Food may become the currency of the future. The Food and Agriculture Organization of the United Nations (FAO) predicts the global population to increase to 9.15 billion by 2050. This means that we must increase worldwide food production by about 65%.
We are going to take a look at the Indian scenario and what we need to do to stay ahead of what could potentially become a global crisis.
Scenario in India
Agriculture's share in the economic GDP may be below 15 per cent. While the overall share in GDP is steadily reducing, almost 50% of the country is engaged and employed by agriculture. This is almost the inverse of the services sector where around a share of 26% of employment results in over 50% of GDP contribution.
This graphic in a Deloitte report captures the essence of a worrying economic-demographic imbalance.
What does this Mean?
An oversized workforce contributes to a very small share of the GDP. The challenge will be to increase food production even while trying to retain employment in agriculture. Agricultural productivity has not increased since a very long time. This coupled with the fact that the next generation of farmers prefer to migrate to urban areas for better opportunities; we are looking at some serious macro issues.
That means we need to disrupt. And disrupt fast!
But where will these innovations come from? They should first solve the immediate needs and then have long-term solutions. I imagine two types of disruptions – for the farmer and for the ecosystem.
Technology in Agriculture
Currently, we are in the nascent phase of technology with Indian farmers.
According to a report, “Through the use of technology, each farmer is able to feed 155 people today, compared to 1940, when one farmer could feed only 19 people”
The technologies we are talking about are motorised equipment, modified housing for animals, and biotechnology to name a few.
The government has set up a number of Farm Machinery Training and Testing Institutes to train farmers on the operation and maintenance of agricultural equipment.
India is the largest manufacturer of tractors in the world, accounting for about one-third of global production.
Growing sales of tractors and tillers in India reflects the increasing level of mechanisation in farming; over FY07-14, tractor sales rose at a CAGR of 8.7 per cent.
But that is not the full extent, we are now busy wondering if they have smartphones and Internet and whether to use WhatsApp or SMS to reach them.
Again, can that be all? While developments in agriculture (biology), planting techniques, GMO will have an impact on the future of agriculture, we believe that there will be greater impact in innovation that improves the working of the agriculture ecosystem. We are seeing some of these disruptions, while others, have not started and have potentials only.
Disruptions Industry Reorganisation
Vertical v/s horizontal growth – when any industry grows, it brings with expertise in different aspects of the business. For example, in the textile industry all the products are produced in the same factory and brand labels are simply appended before packaging. Similarly, we think that a lot of specialised companies are going to prevail with expertise in their various fields such as manufacturing, grading, and marketing.
Globalisation
On a recent visit to an agriculture implements conference, we encountered almost a 100 Chinese manufacturers/promoters of agriculture equipments looking to expand their business in India. With Alibaba also seeing India as the second-biggest market after China, it would not be surprising if the interest also moves to agriculture.
Of course this works both ways, Solvay (the Belgium-based manufacturer of specialty chemicals) has launched a ‘Sustainable Guar Initiative’ which aims to empower countless farmers with the tools and knowledge to cultivate the crop through good agricultural practices, resulting in more continuous, high-yield production. They have joined hands with L’Oreal in a scalable three-year project to teach and promote sustainable agricultural practices among 1,500 guar bean farmers across 10 villages in the desert region of Bikaner, Rajasthan.
Changing Producers and Consumers Producers
The producers i.e. farmers now have very different expectations from their business. They now understand the importance of the work they are doing and the government also acknowledges the issues faced by them. Instead of giving bailouts only, even they want to provide long-term solutions.
They are promoting the development of a common national market for agriculture commodities. Online platforms will be the preferred medium for the project which has Rs 200 crore funding from the Centre. They envision this to be implemented by 2016-17.
And if executed well, this might just be one of the biggest disruptions by the government.
On the side of agri-inputs, farmers now have very specific demands and no local, cheap products work. The shift in mindset comes from viewing themselves as entrepreneurs as opposed to victims. They are embracing technology, even if they do not own a smartphone the local influencer’s phone is requested for to access to information. The averseness to change is slowly diminishing.
Consumers
Food technology startups are evolving the way we view our food and food products – whether we want to buy organic from farmers directly, the FSSAI licences are in place or reading labels to see the percentage of trans fats. Accordingly, the industry has to respond with appropriate service standards – the promise is too high and the pie is too big. The procurement of outputs has become a challenge given the unpredictable nature of agriculture. Say you have contracted a farmer to produce 1,000 tonne of lettuce and a pest attack destroys only the outer leaf, the rest of the lettuce is still usable. How will you manage the balance between the quality standards and the actual fulfilment of a demand? The question will be between lost business or a probable dissatisfied customer who could then put up a picture on social media telling the world about one issue.
Big Data The current buzzword
‘Big Data’ is on our minds for a reason.
The community not only needs to build its own Big Data and data management infrastructures, but also to seek effective analytical techniques to extract information from the large volume of agricultural unstructured data.
Let’s take the example of SWIIM, a company that was recently named a partner for the White House’s Climate Initiative, which was developing the Airbnb for H20. Its hardware/software solution enables farmers to analyse every drop of water on their property, optimise its uses, and then rent out their surplus water needs to thirsty municipalities and industrials.
A description of a modern American farm is thus: A self-driving tractor goes across the field with cameras using GPS signals accurate to less than inch of error, picking up data from the soil and seeds and then transmitting it back to the monitoring centre with a screen for everything right from autosteer, the planting, accurate maps that allow for precise adjustments as the seeds go into the ground amongst others. So what does it promise? Optimising planting down to the yard, identify disease outbreaks immediately and creating better seeds and hybrids.
Moving closer to home, Chitale Dairy Farm is using RFID to do what is called ‘precision dairy farming.’
Chitale Dairy has deployed a “cows-to-cloud” strategy to increase its milk yield to sell more than its current 60 million litre per year.
For their dairy farm and smaller farms in Bhilwadi, they place RFID tags in cows’ ears to receive information, which the farmers access via their mobile devices via the cloud.
The information ranges from whether the animals need vaccinations or deworming or if they are in heat. With this information, the dairy sends a to-do list to the farmers based on the requirements.
Endless Possibilities
Of course many questions remain about the ownership of the data, security of services and who profits off the analytics?
Existing Disruptions (Increase in Efficiencies)
Moving on to where innovation is going to scale up rapidly in the foreseeable future.
Ecommerce (Input & Output)
We are all aware about the agriculture produce wastage condition in the country. If we are simply able to reduce the wastage, we are looking at much lower per kilo rates of our daily fruits, vegetables and grains. A lot of companies are now looking at providing produce directly from the farmer, we predict a lot of bigger players entering this zone as it may be a tougher landscape for startups without a major backing to be able to sustain the unpredictable nature of the industry.
The lesser known problem is about agri-inputs (such as seeds, fertilisers, pesticides, implements); these are basically anything that a farmer needs for the production of his crop. Think of his farm as a factory, without good raw materials at the required time, the quality of output will suffer. Companies like ours (Desta Mart) did notice the gap and on further investigation realised that while this is extremely complex, better quality, variety and brands at the right price are the need of the farmers even in the remotest of areas. Of course a cookie cutter ecommerce strategy cannot work here, an offline element does come into play while also abiding by government regulations since these products by themselves are heavily regulated. There will be also be a trend towards assisted buying for specialised products in the rural and semi-urban areas.
When we say ecommerce, of course, it raises questions about the other aspects of it, most importantly, payment methodology, logistics, supply chain and in the case of outputs specialised warehousing & cold chains
Payments
Nearly 40% of Indians, or some 480 million people, have little or no access to financial services. When we go towards rural India, the percentage is much lower. It was only a matter of time before we were going to see the private entities innovating enough so that even the government encouraged payment banks. But that also requires a little basic knowledge and understanding. Cash-on-delivery, while it is seemingly convenient for the consumers creates complications for the suppliers. There is also a trend towards business correspondents for payment collections. Basically, these companies hire local-level managers who take care of all payment collection from the pick-up point of the consumers and ensure it reaches safely.
A quick glance at this graphic from GrowthPraxis is enough to see the extent of innovation in the Indian money startups phase.
Logistics
While there are rural logistics and Hyperlocal that are changing this landscape and exact business models are established, we can look at how efficiencies can be built up.
A lot of brands and manufacturers across industries want to reach the consumers directly from the origin of the demand generation. This means a lot of tracking and control is required.
Now, usually as it turns out, the same logistics company does not handle end-to-end transportation from the factory to the end-consumer which creates a lot of breaks in communication and some blind spots. Yes, GPS systems on the transportation vehicles whether it is ships, trucks, planes or a small multi-utility vehicle is one step. The handover from one logistics handler to the next needs to be seamless. The solution could lie in an integrated system that automatically feeds data into the system that can be viewed by any person in the value chain at the click of a mouse. Logistics do this only up to the extent of their own systems, APIs will be created so that they can speak to each other.
With Big Data, route planning will be done more efficiently so as to reduce reverse logistics costs. This can also be used to monitor fuel pilferages, traffic situations, sudden changes in weather conditions and predicting close-to-exact delivery times at a reduced cost.
Many organisations are creating specific logistics solutions – for rural, India Post with its massive on-ground network can create some big waves with efficient adoption of latest technologies. For Hyperlocal, we are already seeing a flood of startups which are solving very specific needs.
Our take
Imagine a day farming going farmer-less. Sounds ludicrous? So did, flying a plane in the 1800s. But this is not even science fiction.
Diners in Japan were recently surprised to hear that their rocket, radish and baby spinach are being cultivated locally at a licensed indoor vegetable farm. Any guesses who is cultivating them? Panasonic. The electronics giant better known for televisions.
As it turns out, they are not the only company showcasing their vertical farming technology, Sony, Fujitsu and Toshiba are producing lettuce across Japan utilising erstwhile clean-room facilities at semi-conductor plants and Sharp is cultivating strawberries in Dubai. The technology in question is hydroponics which is soil-less and uses specialised LED lighting for photosynthesis.
While drones are a controversial subject currently, the implications to agriculture are manifold. For starters, it will reduce over-dependence on fertilisers. They can use flight-planning software for evaluation of crop conditions thus increasing yield while reducing usage of external products. Dubai is planning to scaleup agriculture drone technology usage in a bid to become self-sufficient in food security by 2030.
When we are able to use this delivery to remote areas, this will potentially be a game-changer for the industry.
This is a fascinating space and has not been at the forefront of innovation. But the time has come.
We at Desta are trying to be a part of the disruption not only in terms of farmer knowledge (Desta Talk) through our information dissemination via portal, WhatsApp, Facebook and others but also Desta Mart where we endeavour to be able to provide the relevant products at the right time. We are also delving deep into marketing services & logistics support for our sellers who have to constantly find new ways of reaching the ever-evolving market. The combination of Desta Talk & Desta Mart is simply the beginning of a seamless ecosystem which will be at the forefront of innovative solutions and community building for the agriculture industry.
