Agriculture Risk Management leveraging Fullstack Agtech SaaS

Farmers in developing countries are frequently exposed to the uncertainties of weather, prices and disease. Many farmers live on the edge of extreme uncertainty, sometimes falling just below, and sometimes rising just above the threshold of survival.

Many farmers do not know whether rainfall will be good or bad over a season; they do not know the prices they will receive for produce sold; and they do not know whether their crops will be infected by disease and because these risks are not under the control of farmers, even as they become more commercial, there is need to manage their risk effectively enough to catalyze financing for them. Does technology play a role in this regard?

This is what this article intends to address, more specifically about how Software as a service (Saas) is helping key stakeholders of the agri-ecosystem to mitigate farmers and farm risk in a bid to boost food security in Africa.

In actual sense, risk is an important aspect of the farming business. The uncertainties inherent in weather, yields, prices, Government policies, global markets, and other factors that impact farming can cause wide swings in farm income.

Furthermore, based on my research, I discovered that there are five general types of risk which are production risk, price or market risk, financial risk, institutional risk, and human or personal risk.

1. Production risk: This occurs from the uncertain natural growth processes of crops and livestock. Weather, disease, pests, and other factors affect both the quantity and quality of commodities produced.

2. Price or market risk: This refers to uncertainty about the price producers will receive for commodities or the prices they must pay for inputs. The nature of price risk varies significantly from commodity to commodity.

3. Financial risk results when the farm business borrows money and creates an obligation to repay debt. Rising interest rates, the prospect of loans being called by lenders, and restricted credit availability are also aspects of financial risk.

4. Institutional risk results from uncertainties surrounding Government actions. Tax laws, regulations for chemical use, rules for animal waste disposal, and the level of price or income support payments are examples of government decisions that can have a major impact on the farm business.

5. Human or personal risk refers to factors such as problems with human health or personal relationships that can affect the farm business. Accidents, illness, death, and divorce are examples of personal crises that can threaten a farm business.

It is however important to understand how to mitigate the above identified risks, and that is how the concept of Agricultural Risk Management (ARM) came about which is simply described as an innovative approach for improving the resilience of vulnerable rural households.

It mostly involves choosing processes and among alternatives that can help reduce financial effects resulting from uncertainties. ARM does not only allow farmers and businesses to be pro-active, it also helps to increase their capacity to assess, prepare for, absorb and adapt to risks.

With Agriculture being the main source of income for rural areas in many developing countries, it is important to leverage the power of technology to manage the accompanying Agribusiness risks.

It is equally important to note that a veritable technology tool to manage risk is Full Stack Software as a service (SaaS). It is the more economical and scalable way to upgrade to digital farming for mostly for risk management purposes.

Leading agritech companies such as CropIn utilize machine learning and satellite monitoring for performing predictive analysis and deliver customised reports and actionable insights directly to farmers’ screens and this is a low risk investment with monthly and yearly subscription.

More importantly, because most financial institutions are concerned about lending and insuring Agriculture companies, Cloud-based Agritech SaaS solutions find a breakthrough application in agri-lending and agri-insurance by providing actionable insights on the associated risk of the farm plot. MIS keep a cloud storage for storage of history that is available about the farms. Suppose a farmer comes in and asks for a loan, the bank can use agritech saas such as CropIn to look into the farmer’s records relative to the yield and profits in last ten years.

Based on the historical cropping patterns, CropIn’s SmartRisk can estimate yield. This helps banks and insurance in several ways. Firstly, it helps the farmers by increasing their credibility. If the records and predictions show that farmers have been performing well and yield will be good, the loan or insurance amount will be higher.

Secondly, the banks and insurance companies will be benefited as the data obtained is highly accurate, hence can help stop bad lending.

The most captivating thing about Saas software use-case in Agriculture risk management is in its capacity to advance the course of comprehensive digitization of the Agric-value chain and consequently, promoting financial inclusion for Smallholder Farmers (SHF) in Sub-Saharan Africa.