I recently moderated a panel at the 2019 World AgriTech Summit in San Francisco. My thoughts follow.
Digital transformation is happening across virtually every industry, and it is changing ─ often radically ─ how individuals and institutions interact and transact with each other. This phenomenon is part of The Fourth Industrial Revolution, a phrase coined by Klaus Schwab, founder of the World Economic Forum, which describes the current wave of technological innovation. The inside cover of Dr. Schwab’s 2016 book on this subject elegantly describes the bold transformation underway:
“Characterized by a range of new technologies that are fusing the physical, digital and biological worlds, the developments are affecting all disciplines, economies, industries and governments, and even challenging the idea of what is means to be human.”
The digital transformation of food production, sometimes referred to as Digital Agriculture, has been underway for the past decade. It comes as the industry and its supply chain must modernize in response to cascading mega-trends including population growth, changing consumer preferences, food waste, rising demand for animal protein and edible oils. Agriculture production systems are challenged to innovate due to an increase in the frequency and severity of natural catastrophe losses and a complex mix of natural resource issues such as availability of irrigation water and arable land, soil erosion, and non-point source pollution.
Commodity market price volatility, labor constraints, high input costs (seed, fertilizer, and machinery in particular), and an aging base of career farmers are presenting a treacherous outlook for the American farmer. The call to action for innovation is only getting louder.
As I have written before, billions of dollars has been invested in recent years in new data-intensive technologies seeking to help farmers produce efficiently. But, results have been mixed as competing tools attempting to use algorithms to predict actions based on large quantities of disparate data (“big data”) have largely failed to consistently deliver value. There have been other bottlenecks and barriers to adoption of mobile/data intensive technologies, ranging from a lack of reliable broadband in rural America, incompatible systems (despite the “Internet of Things”) which results from the lack of common communication protocols, and/or a universal operating system.
During 2018, I made a series of industry presentations calling for financial institutions to play a bigger role in helping growers adopt farm software and other data technologies. My thinking was based on multiple wins. If farmers and bankers saw the mutual benefits of helping farmers collect and organize data in a way that would drive better decisions, then the farmer would be more profitable, and the bank would have greater certainty in seeing debts repaid. Adding precision and conservation farming methodologies into the mix, other important stakeholders would benefit, namely the environment, animals, and humankind.
This year’s World AgriTech Summit in San Francisco addressed this subject matter head-on, during an engaging panel that I moderated entitled “Digitalization and the Convergence between AgTech and FinTech.” The panel included five panelists representing diverse perspectives:
- Charles Baron, cofounder of Farmers Business Network, which describes itself as an “independent and unbiased farmer-to-farmer network of thousands of American farms.”
- Patrick Christie, co-founder and chief revenue officer, Conservis, a late-stage farm management SaaS provider that serves growers in North and South America, Australia, and Eastern Europe.
- Nigel Gopie, Global Marketing Leader, IBM Food Trust, IBM Blockchain, one of the largest U.S. based, multi-national technology leaders, which is a leading developer of Blockchain/distributed ledger solutions for medium and large enterprises, globally.
- Mark Kahn, Managing partner, Omnivore, an impact venture fund that invests in Indian startups developing breakthrough technologies for food, agriculture, and the rural economy. Omnivore believes the key to transforming rural India lies in increasing the profitability, improving the sustainability, and reducing the uncertainty faced by smallholder farmers.
- Robert Lubben, Chief Operating Officer, Rabo AgriFinance, which, along with Wells Fargo, ranks as a leading agricultural lender in the United States.
A key realization from my panel discussion was that a different go-to-market strategy for farm tech companies is needed, and that banks can help drive adoption. On the former, the more successful startups are increasingly selling on a business-to-business basis rather than purely business to consumer. An interesting thesis playing out is that if a farmer sees tangible benefits of specific data intensive tools that lower his/her costs and improve productivity, then that farmer ought to make more money and will be a better credit risk to the agricultural lender.
A word of caution is warranted however.
The convergence of AgTech and FinTech will likely become a prominent theme in AgTech company pitch books and fundraising documents in the coming months. However, there are only a few companies with the requisite domain knowledge across agriculture, banking, and risk management, to successfully execute on the convergence strategy. Those that do get it should see their fortunes improve as AgTech and FinTech converge. Those that do not will probably be caught in a journey analogous to cross town traffic.