Providing everyone in this world with food is one of the biggest challenges of our time. Supply chain problems and the crisis in Ukraine have exacerbated the situation, and agricultural commodity prices increased significantly. To counteract this, agriculture must become more digital and therefore more efficient. The current situation could favor this development and give to smart farming new impulse.
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High food prices: fear and hope at the same time?
Global supply chains have stalled in recent years. First caused by the COVID-19 pandemic and then by the conflict in Ukraine. Commodities and agricultural produce have not been spared either of these two factors – and supply has become scarcer. As a result, prices for the crops have increased significantly.
This can cause difficulties and more hunger for certain countries – and prices are observed with bigger concerns. Therefore, there is a need to stop these price increases and to ensure global food security. At the same time, this price increase could also help to find a solution for the problem.
Smart farming could get a boost
Because of the higher income caused by higher prices, farmers have more money available to streamline their equipment. The first signs of this could already be seen at the end of 2022, as the various agricultural machinery manufacturers such as Deere received increased machine orders.
Higher yields, more incoming orders – all of which could accelerate the global smart farming trend. This basically means the usage of technologies and new methods that make agriculture more efficient. These includes, for example, more precision equipment, autonomous tractors, drones and much more. In addition, the devices themselves have to become more environmentally friendly, for example by using less CO2-causing fuels. This in turn would help to avoid the fuels that have become expensive.
Demographics demand progress
The UNO estimates that nine billion people will live on our planet by 2037. That’s a significant growth – and all of these people need to be fed. In addition, there are all the people who are already suffering from hunger and need to be supplied with food, too. That’s easier said than done. Therefore, food production must be greatly increased, which is basically only possible if it is made much more efficient. The other solution would be more forest clearance. But nowadays, this cannot be an option because climate protection and sustainability must go hand in hand. Therefore, intelligent cultivation methods and food technologies are increasing in demand.
Trend continues to be driven by politics
Climate change and weather conditions are making things even more difficult. This also requires “smart” solutions in the field of agriculture. Measures must also be taken to limit climate change.
For this reason, not only the demographics and the current situation around the food supply have a positive effect on the smart farming trend. The so-called European Green Deal, the American Green New Deal and plans of other governments could also boost the trend of smart farming.
This means that the strategy to which the countries have committed themselves, is to achieve climate neutrality by 2050 (European Union). The strategy takes a cross-sectoral approach, covering the following areas: climate, environment, energy, transport, industry, agriculture and sustainable finance.
In the agricultural industry, this means a reduction in pesticides and fertilizers, more organic cultivation, endeavors to improve biodiversity and a very significant reduction in greenhouse gas emissions. Achieving these goals will also require major technological advances and changes. The foundations for smart farming and food tech have thus been laid – and the global trend could continue to gain momentum. Some people even already preaching about the next step of smart farming: Agriculture 5.0*.
Even if forecasts are not a reliable indicator of future developments, they are showing that a significant global growth in the smart farming sector is to expect. A global volume of around 34 billion US dollars can be reached by 2026. That would be around twice as much as the market contained in 2022.
But not only farmers and machine builders could benefit from this growth. For a lot of opportunities for investors could also come up, even if setbacks or changes in the conditions, such as overproduction or falling prices for certain goods, cannot be ruled out.
Smart Farming & Food Tech
In order to achieve these goals, investments should be made in a wide variety of areas related to smart farming and food tech. For example, farmers need to reduce the use of pesticides and fertilizers and use them more precisely. In order to achieve this, more and more precision devices will have to be used in the future. Agriculture must be increasingly digitized and thus made more efficient – for example through the usage of drones or satellites like in the USA already used by a lot of farmers. The health of livestock, plants and crops must be improved. And last but not least, the entire supply chain must be made more efficient.
Agriculture stocks to watch
If you would like to invest in some agriculture stocks, I’ve got a small selection for you. Even if these companies are not pure smart farming stocks, they are already using or for sure about to use it in the near future. Please consider this selection not as a final one but as an inspiration and motivation for further and deeper researches before you make a final decision.
- Deere & Co. (DE)
- AGCO Corporation (AGCO)
- The Mosaic Company (MOS)
- Nutrien Ltd. (NTR)
- Corteva, Inc (CTVA)
- AeroVironment (AVAV)
- Trimble, Inc (TRMB)
- Darling Ingredients, Inc (DAR)
- Graphic Packaging Holding Company (GPK)
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