Financing, it is often said, can bring predictability to businesses looking to manage their costs, and given the huge capital outlays involved in the Agri farming sector, equipment leasing has historically played a key role in managing uncertainty. This is particularly so against the current backdrop of accelerating digitisation, robotics and IoT-enabled devices at the cutting edge of the sector. Miles Rogerson considers disruptive innovations alongside new financing platforms in the agriculture and farming sector.
Russia’s invasion of Ukraine, Brexit and the pandemic have all taken their toll on global markets, and UK farmers are now wrestling with the potential impacts of free trade agreements with New Zealand and Australia.
Inflationary fears in the UK have also sparked concern over demand, with livestock markets dealing with a prolonged downtrend in red meat sectors as consumers protect their incomes and reduce spending.
Similarly, for dairy markets, the risk of a high-cost winter is looming ever larger, with an expected increase in feed costs at a time when demand is uncertain.
Preparing for what’s on the horizon is more important than ever for farmers, and new technologies that can aid production yields and help farmers comply with sustainability legislation may offer a solution.
Tech to the rescue?
California dairy tech startup Pharm Robotics offers one such solution; an automated robotic health center that aids dairy farms with the inoculation process for dairy and beef cows.
As cows pass through the gates as they exit the milking barn, an RFID system determines whether the cow needs inoculation and either allows the animal to pass through or proceeds with the inoculation process. The cow gets scanned by a second RFID to determine the type of inoculation needed, and a robotic arm then positions itself to deliver the inoculation to the cow’s neck. Once completed, the inoculation is automatically logged into the management software.
Another solution comes from surface water tools for reducing the impact of pesticides on the environment. One initiative, Surface water Tool for Reducing the Impact of Pesticides on the Environment (Stripe) is led by Ireland's department of agriculture, Food and the Marine (DAFM).
Farmers are currently required to use runoffs (or buffer zones) to protect pollutants from contaminating the environment. Whilst some technology analyses soil, topography and farming practices to recommend the best location for buffer zones, a fundamental problem remains unaddressed; that of space.
Buffer zones take up valuable land, and so the STRIPE initiative incentivises farmers to adopt spray drift-reducing technology to reduce the impact of pesticide exposure on the environment, enabling farmers to reduce the size of buffer zones and make more effective use of their agricultural land.
Spray drift-reducing technology can also be paired with technology that recommends the optimal quantity and timing of fertiliser application.
Alternatively, some pig farmers in the UK have turned to the process of electrolysis to produce hydrogen from the ammonia found in wastewater.
According to the Agriculture and Horticulture Development Board (AHDB), the process consumes 1.55 kWh of electrical energy to produce 1kg of hydrogen. When used as part of a fuel cell, 1kg of hydrogen can produce 33kWh of electrical energy.
The AHDB also pointed out that using a slurry flushing system, farmers are able to harvest the ammonia for electrolysis, generating around £20 per finished pig, or £300,000 per year on a 500-sow unit.
Furthermore, if the electricity for electrolysis comes from renewables, then there is no ‘direct’ release of CO2 when generating, or burning, the hydrogen, with the only waste product being water.
Vendor financing alternative
Due to the cyclical nature of farming, farmers are frequently stuck waiting for their cash windfall for several weeks after each harvest. This can be particularly damaging if a farmer lacks the funds necessary to purchase crucial products and technology to manage the growing season.
As such, many farmers turn to finance to tide them over the months when cash is in short supply. In regions with large populations of small to mid-sized farmers, this generally means turning to vendor financing which often puts a strain on dealers’ cash flows and can be a particularly expensive financing solution for farmers.
This is where Turkish agricultural fintech startup Tarfin comes in. The company offers an alternative to vendor financing, using machine learning-based agricultural risk scoring models that rely on farm data and credit history to provide agri-dealers and small to mid-sized farmers with a tool to finance the sale of their products permitted for use in organic farming.
This arrangement allows Tarfin’s partner retailers, who offer a range of inputs including seeds and fertilisers, to assess the credit worthiness of each farmer and offer them products with fairer credit terms and the chance to pay at harvest.
The company implements automated underwriting and instant approval capabilities, thereby integrating the financing solution with the sale of agricultural inputs. Farmers are also informed of the payment amount due at harvest, with no origination fees, service charges, or deferred payment fees.
Since it was founded in 2017, Tarfin has financed more than 42,000 farmers and has extended over US$100 million of financing for agricultural input sales.
Value chain platform
Meanwhile, Agro.Club is offering financial solutions for players in the European agricultural value chain.
The US-based platform is a digital sales platform that aims to help retailers and grain companies “find the best match of supply and demand.”
Agro.Club says that its platform also helps retailers to do quality control of grain, know-your-customer documentation, logistics, and financing of the transactions.
The company says it has so far facilitated transactions worth more than $200 million and has served more than 25,000 farmers across the globe.
Technology is undoubtedly destined to play a crucial role in the future of agribusiness, fuelling higher crop productivity, reduced food prices, and a reduced impact on natural ecosystems.
Simultaneously, while finance already assumes vital significance in the agricultural industry, it can be used as an increasingly catalytic tool to strengthen the farm business and augment productivity through the adoption of new technology – something we are likely to see in the coming years.