How and why Temasek became a major agri-food investor

Temasek chief executive officer Dilhan Pillay Sandrasegara runs a $403 billion investment company. But every quarter, he spends up to two hours chatting with a man in Indonesia about fish.

Those lengthy calls with Bandung-based eFishery, a start-up so small it accounts for only 0.01 per cent of Temasek's portfolio, are emblematic of its quiet zeal for the business of food.

The precarious state of the world's food supply, highlighted by sizzling heatwaves that are wilting crops in Europe, China and the United States, has found an unlikely crusader in Singapore, a small island with hardly any agriculture at all.

Under Mr Pillay and head of agri-food Anuj Maheshwari, Temasek has doubled down on an agriculture strategy involving ambitious investments - including efforts that take control of some businesses - to try to reap profits from solving some of the biggest problems in food production.

Since 2015, it has quietly grown its life sciences and agriculture holdings from about US$5.7 billion (S$7.9 billion) to US$26.7 billion as at March this year.

"When we started looking at this, most of our peers were not focused on this industry because it tends to have government influence, it's volatile and it involves land, which can be capital intensive," Mr Maheshwari said in an interview.

But if we do not create a system that is more efficient and resilient to climate change, the food security of the planet is at risk, he added.

Singapore produces only about 10 per cent of its food, and while it is trying to lift that to 30 per cent by investing in technologies such as offshore fish farms and vertical farming, the only way to guarantee long-term supply in the face of climate change and disruptions such as the war in Ukraine is to build complex and redundant supply chains.

When Malaysia - supplier of a third of Singapore's chicken - banned most exports last month to keep domestic prices down, Singapore added suppliers of frozen chicken from Indonesia to supplement imports from Brazil, Thailand and Australia to soften the blow.

"Who knew the Ukraine war would happen and we would not have any chicken?" Mr Maheshwari said. "The reality is that it's not just a long-term thing but also a short-term thing."

Temasek started systematically backing agriculture ventures in 2015, putting it well ahead of many state-owned investors, according to Global SWF managing director Diego Lopez.

Venture capital firm AgFunder's 2022 AgriFoodTech Investment Report named Temasek as the world's fifth-most active venture capital fund manager in the sector.

Temasek's strategy has been to blend financial clout with extensive market and climate analysis and to provide entrepreneurs with one of Asia's most potent networking rolodexes.

When US-based Impossible Foods was trying to expand abroad in 2019, for example, Temasek served up the food firm's plant-based burgers at its plush corporate box at the city's Formula One street race. As Ferrari and Red Bull racecars shot past, Impossible's first employee Nick Halla and his team faced a rapid-fire night of networking with up to a dozen Temasek executives introducing A-list contacts from across the region.

By 2017, Temasek was leading the start-up's Series E funding round.

At other times, Temasek's sheer financial heft has come to the rescue.

When Singapore-based Olam Group was attacked by short-seller Carson Block in 2012, its shares slumped 20 per cent. Temasek and other investors stepped in, underwriting and purchasing hundreds of millions of dollars in bonds and warrants. And when other activist investors started separate attacks, it spent billions to buy control of the business.

Today, Olam is one of the world's largest traders of food staples, shipping more than 45 million tonnes of coffee, palm oil, rice and other food staples each year.

Temasek started life managing government assets like Singapore Airlines. But it has tended to avoid acquiring companies outright and for years Olam was an exception.

Under Mr Pillay, though, the strategy is being used more often. One example is the 2020 purchase of an 85 per cent stake in Rivulis, a US-Israeli micro-irrigation vendor.

Temasek's analysis of long-term climate change identified water scarcity as a key issue. Crop irrigation accounts for 72 per cent of all freshwater withdrawals and water demand is increasing at more than twice the rate of population growth.

Rivulis sells drip line systems that run along the ground - a more efficient but also more costly strategy than spraying crops with water. Temasek, halfway round the globe, may not have seemed the obvious choice as a buyer, but Rivulis CEO Richard Klapholz had spent decades working in Asia and knew the firm well.

This year, Temasek raised its stake to nearly 100 per cent. Last month, Rivulis merged with India's Jain Irrigation Systems' international operation, creating a combined business worth an estimated US$1 billion.

"Rivulis is a good example of what the company is doing differently under Dilhan," said Mr Maheshwari, adding that Temasek had been a long-term investor in Jain.

The merger creates a business that "is really making a difference in how water is used by agriculture", he added.

Temasek's deals in agriculture have not all worked so well. In 2018, Temasek spent €3 billion (S$4.2 billion) helping Bayer finance its takeover of Monsanto.

But the acquisition went sour after claims that Monsanto's Roundup weedkiller causes cancer led to billions of dollars in compensation claims.

The setback did not dampen Temasek's appetite for agricultural start-ups that had the potential to change an industry.

Take eFishery, which aims to revolutionise the centuries-old business of aquaculture.

For a monthly fee, it provides fish farmers in Indonesia with a dispenser that scatters pellets based on data from thousands of users. Customers buy feed and sell stock via a smartphone app that offers higher prices than most distributors. eFishery sells the fish on in bulk to larger buyers.

The model is profitable and expanding - eFishery's US$90 million Series C funding round in January valued it at more than US$400 million. If all goes well, the fish-feeding firm could become a unicorn by next year.

One of several co-lead investors in the latest round, Temasek is helping the company expand, including suggesting potential executives and vital partners in India.

Mr Maheshwari says Temasek is not trying to take control of food supply, nor directly bolster Singapore's food security.

"It just happens to be that we have taken stakes in positions which are pretty important for the food system," he said.

As climate change disrupts weather patterns and agriculture around the world, "we need more and more solutions thrown at the problem", Mr Maheshwari said.

"We're just seeing the trailer of what can happen."

BLOOMBERG