Being raised in a family of farmers, I have seen my father and grandfather toil for long hours in the field and not much has changed over the years. Even today, my father relies on conventional farming methods in the two acres of land he has left since most of it was sold due to lack of decent returns. Limited access to information on what to produce and when, and no access to modern agricultural techniques or technology makes him resort to the old ways of farming.
Every harvest results in a negative yield for millions of farmers like my father due lack of solutions to improve the farm output and solve supply logistics from the farm gate. Nearly 86.2 percent of all Indian farmers are small and marginal farmers, that is, they own less than two hectares of land and most of them still use traditional, unscientific methods of farming. Despite more than $500 million of venture capital investment pumped into agriculture in India, the adoption of technology remains sparse and the real impact on marginal farmers is minimal. Approximately 57 percent of this funding (approximately $300 million) has been flowing into the supply chain or market linkages startups like Ninjacart, Jumbotail and Waycool, all of which aim to improve access to markets for farmers and provide them with better prices for their produce.
However, little growth capital and support has flown into precision agriculture, technology led-hardware models, and FaaS (farming as a service) solutions that will eventually improve yields and generate real data-based insights in order to improve crop and soil health.
Crop yields in India are still just 30 percent to 60 percent of the best sustainable crop yields achievable in developed and other developing countries. The decade ahead will be crucial in terms of building food security for 1.3 billion Indians and conserving our vastly degrading soil health.
India’s strict lockdown in March last year disrupted existing supply chains and brought a coerced change in the status quo for 130 million farmers and traders. The momentary paralysis in the existing linkages and services meant that farmers started looking for new means of getting their produce to market and in that process, the technology and e-commerce platforms in rural India got a booster shot. Players like AgNext, a SaaS-based quality assessment tool, and Agrostar, an inputs marketplace reported a 3X jump in revenues within three months of the lockdown.
AgriTech startups that had long been a supplement to the traditional systems now became the go-to players for farmer services. Farmers started engaging online through WhatsApp groups, community pages and seeking advice from their local trust centers on ways to improve yields and returns given this tectonic shift.
However, the farm sector has witnessed a 3.6 percent growth in the last fiscal year and is expected to grow more than three percent in 2021-2022 as per experts. For India to increase the income of its farmers, there is a need to adopt sophisticated digital technologies.
We at Kalaari, view technology not as an enabler but as a disruptor (or driver) of agriculture’s fourth revolution. Players involved in market linkages and e-marketplaces solve for supply chain inefficiencies and better prices for farmers but have effectively evolved into traditional logistics plays. It is increasingly seen that the player is not adding any significant value to the farmer’s life or wallet and in the process is burning a lot of cash to scale faster. These models will soon need to pivot towards operational profitability and data-driven pricing models.
In our opinion, we see three key opportunities as India recovers from a harsh second wave of Covid-19 and lockdowns:
Improving access to technology
We strongly feel that the time is now ripe for precision agriculture players to set foot across villages in India, and bring science and precision to our conventional methods of farming. For rapid adoption of plug-and-play hardware or software, we believe it is imperative for farmers to see monetary benefit in adoption of such tools. Hence, a lot of players need to demonstrate a proof of concept with an influential farmer—that drives adoption across nearby areas. These hardware devices and tools also provide an access to global export markets especially in Southeast Asia. Lastly, it is also important for these precision players to build a network of partners around their core product such as output linkages, insurance, or inputs sale in order to provide a near-full stack solution to the farmer and leverage the data collected at various stages of the crop cycle.
Investing in smarter value chains
Recently, we have seen rapid digitisation of long-ignored supply chains like silk, through startups like Reshamandi. We understand that such models could pan out in a variety of other adjacent non-food crop supply chains like cotton, hemp, or even tractors and implements. Food processing is another industry that is ripe for disruption. It serves a larger purpose than just extending the shelf life or preserving the nutrient value of products as it also can be viewed as a hub for creating rural employment and exciting tech-enabled business models.
Access to better credit and working capital
More than 36 percent farmers in India use informal sources of credit and as many as 33 percent have no access to credit at all. Credit is a major enabler for any business, and farmers today are often overlooked and are far from being independent entrepreneurs. Agri-tech startups that develop more intuitive and farmer-focussed ways of underwriting loans to farmers and create strong produce-linked or quality-based collections hold the key for unlocking this segment. Direct or indirect credit could be extended through input retailers, traders, or using other existing ecosystem players as anchors to facilitate credit requirements effectively.
In addition to the above, data science will play a key role in addressing various agriculture sector challenges. The use of data science can also help farmers in making informed decisions that can enhance their profitability and save costs.
Smart farming will also play a critical role in helping farmers take corrective measures on time. Monitoring parameters through IOT enabled solutions and automating as well as optimising processes is the need of the hour.
With the increasing penetration of smartphones and the affordability and easy access to data is digitising. We also foresee this digital revolution in the agricultural sector. With the introduction of IoT, nanotechnology, and other technical elements, the sector will witness massive disruption. Technology will be a key enabler in scaling solutions and key applications like price modelling, optimising forecast and reducing wastage will be the way forward.
The writer is a Partner at Kalaari Capital