If society wants to ensure our planet’s resources are not depleted and can last for future generations, the resource-intensive agriculture sector must be optimised.
While technological innovation and disruption has powered major advances within almost all global industries, agriculture remains the least digitised by a considerable margin. However, we believe we have now reached an inflection point in ‘smart farming’.
Productivity-enhancing solutions in agriculture are helping to improve resource efficiency and lower the environmental footprint – while also advancing the competitiveness of farmers. The smart farming revolution has intensified in recent years due to a reduced cost of technology, which is now being deployed across a broad area of applications.
For example, we are witnessing innovative solutions in precision and automation equipment, with the use of robotics and sensors helping to improve resource efficiency in areas such as fertilisers and water. There is also software helping to enable the ‘connected farm’, which can improve the utilisation of assets and reduce inefficiency. In addition, innovative technologies – such as big data, artificial intelligence and drones – are powering the next leg of the current green revolution.
Governments are also now beginning to notice the long-term potential of innovation in the agricultural space. For example, the UK government earlier this year announced a new £90m (€103m) investment to bring together AI, robotics and earth observation to improve supply chain resilience in the agri-food sector.
The agricultural sector is the largest industrial sector in the UK, larger than the automotive and aerospace sectors combined, employing almost four million people. The UK agri-tech sector, specifically, contributes £14.3bn (€16.4bn) to the UK economy and employs 500,000 people – with companies and researchers developing pioneering technologies from farming drones to 3D printing.
While governmental assistance and incentives are important, most of the progress we are witnessing is coming from the corporate sphere, with many leading global agricultural groups already delivering value-added solutions to real world problems.
Smart farming may currently only be a small investment area within our Nordea 1 – Global Climate and Environment fund, but we are witnessing tremendous potential in companies such as Bunge, AGCO Corporation and Kubota Corporation.
Bunge, for example, supplies the world with many vital agricultural commodities – such as grains and oilseeds. It focuses on producing food more sustainably, efficiently and with greater sensitivity to the environment. The group attempts to ensure the entire agricultural value chain is operated sustainably, while ensuring all production is economically beneficial to local communities. Bunge is also committed to eliminating deforestation, as well as improving the carbon footprint and biodiversity in agriculture.
We see major potential in smart farming, which is already proving its worth in delivering more sustainable agricultural production. With the agricultural sector just beginning on its path of innovation, investors have a rare opportunity to share in the long-term growth of the last major industry on earth yet to fully enter the era of innovation.
Thomas Sørensen and Henning Padberg are portfolio managers of the Nordea 1 – Global Climate and Environment fund