By Vikas Pershad, Portfolio Manager at M&G Investments
The world needs a bigger dining table.
Between now and 2050, another two billion diners are coming, as the global population expands to ten billion. The arrival of new family members, friends and neighbours will coincide with a period of higher average temperatures, more frequent severe weather events and higher atmospheric carbon dioxide levels. The next few decades will also demand greater resourcefulness with our water and land while preserving our air. These constraints will put ever greater burdens on the global food supply – and most of all on the world’s farmers. But innovation is borne of constraints. The world’s oldest job – securing food – has been evolving for millennia. With the aid of rapidly advancing technology, it’s about to enter its most revolutionary period. Farming and machine learning, yin and yang, coming together to sustainably feed the world’s people.
Sixty years have passed since the last Year of the Water Tiger. 1962 also marked the middle period of the Green Revolution, by which point increased mechanisation, large scale irrigation and chemical fertilisation had led to a six-fold increase in the average number of people fed (from 26 to 155) by each of the world’s farmers over the previous sixty-year cycle. A similar feat must now be achieved: by 2050, a farmer will need to feed nearly 300 people – double the output, half the time. This increase in productivity is possible, as advanced hardware coupled with machine learning algorithms are enabling improvements at every stage of the food production and distribution chain. Opportunities abound for farmers and entrepreneurs.
Pre-production: Predictive Farming
The journey from farm to table is a long one, and it starts at the planning stages. Improved data capture through sensors, radar and LiDAR technologies, portable weather stations and autonomous drones and satellites will allow farmers to monitor soil conditions and to allocate land, capital, water and chemicals to optimise crops and yields amidst fluctuating climates and volatile weather. The potential for meaningful incremental impact might be greatest at this stage of the process.
Production & Processing: More than just tractors
Perhaps the most visible use of technology will be in the production and processing stages: self-driving machinery and robots for ploughing, seeding and harvesting; meters for micro-irrigation; drones (again) for detecting plant diseases, pests and weeds, and for general surveillance; scanners and chemical detection systems to determine product authenticity; and wearable technology to monitor livestock health and movement. Though investments in these technologies will quickly pay for themselves, questions will arise about the equitable distribution of opportunity – and the answers will be found in novel business models, including “Faas,” (farming as a service) and shared machinery.
Distribution: Less Waste, More Money
At every stage of the food supply chain, there is waste. Early in the process, a lack of predictive power and inventory management lead to wasted fertilisers and water. Untapped mechanisation results in wasted energy. At the distribution stage, poor warehousing, insufficient cold chain facilities and poor meal planning by consumers themselves all lead to massive quantities of food being wasted: by some estimates, more than one billion tonnes of food (nearly one pound per person per day) perish annually. Waste, waste, waste.
Enter blockchain. Digital ledgers will increase transparency of food origin, quality and safety, generating feedback that will cycle back to farmers on what – and how much – to produce.
Innovations in financial products, from payment systems to insurance, are sure to follow. Driven by petabytes of data, machine learning will enable highly customised (yet scalable) financial solutions for farmers around the world. Paired with improved logistics networks and blockchain technology, fintech should result in streamlined resource management, lower prices for consumers and greater incomes for farmers.
Participating in the growth of the global agtech industry is not limited to farmers and entrepreneurs. The farms of the future will be served to a great extent by the companies of today. Asia is already home to publicly listed providers of sensors, drones, agrichemicals, robots and advanced heavy and light agricultural machinery. The region is also an increasingly fertile ground for original business models that are leveraging affordable hardware, vast datasets and sophisticated machine learning algorithms to create marketplaces, facilitate payments and provide consulting services. Not every business serving the agricultural industry will flourish, but the aggregate value of these businesses today seems low when compared to the earnings to be generated by them. And for investors who actively invest based on ESG considerations, there might not be a sector that more comprehensively impacts portfolios while impacting our world.
The opportunities are here, but seizing them will require courage, ambition, patience and adaptability – fitting, then, that these are all attributes of a tiger.
The article was first published on South China Morning Post at: https://www.scmp.com/comment/opinion/article/3165180/will-asias-investors-pounce-farm-tech-revolution-year-tiger
