficient and outdated open-field farming. Our high tech indoor farming allows us to increase the yield per square meter by 20-30 times, using just 90% less water per pound. Climate is also becoming less predictable, so an indoor environment helps you to protect your crop from waste and losses. It is calculated that 30% of crops go to waste because of bad quality or climate. You could aim to allocate this lesser quality produce, but the root solution is to not have it in the first place. At Rising Farms' first year we were able to export 98% of our harvested produce.

Where does your technology come from?

We have our own proprietary growing algorithms and operational procedures that give us an edge, but we are also a technology integrator. We look at the best agro tech companies in the world and use their technology. They come from the Netherlands, France, Israel, Mexico, and the US, and we bundle them together at our facilities to ensure the most sustainable and efficient operation we can have. Our focus is on niche quality products for those looking for more sustainable, healthy, and quality alternatives in their diets. We also have announced a partnership with an artificial intelligence company from the Netherlands which provides data-driven automation for growth decisions. It is an algorithm that harnesses the data to assist in decision-making. We are seeing a major push into plant-based diets, which is also one of the things that humanity needs to do to unburden the climate crisis, because a plant-based diet has a much smaller carbon footprint than a meat-based counterpart. With our processes we cater to both.

Can you tell us about how close you are to finishing the first stage of your Rising Park project?

We bought the land in 2Q2021 in Querétaro, because it has one of the best climate deltas there is, and it has great sunlight. It is also a state that has continuity of good governance. The Bajio corridor and hub is one of the most important aerospace and industrial clusters in the world for its strategic position to the North American markets, but also to key ports that go to Asia and South America. It is also a talent-focused zone where you can find great talent. We are developing the first stage with 150,000sqm of high-tech indoor space and packing area. That facility is to be operational in 2Q2022. This expansion is a strategic step not just to triple our installed capacity buy also to solidify the company's balance sheet and base for much bigger things in the future. Moreover, we are working closely with institutional real estate investors for built-to-suit projects that will allow us scale and to grow much faster in a leaner fashion. When you look at other industries, like the retail and hospitality industries, a real estate investor takes care of the Real Estate CAPEX, and the operator leases it, because the operator's business is not Real Estate. There is no reason why the High-tech indoor farming industry can't work this way as well, and the fact that it hasn't to this day, has been extremely burdensome to the industry because of the resources needed for the CAPEX investments for growth. We need 10% of resources to operate one hectare, compared to what we would need to build a facility. So, we would rather operate 10 times the area, rather than own the facility, at least until our cost of capital reaches a point where it would start to make sense for us to build them ourselves, a thing we will do in the future via our own Real Estate investment vehicle. Especially after the COVID pandemic, where retail and office space Real Estate Assets have been set back as a great investment, we think Rising Farms can offer the institutional investors with large concentrations of these assets a way of diversifying their portfolios within a Real Estate in a resilient industry and with the future of food. We need just 5% the land with our method of production compared to traditional farming, to produce the same, and we also do not work with soil, which reduces contamination and degradation.

What are your main goals and objectives for the rest of the year?

We are looking to finalize our Series A funding round, for which we have commitments in terms of equity and debt. We are raising 10 million dollars and will probably raise more due to the interest we have seen, especially with strategic partners who understand our operations and want to help us build the many things we want to build within the several huge areas of opportunity in the Agro and Food space. With this, we are also making great strides for increasing yields, efficiency, and our carbon footprint even further, Rising Park will be pivotal for the development of our own specialty brands, and the exploration of new markets.

What do you consider are your biggest challenges for taking the company to the next level?

The biggest is the lack of understanding among most investors of the actual workings of the industry and the incentives that drive it. A lot of them want to paint it with the software or fintech brush, a thing that just can't be done. One can argue that we might have less exponential growth, and that is true, but we were also profitable right off the bat (the ones doing things right and for the right reasons at least), and food is something very hard to replace or to out-date. We are bound to the realm of physics, where you need an actual square meter of land, a plant, water, or physical produce. Weather is extremely important which makes every part of the world different, and logistics also play a vital role with perishable products. It's impossible to measure them with the same parameters. The final argument is that we need to solve the climate crisis connected with our food supply and to do so we need to invest in it, period. I often get questions on vertical farming. Mostly because it sounds very cool, and because technology for technology's sake is very popular. The sun is one of the key factors for crops, with the vertical farming proposition, you are deliberately covering the sun and adding grow lights to replicate that very sun you neutralized. For a country with vast extensions of land and a lot of sun all year long, this is a value-destroying proposition, plain as that. It costs more, it has a larger carbon footprint, and none of the problems it is aiming to solve are real problems. The carbon footprint argument is reversed. You might not be shipping the produce as far, but the fact of using growing lights and having to burn a lot more fossil fuels for heating counteracts this argument by ten-fold. We need to understand the opportunities and challenges for the industry in Mexico. We cannot use the same technology you would use in Denmark, because we have more sun, and the labor force is cheaper. We need installations that will be good for 20 years, but we also need to care for the bottom line and ensure profitability. In Mexico you do not have to automate your operations as in the US or Europe because we have competent and affordable labor. The reasoning behind these decisions must make sense. We had a great first year, and that forms the basis to bring in investors that will take us to the next level. We are not going to stop until we reach the potential this country has to offer.