Part 1: Navigating the Next Decade of AgTech
As I started writing about the next decade in farming it became apparent this was going to be long, so instead of an incredibly long post, I decided to break it up into several posts. Below is Part 1.
As we start out the new decade, it’s often fun to look back on what has been accomplished, what has changed and where we have came from. It’s amazing what can be accomplished and how a business and industry can change in just 10 years. For me, the last decade was my first in the agriculture industry and from my first day scouting a field to sitting here today it’s crazy what has progressed in the industry since 2010: digital becoming ubiquitous, consolidation of farms and agribusinesses, machinery capabilities, use patterns of products like seed treatment and fungicides, to the beginning of digital connectedness. While it’s great to reflect on where we have came from, what’s really exciting to consider is where we are headed and what is going to be driving that.
Stanford computer scientist Roy Amara once said “We over estimate the impact of technology in the short run and under estimate it in the long run”. Much of Amara’s comment can be attributed to Moore’s Law, essentially the doubling of computer processing technology every ~24 months. When we apply this take over the course of a decade, it can be a lot of fun to extrapolate what might happen and what’s possible. With this in mind I thought it would be more compelling to look beyond 2020 and take advantage of it being a new decade to look at what will be influencing agriculture and the implications of that over the next 10 years. The 2010’s were the digital installment period in farming, while the 2020’s will be the turning point for uptake.
To start I am going to discuss some of the macro trends that I view as having an influence on the next 10 years of farming in North America, as well as some predictions and commentary around the byproduct of these trends.
Before getting into some more of the specific changes we will see, here are some of the macro-trends that will influence and continue to shape agriculture and farming in the coming decade on a more general basis:
We will continue to see consolidation in two ways: farms and within agribusinesses including ag technology companies, retails and product manufacturers.
The trends towards scale is something that will continually occur in the coming decade. Farms want to distribute risk and costs across more acres to achieve economies of scale and retails, tech companies and product manufacturers want to vertically integrate to enhance product margins throughout the supply chain, have a full stack product offering, leverage data in more robust ways and exert more influence in the market place. This will mean unique business models in the market place, more specialized offerings for farmers and product offerings with the farmer and consumer in mind.
The consolidation from a farm perspective will give increasing rise to an ever more business savvy farmer with laser like focus on the finances and operational efficiencies within their farm business. We will see the start of a trend that increasingly emphasizes a mindset of adaptability, innovation and data analysis in flourishing operations and a significant decrease in those with a complacent mindset focusing on what has worked in the past.
Food Company Influence and Traceability/Sustainability
We will continue to hear about traceability and sustainability initiatives, hearing more in the coming decade than in the past 10 years. This will be driven by consumer demand, but will also be driven by food company initiatives and government mandates. Like it or not, farming is at the center of many hot topics like the climate change discussion and will continue to be for years to come. Part of the sustainability and traceability initiatives within agriculture will be simply proving we are using technology and practices that are environmentally friendly; this is where traceability initiatives will come in.
General Mills, Anheuser Busch and Tyson are just a few examples of companies with commitments to sustainability initiatives in the decade to come and we will see more of this. Organizations in agriculture and beyond will increasingly be rated on their “sustainability” initiatives and environmental impact.
In agriculture we often discuss how consumer demand drives the farm gate; While true, I think we need to do a better job acknowledging how much influence the food companies and grocery retails have when it comes to food. They have incentive to differentiate and sell higher value products, so even though there is a definitive thread starting with the consumer, the trends get amplified by food companies through their significant marketing spend and consumer touch points. This trend will begin to shift other components of farming like quality parameters and specs on the grain, where eventually towards the end of the decade in higher value crops we will see nutrient density assessed vs. historical emphasis on visual specs. This will be from emphasis around the food link to health and well being. These new spec requirements around “sustainable” or “traceable” grains won’t necessarily yield more money per unit for executing on, but will become the standard in order to sell the grains in the future, meaning those with the ability to measure, track and manage their production and crop will have an upper hand as those trends take off further.
Reaching and influencing the consumer is difficult as there is such fragmentation (high number), a real benefit will come form those organizations working with the food companies (lower number, high influence).
There is a plethora of technology out there: artificial intelligence, edge computing, quantum computing, augmented reality, sensor tech, blockchain, 5G and other digital tools. Plus, we will identify other technology in the coming decade. For example, in 2009 machine learning was hardly known/talked about.
All of this technology will shape the next decade of agriculture because of trends like consumer demands for transparency (sustainability and traceability), consolidation, labour shortages, farm profitability and various consideration like climate change, driving the uptake and use of technology. This will also drive unique business models that we haven’t seen in the past, trending along the lines of increased de-risking crop input/insurance products as well as more “XYZ as a service” business models. Tech will drive the physical and digital world of agriculture in the coming decade and beyond. The best way I have heard to sum this up is from Rob Saik, calling it the “convergence” of technology that will enable this technology to be used effectively.
The expectation has been that technology would come in and make life easier and more efficient for the farmer. The reality is that agtech is hard and it takes time and effort from the farmer and anyone supporting the farmer to see the benefits. Just like technology in ANY OTHER industry, it has massive promise, but it needs time to take hold and become comfortable for the beneficiaries; what’s required for it to become standard. There was a time when airplanes were deemed to never be useful on a commercial basis, same with TV, and same with successful products in our own industry like Lumiderm on canola seed; a practice I said in 2014 wouldn't be on more than 10% of the canola acres per year and as of 2019, my best estimates are that it gets treated on roughly ~25% of the canola seed that goes down in western Canada. The point? It can be tough to see the day when technology hits mass scale, but all useful technology reaches a tipping point and I believe later on this decade is when we will reach a significant tipping point, or “convergence” of all of this technology.
In 2013 there was approx. $1.5B USD invested in the Farm Tech (upstream, farmer used portion of “agtech”) space and that investment amount increased to $6.9B USD in 2018, 360% growth in 5 years. While the growth may not necessarily be 360% over the next decade the trend in terms of investment in both the venture world and the world of corporate big ag will continue to grow in absolute dollars. This reinforces the influence of technology in agriculture and farming out to 2030 and beyond.
While there are many other trends such as geopolitical issues, North American government and political dynamics, profitability at the farm gate and more, the 3 macro trends listed above I feel will have the most consistent, lasting impact on agriculture in North America.
In covering some of the macro trends, here are some of the broad predictions and happenings that I believe we will see in the coming decade because of these macro trends and the happenings within the industry. Some of these consistent with conventions, some more on the contrarian end of the spectrum.
Implications Due to Macro Trends
While there are MANY implications that one could draw from some of the macro trends I have went through, and those that I did not acknowledge, the real value in looking at trends is identifying how those impact micro trends and gleaning specific predictions or insights from those trends. Below and in the following posts I will go into some of the more specific implications we will see over the coming decade.
Jobs-To-Be-Done Theory Will Be More Actively Applied to Agriculture
Jobs-to-be-Done Theory is best defined as a group of principles that explain how to make marketing more effective and innovation more predictable by focusing on the customer’s “job-to-be-done” (need being completed). The theory is based on the notion that people buy products and services to get a “job” done. The theory goes on to say that by understanding in detail what that “job” is, companies are far more likely to create and market solutions that will win in the marketplace
While most companies innovate by trying to improve their existing products (creating a better quarter-inch drill), the innovation process is dramatically improved by instead trying to find better ways to create a quarter-inch hole (to get the job done). The implication of this thinking is profound: stop studying the product and instead study the job that people are trying to get done. By making the job, rather than the product or the customer, the unit of analysis, it is possible for companies to achieve better results and for farmers to thrive based on this.
In agtech there is often the discussion about starting with a problem, then creating a solution vs. coming up with a solution then identifying a problem. While the data shows there is some truth to this, I believe many strong technologies out there are being written off due to short termism. The thing is, many technologies that are being deployed do solve some problem, or increase information to make a better decision, however, they haven’t been considered on a long enough time horizon or from the psychology of the farmer today. In the next decade now that we have an array of different technologies to choose from, it will be about optimizing the experience for the farmer from the perspective of the farmer, not the perspective of the company. In other words, it won’t be “What problem are farmers facing?” It will be “What problem do farmers face? How does this problem permeate throughout their operation? How can our product offer a solution? How do we make this solution work within their current situation? Who else can my organization collaborate with to ensure this works effectively for the farmer?”. This will enable companies to better showcase their product to the target customer vs. what today is more of a shot gun approach. This will increase the experience farmers have with ag technology, increase adoption as well as increase the ROI that farmers see from utilizing various types of tech.
Stay tuned for Part 2 where I talk about the future of soil sampling and the industry becoming increasingly tech savvy.