Q&A: Roots is solving major problems in modern agriculture

Finfeed recently caught up with Dr. Sharon Devir and Boaz Wachtel, the co-founders of Roots Sustainable Agricultural Technologies (ASX:ROO) — an Israeli-born small-cap innovator whose disruptive tech is addressing critical problems faced by the agricultural community.

FF: Thanks for joining us, Sharon and Boaz. For readers who’ve only just come across Roots today, could you give me a quick overview of your company and its key technologies?

Sharon: Roots listed on the ASX in December last year, and is a graduate of the Israeli Chief Scientist technological incubator program. We have two core, IP-protected technologies.

The first is Root Zone Temperature Optimisation (RZTO), which is a two-in-one, low-energy, root zone heating and cooling system, and is at the commercialisation stage. This technology has seen significantly increased crop yields of 10 to 140 per cent, shortened life cycles, reduced climate control expenditures, and low environmental signature — all achieved while keeping the root zone temperature at a stable and favourable range throughout the year.

The second technology we’ve developed is called Irrigation by Condensation (IBC), which is a complementary solution to RZTO. It’s is the only technology that could facilitate food production and positively impact the entire food chain. It’s in final stages to become a solar-operated, standalone system that allows farming in remote locations previously unsuited to food production due to water shortages.

IBC is a closed cycle of chilled water which irrigates crops by condensing water from moisture and humidity in the air and soil on the external surface of pipes laid near the crops. This is made possible because the relative humidity at night is high and sufficient to sustain some of the crop’s agricultural growth completely off-grid.

We’ve successfully completed proof of concept for IBC, where a number of crops, including tomatoes, cucumbers, spinach, lettuce and wheat, were grown only with condensation of the humidity in the air.

Both technologies can also be integrated into a single, comprehensive solution to optimise root zone temperature and provide access to water for irrigation.

These technologies are early stage and investors should seek professional financial advice for more information if considering this stock for their portfolio.

FF: With more than US$700 million invested in ag-tech companies in 2017, it’s clear that the ag-tech industry is on the rise. Why is this surge happening now?

Boaz: A number of factors — global population increase, shortage of water, arable land reduction due to urbanisation, and the desire to reduce the environmental impact of agriculture, are all contributing factors to the desire of investors and governments to increase investments in solutions addressing the severe stress on existing resources.

FF: What kinds of challenges is Roots directly addressing in agriculture today?

Sharon: Roots addresses two major problems in agriculture. Firstly, there’s the issue of how to influence and manage the climate of plants in greenhouses in a sustainable and cost-effective manner. Roots is offering a ground source heat exchange based system that heats and cools as needed, saving up to 80 per cent of energy compared with air heating and cooling.

We also address the shortage of water for irrigation with our IBC technology (70 per cent of all potable water is used in agriculture). This system produces water for irrigation from humidity in the air, condensed on the external surface of pipes with running cold water (in a closed cycle), completely off electricity and water grid.

This will allow agricultural creation and food chain for humans and animals, initially on a small scale, to produce and sustain food production — even in arid or semi-arid areas due to the ability to irrigate at night when humidity is high; even in deserts.

FF: Recently, you’ve had some excellent results from a winter pilot study in southern Israel. Could you tell us more about that?

Boaz: We have had very impressive heating basil pilot results, increasing yield by 66 per cent compared with control, improving shelf life and facilitating for the farmer prime prices during the winter when there is very little basil around. All these contributed to a less than two years ROI for the farmer.

FF: You’ve also had a major win with your first root zone shipment to China. Tell us more about what that means for the company, and the size of the market we're looking at here.

Boaz: This follows on from our first significant commercial sale for A$323,000 (US$257,000) with Dagan Agricultural Automation for the installation and use of our proprietary RZTO technology to heat and cool the roots of eight crops such as vegetables, herbs and flowers.

We now have in place a conditional exclusivity agreement in place with Dagan for China whereby Dagan is committed to purchase US$19 million worth of Roots products over five years in order to maintain exclusivity with Roots.

We’ve now dispatched the first shipment of eight, including specially formulated pipes for RZTO. The RZTO system will play a central role in this project, being able to increase crop yields by addressing local land and water resource constraints common in the region. We also intend to use the Green Root Zone pipes to set a global unified green colour standard for root zone heating and cooling pipes.

FF: What advantages do Roots’ technologies offer over others on the market?

Sharon: We believe we’re uniquely positioned as we have two disruptive technologies which are attracting a lot of attention in the rapidly growing ag-tech investment community. As far as we know, we have the only technology with two-in-one heating and cooling ground source heat exchange technology.

This is a significant benefit. Today's existing tech for climate control requires two separate systems: one for heating and one for cooling. Ours both heats and cools in the same system. Our system also offers low energy requirements, saving up to 80 per cent compared with air heating and cooling systems.

RZTO allows off-season planting, improves yield dramatically without any GMO technologies, is environmentally friendly, and involves quick installation. It’s a stable system that’s remote controlled via cloud. We’re also able to provide precision agriculture, targeting the root zone area and not the canopy.

FF: What can we expect to see from Roots in the months to come?

Boaz: We’ve seen a lot of interest in our two key technologies, so we’ll be at quite a few big ag-tech conferences this year, and talking with farmers in several countries. We’ll be participating in AgriTech in early May, presenting our achievements to visitors from around the world.

Sharon: We will be finalising our solar-based stand-alone IBC system, as well as the China installation. We will also finish our demo site in Israel.

RZTO is already commercialised in Israel and China, and we’ve got 14 projects underway in China, Israel, Spain and Australia, with more to come soon. As part of our expansion plans, we’re hoping to enter new territories, increase sales, and hire more personnel.

FF: Looking at the bigger picture, how do you see the evolution of Roots in the longer term?

Boaz: We see Roots as having the potential to be a significant leader in ag-tech innovation with its two key products, RZTO and IBC. We believe Roots will grow to be a very large ag-tech company with a global presence, providing significant impact to farmers and their families worldwide, as well as providing shareholder value.

Keep in mind that Netafim, an Israeli drip irrigation leader, was recently sold for US$1.6 billion to Mexichem, a Mexican group — so significant values can definitely be created in ag-tech companies coming out of Israel.