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Wholesale Banking

How data-driven analytics is powering agribusiness for the big task ahead: reducing food insecurity while the population spikes.

Even before the rise of a global pandemic, food insecurity affected 2 billion of the world’s population.

So it was all the more devastating to learn, in the spring of 2020, that food supply-chain disruptions caused waste scenarios like dairy farmers to dump thousands of gallons of milk before it could be processed or pasteurized, let alone reach grocery-store shelves. A small comfort, but it’s possible to pinpoint precisely where the supply chain broke, washing all that perfectly good milk down the drain.

One major factor was school closures. With students learning at home, school districts no longer needed bulk orders of small cartons of milk designed for a child-sized grip. Packagers of those individual-serving cartons didn’t have the workflows to easily shift to consumer-friendly jugs instead. Meanwhile, dairy farms’ cows continued producing, though the school contracts they serviced were on pause. No area of food production went untouched. As more and more restaurants were forced to close, meat-based versions of this scenario played out in cattle farming. High-end, pricier cuts of meat that traditionally would have been consumed by restaurant diners were re-routed to supermarkets and often ground in order to stretch farther and feed families, at lower prices that meant producers didn’t see their usual returns.

“What we’ve seen to an extreme degree is how one change in behaviour really flows all the way through the value chain,” says Deborah Perkins, global head of food and agribusiness for ING. “It means that growers have to respond, processors have to respond, and retailers have to respond. One intractable supply-chain challenge is the implausibility of the “pivot” — a business-world buzzword often easier said than done. A more useful p-word, as agribusiness experts like Perkins see it, is “precision.” A precise view into the supply chain can isolate and address vulnerabilities. And, perhaps more importantly in the long term, precision carries the power to focus food producer efforts for yields that are efficient, scalable, sustainable, and resilient in the face of a changing climate.

What is precision agriculture?

It’s a lot to chew on. First, what is precision agriculture and why is it important?

It’s helpful to think of the practices known as precision agriculture as the farming equivalent of data-and-analytics-powered decision-making in the business world: the practice of collecting and measuring inputs to get the most out of soil, seeds, water, fertilizer, weather, and storage to eliminate waste and maximize yield. If it sounds like these practices are more accessible in developing countries, that would be an accurate view. This imbalance of precision is reflected in root causes of worldwide food wastage.

Can precision agriculture ease supply-chain pressures?

The United Nations estimates that one-third of food produced globally for human consumption is lost or wasted every year. Half of all fruit and vegetables grown go uneaten. In industrialized countries, this is often due to retail-level prioritization of visually appealing produce, as well as consumer waste. In developing countries, deficiencies in cooling and storage facilities are often to blame. Economically this amounts to $680 billion in losses for industrialized countries, and $310 billion for developing countries. (Source: UN) Also per the UN, the world’s population will grow to 9.7 billion by 2050, requiring global food production to more than double, unless major efficiencies are found to mitigate waste. To achieve that, Perkins says, food growing, storage, and distribution must reach higher levels of efficiency and precision than have been seen even in the world’s medium- and high-income countries, where technological innovation has historically been more accessible. And access to data — and to the tools for collecting and analysing it — must grow in the developing world. On a parallel path, the complexities of food reaching consumers is already on track to becoming more precise. As shoppers awakened to the environmental and ethical implications of favouring nearby suppliers, the market for locally sourced food doubled between 2014 and 2019, according to Markets Insider. Along with evolving customer attitudes, “the pandemic has made companies profoundly aware of how global their supply chains were,” Perkins says. “When they couldn’t get a critical piece of equipment for some of their key inputs, they realized the more efficient and disruption-proof move was to build a more localized supply chain wherever possible.”

Feeding on technology

Precision agriculture has its roots in the development of Global Positioning Technology, or GPS. Once GPS satellites reached critical mass in the 1980s, farmers gained the ability to spatially chart where and why crops performed best. And while many people still associate technology in farming with the need to close labour-shortage gaps, the artificial intelligence at work on modern farms is increasingly being used to make high-level decisions. “In the livestock sector, we’re seeing an increased focus on automation like the use of robots for milking cows and in processing plants in response to labour supply issues,” says Perkins. “But in a broader sense we’re seeing technical innovations that focus on sustainability as well as profitability.” These include research and development of feed additives that reduce methane emissions while improving feed conversion ratios, which are crucial for beef and dairy farmers’ margins, Perkins adds.

In the cropping sector, “advancements in plant breeding are key to adapting to the changing environment,” says Perkins. “Satellites, drones, and sensors are also being introduced to provide data that can be analysed to make decisions about fertilizer, pesticides, and anything that can help farmers manage their properties better.” But, given the economic uncertainties presented by 2020, it’s not all systems go for emerging tech on the farm.

“Some innovations — self-driving tractors, for example — have slowed a little because returns for growers who would be implementing that technology have been thinner,” Perkins says. “At the same time, we’re seeing a lot of companies understand just how important these types of innovations are, and create funds and initiatives to support it,” she adds. “If the innovation relates to sustainability, then there is special financing like sustainable improvement loans and green bonds that could be available.”

Combating climate imprecision

In many ways, an alarmingly volatile climate forces farmers to be much more precise.

“Climate change is increasing temperatures and altering rainfall patterns, which has an impact on what can be grown where, and in some cases shifts the growing season for crops,” Perkins says. In response, she cites the development of new crop varieties suited to altered growing seasons, and innovations in grain storage to prevent spoilage and contamination. In the agtech space, new microbes are being developed to enable staple crops like wheat and corn to extract nitrogen from the atmosphere, which reduces reliance on man-made fertilizer. And the cultivation of year-round ground cover is reducing erosion while buffers along rivers and lakes protects water quality.

“Agriculture is a significant user of water, so there will continue to be scrutiny on what is being done to improve our water-use efficiency to ensure there is enough water available for others,” Perkins says. This, she says, is where precision agriculture intersects with circularity and conservation of resources. “In processing plants, we’re seeing a lot of attention to taking water that’s gone through the plant and then reusing it for other purposes, therefore reducing overall usage.” All this agricultural optimization — either through technology, land management, or lab-grown ingenuity — gives Perkins confidence in sector recovery and new growth. “There’s reason to be optimistic as we see farmers strive to produce more from less land and animals,” she says. “A new focus on retaining, and where necessary regenerating, natural habitats will lead to biodiversity and ultimately our ability to capture and store carbon and keep it out of the atmosphere. “Like anything, to be successful this needs to be a collaborative approach: All players along the value chain have to be aligned.”

This content was created by Insider Studios (Business Insider) with ING.