08/02/2022

STEVE DAVIS

AG TECH - A SECTOR TO WATCH

The world’s population is on track to reach 9.7 billion by 2050, and this will require a 70% increase in calories to feed the world. This is a daunting prospect, made worse by the impacts of climate change and increasing social pressures for more sustainable and ethical farm practices. Increasing efficiency and precision to achieve this is the realm of AgTech.

The agriculture industry has radically transformed over the past 50 years but needs to continue rapidly advancing. Machinery advances have expanded the scale, speed, and overall productivity of farm equipment, leading to more efficient cultivation of more land. Automation has appeared in many areas but there are still many more untapped opportunities, particularly when combined with the emerging area of driverless equipment. Advances in plant varieties, fertilisers, irrigation methodologies and other farm practices have also improved productivity. The impact innovation can have is well illustrated in the Netherlands, where incredibly, modern methods and automation have transformed a county with limited land availability into the second largest exporter of goods in 2020 after the United Sates. In addition to these productivity advances there is an emphasis on sustainability. The University of Wageningen grew their first crop of bananas using an alternative soil composite made of coco peat and rock wool. The process ensures that any fungus making its way into the product through bad soil is eradicated. Dutch company Nijsen/Granico  based in Veulen, produces about 90,000 tonnes of animal feed a year entirely from discarded foodstuffs. In Rotterdam’s new floating farm concept, the entire farm will be sustainable, feeding cows with leftovers from local restaurants collected by electric-powered trucks with the remaining feed from home-grown duckweed. Even the cow manure is collected and sold, making the floating farm completely sustainable. Years of refining and improving farming methods and limiting waste have ensured Dutch dominance in the agriculture sector. 

A new driver of AgTech is data and IoT. New types of sensors are being developed to be able to provide automatic measurements on uses of resources, environmental parameters, soil parameters, plant health and growth and animal health and growth. Development of low-cost sensors facilitates deployment of large numbers of sensors for mapping purposes which can be supplemented with imagery from drones and satellites. These maps can direct precision application of fertiliser, water and pesticides to where it is needed, which reduces these inputs whilst at the same time improving yields. Improving yields, increasing efficiency and reducing inputs must be the outcomes from any new technology if it is to be successful.  

Data layers can be integrated and mined for further information and relationships using artificial intelligence and data analytics which can then be used to develop decision support systems to improve productivity. These tools require a digital transformation which needs to be enabled by connectivity. 

Despite the increasing implementation of data mining and AI, agriculture remains less digitised compared with many other industries globally. There are two challenges the industry is facing: connectivity infrastructure must be developed to enable the use of data collection and digital tools, and where connectivity already exists, strong business cases must be made in order for solutions to be adopted. Connectivity coverage is increasing almost everywhere and by 2030 it is expected advanced connectivity infrastructure of some type will cover roughly 80% of the world’s rural areas. 

So the ability to use digital solutions will continue to improve but the adoption of any new AgTech whether it be digital, mechanical, genetic or chemical will always depend on the business case. Any new technology generally has to improve the bottom line, and that improvement has to be validated to get adoption. Many areas of agriculture remain conservative and resistant to disruption so validation of the value proposition and the market entry strategy will be the key to success. Formulating the best market entry strategy requires intimate knowledge of the market: the market segments (including sizes and profitability), the drivers and practices of the segments, the main jobs to be done, the current ways these jobs are being done and their limitations, and the current suppliers of solutions (including their size and market share). Understanding the market provides opportunity to identify market entry points where there is less competition from incumbents where a beachhead can be established. This provides focus on where to fully validate the value proposition of a minimum viable product. Just as data is driving new areas in AgTech and many other areas, there are new data science-based tools for mapping markets and quantifying bases of competition which, particularly when combined with the principles of disruption theory, can be used to develop market entry strategies and improve the chance of adoption and success.