German chemicals giant Bayer and US biotech firm Ginkgo Bioworks are setting up a new company to develop and improve the ability of certain microbes to produce nitrogen fertiliser.

The new company to be established by the US$100M deal was set to be co-located with Ginkgo in Boston, Massachusetts, and with Bayer’s plant biologics R&D centre in West Sacramento, California, the companies said in a joint statement on 14 September.

It would develop endophytic (living within the plant) microbes to improve nitrogen fixing and benefit farmers through reduced fertiliser costs and a lower environmental impact.

“The plant microbiome is one of the next frontiers in sustainable agriculture and it may enable us to take a major leap in plant physiology – producing nitrogen fertiliser directly in the plant,” said Axel Bouchon, head of the Bayer Lifescience Center.

According to Bayer and Ginkgo, certain crops – such as soyabeans, peas and other legumes – could pair with endophytic microbes to fulfil their nitrogen needs, but most other crops lacked this ability, making the application of nitrogen fertiliser essential.

However, they said the cost impact of fertilisers was notable and they could increase greenhouse gas emissions and water pollution.

“Biology is changing industries as diverse as flavour and fragrance to consumer electronics. Agriculture is the original biological technology and the more we can learn to work with the soil microbiome, the more we can discover ways to add value to farmers and return to its biological, and more sustainable, roots,” said Ginkgo co-founder and CEO Jason Kelly.

In addition to the US$100M investment, Ginkgo would provide exclusive access to its technology, laboratory and office spaces and would build a new facility exclusively for the new company, while Bayer would provide exclusive access to its proprietary microbial strains and all necessary development know-how.

The transaction, expected to conclude in late 2017, was the fifth investment by Bayer Lifescience Center, which operates as an innovation unit within Bayer.

The centre’s previous investment included the CRISPR/Cas gene editing technology by Casebia and induced pluripotent stem cell technology by BlueRock.