equities
How is precision agriculture transforming food systems?
The transition to new food systems will disrupt existing profit pools across industries and create new ones. This transformation is anticipated to potentially generate annual revenues of USD 1.5 trillion globally by 20301.
Precision agriculture provides opportunities to reform food systems. The digital revolution is advancing agricultural technology by using data and technology to improve operations, such as efficient fertiliser and pesticide application, and livestock management. It is not one technology but a toolkit from which farmers choose what they need.
This is the first instalment of a three-part series on sustainable agricultural practices and how they are transforming our food systems. Precision agriculture is aligned with the enabling solutions theme in our New Food Systems strategy.
FIG 1. Three investment themes drive our LOIM New Food Systems strategy
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| Sustainable food production |
| Companies which produce biological and synthetic inputs, and food products |
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| Enabling solutions |
| Companies which provide specialised enabling products and services along the value chain |
|
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| Sustainable food consumption |
| Consumer-facing companies which manufacture, retail and serve food |
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Source: LOIM. For illustrative purposes only.
Feeding more with less: a sustainability challenge
Industrial agriculture destroys biodiversity by converting natural habitats to intensely managed systems, creating monocultural, abiotic spaces that rely on the harmful agrochemicals which fragment natural ecosystems. This degrades nature and the ecosystem services that agriculture depends on.
Inputs. Agricultural inputs refer to materials deployed to improve yields, including pesticides and other agrochemicals. The overuse of these inputs can damage water quality and soil health, threatening future yields as well as contributing to biodiversity loss. Excess nitrogen and phosphorous, for example, leaches into freshwater sources, causing eutrophication that costs up to USD 2.2 billion per year in the US.
Land use. Our current food system is built on an inefficient, intermediated model. Almost 80% of all agricultural land is used to produce meat and dairy products. In exchange, this returns just 20% of global calories and 37% of protein. Farmed animal products are responsible for 83% of agricultural land use, 57% of water pollution, and 56% of air pollution.
Carbon emissions. Food systems are currently responsible for 20-30% of global greenhouse gas emissions. Dramatically reducing the environmental footprint of food production is essential to sustainably meet the nutritional needs of a growing population.
Precision agriculture: a sustainability solution
‘Sustainable intensification’ can improve food systems: fewer inputs are used to grow more food, on smaller land areas, and with a lower carbon footprint. Precision-agriculture solutions can be split into three segments: hardware, software and services.
Hardware. Advanced precision-agriculture technologies can help farmers apply the optimal amounts of inputs for each crop. Automation and control systems, sensing and monitoring devices, and drones are increasingly common, as are mobile devices, cameras, antennas, and display hardware. Drones are controlled remotely and can analyse fields thoroughly, conducting complex multispectral, thermal, and hyperspectral soil analyses. The global agriculture robots market was valued at USD 7.07 bn in 2022, and is expected to reach USD 24 bn by 2030, with a CAGR of 15.5% from 2023 to 2030 as a result of an increase in crop yields.
Software. Technological and commercial developments have made cloud computing an affordable and scalable platform technology. Cloud computing is particularly beneficial for decision support in precision agriculture for specialty crops. It provides the scalability necessary for handling large amounts of data in real time. Data are collected from a range of supporting hardware sources, such as soil moisture or nitrogen sensors, and used to optimise conditions for specific crops. Cloud computing focuses on shared networks, servers, and storage devices, and tends to reduce some of the high costs that can be associated with the maintenance of hardware and software infrastructure.
Services. Agricultural service providers offer a wide range of auditing, training and consulting services. The most common services on offer are intensive soil sampling, mapping, and variable rate applications of fertilisers. Reuters Market Light’s (RML’s) decision-support technology uses a mobile app to provide farmers with personalised agricultural data analytics for the entire growing cycle, from pre-sowing to post-harvest. RML’s solution provides information on more than 450 crop varieties and more than 1,300 markets. Farmers can receive support in their local language from call centres and remote intervention by SMS, voice and mobile applications. Producers using this mobile service have seen income improvements estimated at between 8% and 25%, according to the World Economic Forum.
Aligned companies
Companies are creating new profit pools by developing or providing solutions that drive the growth of precision agriculture. Below are examples of specialist companies in these industries. They are provided as information only and are not necessarily held in our portfolio or represent investment recommendations.
Company2 |
Solution |
| John Deere | An US manufacturer of agricultural machinery. Specifically, the company offers guidance solutions, automation systems, and services related to site-specific farming. |
| CNH | An US company that designs, produces, and sells agricultural machinery and construction equipment. Precision technologies supplied by CNH include crop management, and yield monitoring systems. |
| Corteva | An US agricultural chemical and seed company. Corteva provides digital crop and land management systems. |
Sources
1 LOIM research analysis; based on FOLU (2019) Growing Better: Ten Critical Transitions to Transform Food and Land Use.
2 Any reference to a specific company or security does not constitute a recommendation to buy, sell, hold or directly invest in the company or securities. It should not be assumed that the recommendations made in the future will be profitable or will equal the performance of the securities discussed in this document.
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