Agriculture is the world’s oldest industry, but unfortunately, it is also one of the most inefficient because the feed-to-food value chain is so long and complesx according to management consultant Chris de Lavinge.
“That may sound bad, but I look at it from a positive perspective. Things can only get better,” said Mr de Lavigne.
Inputs and outputs at both ends of the value chain may originate from one corner of the world and go all the way to the other side, and require multiple stages of processing in every step of the way in between.
“Technologies that succeed are the ones that address the pain points that we have,” he said.
Blockchain, the “internet of things,” artificial intelligence, or a confluence of the hottest technologies working hand in hand could become the next “holy grail” of agriculture.
Also, the long, complex, inefficient value chain is “full of data,” which represents one of the greatest opportunities.
“We know it’s there, but so far we have not really been able to mine that data and use it to our benefit,” he said.
Technology costs money, and the lowest-cost producers are typically the winners in business, but moving forward the focus will shift to margins, differentiation, and long-term investments to be successful.
Unlocking the secrets hidden in the industry’s troves of data will provide the keys to improving margins and reducing costs. Coupling the hardware with the software, and creating analytics to mine it successfully will offer great rewards to solutions providers, he added.
“There is increasing interest in the ag sector because they are realizing the opportunity that we have in front of us,” said Mr de Lavigne, adding that mid-to- long term investors are searching for winning ways to unlock value that was previously overlooked.
Companies, whether they are in the food and beverage sector or feed additives, are setting up their own venture capital arms to invest in interesting developments across the value chain.
Labor requirements are high and small-holders are still a huge part of the industry, but new technologies promise to facilitate greater efficiency.
But even in regions with traditionally low-cost labor, the exodus of farmers to the cities is forcing wages ever higher in a trend line that is not sustainable and the industry is starting to feel the pinch, said Mr de Lavigne.
Agriculture technology breakthroughs are coming not just in the fields of automation, robotics, drones, sensors, precision nutrition, and big data.
Even finance has adopted new ag tech. For example, insurance companies are seeking to better understand what is happening on the ground at the individual farm level via analytical tools for studying yield potential and balancing weather risks to create more flexible premiums.
“A lot of industry relies on small-holders, so I think there is tremendous opportunity for things like micro-insurance,” said Mr de Lavigne, noting that many countries, unlike Thailand and the Philippines, with vast numbers of small farmers, do not have state-supported crop insurance.
“Do we know what we are really eating when it lands on our plate? Do we know where it comes from? Do we know what’s actually gone inside it,” he asked.
“There is a lot of fake food out there in the market. We have got to find ways to regulate that because it’s certainly not good for the consumer and it’s not good for the farmers.”
How does a consumer know, for example, that they are actually getting the “premium,” or antibiotic-free chicken that they are paying so much for?
Technology will soon provide ways to ensure that honest operators are rewarded for the their honest efforts, said Mr de Lavigne.