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Precision agriculture: a precise solution to food security

Olga Cotaga
Deutsche Bank Research Management
Stefan Schneider

After food prices skyrocketed in 2022, Ag-tech jumped into the spotlight as a potential solution for food security. It has come at just the right time as the technological infrastructure in emerging markets has developed to the point that makes precision farming possible.

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Food security shot into the spotlight this year following the risk of shortages from Russia and Ukraine. Indeed, it commanded its own agenda at the recent COP meeting. As a result, 2023 is shaping up as an acceleration year for the commercialisation of ‘precision agriculture’.
Precision agriculture is the concept of tailoring farming processes to specific parcels of land by using the proliferation of wireless connectivity, new hardware, and analysis tools. These include positioning systems like GPS, geo-mapping, sensors, integrated electronic  communications and variable rate technology. The aim is to help solve the food problem, particularly in emerging markets, by increasing productivity and crop yields.
Precision farming tech can roughly be separated into three categories: guiding, recording and reacting. The former includes forms of automatic steering for tractors and self-propelled agricultural machinery, such as driver assistance and controlled traffic farming. Recording tech helps with soil and soil moisture mapping, as well as canopy and yield mapping. Reacting tech means variable-rate irrigation, application technologies for nutrients and crop protecting agents, as well as precision seeding and weeding.1
Take, for example, variable rate technology. One study has shown an increase of 8 per cent in wheat yields (for 10 per cent less nitrogen), a rise of nearly 7 per cent in yields over 4 years in winter wheat (through variable-rate seeding) and 7 per cent growth in net income on fields that used variable rate seeding and data-influenced management zones.2
The point of precision farming is to produce more food from specific parcels of land using fewer resources. Indeed, one Spanish example showed a 25 per cent water savings3. Of course, the economic benefits are different across regions. In the US, as a share of total  production, precision agriculture’s potential gross economic benefit is of 18 per cent.4
As precision farming techniques become more widespread, they will help decarbonise the food chain. This is critical in countries achieving their self-stated climate goals as greenhouse gas emissions from farm, livestock, and related land use comprise up to 25 per cent of all emissions from human activities.5 The food system as a whole is responsible for a larger share.
Carbon offsets will likely be a driving force behind the decarbonisation efforts as they help solve the issue of lack of financial incentives from agriculture climate adaptation. With carbon credits taking centre stage at COP27 following the US carbon offset plan, their path towards a projected $190bn market by 2030 (up from $2bn in 2021 ) will likely take a big step forward in 2023 with the help of precision agriculture techniques. It is rare that a true win-win scenario like this is offered to investors. 2023 could be the year they take it.
  1. Soto Embodas et.al., “The contribution of precision agriculture technologies to farm productivity and the mitigation of greenhouse gas emissions in the EU”, 2019
  2. Business Wales of Welsh Government, “Can Precision Farming Help Mitigate Climate Change?”
  3. European Parliament, “Precision agriculture: an opportunity for EU farmers – potential support with the cap 2014-2020”
  4. USDA, “A case for rural broadband: Insights on rural broadband infrastructure and next generation precision agriculture technologies”, April 2019
  5. FAO 8 November 2021

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