New technologies developed over the last decades offer a set of tools that mark a point of no return regarding agriculture.
What do we mean when we talk about AgTech?
The term AgTech is the result of the combination of the words agricultural and technology. Coined rather recently, it contains a broad range of new technologies applied to agricultural systems. If we talk about new technologies, we can start by mentioning some of the ones producers are more familiar with like agricultural precision tools (sensors that allow farmers to control the amount of inputs they apply in a specific location when they cultivate and fertilize land), global navigation satellite systems to georeference pesticide applications and, regarding software, applications or sites to check weather forecasts or online markets.
The growing world’s demand for food requires the improvement of agricultural productivity and competitiveness through technology and the development of innovative processes that increase the yield and efficiency of the sustainable use of natural resources. According to FAO estimates, over the next decade agricultural productivity will increase so there will be more production on existing agricultural land. According to the international agency, wheat and soybean production will increase by nearly 10% over the next decade and productivity gains will mostly account for this increase. So, in order to maintain competitive advantages the use of new technologies has become a must.
With large doses of innovation and disruption, AgTech has transformed operative processes and expectations of the agricultural industry. Like any other industry transformed by technology, the agricultural sector must keep up with the changing work styles, gear and mobile devices updates and the clients that look for efficient results.
In Argentina, the AgTech sector, where agriculture, technology and knowledge based services (KBS) coexist, is one of the sectors with greatest economic potential. With 53% of arable land, the agro-industry is the main export complex in our country, followed by the automobile industry and the KBS industry, which is the third export pole. From the combination of these two development driving forces, agriculture and KBS, emerges the AgTech industry. The growth potential is huge considering that agriculture is one of the least digitized industries in the world. Argentina has distinctive qualities suitable for its development: Besides the talent, entrepreneurial culture and the companies with great innovative ability there is a powerful educated agriculture sector familiar with technology. Additionally, it counts with an important public policy model with laws such as the Entrepreneurs’ Law and the Small Business Law that favor the sector’s development.
Now then, in the face of the dramatic progress of computer processing capabilities, today it’s possible to save and manage a great amount of data coming from agriculture, genetics, transactions and climate phenomena, previously unthinkable, that create a new paradigm and an endless number of applications for the agro-industry.
Why are they a boom today?
AgTech startups are a global boom: in 2018 they raised 16.900 million dollars. In addition to the large agricultural machinery market and the genetic progress used to increase production, this year there is a new sector that especially targets the booming AgTech segment made up of software companies with an increasing customer base and reach. Thanks to precision agriculture, AgTechs can check the crops’ evolution through satellite images, monitor fields and program alerts in areas that can present problems, etc.
In dialogue with iProUP, Wiagro CEO, Martín Cordasco, highlights the technologies incorporated by his company, which include field monitoring using GPS, global coverage via satellite, Whatsapp alerts –that allow you to “chat” with your silobags –, and the use of blockchain to protect the data.
This year, however, banks took a step further and plunged into the digital world to increase the customer base. The Galicia bank included new features in their Galicia Office app that will allow companies in the sector (which represent 30% of their client portfolio) to open checking accounts online.
Even though in Argentina the adoption of digital technology in the agricultural sector is a slow process (that’s not the case of mechanical technology which is in the production frontier), the large number of companies emerging, consolidating and expanding thanks to the combination of investors and government plans offer encouraging prospects. Among them are S4, Auravant, Beeflow and Kilimo.
In Argentina, S4 knew how to reinterpret the problem regarding the climate risk in agricultural production and created a digital product (insurTech) that offers foreseeability in an unforeseeable business. In other words, S4 Coverage allows you to save money in a business where losing money has always been the rule..
Using a simple web, the farmer or producer has access to a coverage against floods or droughts and can recover the lost yield. In an industry where between 35% and 42% of crops have been historically lost due to inclement weather, S4 offers a transparent, technological and completely disruptive solution.
Auravant is a Big Data company for the agricultural sector that helps producers during the whole season with notifications of potential problem areas and precision farming tools. It has more than 3000 users in 22 countries around the world and helps producers monitor almost two million hectares.
Kilimo developed a platform for efficient irrigation management that, using satellite and climate data and soil samples, recommends producers when and how much should they irrigate each crop. The company also has clients in Chile, Brazil, Uruguay and Paraguay besides Argentina and will soon start working with producers in the United States and Peru.
Some global data to measure the phenomenon
Numbers speak for themselves: it is expected that the market value of AgTechs across the world reaches approximately 26.7 billion U.S. dollars by 2020. This way becoming the most influential agricultural trend in developed countries. It is also expected that the market value of precision agriculture increases from 730 million U.S. dollars in 2015 to 2.42 billion U.S. dollars by 2020. Production distribution in the world shows North America as the main actor.
However, it is projected that the region of Asia and the Pacific shows the fastest market growth between 2017 and 2022. The region presents a huge reach for market development due to the growth of urban population, the growing internet breakthrough in farm management and the favorable government investments. Moreover, it is expected that the presence of countries with advancing economies like India and China will make the region a key actor in the growth of precision agriculture over the next years.
On a year-on-year basis, the global smart farming industry grew by nearly 6% in 2016, with its value going beyond the $10 billion mark. In the next ten years, the smart agriculture market is expected to witness a 4X growth (by the end of 2026, it will be a $40+ billion market). The hardware component of the industry will be at the forefront of this growth, with more than 50% share in the overall technological solutions for agriculture. The CAGR of smart agriculture for the 2016-2026 period has been estimated to hover around 11.5% – a mighty impressive statistic in itself. The variable rate technology segment of smart agriculture will, in particular, grow rapidly.
Apart from productivity, ‘greater efficiency’ is the other main objective of smart agriculture. To attain these targets, IoT (internet of things) is quickly making its way in this sector. According to a recent BI Intelligence report, more than 75 million IoT devices will be installed (for agriculture) by the end of this decade – a rise of 150% from the 30 million figure in 2015. The average volume of big data generated and managed by individual farms will also show a staggering increase between 2017 (<0.5 million data points) and 2050 (>4.0 million data points). Consistent application of technology is resulting in more agricultural information being generated than ever before – and these insights are helping in boosting productivity and efficiency.
The publication of a new World Resources Report from the WRI underlines the urgency of creating a sustainable food future. The global population is projected to reach more than 9 billion in 2050 and today’s crop yields will not be enough to meet the growing food demand. If we want to feed the world in the coming years (and manage to do it without destroying the planet) we will need to change the food production paradigm. Big data will be crucial to make this change happen.
New AgTech companies received more than $ 10 billion U.S. dollars in investments in 2017. However, these investments are mostly concentrated in richer countries where the immediate perspective of revenue is greater. According to the Food and Agriculture Organization of the United Nations, ‘There are 500 million smallholder farmers in the world and they run the risk of falling behind in structural and rural transformations.’ There are new developments in farming technology for the developing countries which have a large number of poor yielding lands and the greatest potential of yield increase that could close the global food gap.
How can this reach people?
The technological advances, the apps and user experiences, which in other industries have reached users on a large scale, haven’t yet arrived to the AgTech industry.
Even though it is a profitable industry globally, the number of users is low. As a result, digital products such as web-apps, progressive web-apps and apps had a less effective development so users in this field don’t receive, browse and interact with the information in the best way.
In the case of S4, pioneers in offering crop insurance, the company has taken a step further and made a large time and resource investment in order to make the user experience of their products completely intuitive and accessible from any desktop device, tablet or smartphone.
The main difference lies in S4 Index which virtually allows for all the purchase, paperwork and beginning process to be digital.
This means that any farmer with a smartphone and an internet connection can compare and purchase at any time a coverage for their crops.
Unlike traditional methods, S4 automatically triggers the coverage when satellite images and digital meters indicate that the index has been surpassed allowing the producer to collect their insurance money without mediation.Automation of these kind of processes in the industry opens up a wide range of new possibilities. Considering the industry predictions and the short-term technology developments, such as the arrival of 5G and IoT (internet of things), we can only expect a rapid production and revenue growth. The gap between technology and users in an industry still under development is closing but this can only succeed if companies invest their resources correctly and manage to develop extremely simple and accessible digital products for the users.
8 key elements to understand
the AgTech industry:
- AgTech is the combination of agricultural and technology. It includes a wide range of new technologies applied to the improvement of agricultural production systems.
- Precision agriculture includes the use of georeference, satellite images, crop monitoring and apps to check weather forecasts and markets.
- The AgTech industry grew by nearly 6% in 2016, with its value going beyond the $10 billion mark. In the next ten years, the smart agriculture market is expected to witness a 4X growth.
- The growth potential is huge considering agriculture is one of the least digitized industries in the world.
- AgTech startups are a global boom: in 2018 they raised 16.900 million dollars.
- According to the international agency, wheat and soybean production will increase by nearly 10% over the next decade and productivity gains will mostly account for this increase.
- The main objective of smart agriculture is to increase efficiency.
- It is expected that the AgTech global market value will reach 26.76 billion U.S. dollars by 2020.