Farming is smart, useful, but expensive and unconvincing

High-tech developments in agriculture provide market participants with increased yields and competitive advantages, but not everyone is ready to implement them due to the high cost and general conservatism of the sector, according to a global survey of farmers conducted by McKinsey & Company. In general, the results of the study capture the interest of farmers in the gradual integration of best practices. Today, agricultural technologies in the world are used (or plan to start using them in the next two years) by 39% of agricultural producers: according to the results of 2022, farmers in Europe remain the leaders – 62% and North America – 61%, in South America 50% are interested in agricultural technology, in Asia – only 9%. The activity of introducing new developments correlates with the scale of the farm: they are most readily used on large farms (81%), the share of introducing technologies in medium-sized farms is 76%, in small farms – 36%.

In recent years, interest in agtech has been fueled by a desire to offset inflationary pressures and rising costs, as well as disruptions in supply chains. Farm management software systems and smart farming solutions (yield monitoring, fertilizer dosage, irrigation controllers and soil sensors; see graph) help ensure stability in an environment of general uncertainty. According to McKinsey & Company, farmers implement them most often. The fact that the agro-industrial complex is showing interest in high-tech developments is also evidenced by the inflow of capital into startups involved in them: $18.2 billion in 2021, which is 38% more than in 2013.

However, despite the interest of the sector in innovation, the pace of their implementation is still low. Farmers, as well as analysts themselves, explain this by the high cost of technology (for 47% of participants in the agro-industrial complex, this is the main problem, 50% of respondents are not at all ready to spend money on smart farming methods). Another obstacle to the widespread use of high technologies is the sector’s conservatism: many farmers do not trust new developments and prefer habitual spending to investments in agrotech. According to McKinsey analysts, the situation can be improved by a targeted approach that takes into account the specifics of the region and the specialization of specific farms, as well as government investment in agricultural technology.

Christina Borovikova