Human's Ancient Practice Gets a Digital Upgrade

Farming is an industry as old as civilization, but it is currently at the forefront of digital transformation.

This is due to various factors, which all point towards digitalization as a solution for the industry as it faces the challenge of remaining profitable and feeding hungry and demanding consumers worldwide. 

First of all, the costs of production are rising. According to consultancy McKinsey, input prices for fertilizer and other crop protection chemicals have increased between 80% and 250% in the last few years.

Then there are labor shortages. McKinsey estimates that over 22 million pounds of fruit and vegetables go to waste in the U.K. each year due to a lack of workers.

While supply chains are under pressure and input prices are rising, farmers are also facing the challenge of climate change and extreme weather events.

Governments are responding to the climate crisis with stricter regulation which is also proving to be a driver of digitalization.

For example, the European Green Deal requires a 50% reduction in pesticide use by 2030 based on 2020 levels. Canada has introduced a similar target and warned Canadian farmers who miss it that they risk losing access to USD1.1 billion in government support.

One way of reducing pesticide use or wastage, of course, is precision agriculture.

Consumer demand in the developed world is also a factor, and there is a knock-on effect.

Because consumers prefer sustainably produced food with transparent supply chains, this also increases momentum for the digitalized processes that are increasingly required to produce it.

A 2023 McKinsey U.S. consumer study found that sustainable brands are already seeing market progress due to increased consumer interest.

“Products making environmental, social, and governance (ESG)–related claims averaged 28% cumulative growth over the past five years, compared with 20% for products that do not make such claims,” McKinsey says.

“Products making multiple types of ESG claims—such as environmental sustainability and organic-farming methods—grew about twice as fast as products that made only one claim.”

Adopters and laggards

Traditionally, however, farming has been averse to technological change, particularly smallholder farmers, creating a widening gap between adopters and laggards.

While precision farming technologies present a significant part of the industry's solution, IDC estimates that over 50% of farms worldwide are cutting spending on IT after the COVID-19 crisis.

McKinsey says that even though it has been proven that automated precision spraying, fertilizer robots, drones and other solutions such as livestock tracking are more efficient and can deliver productivity gains, only 5% of farmers currently use these technologies.

The firm’s recent report on farm automation estimates that in the U.S., applying some herbicide application technologies using computer vision to selectively spray weeds while avoiding crops can cut costs by 80%, creating an increased value of USD30 per acre and a payback period of two years.

Fully autonomous use cases across orchards and vineyards could deliver more than USD400 per acre per year in enhanced value.

Similarly, McKinsey says that fertilizer application robots enabled with sensors that control the amount of fertilizer directly applied onto individual seeds during the planting process can save more than 93 million gallons of starter fertilizer annually across U.S. corn farms alone.

In terms of labor, automation can positively impact labor conditions on farms, lowering the operating skills required by the workers and reducing labor costs.

“Automated weeding and mowing alone could generate USD30 per acre in labor savings on U.S. vineyards"

McKinsey gives an example where semi-automated technology, such as assisted steering systems, guide tractors to reduce overlap between passes, making equipment operation less physically taxing.

Take the technology fully autonomous, and it goes even further.  

Instead of sitting in a cab doing hazardous activities such as spraying, McKinsey says machine operators can serve as fleet managers who oversee multiple machines. 

"In a scenario in which automation enables one worker on a U.S. corn farm to manage four machines, the savings amounts to USD15 to USD20 per acre, which can unlock up to about USD1.5 billion in value annually across all U.S. corn farms," the McKinsey report says.

"For U.S. specialty crops, for which labor is a larger cost driver, the value potential for growers is even greater. For example, in the same scenario where one worker manages four machines, automated weeding and mowing alone could generate USD30 per acre in labor savings on U.S. vineyards."

Drivers of value

Recognizing that the momentum for automation in farming is only going one way, McKinsey advises the agricultural sector as they ponder levers for change.

First, understand the ROI and near-term value drivers of autonomous equipment as part of the value proposition, sales pitches, and sales materials.

Then, re-imagine the farming experience with automated equipment and a suite of software and services that create a digital ecosystem for measuring, tracking, and optimizing everything that happens in a field.

Also, evolve business models to reduce the up-front capital costs of new automation equipment. For instance, models in which farmers pay regular subscription fees or share a portion of their cost savings with a vendor can make new technology more attractive and affordable for farmers.

Finally, McKinsey urges the agricultural industry to collaborate more closely with consumer packaging companies to help bring more transparency and traceability to farming while supporting farmers with the tools and capabilities to make it easy to collect and share data.

“Though farmers have low levels of adoption currently, there is an increasing level of interest from farmers to invest in new innovative technologies that allow them to protect their current book of business while also continuing to optimize yield looking into the future,” says McKinsey partner Vasanth Ganesan. 

“In addition, sustainability commitments made by companies across the agriculture and food value chain combined with regulations will further incentivize farmers to adopt automation technologies.”

Lachlan Colquhoun is the Australia and New Zealand correspondent for CDOTrends and the NextGenConnectivity editor. He remains fascinated with how businesses reinvent themselves through digital technology to solve existing issues and change their entire business models. You can reach him at [email protected].

Image credit: iStockphoto/Scharfsinn86