Rabobank, the Dutch multinational banking and financial services company, is often seen to have its finger on the pulse of the agriculture industry given its position as global leader in food and agri financing and sustainability-oriented banking – and 2015 proved to be no different. Utilising its array of expert analysts, the group produced several reports in 2015 highlighting the challenges facing the industry, and the opportunities that could, and should, be taken.
Firstly, the group focused on the need for fresh produce suppliers to be ‘e-daptable’, in its look at how the future of online retailing will affect the industry. Entitled ‘Wanted: E-daptable fresh produce suppliers’, the report emphasised that just as tomorrow’s shopper will buy groceries online, he or she will also buy fresh produce online - and highlighted how suppliers that wanted to take advantage of this development would have to adapt to the specific requirements of the ‘e-shelf’.
While total retail sales are stagnant, online grocery sales in western Europe are expected to double in the next five years, and looking further ahead Rabobank expects that in 2025 the share of online grocery shopping in total grocery shopping will be as high as 25 per cent. The magnitude of the change will be compared to the rise of private labels in the 1970s and the rapid rise of hard discounters since the turn of the century, Rabobank predicted.
Several developments have indicated consumers’ increasing willingness to buy fresh produce online, according to report author Cindy van Rijswick. “For a long time, consumers were accustomed to choosing their own fruit and vegetables in the store,” she explained. “Now, consumers are increasingly used to having their vegetables delivered to their doorstep, either via regular supermarkets and meal kit deliveries, or via specialised online fresh produce suppliers.”
Fresh produce suppliers that respond proactively to the online developments could cash in, according to Rabobank. The various online channels for fresh produce offer several opportunities, such as increased shelf space, the option of adding information about the product, active screen management, cross-sell opportunities and fresher products evia a shorter supply chain. At the same time, suppliers may face challenges from increased competition and complexity, as well as changes to impulse buying.
Embracing technology
In addition to becoming more e-daptable, the agriculture industry as a whole must also become smarter when it comes to utilising data and technology. That was the verdict of a second Rabobank report, ‘Building a smarter food system’, that was presented at Expo Milano 2015 late last year.
This report stated that the food and agriculture industry must increase production, availability and access to food “significantly” over the next ten years if it is to meet the demands of a larger and increasingly urban global population. Against a backdrop of uneven growth and soft commodity prices, this will require all segments of the supply chain to embrace the opportunity provided by data and technology.
“A smarter food system is more productive, less wasteful and more profitable,” explained Fred van Heyningen, global head food and agri-banking at Rabobank. “It combines technology and data to change the way, as well as the speed, at which decisions are made and to optimise the use of resources to produce and deliver the food consumers need where they need it.”
By 2025, the UN Food and Agriculture Organisation anticipates a 30 per cent increase in global daily food demand, which will require “a global food system that is more efficient, better able to meet consumer expectations, be more profitable, and more resilient in the face of macro-economic pressures”, the report said. The research within the study makes it clear that this is not possible through what Rabobank called a “business as usual” approach – instead, the combination of technology, big data and more advanced algorithms represents an opportunity to improve outcomes. Indeed, the group believes that a smarter food system could offer productivity gains of at least 5 per cent across a number of sub-sectors, supply chain stages and regions.
“Technology automates the way things happen, big data tells us what is happening, algorithms translate that data into decisions, adding speed and accuracy to food production, processing and distribution,” noted Justin Sherrard, global strategist at Rabobank. “Success will depend on disruptive ideas that investors are willing to back. The good news is that the move to a smarter food system is already beginning to take shape.”
Some of these moves, where tangible steps are being taken towards progression, include the adoption of things such as drones, which are increasingly being used to monitor crops; the use of big data, with retailers able to track purchases and monitor the quality of perishable goods; and smart irrigation, with gps, plant and soil sensors providing real-time data to spray systems to optimise the delivery of water and fertilisers. This is not enough, Rabobank said, adding that it has identified three key areas that will be essential for the future – namely the strengthening of supply chains, enabling investment and achieving social acceptance.
Big Data
The concept of Big Data alone has the potential to add US$10bn per year to the value of global crop farming, according to Rabobank analyst Harry Smit – the author of a third report, ‘Intuitive to fact-based farming’. However, the successful implementation of data-led farming will also require fundamental changes to existing farming practices, as well as an alteration in relationships between farmers, suppliers and customers.
“Also known as smart-farming, data intensive farming utilises new sensor technology to collect and process data for many variables relevant to monitoring and optimising crop growth,” explained Smit. “This allows farmers to tailor inputs and fine-tune application rates and cultivation activities down to the square metre. Over time, aggregation of data from many farmers will drive the development of even better agronomic decisions that can be customised and automated.”
However, the report warned that the industry would have to adapt to manage the cost of such investment, although this would be easiest for the type of large corporate farms most common in the US, South America and Australia. Medium and small-sized farms will need to develop a means to access the required technology, and could face considerable pressure to do so – this will necessitate scaling up by either increasing their own operations or by becoming part of a bigger franchise, sharing technology and expertise.
The report on big data also anticipates a second phase of change, during which the human factor in decision making will be increasingly supplemented and partly replaced by algorithms. For example, machines equipped with sensors will execute real-time, automated, fact-based decisions to address variable needs within the field.
Whatever happens in the future, it is clear that the fresh produce industry, and the agricultural sector as a whole, has a lot of adapting to do to move with the times.
