Cultivating High-tech Change in the Agriculture Industry | SGInnovate

Cultivating High-tech Change in the Agriculture Industry

Saturday, November 14, 2020

Topics: Blockchain, Deep Tech for Good, Investments, Startups, Sustainability

From urban farms to labs, the way we produce food in Singapore is changing significantly. In this Future of Food series, SGInnovate looks into the tech and trends that are redefining Singapore's food production landscape and helping the country attain food security.

Despite advances in farming technology, many farmers of small plots of land—or smallholder farmers—are still in the initial stages of adopting technology, relying on a basic mobile phone to communicate with suppliers, customers, and lenders.

At the same time, plenty of their crops often go to waste, whether these are unharvested or spoiled. According to the Food and Agriculture Organisation of the United Nations, around 14% of food produced is lost between the harvest and retail stages of the supply chain.

Fortunately, these problems have not gone unnoticed. We speak with stakeholders in the agriculture industry to learn how technology can be leveraged to encourage more efficient and sustainable agricultural practices.

B2B, not “B2Farmer”

“When we come to this problem [of digitising the agriculture industry], I think we have a sort of romantic notion of bringing tech to the farm,” says Paul Voutier, Director of Knowledge and Innovation at multi-stakeholder partnership platform Grow Asia.

Such a notion may be imagined as follows: a savvy entrepreneur swoops into a farm and presents their latest farming technology to a farmer. The farmer then uses it to transform their farm into a high-tech farm of the future, not unlike something you might see in a science fiction movie.

The problem with this idea, however, is that smallholder farmers often earn low revenues and have lower appetites to pay for such technology. So while Voutier acknowledges that bringing tech directly to the farm—through a “B2Farmer” approach—is a “good ambition to have”, he shares that Grow Asia has seen more traction for the business-to-business (B2B) approach to this problem instead.

This B2B approach involves the entrepreneur selling their technology not to farmers directly, but to the banks, aggregators and traders that work with these farmers. A win-win situation results as these parties often have deeper pockets to pay entrepreneurs for their technology, while such technology reaches their intended audience—the farmers.

Engaging Farmers Using Technology They’re Already Familiar With

Apart from farmers having a lower financial ability to pay for technology, another commonly suggested reason for the slowness of farmers to adopt technology is their lack of digital literacy. However, Voutier begs to differ.

“Farmers are actually much better at using technology than we necessarily give them credit for,” says Voutier. Instead, he believes that the reason why technology developed for farmers may experience low levels of adoption has more to do with the value proposition for such technology.

“For example, there’s been a lot of apps developed to try and educate farmers [on agronomy] but the reality is that farmers are not interested,” explains Voutier. “They’d rather learn from farmers around them [with whom they have a] personal and trusted relationship.”

So if entrepreneurs are looking to engage farmers using technology, Voutier has a recommendation that can be summed up as “join them, don't try to beat them”.

Voutier shares that most farmers are familiar with using messaging apps such as Facebook Messenger, WhatsApp, and Line to chat with their peers. Hence, an entrepreneur looking to build an app to deliver agronomy information may do better to incorporate such messaging apps—which farmers already see the value of—into their businesses and communicate with farmers that way.

Tracking the Movement of Produce to Optimise Production

After harvested produce leaves the farm, it still has a long way to go before it reaches the hands of consumers. During this time, technology like the Internet of Things (IoT) devices and blockchain can be utilised to track and evaluate its progress.

This allows parties involved in the agriculture supply chain to identify areas for improvement, such as how food wastage along the supply chain can be minimised for better environmental sustainability.

Gary Loh, founder and chairman of trading technology platform DiMuto, gives the example of an apple that is grown in and harvested from an apple farm in China. The apple is packed into a pallet that is placed in a container, that is in turn put on a ship bound for Singapore.

The container then goes through customs before reaching a wholesale market or retailer in Singapore. There, a consumer buys the apple, takes it home and finally eats it.

“Previously, the apple travels, and the apple could never talk to anybody and tell him or her how its journey was,” explains Loh, who also says “only the apple knows exactly what happened”.

Now, however, each apple can be given a digital ID, which is tied to a physical indicator, such as a QR code. The apples might be packed into a pallet equipped with temperature and humidity sensors to monitor the environmental conditions of the shipping journey. Finally, GPS locks ensure that the pallet is opened only after it has reached its intended destination.

“Right now [with the use of technology], everyone in this system is now able to participate in that journey and [...] actually give feedback to improve on that journey.”

For example, with data on the movement of produce from farm to table in hand, parties can identify the stages of the journey that lead to significant food wastage, then work on reducing this wastage for a more sustainable food supply chain.

Not Every Party in the Supply Chain Needs to be Involved for Effective Tracking

The parties in the agriculture supply chain can be separated into three main categories: the buyer, seller and auxiliary service providers. The buyer and seller are the parties procuring and supplying the produce respectively at both ends of the supply chain. On the other hand, the auxiliary service providers, such as the shipping company, provide supportive services in between to put the seller’s produce into the buyer’s hands.

Because of the many parties involved, we might think that all of them need to assist in making produce tracking happen actively. (For example, each party scanning produce as they receive it, so that the produce’s journey can be monitored.) However, Loh calls this premise a “fallacy”.

Instead, Loh views the buyer and seller as being the “key stakeholders” that need to get on board. “The truth of the matter is that if you get the buyer and the seller on this system, then actually every other information that's required [for the tracking to work] is already provided by both the buyer and the seller,” says Loh.

And of these two parties, perhaps the party has to be won over the most is the buyer—because if the buyer requires certain auxiliary services, such as the provision of phytosanitary certificates or obtaining of customs clearance, the seller will have to implement them if it wants to do business.

Forging Partnerships to Help Farmers Reduce Transaction Costs

According to Voutier, smallholder farmers typically borrow money at high interest rates at the start of the crop season to buy seeds and fertiliser and repay that money at the end of the season. However, such high borrowing costs affect the ability of their businesses to grow.

“We think that digital tools that help farmers gather data on their creditworthiness [to be shared] with lenders could be a real game-changer in the whole industry,” says Voutier. He also expresses the hope that farmers will be able to get their transaction costs down if they are able to access digital payments, as well as chat-based platforms for communicating with traders and marketplaces.

With this in mind, Grow Asia has launched initiatives for startup founders and corporate leaders, such as banks and crop protection companies, to engage with farmers and learn about their needs so these can be addressed.

For example, the non-profit organisation runs a startup accelerator programme called the Digital ASEAN Programme which offers learning and mentorship opportunities for startups keen to make an impact on smallholder farmers.

Voutier shares that through the accelerator, Grow Asia has seen several founders enter into partnerships with corporate organisations to test new agriculture technologies.

Harvesting the Benefits of Agricultural Technology

While the agriculture industry is ripe for technological disruption, exactly how this should be done for maximum benefit will require some strategy.

For example, while we may imagine that every party in the supply chain has to buy into the idea of produce tracking, perhaps it is only the buyer and seller who needs to be convinced to invest in the relevant technology for it to happen.

Startup founders and corporate leaders may also combine forces to digitise the agriculture industry. When doing so, however, they may leverage platforms that farmers are already familiar with, rather than trying to reinvent the wheel.

If technology is put into the hands of the right parties, and in the right manner, then the seeds of change that are sowed in the agriculture industry may just bear fruit.

Singapore has committed to a ’30 by 30’ strategy, whereby 30 percent of our food needs will be produced locally by 2030. At SGInnovate, we are encouraged and excited to support innovative startups who are building capabilities to enhance our AgriFood ecosystem.

DiMuto is one of our portfolio companies.

Topics: Blockchain, Deep Tech for Good, Investments, Startups, Sustainability

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