There has been significant growth in Brazil’s agricultural system in the past few decades. Surprisingly enough, up until the 1970s, the country depended on the import of many agricultural products and on donations from more developed countries. With this in mind, the fact that Brazil turned out to be one of the top leaders in agricultural production and exports is quite the achievement, with many thanks to the advancements of agtech.
From Zero to Hero
According to data from Empraba, a public research company for agricultural sciences, Brazil has only 7.8% of its territory occupied with agricultural production. It’s one of the few countries with minimal infrastructure and stability that has tremendous potential for farmland growth. This has been particularly noticeable in recent years in a region called MAPITOBA (the combination of four states in central Brazil — Maranhão, Piauí, Tocantins and Bahia).
Just how quickly has agriculture developed in Brazil? In 1975 there was a harvest of 39.4M grain tons. That number skyricketed to 238.7M between 2016/2017! Different structural factors played an important role on this path to becoming a global agriculture leader for many commodities. But the main reasons are related to Brazil’s natural resources, paired with investments in technology that made tropical agriculture possible and agricultural policies of the last decades.
The Need for AgTech in Brazil
Until 1985, the agricultural policy focused on securing the rapidly-growing urban population supply with price control and R&D investments. It was done to adapt cultures to environments that were considered hostile for agriculture. Today’s main areas for grains have acid soils, drought and no winter — which translates to a higher concentration of plagues and being considered not to be arable.
From 1985 to 1995, Brazil went through a financial crisis with uncontrollable inflation, lack of credit, and a later liberalization process. It exposed farmers to the market, naturally selecting those with higher productivity and excluding smaller local farms. Efforts in the beginning of the century were then directed to familial agriculture incentives, land reform and income support.
When one compares different geographies, one can categorize agriculture in three main regions with distinct characteristics:
- South Brazil is structured around farmers’ cooperatives, due to a mixed production and smaller land farms. These associations were formed with the coming of European immigrants at the end of the 19th century, that provided credit, technical assistance and agricultural inputs.
- Southeast Brazil is heavily marked by contract farming with high vertical integration between farmers and industry. This region is rich in citrus, cellulose, sugar cane and coffee.
- Central Brazil is where most grain and extensive cattle farming is located.
Given the importance of this industry, it was natural to expect a boost in AgTech. Brazilian agriculture is highly mechanized with one of the best productivity numbers, but digital farming, remote sensing, data analysis and biotechnology are all areas still currently being addressed by startups.
Periodic AgTech Obstacles
AgTech services however face big challenges specific to the agriculture industry in Brazil, which goes beyond bureaucracy and lack of capital. The ecosystem still has much maturing to do in certain regions, and progress can get slow at times given the lack of capital and risk aversion, but the potential of the opportunities is huge.
Another challenge that is sometimes faced by AgTech services is the difficulty of testing their products. Usually farmers will only agree to use their solutions and if so, in a very small area. Results then can only be validated after that harvest, extending development cycle times. Once products are minimally validated, distribution is a hard task given the country’s territory extension, strong players in the supply chain and/or a traditional mindset somewhere up the ladder that resists technology.
Potential in Precision
This industry is rich, and there is more capital in those companies for investments. Besides this, the dominant players see digital farming as the next strategy for incremental productivity gains and are in a run for winning the market with their solutions. Companies with specific solutions such as remote sensing, precision agriculture and data analytics for later bundling have the strongest value proposition for their clients.
