Food system efficiency: investing for positive change

1. Fragility in Fertilizer Supply Chains Intensifies Pressure on Food System Efficiency

The report notes that global food demand growth, reliance on fertilizers, and water constraints are collectively forcing the food system to significantly improve efficiency. Fertilizers are among the most critical agricultural inputs, yet roughly one-third of global fertilizer shipments by sea must pass through the Strait of Hormuz, a geopolitical chokepoint. The author states, "If supply is disrupted, the effects do not show up as quickly as an energy shock. They appear later, when farmers buy inputs, when crops are planted, and eventually when food reaches the checkout." This means: if supply is disrupted, the impact does not manifest as rapidly as an energy shock. It appears later—when farmers purchase inputs, when crops are planted, and ultimately when food reaches the checkout counter. The 2022 Ukraine conflict caused fertilizer prices to surge nearly 50% within two months, and a similar disruption in the Strait of Hormuz would have the same effect.

Over the long term, global food demand is projected to grow by more than 50% by 2050, but the current system is already under strain: over 70% of ammonia fertilizer production still relies on natural gas, directly linking food costs to energy prices; roughly one-third of global food is lost or wasted before consumption; and water stress continues to intensify in many high-yield agricultural regions.

2. Deere: Precision Agriculture Boosts Output Per Acre, Reduces Input Waste

The author argues that Deere's precision agriculture technology is driving a structural shift in farm economics, particularly critical when fertilizers, chemicals, and labor are expensive. Deere's See & Spray technology uses onboard cameras and machine learning to distinguish crops from weeds in real time, applying herbicides only to weeds, reducing usage by up to 50%; ExactShot precisely applies fertilizer to each seed during planting, cutting usage by up to 60%. More precise inputs mean less runoff, waste, and emissions during production and application.

The tangible results are significant: Deere's engaged acres grew from 315 million acres in 2020 to nearly 500 million acres in 2025, with See & Spray's coverage area alone increasing fivefold in 2025. The author estimates that See & Spray avoided the use of approximately 3,040 tons of herbicides in 2025. The report further notes that Deere aims to make its cloud-based farm management platform the digital hub for farms—more data improves recommendations, attracts more users, and creates a positive feedback loop. The shift toward software and services will unlock recurring, higher-margin revenue streams, and the author believes the market is still in the early stages of pricing in this potential.

3. Ecolab: Reducing Waste in Processing, Highlighting the Value of Water Management and Food Safety

The report argues that Ecolab helps reduce post-harvest waste in food processing, hygiene, water management, and cleaning systems, and its role is becoming increasingly vital as water, energy, and labor constraints tighten. Ecolab estimates that it helps safeguard the quality and safety of 36% of the world's processed food, secures over 40% of the global processed milk supply, and supports clean kitchens for 57 billion restaurant meals annually. In 2025 alone, it helped customers save 927 billion liters of water, roughly equivalent to London's annual water consumption.

Since 2019, Ecolab's solutions and services have helped customers achieve cumulative value of $12.9 billion, including reduced water and energy consumption, less waste, and improved operational efficiency. Ecolab captures a portion of the value it creates through value-based pricing while consistently delivering incremental customer benefits that exceed its price increases. The report notes that its enterprise penetration among global large customers remains well below 50%, while water scarcity continues to intensify in many regions where Ecolab's largest customers operate, making its water management services increasingly indispensable. Digital tools are being embedded into core products to help customers optimize cleaning in real time and track savings, thereby deepening customer relationships and expanding market share in a vast, underpenetrated market.

4. Investment Implications

The report's core thesis is that Deere and Ecolab respectively address efficiency issues "before and after production" in the food system, and their quantifiable environmental benefits (reduced fertilizer/herbicide use, water savings, waste reduction) reinforce financial returns (pricing power, recurring revenue, hard-to-replicate competitive positions). The author emphasizes that the structural trends of rising global food demand, tightening resources, and shrinking room for waste are precisely what these two companies are "designed to deliver"—along with potentially attractive returns. Institutional perspective bias note: Baillie Gifford is a long-term holder of both stocks, and the article is essentially a "position-holder narrative" that uses sustainability arguments to strengthen the investment case; readers should be aware of its self-justifying tendency.

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