To understand the impact of AgTech and Artificial Intelligence (AI) in agriculture, one needs to understand the basics of food production. Primary production is a combination of inputs, like seed and fertiliser, and processes that enable the plant growth phases, such as germination when seeds sprout and flowering later on.
What is required is universal – seed and the right amount of nutrients, water, air and light for it to grow best. Based on these fundamental elements, current farming techniques have been honed for centuries and production optimised. This largely explains why traditional farming has leaned so heavily on land and location.
Reducing the cost of production – more for less – and responding to consumer needs has always driven innovation in the sector
The ability to influence and manipulate these fundamental elements to increase yield and reduce the cost of production has seen significant research and great scientific advances since the 1920s. These improvements have been driven by production cost, optimising resources and consumption patterns. The consumption patterns are, sometimes illogically, driven by myths – be it cultural or intentional by marketing companies.
The 1920s saw the introduction of mechanisation (in the US) which just about eliminated the use of animals for crop production by the 1940s. The 1950s and 1960s saw the wave of the green revolution where scientists developed high yielding crop varieties that were more responsive to fertilisers and could produce significantly higher yields – coupled with the advances in irrigation and cultivation methods.
Based on these advancements, food is now cheaper than ever. This trajectory will continue until the economics of current production methods are no longer viable at which point these methods will improve. The cycle continues.
Today's AgTech-wave is no different from previous phases of agricultural innovation
The new phase that we have entered is no different from previous phases. Scientists continue to find new ways of providing the fundamental elements of production in non-traditional ways. Precision farming, vertical farms, hydroponics and data-driven decision making are clear examples of optimising resources for maximum output.
The costs related to these advancements, however, are not always justified – particularly when investors and policymakers are driven by the fear of missing out rather than a deep understanding of where best to place capital when it’s one of the scarcest resources.
If we consider the economics of growing our basket of staples – even if some exotic ingredients have become ‘essential’ – hydroponics and vertical farms can only cater to a fraction of our required calorie intake. Proven economically viable produce using these techniques are salad greens, herbs, tomatoes and a few berries. Furthermore, these are only viable in areas where land is very costly and light is scarce.
For the majority of our essential produce – cereals, trees and deep root vegetables – a significant amount of space is required. South Africa is rich in these resources, has diverse climates, access to affordable labour and solid infrastructure.
Can investment in Ag-Tech exploit our competitive advantage or would it be unwise?
- Today’s technological advancements in food production revolve around better decision making and the optimisation of resources to improve production. Noteworthy Ag-Tech trends are:
- Sensor technologies: using sensors to collect ground & air data remotely
- Monitoring technology / smart farming: Technology aimed at monitoring crop health and optimizing resources
- Data integration and artificial intelligence: processing big data for optimal decision making
- Blockchain in the food value chain: used for digitization and traceability of crop supply chains
- Equipment and tools: robotics and drones for improved efficiency and reducing reliance on manual labour
- Biological enhancements: for all agricultural inputs
The introduction of these technologies is based on the same fundamental premise as all previous improvements – producing more for less. The incremental value added by most of these technologies does not change the fact that, in South Africa, we need to bring huge amounts of land into commercial production and use that to create the jobs that our economy so desperately needs. For now, these technologies would largely only help commercial farms extract more margins or assist in areas where the economics of traditional farming is not viable.
In South Africa, like every global market, investment should follow the economics of production. The costs of labour, land and ‘natural’ energy are fundamentally different here. This, coupled with our established agricultural trade links with Europe and the continent and massive underdeveloped agricultural potential is the competitive advantage which should be exploited.
In our view, our growth should be based first on expansion, not just on improved margins. This means continued investment in fundamental infrastructure (water, energy, logistics, etc.), technical growing expertise, developing business-building ecosystems and aggressively rolling out more diverse funding options, not keeping up with tech trends.