Key Takeaways
- The One Big Beautiful Bill Act (OBBBA) primarily benefits large agricultural operations, potentially hindering agtech start-ups and smaller farms.
- Increased subsidies might reduce pressure on traditional farms to adopt new technologies, limiting the market for agtech solutions.
- VC funding for agtech has declined significantly, with early-stage investments shrinking as investors focus on late-stage opportunities amidst market uncertainty.
Impact of the OBBBA on Agriculture
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, is expected to favor larger agricultural operations while creating challenges for smaller growers and agtech startups. Alex Frederick, a senior research analyst at PitchBook, highlighted that the legislation delivers substantial subsidies to traditional commodity producers, which risks stifling innovation in the sector. The focus on larger farms may limit the resources available for small and medium-sized farms to invest in technology, ultimately constraining the addressable market for agtech solutions.
Frederick noted that the economic pressure traditionally driving technology adoption might diminish due to increased subsidies. Despite these drawbacks, the OBBBA includes provisions that could stimulate interest in agtech, such as the restoration of a research and development tax credit and an increase in tax deductions for equipment purchases under Section 179. However, the overarching trend shows a steady decline in the number of farms in the U.S., raising concerns that these provisions won’t effectively level the playing field.
The legislation also introduces new subsidies aimed at the top 0.3% of farms, enhancing income stability for major crop producers through higher Price Loss Coverage (PLC) reference prices. Furthermore, it boosts premium support for crop insurance aimed at beginning farmers, expanding eligibility for what constitutes a beginning farmer, and introducing a pilot insurance program for poultry producers.
Challenges for Small Farmers
Simultaneously, small and medium-sized farmers are grappling with a survival crisis, with a significant number going out of business. The USDA Census of Agriculture reported a loss of 141,733 farms from 2017 to 2022, with small farms generating under $50,000 in revenue experiencing the steepest declines. In contrast, larger farms, those earning $5 million or more, have seen growth during the same period.
The agriculture sector faces additional uncertainty amid shifting tariffs and an unpredictable farm bill under the Trump administration. Frederick cautioned that the current economic landscape poses unique challenges for companies operating internationally and emphasizes the need for startup founders to prepare for adverse scenarios.
Venture Capital Funding Trends
In the realm of venture capital, global agtech funding has dropped to $3.4 billion in the first half of 2025, marking a 55.4% decline from the sector’s peak in early 2020. Preliminary data shows a decrease in deal counts, indicating a shift in investor focus towards late-stage ventures as they seek to mitigate risks in a volatile environment. Investors now appear to favor maturing firms, with early-stage funding significantly reducing compared to five years ago.
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