We are at a momentous time in history with technology redefining how we address the most pressing agricultural challenges of the 21st century. Governments and businesses are putting the onus upon themselves to restructure a system that has often been affected by inefficiencies, and wastage of produce.
According to a report by Oliver Wyman launched during the World Government Summit in 2018, the rising global population will require 70% more food by the year 2050. India, being the second-most populous country and a net exporter of agricultural produce, is yet to find large-scale solutions to such challenges alongside the prevailing ones.
Be it receding water tables, shrinking of arable land, or improving farmers’ access to markets across the country, a lot remains to be resolved. Nevertheless, the nation is looking forward to its burgeoning agritech ecosystem for addressing concerns around access, affordability, and reliability.
For industry players, a natural consequence of these trends is the acceleration of tech-enabled solutions covering all aspects of farming. Starting from soil preparation for the next crop to delivering the agricultural produce to the retailer, we are witnessing the best practices coming to the fore due to the integration of technology. Several agritech firms have mushroomed in the past few years backed by successful pilots, and they address issues as per their expertise and niches.
As of now, interventions are taking place to improve yield, determine climate effects, and refine post-harvest procedures. Some of them are on the fronts of warehouse management, securitization of commodities, and agri-trade financing. However, apprehensions continue to persist on the long-term efficacy and scale of operation, considering that we are fraught with archaic challenges related to landholding and regulatory roadblocks.
Nevertheless, if the developments on the ground are any indication of things to come, agritech startups are at the cusp of resolving major concerns and hurdles within the sector.
How Innovation in pre-harvesting techniques improves production?
Today, the traditional farm preparations before a season’s crop are aided by insights from artificial intelligence (AI). It is helping increase the quantity of produce, quality, and the overall operational efficiency. In a time when climatic conditions are getting unpredictable – leading to flooding, pest infestation, and damage to crops, Indian farmers can avail maximum benefits with AI.
Through remote handling of devices, the need to traverse the land for supervision gets minimized, as it has become easier to identify crop areas that need attention and fixing. In addition to this, real-time insights from AI tools are helping predict an ideal time for sowing seeds, monitoring soil health over long durations, and harvesting faster with accuracy. Furthermore, state-of-the-art nanotech applications, soil & water sensors, and GPS technologies are proving to be effective in improving crop health and diagnosis wherever damages have occurred.
GPS navigation and GIS mapping are bringing useful outcomes through precision farming, and the advantages are self-explanatory. Advancements in monitoring techniques will be the future of pre-harvest practices, as it is helping with farm planning, field mapping, soil sampling, and guidance of farm equipment, to name a few.
Agri companies are also disrupting the space using agricultural robots and drones. They can speed up across-the-board processes and drive precision spraying of herbicides/insecticides on the weed-affected areas of the crop. It cuts down on excessive and improper usage of pesticides while addressing the issue of productivity and management of agricultural labor. It also leads to the reduction of fertilizer and chemical use, which could bring down spending further. This gives producers room to invest in other essentials simultaneously.
Skeptics argue that the leap in technology could disenfranchise farm laborers due to limited educational qualifications. Unfortunately, it is also coupled with a dearth of alternate employment opportunities in the sector. However, we already witnessed the utility of farm machines in improving agricultural functions in the last few decades.
Innovation, therefore, need not stop, and any new disruptions that technology brings could be strategized to help both the productivity and employability of farm laborers. By training and assisting farmworkers towards achieving better yield and innovation, the sector could explore newer avenues for jobs and business.
Strides made by agritech firms in improving post-harvesting processes
It is no secret that one of the biggest challenges faced by farmers concerns commodity pricing and market access. Following crop harvests, producers are often forced to deal with layers of regulatory constraints, middlemen, and bureaucratic red tape. It has had a crippling effect on the sale of produce, distribution, storage, and so forth, as supply chain practices have thus far been fragmented and operationalized in silos. More importantly, maintaining the quality of the produce is essential, as stakeholders seek to purchase commodities as per their usage and convenience.
In regard to accessibility of loans and financing, banks and institutions have been quite apprehensive – either due to weak credit ratings of applicants, new customers, or the lack of collaterals. Therefore, the money flow has largely remained informal, with low-income families relying on traditional lending practices that usually had little to no accountability.
Having observed such trends over time, agritechs took the commodity financing and infrastructure challenges head-on. The focus has been on streamlining supply chains, and other procedures that bring accountability into the system. Building the necessary infrastructure to handle large-scale movement of accounted commodities is already a milestone in the making.
Several private players are currently partnering with banks and public institutions to ensure AI-enabled warehouse management systems, and facilities spread across multiple states are proving to be instrumental in delivering stocks whenever they are demanded.
By organizing procurement and storage under professional supervision, quality checks, and automated mechanisms, agritechs are ensuring that only high-quality commodities are distributed to retailers and buyers. These procedures are backed by newly defined global standards of testing, grading, and certification, and are a hallmark of the new-age warehouse management practices.
Thanks to thorough innovations in the space, stakeholders have a whole host of services to choose from, while simultaneously testing their efficacy and reliability. For instance, people are now keen on tapping mobile app-based price discovery platforms.
Such platforms are integrated with blockchain technology to handle the scale being imagined. In doing so, it is easier for the farmers to find appropriate buyers and commodity prices for their produce, supported by trackable transportation of goods. In addition to being alternate marketplaces, it is the affordability, real-time insights, transparency, and secure lending that is piquing everyone’s interest in the sector. It has the potential to bring credit seekers like small-time traders, buyers, and agri-processing manufacturers closer to more structured frameworks, instead of depending on traditional moneylenders.
There are other advantages of going digital as well. Buyers and sellers can transact with requisite documentation and record everyday activity. There is significant traction also in the agri-commodities securitization sphere, with leading agritechs issuing pass-through certificates (PTCs) to institutional investors. It is driving more liquidity into a system that has suffered from financial shortcomings for ages. The PTCs allow institutional investors to gain interest over their commodity purchase annually, and the low-cost warehouse receipts can be exchanged, immaterial of crop harvest cycles.
The process is further legitimized by well-renowned rating agencies like ICRA and India Ratings and Research, which recognize the standards and authenticity of agri-instruments like PTCs. Consequently, an environmentally conducive agri-business model is taking shape, and new entrants are likely to offer stiff competition, which could further augment the agricultural activity.
In the coming years, the growth trajectory is leaning towards large-scale securitization. It will open India’s agricultural sector to capital markets and retail investors. Furthermore, robust pre-harvest practices, quality management of commodities, crop management as per weather conditions, and agri-trade financing, will unlock new avenues for the segment.
Based on how we build confidence among investors going forward, the sector can take-off the way it is desired, i.e., with better growth and ample liquidity. It will be interesting to see how these trends shape up, while providing the right momentum to Agriculture 4.0, and steer India into the future.
The author of this article is Sunoor Kaul, Co-Founder & Director, Origo Commodities