Oxstones Investment Club™By Adam J. Crawford, Casey’s Research,
If you think the agriculture industry is asleep at the technological wheel, you’re in for a surprise. The fact is, farmers across the globe are embracing high-tech products in droves as part of a mad dash to keep pace with accelerating food demand.
The Factors Driving Food Demand
Today, there are about 7 billion people in the world. That’s a lot of mouths to feed. But consider that by 2050 there will be 2 billion additional mouths, as the world’s population is projected to surge to over 9 billion.
On the basis of population growth alone, world food demand will increase by over 30%. But in addition to the increase in the number of people on the planet, growing affluence will also have a significant impact on global food demand.
Today, there are about 2 billion people worldwide who are considered to be in the middle class; within 20 years, the number is expected to expand to 5 billion, with almost all of the increase coming from emerging markets. As these people enter the middle class, they will be able to afford to consume more food. Furthermore, they will be able to consume—and will demand—higher protein diets, i.e., more meat and dairy products. The livestock that are the source of the meat and dairy products will, in turn, be consuming enormous amounts of feed crops, such as corn and wheat.
All this will put agriculture (the industry responsible for meeting the world’s growing food demand) under the gun. To keep up with the demands of an increasing population and an expanding middle class, it is estimated that global food production must increase a whopping 70% between now and 2050.
From Shovels to Sensors and Software
The challenge is daunting, but it is nothing new. Ever since the beginning of time, mankind has been perpetually engaged in a desperate race to keep food production a step ahead of growing demand. And to the extent we have succeeded, it has been primarily because of innovation and technology.
In ancient times, this included the plow, irrigation, and crop rotation; and more recently, reapers, threshers, combines, chemical fertilizers, hybrid seeds, herbicides, and gasoline-powered tractors.
Technology’s impact on agriculture efficiency and yield, especially in the last 150 years, has been dramatic. For instance, in 1850, American farmers produced an average of 40 bushels of corn per acre; today the average is close to 160 bushels per acre. And since 1940, the number of people that one American farmer feeds has steadily risen from 19 to 155.
To the casual observer, the age of discovery and innovation in farming may appear to be nearing an end. Other than making things like tractors, planters, and cultivators bigger and more powerful, what’s happening in agriculture that’s of any technological significance?
Well, as it turns out, plenty. Though driven by things not as visible as bright green tractors, there is a powerful movement under way in agriculture, driven by things such as software, global positioning systems, and electronic sensors. This movement is called “precision agriculture,” and it is the driving force behind the next leap in farm productivity.
What Is Precision Agriculture?
Precision agriculture is a vague term without a formal definition. Broadly speaking, it’s about information-based farming, and more specifically, it’s about getting near real-time and location-specific data, then reacting to those data in ways that will lower cost and increase yield.
The best way to explain the precision agriculture concept is by way of example, and the best example we’ve seen comes from David Herring, who wrote this way back in 2001:
“Imagine you are a farmer riding along in your 50,000 acre wheat field early in the growing season. You push a button on your tractor to turn on its Global Positioning System (GPS) monitor, which pinpoints your exact location to within one meter. Touching another button, you display a series of Geographical Information System (GIS) maps that show where the soil in your field is moist, where the soil eroded over the winter, and where there are factors within the soil that limit crop growth. Next, you upload remote sensing data, collected just yesterday, that shows where your budding new crop is already thriving and areas where it isn’t. You hit SEND to upload these data into an onboard machine that automatically regulates the application of fertilizer and pesticides—just the right amount and exactly where the chemicals are needed. You sit back and enjoy the ride, saving money as the machines do most of the work. Congratulations, you are among a new generation of growers called ‘precision farmers.'”
If you stop and think about this for a minute, it becomes clear that precision agriculture is primarily about customization. Traditionally, farmers have farmed land uniformly, applying seed, fertilizer, water, and herbicides en masse and indiscriminately. But land always has variation: in soil type, in moisture content, and in nutrient content. Uniform application of inputs inevitably results in under-application in some areas (resulting in decreasing yields) and over-application in others (resulting in wasted inputs). Armed with relevant data and software- and sensor-driven equipment, precision farmers can customize applications to allow for field variations, thereby increasing yields while reducing costs.
A USDA study published in 2011 found that corn growers who had adopted various precision-farming technologies achieved crop yields that were about 15% higher than non-adopters. Those kinds of productivity improvements are important not only to the farmer and his profitability, but also to the agriculture industry’s ability to meet future demand. According to the National Intelligence Council, “The world is already farming its most productive land, so improving crop efficiency will become especially important to meeting global food needs.”
Providers of precision-farming technologies are bound to benefit from demographic trends and the pressure those trends will put on food production. Several companies participate in the space in varying degrees, but the BIG TECH team discovered a company that we think is best positioned to serve, grow, and profit from this blossoming market. This company’s grand vision is to achieve the connected farm. As an analogy, it is beginning to do for agriculture what Oracle did for the manufacturing industry with increasingly broad-scope enterprise resource planning (ERP) systems in the 1990s. We all know what’s happened to that stock since.
Tags: 160 bushels of corn per acre, agriculture, crop efficiency, farming, farmland, food production, global food demand, global population growth, increasing crop yield, moisture content, nutrient content, precision farming, precision farming technologies, soil type, the use of technology in agriculture, using data and software and sensor-driven equipment in farming