Breaking Down Farmer Adoption Dilemma With Agtech

Current macroeconomic conditions, consumer focus on sustainability, regulations, and changing business models could further drive farmers’ adoption of agtech products if their concerns are addressed.

On-farm profitability has recently increased, and there have been significant expenditures over the past ten years, so there is a high level of openness to innovation, but adoption is gradual. On the one hand, the majority of farmers have profited from the macroeconomic tailwinds of the global commodity cycles; in many regions, on-farm income peaked and was forecast to stay near record highs in 2022.

On-farm profitability has recently increased, and there have been significant expenditures over the past ten years. There is a high openness to innovation, but adoption is gradual. On the other hand, farmers are facing a slew of difficulties due to rising inflationary pressures, including the need to carefully monitor weather forecasts, be alert to changes in the regulatory environment, or adapt to changing consumer preferences, rising costs from inflation, and erratic supply chains.

In the meantime, upstream agriculture, food technology, and outside funding have been flooding to the tune of roughly USD 18.2 billion since 2021. With this infusion of cash, the agricultural sector has access to a wide range of technical options. Agtech start-ups that cater to farmers have multiplied during the past ten years. Now, farmers may take advantage of the hardware, software, and service-based solutions that claim to boost productivity, alleviate problems, and reduce their environmental impact.

Agtech start-ups are experiencing difficulties in scaling even with the availability of need-driven finance. A smaller number of agtech startups are receiving later-stage investment or going public, indicating that they lack the necessary client base to shift into these funding rounds. The use of agtech solutions is already enhancing farm productivity by reducing operating costs and reducing resource consumption.

About 61 per cent of European farmers use or intend to use an agtech product in the next two years, making them the leaders in agtech adoption worldwide. Farmers in Europe express complexity in setup and use as a further significant obstacle to adoption, although being most concerned about high costs (48 per cent).

Farm-management software, which has a 21 per cent adoption rate among farmers, is the most popular agtech submarket, followed closely by hardware for remote sensing and precision agriculture, which has a 15 per cent adoption rate. Automation, robotics, and sustainability-related technology, which includes software and hardware that analyse carbon emissions and sequestration and monitor and improve irrigation systems, lag in adoption at about five per cent. The adoption of farm management software, precision agriculture hardware, remote sensing solutions, or sustainability-related technologies is anticipated to increase by about four per cent among farmers over the next two years, whereas the adoption of additional automation and robotics is anticipated to increase by about 2.5 per cent over that same period.

Five trends emerge across six farmer-facing agtech submarkets. While some trends crosscut across agtech submarkets, others have a disproportionate impact: Farmers are open to innovation, even though agtech adoption is slow. Precision agriculture is a crucial enabler of transitioning toward more sustainable, less resource-intensive food systems. Some agtech submarkets are likely to see growth accelerated by regulation. As business models evolve toward integrated solutions, integrated solutions become more prevalent. The access to data is limited, which presents an opportunity to improve product personalisation.

Farmers are becoming increasingly receptive to agtech developments as potential instruments to maximise their profits and reduce their financial risk as a result of changing demands. In a global poll, 39 per cent of farmers said they now use or intend to utilise at least one agtech product within the next two years. Nearly a quarter (22 per cent) of farmers questioned plans to alter their purchase and vendor tactics. In contrast, 43 per cent of farmers are interested in experimenting with new goods to increase production.

With 67 per cent of farmers reporting increased input prices as one of their top three concerns for profitability over the next two years, rising input prices are currently the biggest concern for farmers. Their problem is well-founded since farmers worldwide say that the cost of their inputs has increased by 80 per cent to 250 per cent in the last several years. Although farmers are currently producing food at high sales prices, future profitability could be more predictable due to the instability of the commodity markets and rising input costs. The time lag between input production, acquisition, and use implies that a decline in commodity prices does not instantly match a drop in input prices, placing further pressure on farmers' bottom lines, as demonstrated by previous economic cycles. To counteract this uncertainty, farmers are motivated to maximise their yields, which presents a chance to integrate agtech advancements into their farming practices.

Agribusiness technology is more likely to be implemented by farms with more than 5,000 acres (81 per cent) than by farms with 2,000 to 5,000 acres (76 per cent) and by farms with fewer than 2,000 acres (36 per cent).

The current situation is expected to encourage farmers to concentrate on integrating two main submarkets: farm-management software systems and precision-agriculture hardware solutions, instead of focusing on adopting individual agtech solutions. Together, these two developments optimise fertiliser and pesticides and customise planting rates. Farm management software systems are up-and-coming as they can provide farmers with the knowledge necessary to assess and control how they utilise vast value pools, including inputs like fertilisers, seeds, and pesticides. When hardware for precision agriculture is used for input applications in the field, these benefits are increased. For instance, farmers have more control over preventing site-specific overapplication by optimising input application through variable rate applications, especially when combined with cutting-edge guiding systems and automatic shutoffs.