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Report: Agtech start-ups need to address farmers’ challenges about agtech solutions

Agriculture tech can drive more inclusive and sustainable growth for farmers, but only if agtech start-ups make a concerted effort to address farmers’ persistent challenges about agtech solutions, according to research by leading global consultancy, McKinsey & Company.

The latest report from McKinsey’s Agriculture practice, Agtech: Breaking down the farmer adoption dilemma, identifies the barriers holding farmers back from using agtech more widely, including concerns over ROI, ease of use, and data sharing, as well as the actions agtech players can take to drive wider adoption by farmers.

Despite billions of dollars in capital flowing into the upstream agriculture food-technology industry, and 38 percent year-on-year investment growth in the sector, agtech start-ups are struggling to grow their customer base among farmers. McKinsey surveyed 5,500+ row- and specialty-crop farmers in 2022 across Asia, Europe, North America, and South America to understand why.

The survey found that levels of agtech use and challenges to broader adoption differ markedly between regions. North America and Europe lead in current agtech adoption, but around half of the farmers who are hesitant to adopt agtech products report they are deterred by the high costs. While in South America, where half of farmers use or plan to use agtech, a third of famers are apprehensive about purchasing via online platforms. Agtech adoption is lowest in Asia, where only 9 percent of farmers use or plan to use any agtech products.

Vasanth Ganesan, Partner at McKinsey, said: “Over the past decade, the number of agtech start-ups has ballooned as external capital has poured into the industry. This has brought a plethora of technological solutions to agriculture, helping farmers to increase operational efficiency, drive yield, and lower their environmental footprint. Yet agtech start-ups are struggling to scale, not least because of the barriers and challenges observed by farmers themselves.

“When done well, greater agtech adoption can lead to more sustainable growth for farmers, and benefit conscious consumers and investors beyond the farm gate – but only if there is a concerted focus by agtech players on solving the persistent challenges of the past decade around ROI, ease of use, and data sharing.”

Globally, McKinsey’s research identifies five key global trends that agtech players need to follow:

  • Though agtech adoption is slow, farmers are open to innovation. 39 percent of farmers surveyed globally are currently using or planning to use at least one agtech product in the next two years.
  • There is a transition toward more sustainable, less resource-intensive food systems. Nearly 30 percent of western consumers have increased their consumption of more sustainable food products since the start of the COVID-19 pandemic, and nearly one-third of start-ups have a sustainability-focused value proposition.
  • Regulation has a key role in accelerating agtech growth, especially in sustainability programs. Government-sponsored programs are the main drivers of sustainability-program adoption.
  • Business models are evolving toward integrated solutions, as players such as input retailers are increasingly motivated to gain meaningful insights into their customers’ behaviours.
  • Improved product personalisation can improve trust around data sharing. Products that offer greater personalisation and provide science-backed, actionable insights are the ones most likely to foster trust and gain traction.

To seize these opportunities, McKinsey recommends four key areas of action for agtech companies to prioritise:

  • Personalising products and business models: Specialty- and row-crop farmers each have distinct requirements for agtech solutions. By focusing on the uniqueness of each farmer’s operations, agtech innovators can develop clear value propositions for their technologies, highlighting ROI with measurable KPIs.
  • Making the customer journey easier: Agtech companies could explore solutions to elevate customer experience. Given differences in the needs as well as the average age of farmers globally, increased product testing that leverages user-experience design principles could help solve farmers’ pain points in a more personalised way.
  • Renewing trust in data sharing: Considering the hesitancy that farmers express about sharing data, agtech start-ups have an opportunity to build trust by honing their data strategy, streamlining data collection, and gathering only the information that is essential to deliver better products and solutions to farmers.

Integrated solutions versus amassed point-based solutions: Agtech leaders have the potential to unlock more value by tapping into data from different sources – such as field-based sensors, satellites, farm equipment, and both public and for-sale private sources – and to ensure that their technology can integrate with the large set of solutions already used by farmers.

Source: McKinsey Agriculture
Photo: Credit Sasin Tipchai from Pixabay
Media contact:
Aspectus Group
mckinsey@aspectusgroup.com

Editor & Publisher: Lukie Pieterse


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