In order to cope with rising demand and a slew of disruptive forces, one of the oldest businesses must embrace a digital, connectivity-fueled change.

Agriculture has seen substantial transformations in the previous 50 years (How technology can yield new growth). As a consequence of technical developments, farm equipment has risen in size, speed, and productivity, allowing for more efficient cultivation of wider regions. Seed, irrigation, and fertilizers have all improved significantly, allowing farmers to increase crop yields. Agriculture’s currently undergoing another transition, this one centred on data and connectivity. Artificial intelligence, analytics, networked sensors, and other emerging technologies have the potential to increase agricultural yields, improve water and another input efficiency, and improve crop and animal husbandry sustainability and resilience.

None of this, however, is possible without a strong connectivity infrastructure. According to our analysis, if the agricultural connection is properly implemented, the industry may provide $500 billion in added value to the global gross domestic product by 2030. This would represent a 7 to 9% increase above the total forecast, alleviating much of the current burden on farmers. According to research from the McKinsey Center for Advanced Connectivity and the McKinsey Global Institute (MGI), it is one of only seven sectors that will add $2 trillion to $3 trillion to global GDP over the next decade as a result of advanced connectivity (see the sidebar “The future of connectivity”).

Food demand is increasing at the same time as land and farming supplies are becoming scarce. By 2050, the world’s population is expected to reach 9.7 billion, necessitating a 70 per cent increase in calories available for consumption, even as the cost of the inputs needed to produce those calories rises. Water supplies will fall 40% short of global water demands by 2030, and growing energy, labour, and fertilizer costs are already putting pressure on business margins. Around a fourth of arable land has been damaged and requires extensive rehabilitation before it can be used to grow crops on a large basis again. There are also increasing environmental and social pressures, such as the push for more ethical and sustainable farm practices, such as higher standards for farm animal welfare and reduced use of chemicals and water, as well as social pressures, such as the economic impact of catastrophic weather events.

Agriculture must embrace a digital revolution enabled by connectivity to confront these pressures set to further roil the business. Agriculture, on the other hand, is less digitalized than many other industries throughout the world. The majority of previous advancements were mechanical in nature, such as more powerful and efficient machinery, and genetic in nature, such as more productive seed and fertilizers. To provide the next productivity jump, significantly more advanced digital technologies are now required. Some currently exist to help farmers utilize resources more effectively and sustainably, while others are in the works. These new technologies have the potential to improve decision-making by allowing for better risk and variability management, allowing yields to be optimized and economics to be improved. When employed in animal husbandry, they can improve the well-being of cattle, addressing growing concerns about animal welfare.

Food demand is increasing at the same time as land and farming supplies are becoming scarce

However, the sector faces two major challenges. Some areas lack the requisite connection infrastructure, necessitating its construction. Farms have been sluggish to adopt digital solutions in areas where connectivity infrastructure is already in place, owing to a lack of evidence of their effectiveness.

Other issues agriculture suffers in five areas have been exacerbated by the COVID-19 crisis: efficiency, resilience, digitisation, agility, and sustainability. Margin pressure has increased as a result of lower sales volumes, intensifying the need for farmers to cut expenses even further. The necessity of having more local providers has been underscored by gridlocked global supply networks, which might boost the resilience of smaller farms. The high reliance on physical labour has exacerbated the worldwide pandemic’s impact on farms with limited mobility. Significant environmental advantages from reduced travel and consumption during the crisis are also expected to fuel a desire for more local, sustainable sourcing, forcing manufacturers to change long-standing practices. In summary, the crisis has highlighted the importance of extensive digitalization and automation, while rapidly altering demand and sales channels have highlighted the importance of quick adaptability.

Agriculture’s current connectivity

Many farmers have begun to examine data regarding critical elements such as soil, crops, animals, and weather in recent years. However, few, if any, have had access to modern digital technologies that may aid in the transformation of these data into useful, actionable information. Almost all farmwork in less-developed areas is done by hand, with little or no technological technology or equipment.

Even in the United States, a pioneer in connectivity, only about a quarter of farms use connected equipment or devices to access data, and the technology isn’t exactly cutting-edge, running on 2G or 3G networks that telcos are planning to decommission or very low-band IoT networks that are difficult and expensive to set up. In any scenario, such networks can only handle a limited number of devices and lack the real-time data transmission capability required to unleash the value of more sophisticated and complicated use cases.

In many situations, however, current IoT technologies operating on 3G and 4G cellular networks are adequate to allow simpler use cases, such as sophisticated crop and livestock monitoring. However, because hardware costs were high in the past, the business case for deploying IoT in farming did not hold up. Device and hardware prices are decreasing rapidly these days, and several businesses are already offering solutions at pricing that we believe will pay for themselves within the first year.

These basic technologies, on the other hand, are insufficient to harness the full potential benefit of connection for agriculture. To do so, the industry must fully utilize digital applications and analytics, which will necessitate low latency, high bandwidth, high resiliency, and support for a high density of devices, all of which are provided by advanced and frontier connectivity technologies such as LPWAN, 5G, and LEO satellites (Exhibit 1).

The industry’s problem is thus twofold: infrastructure must be established to enable the use of connection in farming, and compelling business cases must be presented where connectivity currently exists in order for solutions to be embraced. The good news is that internet access is becoming more widely available practically everywhere. We estimate sophisticated connectivity infrastructure of some kind to cover around 80% of the world’s rural areas by 2030; the significant exception will be Africa, where barely a quarter of the continent will be connected. The objective is to create more—and more effective—digital tools for the sector, as well as to promote their wider use.

These instruments will allow new capacities in agriculture as a connection becomes more widespread:

• The Internet of Things (IoT) is a massive network of connected devices. Low-power networks and cheaper sensors will pave the way for the Internet of Things to scale up, allowing for use cases like precise irrigation of field crops, livestock monitoring, and tracking of the use and performance of remote buildings and big fleets of machinery.
• Mission-critical services The ability to run applications that need total dependability and responsiveness, such as commanding autonomous robots and drones, will be aided by ultralow latency and improved connection stability. Coverage that is nearly worldwide. If LEO satellites live up to their potential, they will enable even the world’s most remote rural locations to benefit from major digitization, hence increasing global agricultural productivity.

The value-creation potential of connectivity

Agriculture’s improved connection may bring more than $500 billion to the global gross domestic product by the end of the decade, a key productivity boost of 7 to 9% for the industry.

5 However, most of that value will be dependent on investments in connection, which are currently virtually missing in agriculture. Other sectors are already utilizing technology such as LPWAN, cloud computing, and cheaper, better sensors that need minimum hardware, lowering the required investment. We looked at five use cases where enhanced connectivity is already being used and is most likely to deliver the higher yields, lower costs, greater resilience, and sustainability that the industry requires to thrive in the twenty-first century: crop monitoring, livestock monitoring, building and equipment management, drone farming, and autonomous farming machinery (Exhibit 2).

It’s crucial to remember that not all use cases apply to all areas. Monitoring systems, for example, may not have the same potential for value creation in North America, where yields are already reasonably optimized, as they do in Asia or Africa, where there is much more space to increase productivity. Drones and self-driving vehicles will have a greater influence in advanced markets, where technology will be more easily available (Exhibit 3).

Large farms with greater investment power and stronger incentives to digitize will get the most value at first. Large areas of land can be surveyed more simply with connectivity, and the fixed costs of building IoT solutions can be offset more cheaply in large production facilities than on small family farms. For similar reasons, cereals, grains, fruits, and vegetables will yield the majority of the value we found. Because of the large average size of farms, comparatively greater player consolidation, and better application of connected technologies (IoT networks are specially fitted to static monitoring of numerous variables), these industries have more use cases than meat and dairy. It’s also worth noting that Asia should receive around 60% of the overall value simply because it produces the most crops (see the “About the Use-Case Research” sidebar).

Crop monitoring (Use Case 1)

Connectivity allows for a range of improvements in crop surveillance and maintenance. By more effectively recognizing and anticipating shortfalls, integrating meteorological data, irrigation, nutrition, and other systems might optimize resource consumption and raise yields. Sensors monitoring soil conditions, for example, may communicate through LPWAN to instruct sprinklers to alter water and fertilizer delivery. Sensors might potentially send pictures from far-flung areas of fields, allowing farmers to make more informed and timely decisions and get early indications of diseases or pests.

Farmers may be able to improve the harvesting window with the use of smart monitoring. Crop quality parameters, such as sugar content and fruit colour, might be monitored to assist farmers to get the most money out of their crops.

Most IoT networks currently are incapable of supporting picture transfer between devices, let alone autonomous imagery processing, or of supporting big enough device numbers and density to reliably monitor broad fields. Narrowband Internet of Things (NB-IoT) and 5G have the potential to address these bandwidth and connection-density challenges. By 2030, the usage of greater and smoother links between soil, agricultural equipment, and farm management may yield a value of $130 billion to $175 billion.

Livestock surveillance (Use Case 2)

In large-scale livestock management, where most animals are maintained in close quarters on a regimen that assures they go readily through a highly automated processing system, preventing disease outbreaks and recognizing animals in distress are crucial. Chips and body sensors that monitor temperature, pulse, and blood pressure, among other things, might identify diseases early, reducing herd infection and enhancing food quality. Farmers are already employing ear-tag technology from firms like Smart bow (part of Zoetis) to track cows’ heat, health, and position, as well as equipment from Allflex to deploy extensive electronic tracing in the event of disease outbreaks.

Environmental sensors might also prompt automatic ventilation or heating adjustments in barns, reducing suffering and enhancing living conditions, which are becoming increasingly important to customers. By 2030, better monitoring of animal health and growth circumstances might provide a value of $70 billion to $90 billion.

Facility and equipment management (Use Case 3)

Chips and sensors used to monitor and measure levels in silos and warehouses might prompt automatic reordering, lowering inventory costs for farmers who currently use systems from Blue Level Technologies. By monitoring and automatically regulating storage conditions, such instruments might extend the shelf life of inputs and decrease post-harvest losses. Monitoring building and equipment conditions and usage offer the potential to cut energy consumption. Computer vision and sensors mounted to equipment and linked to predictive-maintenance systems have the potential to save repair costs and increase the life of machinery and equipment.

By 2030, such technologies might save $40 billion to $60 billion in costs.

Drone-assisted farming (Use Case 4)

Drones have been used in agriculture for over two decades, with farmers all over the world depending on pioneers such as Yamaha’s RMAX remote-controlled helicopter to assist with crop spraying. Now, the next generation of drones is beginning to make an influence on the industry, with the potential to rapidly and efficiently scan crops and herds across large regions, or as a relay system for transferring real-time data to other linked equipment and installations. Drones might potentially employ computer vision to monitor field conditions and deliver exact fertilizers, nutrients, and pesticides where they’re needed most. They might also sow seed in faraway regions, saving money on equipment and labour. Drones might produce between $85 billion and $115 billion in value by lowering costs and enhancing yields.

Self-contained farming equipment (Use Case 5)

The introduction of smart and autonomous agricultural machinery might be aided by more precise GPS controls combined with computer vision and sensors. Farmers may use a variety of equipment on their field at the same time, without the need for human involvement, saving time and money. Autonomous machines are also more efficient and accurate in the field than human-operated devices, potentially saving fuel and increasing yields. By 2030, increasing the autonomy of machines through improved connection might contribute $50 billion to $60 billion in value.

Sources of additional value

Connected technologies provide an extra, indirect advantage that is not accounted for in the estimations provided in these use cases. The worldwide agricultural business is extremely fragmented, with individual farm owners performing the majority of the work. Few farmers hire outside employees, particularly in Asia and Africa. The adoption of connection solutions on such farms could free up a large amount of time for farmers, which they may utilize to grow additional land for profit or seek jobs outside the business.

We estimate that adopting advanced connections on these farms to achieve such labour savings will be worth almost $120 billion by 2030, raising the total value of increased connectivity from direct and indirect results to over $620 billion. However, the amount to which this value will be collected is primarily dependent on advanced connectivity penetration, which is predicted to be very low in Africa and poorer areas of Asia and Latin America, at roughly 25%. It will also be more challenging to get the critical mass of users required to build an economic case for providing enhanced connections in those places where farming is more fragmented than in North America and Europe.

What does this mean for the agricultural ecosystem?

New pockets of wealth will most likely be unlocked as the farm business digitizes. Because of their strong links with farmers, their own expertise in agronomy, and their track record of innovation, input suppliers offering seed, fertilizers, pesticides, and equipment have played a crucial part in the data ecosystem to far. One of the world’s leading fertilizer distributors, for example, now supplies fertilizing agents as well as software that analyzes field data to assist farmers in determining where and how much fertilizer to apply. Similarly, to increase the efficiency of field equipment, a large-equipment maker is designing precise controls that leverage satellite imaging and vehicle-to-vehicle links.

Agritech firms are another example of new entrants into the agricultural sector. They specialize in providing farmers with cutting-edge tools that employ technology and data to help them make better decisions and enhance yields and earnings. Such agri tech companies might provide solutions and pricing structures that decrease farmers’ perceived risk, such as subscription models that eliminate the initial investment burden and allow farmers to opt out at any moment, resulting in speedier adoption of their goods. This is being done by an Italian agri tech company, which is providing vineyards with a seasonal, per-acre cost that includes hardware installation, data gathering and analysis, and decision assistance. Agritech might potentially create solutions in collaboration with agribusinesses.

Nonetheless, most of this will be impossible to do until many rural communities get access to a high-speed internet network. We see three main methods in which the necessary investment may be made in order to make this a reality:

• Deployment pushed by the telecommunications industry. Despite the fact that high-bandwidth rural networks have historically had poor economics, telcos may gain from a dramatic increase in rural demand for bandwidth as farmers embrace innovative applications and integrated solutions.

• Deployment that is driven by the provider. With their current sector expertise and ties, input suppliers are likely to be the best positioned to lead in connectivity-related investment. They may team up with telcos or LPWAN companies to build rural connectivity networks, then offer farmers business models that incorporate linked technology, products, and decision-making help.

• Deployment led by farmers. Farm owners, acting alone or in collaboration with LPWAN organizations or telecoms, may be able to spur investment. This would need farmers developing the knowledge and skills necessary to obtain and evaluate data locally rather than through other parties, which would be a significant challenge. Farmers, on the other hand, would have more control over data.

How to Go About It

No one company will be able to generate the necessary investment in agricultural connection on its own, regardless of which group leads the charge. All of these advancements will need coordination among the industry’s major players as a necessary part of conducting business. Winners in bringing connection to agriculture in the future will need strong competencies in a variety of disciplines, from farm operations knowledge to advanced data analytics, as well as the ability to offer solutions that interact quickly and efficiently with other platforms and adjacent businesses. Data collected by autonomous tractors, for example, should flow effortlessly to the computer managing irrigation systems, which should then be able to integrate weather-station data to improve irrigation plans.

Industry leaders in connectivity, on the other hand, have already begun creating these new capabilities internally. For reasons of confidentiality and competitiveness, businesses want to keep proprietary data about operations inside. This degree of control also makes data easier to analyze and allows the company to respond more quickly to changing client demands.

However, acquiring new skills isn’t the goal. Agriculture companies that can form strategic alliances with telecoms or LPWAN providers will have a considerable advantage in the emerging connected-agriculture ecosystem. They will be better positioned to create tight ties with farmers when connectivity becomes a strategic concern as a result of those collaborations, not merely because they will be able to obtain connectivity technology more readily and inexpensively. As a result, input suppliers and distributors may find themselves in a connectivity arms race. If input suppliers can establish such relationships, they will be able to interact directly with farmers, bypassing wholesalers completely. If distributors win that race, they will strengthen their position in the value chain by staying an important middleman who is closer to farmers’ demands.

The government may also help by lowering the cost of establishing broadband networks, especially in rural regions. For example, by massively subsidizing spectrum or granting tax advantages to carriers, the German and Korean governments have played a key role in making network expansion more appealing.  This concept might be replicated in other places, expediting the development of connective goods by providing input providers and agri tech businesses with a reliable backbone over which to provide services at a low cost. The deployment of LEO satellite constellations in the future would very certainly have a similar effect.

Agriculture, one of the oldest sectors on the planet, is at a technical fork in the road. The industry will need to overcome the obstacles of providing improved connectivity to properly meet rising demand and various disruptive developments. This will necessitate major infrastructure investment as well as a reorganization of conventional roles. With more than $500 billion in worth on the line, it’s a massive but vital endeavour. This digital shift may well determine the profitability and sustainability of one of the world’s oldest sectors, and those who embrace it from the start may be best positioned to succeed in agriculture’s connected future.