A farm-tech revolution in the Year of the Tiger

4 min read 14 Feb 22

“The article was first published on South China Morning Post, 2 Feb, 2022 at https://www.scmp.com/comment/opinion/article/3165180/will-asias-investors-pounce-farm-tech-revolution-year-tiger.

Summary: Farming and machine learning are coming together to feed a hungry world in agtech’s biggest revolution yet – and Asia is already home to many companies with the technology that is required. Vikas Pershad, Portfolio Manager, Asia Pacific equities discusses some of the technologies being employed to meet growing demand, contribute to food sustainability and reduce waste.

The world needs a bigger dining table. Between now and 2050, another 2 billion diners are coming, as the global population expands to 10 billion[1].

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 quality.

These constraints will put ever greater burdens on the global food supply – most of all on the world’s farmers. But innovation is born of constraints. The world’s oldest job – securing food – has been evolving for centuries.

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 in 1962, when the world was in the throes of the Green Revolution. In the years since, increased mechanisation, large-scale irrigation and chemical fertilisation have led to a sharp increase in farm productivity.

A similar feat must now be achieved, and in half the time. The US Farm Bureau estimates that the world’s farmers have to produce about 70 per cent more food by 2050 – less than 30 years from now.

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.

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 (light detection and ranging) technologies, portable weather stations and autonomous drones and satellites will allow farmers to monitor soil conditions and allocate land, capital, water and chemicals to optimise crops and yields amid a fluctuating climate and volatile weather. The potential for meaningful incremental impact might be greatest at this stage of the process.

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.

At every stage of the food supply chain, there is waste. Early in the process, a lack of predictive power and inventory management leads 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 (about 0.4kg per person per day) perishes annually. Waste, waste, waste.

Enter blockchain. Digital ledgers will increase transparency of food origins, 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.

Taking part 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 data sets 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 compared to the earnings they can generate.

And for those who invest based on environmental, social and corporate governance considerations, there might not be a sector that more comprehensively affects portfolios while also 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.

[1] https://www.eea.europa.eu/data-and-maps/indicators/total-population-outlook-from-unstat-3/assessment-1

By Vikas Pershad, portfolio manager in M&G's Asia Pacific equity team

The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance.

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