Wednesday 30 November 2022

Agriculture 'fertile ground for digitization'

LONDON, October 19, 2016

A digital revolution in agriculture will improve yields to feed an additional one billion people within 10 years, says a new study.

Digitization has the power to challenge well-established business models. Staying ahead of the competition will require new ways of thinking. Opportunities exist to bundle technologies to provide end-to-end services for growers - from selecting crops to optimising planting times, seeding rates, and fertilizer applications, according to A T Kearney’s new report, ‘Agriculture Is Fertile Ground for Digitization’ released today.

Data gathered throughout the crop cycle and lessons learned on one field can automatically be transferred to other growers in similar climates, it said.

The first company to develop an appealing platform and business model will increase its chances to capture first-mover advantage and gain a foothold to establish a monopoly.

Rapid changes in demand patterns and disruption of traditional farming models have forced major adjustments to the agriculture industry, the study says.

After decades of strong growth, a slowdown in global growth rates of agricultural demand is projected resulting from the confluence of slowing population growth, the consequent effect on demand, regulatory rules that impede commercialization, and consumer concerns about agrochemicals and high-intensity farming.

The slowdown has triggered an immediate focus on protection of margins and consolidation in agriculture. The sector quickly turned to increased M & A activity through a series of mega-deals among suppliers of crop protection, seeds, and fertilizers. As a result, earnings multiples reached record highs and premiums stretched into the billions of dollars.

“An industry under pressure is going to trigger a wave of cost cutting and consolidation,” said Carsten Gerhardt, Partner, AT Kearney and co-author of the report. “But in agriculture it didn’t take long for the larger companies to also consider alternative strategic moves. Digital farming is one move that offers vast opportunities for growth of the sector.”

Currently, digital farming is mostly confined to small application fields and start-ups developing high-tech drones for surveillance, satellite imaging, and robotics. Monsanto’s Climate Corporation covers only 30 to 40 million hectares - about 2 percent of the world’s crop land. By expanding digital to cover broad-acre and horticulture crops, the increase in yields could potentially reach 20 to 30 percent, providing food for as many as 1 billion additional people in the coming decade.

“With digital farms, today’s large spreads in yield and productivity, mostly from poor decisions by some growers, will disappear and global productivity will increase dramatically,” said Dave Donnan, Partner, A T Kearney and co-author of the report.

“We expect the industry majors to move first and fast, followed closely by start-up tech firms keen to leverage the market opportunity,” explains Gerhardt “In digital, size and speed matter. First movers will set the standards for the entire industry and shape its future.”  - TradeArabia News Service

Tags: agriculture | AT Kearney | Digitization |

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