California cuts water allocation (STKL)
The California Department of Water Resources announced an adjustment to its initial State Water Project allocation for the 2021 water year. The department now expects to deliver 5% of requested water supplies, down from the initial allocation of 10% announced in December. Last year the initial allocation was 10%, and the final allocation was 20% in May. The allocated water is distributed to 27 million residents and 750,000 acres of farmland. California’s major reservoirs are at 50% capacity, and the Sierra Nevada snowpack is 37% less than normal. The U.S. Bureau of Reclamation said the 5% of water allocation would not be available for delivery south of the Sacramento-San Joaquin Delta until further notice. The Department did not declare a drought; that is something only the Governor can do.
California is an important agricultural producer for the country, especially in fruits and nuts, where it produces 2/3 of the U.S. supply and 40% of organic produce. California’s largest agricultural products are dairy, almonds, and grapes. For AppHarvest, the type of tomatoes it grows is mostly grown in Florida, not California. California represents the vast majority of tomatoes used for processing (sauce, ketchup, etc.). For SunOpta, California supplies 88% of U.S. strawberries, leading to another year of small supplies. California also supplies ~80% of the world’s almonds and 100% of U.S. commercial supply. (Last year’s almond crop was a record, and prices have been historically low, at times lower than the production cost.) SunOpta’s almond milk contracts pass on the cost of the commodity.
Albertsons adds vertically grown produce (APPH)
Albertsons has begun rolling out fresh produce from Bowery Farming to 275 Acme and Safeway stores in the Northeast and Mid-Atlantic. Bowery describes itself as the largest vertical farm company in the U.S. Bowery’s top five SKUs are four types of greens and one herb. Bowery’s farms are located near the cities served. According to Bowery, its farms are over 100x more productive than a comparable square foot of traditional farmland and grow twice as fast. The company is building its largest farm in Bethlehem, PA, to add to the farms it has in Nottingham, MD, and Kearny, NJ. Earlier in March, Albertsons expanded its partnership with Plenty to rollout more indoor-grown produce in Northern California.
AppHarvest has a market capitalization of over $2B. Still, its financial model is unproven, and its production track record is years behind many other vertical growth competitors that are not public. Nearly all of its competitors focus on growing closer to the end markets, growing produce that requires less energy, and price their goods at large premiums at the grocer. We contend that there are good reasons for all three differences that the company has not effectively addressed.
Eat Just fundraising round (BYND)
Eat Just raised $200M in a new fundraising round. Since the company’s launch, it has raised more than $650M. The previous round valued the company at $1.2B. Eat Just makes eggless eggs and mayonnaise and is the first government (Singapore) approved lab-grown chicken vendor. Its JUST Egg product uses mung bean protein to ensure that the vegan egg is free of cholesterol while containing protein comparable to a conventional chicken egg. The company’s products are sold in 20,000 retail outlets and 1,000 foodservice locations. The company's folded egg product was added to Starbucks and Peet's this year. Eat Just said it has sold the equivalent of 100 million eggs so far. Three weeks ago, its cultured chicken was approved and started selling at a restaurant in Singapore. The company says its cultured chicken is on the path to price competitiveness with conventional chicken by 2030. Last year it was reported that the company would consider going public once it turns an operating profit.
Eat Just is hardly the only cultivated meat startup. Aleph Farms, Memphis Meats, Future Meat Technologies, Meat-Tech 3D, Finless Foods are also trying to create muscle cuts of meat in the lab. According to The Good Food Institute, last year, $3.1B was invested in the alternative protein sector. Meatable raised $47M this week in a Series A financing round, bringing the total raised to $60M. Meatable showcased cultivated pork last year and is currently working on cell-based beef.
