Sunday Musings – Digital activity in farming segment beyond Smart Farms

While, the automation in the farm space could still be a decade away, and not be very politically expedient due the replacement of unskilled labour (esp in developing economies), there a a few digital interventions happening in the marketplace that is gradually transforming the farm to fork supply chain as we speak.

  1. Proliferation of messenger groups such as Whatsapp and Telegram, allows the farmers better price discovery and an opportunity for collective bargaining that has not been happening in the past. This also allows easy transmission of information regarding inputs, financial services and infrastructure (farm equipment) that would significantly reduce the value of intermediaries such as local financiers and/or collectors (aggregators). Esp in India, if we read this trend with the advent of the Jio Smartfone (and similar devices that will follow), the financial and supply chain inclusion of the farmer should happen very quickly.
  2. The advent of mobile banking and app based payment systems, eliminate the need for exhaustive bank accounts and detailed KYC needs, without compromising of the quality of payments and its ability to reach the last mile. Mobile payment systems have been existent in Africa for a while now and is fast reaching acceptability in the subcontinent and S E Asian countries.
  3. If we layer cryptocurrencies/blockchain on top of the above allows payments to flow smoothly and securely from buyer to seller without the need for an expensive vetting mechanism in the middle for checking the veracity of payments and goods.

What is the trading play in the new environment?

  1. The primary role, would move from price discovery and risk mitigation to pureplay supply chain providers, either through owned infrastructure and platforms or 3rd party infra and applications. The farmer is showing an increase in the propensity for taking price risk, hence they will have the need to preserve quality of goods, and timely offtake when they need to sell.
  2. With the absence of price opacity (to the farmer), the margins would have to come from scale of operations rather than segmental
  3. With a rise in the income levels in these countries, we should expect the demand for localized value added food products to increase, and hence see a potential increase in local supply chains vis-à-vis global movement of material.
  4. The scramble for this space should be more in the developing world, since the developed world already has installed infrastructure and stable supply chains, in addition to large unfragmented landholdings and prosperous farmers.

The following articles led to the above opinions.

http://economictimes.indiatimes.com/news/economy/agriculture/how-tech-enabled-agriculture-ventures-are-offering-farm-related-services-via-mobile-phones/articleshow/60265335.cms

https://nextbillion.net/three-steps-to-jumpstart-agriculture-mobile-payments-pt3/

http://www.digitaljournal.com/business/new-blockchain-for-agriculture-and-food-businesses/article/501623

http://www.livemint.com/Opinion/aUeXY1XnoIuWCvqp6ZAvZJ/Agriculture-a-fertile-ground-for-digitization.html

 

Arijit Sen,
Global Head – Strategy,
Swiss Singapore Overseas Enterprises

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