Opportunities in Precision Agriculture
A deep dive on the most promising sub-sectors for smallholder farmers in emerging markets
Globally, food demand is growing. Food consumption — the main use of agricultural commodities — is projected to increase by 1.3% per year over the next decade, a slower pace than the previous decade. Growing consumption creates a need for increased agricultural production to service those needs. As agricultural production expands-so do GHG emissions, that worsen climate change and in turn hinders agricultural production. It is a toxic feedback loop. Farmers today require new tools and technologies for more sustainable agricultural production.
Among the innovations in technology targeting climate adaptation, precision agriculture presents farmers with an opportunity to grow more predictable, profitable and environmentally sustainable outputs. Precision agriculture uses the analysis and aggregation of farm and sub farm level data to allow farmers to optimize their resources. Data is often obtained through remote sensing (ex. satellites, weather stations) or in-field hardware (ex. soil sensors, smart robotics).
Mercy Corps Ventures has collected valuable insights on which sub-sectors of precision agriculture hold the most promise for smallholder farmers in emerging markets. The solutions will center issues like irrigation, soil management, pest and disease management and animal protein given the applicability to smallholders and the availability of relevant emerging market examples.
We have learnt that:
- Neither a ‘winning’ measurement tool nor a ‘winner takes all’ super app are likely to emerge.
Mercy Corps Ventures consulted experts in precision agriculture to wager on the future possibilities of remote sensing. In particular if it would evolve to reliably measure and predict smallholder farm production potential. Or whether in-field hardware to measure soil moisture, NPK (nitrogen, phosphorus, and potassium) etc. will become affordable enough to be adopted by smallholder farmers. The consensus was clear: satellite imagery won’t reach the accuracy level of sensors and the increased yield benefit of sensors doesn’t outweigh their costs for smallholder farmers. The companies that are on the forefront of developing agricultural knowledge graphs rely on both sources of information to establish relationships and develop hyper-local insights and recommendations.
Furthermore, it is unlikely that a single company will be able to provide the machine learning sophistication, processing power and data quality needed to offer precision agriculture recommendations across all value chains and geographies. For the foreseeable future, the market will continue to be characterized by regional and/or value chain specific solutions.
2. Integrated solutions are the North Star.
Information sources are currently fragmented and delivered through multiple service providers, resulting in unclear or conflicting recommendations. In order for solutions to move beyond diagnosis at a sub-farm level, the integration of multiple remote and in-field data sources powered by AI / machine learning.
These recommendations should be accessed through a digital advisory platform to improve real-time uptake, and deliver visible on-farm results.
For optimal performance, advisory services should consider bundle deliveries using farm management software, input and output marketplaces and digital financial services as a user-friendly ‘one stop shop’ to maximize impact.
3. The horticulture and animal protein sectors are most likely to benefit in the Global South while innovations in the Global North prioritize field crops.
High-value and more price-stable agricultural goods are the most likely to reduce the cost of precision agriculture technologies for smallholder farmers in the Global South (GSMA 2022, UNDP 2021). Meanwhile, given the composition of agricultural production in the Global North, innovators are choosing to focus on field crops (soy, corn, wheat) as they gather data and refine their models to accurately predict yields and determine appropriate growing conditions on diverse terrain. This difference in focus could potentially hinder the ability to transfer technologies from the Global North to the Global South. However, it provides more opportunities to grow locally-developed solutions in the Global South.
In summary, precision agriculture holds great potential to address some of the most pressing climate challenges in high, low and middle income countries. Mercy Corps Ventures is excited to have explored and to continue promoting the possibilities of this innovation.
Explore our deck here to learn more about the trends and technologies, trends and opportunities for developments in irrigation, soil management, pest and disease management and animal protein.
