October 2019Farming 4.0: How precision agriculture might save the world Precision farming improves farmer livelihoods and ensures sustainable food productionManagement summaryFarming is under pressure due to global warming, fall-ing commodity prices and high debt. Consumers de-mand ecological farming practices and sustainable food. How can industry respond and support farmers in this challenging situation? In this special report, we'll examine how crop protection companies, equipment manufacturers, and donullns of startups are engaging risnullanullerse farmers with sensors, biologicals, robotic au -tomation, and digital data to impronulle farm yields and reduce input wastage. nulle'll also explore the role of col-laboration in staying ahead on the innonulltion ladder and capturing a relenullnt piece of a rapidly growing pre -cision agriculture pie.2 Roland Berger Focus Farming 4.0ContentsCoverphoto: koya79/GettyImages; Allicons in the studyfrom Noun Project1. Challenges in agriculture . 4An urgent need for change2. Precision agriculture is the future of farming . 7Doing more with less by leveraging technology3. Knowing the main protagonists . 14Finding your way in a rapidly developing environment4. Managing the transition . 22Addressing opportunities in an extended ecosystem5. A technological race with uncertain outcomes . 25Our views on key technologies6. Navigating agriculture's transformation successfully . 27Some thoughts on how to move forwardFarming 4.0 Roland Berger Focus 3nullriculture touches enulleryone's life linulle few other indus -tries. nullnce food and water are basic necessities, farming is central to enullery nation's well-being. nullether the high -ly industrialinulld row crop farmers in the null.null. or nullanulll, medium-sinulld cereal growers in nullrope, or small sub -sistence farmers in India and China, our global econo-my relies upon all of these for basic food security. In that way, farming is nulltally important, which explains its po -litical clout and enduring influence, despite represent-ing a small fraction of the total population in denulleloped economies.In today's ennullironment, modern farming faces many challenges. nullther than conullering an exhaustinulle list nullon -sumer awareness, traceability, and bio-fuels to name a fewnull this report will concentrate on a few examples that highlight the need for change in the agricultural industry.First and foremost, the agricultural sector needs to ensure sufficient food for a still growing global popula-tion. nulls per a recent null report,nullthe nullnull global popula -tion of nullnullbillion is expected to grow to nullnullbillion by nullnull and nullnullbillion in nullnullnulln increase of nullnulland nullnull respectinullely. nullme null million people are born in the world each year, despite falling global fertility rates.nullile the population continues to increase, the anullilability of arable land is decreasing. nulls per the Food and nullriculture nullganinulltion, soil destruction caused by chemical-heanully farming methods, deforestation, and global warming is proceeding at an alarming rate.nullnullnce three centimeters of top soil tanulle nullnullnullyears to denullelop, our current rate of replenishment is unsustainable. nullnull -en the rate of population growth, the amount of arable and productinulle land per person by nullnull would equal only a quarter of the total anullilable land in nullnull.nulling more of the same is clearly not an option. nulls per a recent null report,nullland degradation will threaten the existence of about nullnullbillion people by nullnull, cause species extinction nullsuch as dramatically reduced popu-lations of select insects and birds in nullropenull intensify climate change, and lead to mass migrations. nullile hu -man migration pressure has made headlines recently, the migrations from epic ennullronmental destruction will inenulltably lead to nullolence.Farmers, as the original custodians of the land, un-derstand these challenges well. In the midst of all this upheanulll, howenuller, farmers are getting older. nulley are finding it increasingly difficult to find and nulleep labor to support them in the field. nulley are often under financial pressure. A nullen coupled with their traditional risnullanullerse nature, this manulles it especially difficult for them to innullest in unpronullen technologies.nullriculture, and with it the world, clearly has a burn -ing problem. Change is needed. If industry participants do not react in time to these challenges, they will face increased actinullst pressure and regulatory action, simi -lar to the emission regulations that were prenullously im -posed on the automotinulle industry.null course, there is no silnuller bullet to address the challenges we face. nullo magic wand we can wanulle to en-sure enulleryone has bountiful, nourishing food on the ta-ble. In fact, solnullng today's challenges will require the application of many lenullers. nullnullorld nullpulation nullospectsnullnulle nullnull nullenullsion, httpsnullnullww.unnullenullelopmentnullesanullublicationsnullworld-population-prospects-the-nullnull-nullenullsion, accessed on February null nullnullnullnullsenault, C.nullnullly null nullears of Farming nulleft If nullil nullgradation Continues, nullientific nullerican nullhttps nullnullww.scientificamericannullarticlenullnly-null-years-of-farming-left-if-soil-degradation-continuesnull accessed on February null nullnullnullnullllemen, null nulld.null nullmmary for policymanullers of the thematic assessment report on land degradation and restoration. Intergonullernmental nullience-nulllicy nullatform on nullodinullersity and nullosystem nullrnullces nullnullnullnull nullnn nullnull, p. null1. Challenges in agriculture An urgent need for change4 Roland Berger Focus Farming 4.0A: U.S. farmers are increasingly feeling the pressure of falling crop prices and incomes coupled with a dramatic increase in debt Economic environment for farmersSource: USDA, Roland BergerUnited States net farm income USD bn and debt/net income ratioComment140120100806040200864202000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018FNet farm income Debt/income ratioCrop prices USD/bushel1510502000 2005 2010 2015 2020Corn priceSoybean priceNet farm income (left axis)As farmers continue to face economic pressure, invest­ment in and adoption of new technologies is slowHigh level of debt and increasing interest rates weigh on farmers' live li­hoodsSo far, land prices seem to be holding but first rumors about declining prices can be heardTrade war with China likely to lead to per­manent market share loss for American soy farmers similar to results of Carter's wheat boycott against Russia in the 1980'sFarmers are generally risk-averse and need to be convinced of a clearreturn on investment in order to adopt new technologiesDebt/net income (right axis)Farming 4.0 Roland Berger Focus 5world's farmland and contribute nullnullnull of food emis -sions. nullet only nullnullof our protein and nullnullof our calo -ries stem from these food sources. nullifting the planet to a nullegan diet would reduce food land use by nullnull green -house gas emissions by nullnull acidification by nullnull and freshwater withdrawals by nullnullfrom nullnull lenullels. nullatnulls more, consuming more produce has measurably result-ed in better health, so the case for a more plant-based diet could not be clearer.nullyond these two big opportunities, how we operate farms today is another area ripe for change. For one, farming practices within the same crop type, land sinulle, and geography nullry immensely, which creates senulleral op -portunities for further optiminulltion. nullcross geographies, these differences are enullen starnuller. nullanulle, for example, anull-erage fertilinullr use. nulle anullerage nulllue for this ranges be -tween nullnulllogram of nitrogen per hectare in nullanda to nullnullnulllograms of nitrogen per hectare in China.nullnullast, but definitely not least, precision agriculture holds the promise of significantly impronulled yields, enullen while reducing input costs. Impronullements in both hardware and software technology are opening a new chapter in agriculture, especially in the case of sensors, biologicals, robotic automation, and digital data. nullther than being a domain for consernulltism, agricul -ture today is at the forefront of the Internet of nullings nullonull renullolution.nulleducing food waste is paramount. nullearly, about nullnullbil -lion tons of food produced for human consumption are wasted throughout the supply chain.nullnullth total global food production of null.null billion tons, this amounts to about nullnullannually. nullsides optiminullng the supply chain, consumers must change the way they consume food, especially in denulleloped marnullets. nullccording to a recent report by the Commission for nullnullronmental Co -operation in nullntreal,nullabout half of the food waste in the null.null. and Canada is caused by consumers at the tail end of the supply chain.nullot only must we reduce food waste, we must shift food consumption towards a more nullegetarian diet. nulls per a recent study by the nullninullersity of nullford, meat, aquaculture, eggs, and dairy use about nullnullnull of the nullnullobal food losses and food waste nullnulltent, causes and prenullention. Food and nullriculture nullganinulltion of the nullnited nullations null httpnullnullww.faonullnull-inullnulle.pdf, accessed on February null, nullnullnullCharacterinulltion and nullnagement of Food nulloss and nullaste in nullorth nullerica. Commission for nullnullronmental Cooperation nullnullnull nullntreal, nullnull, p. nullnullnullore, null. and nullemecenull null.nullnulleducing food's ennullronmental impacts through producers and consumers. nullience nullol. nullnull Issue nullnull, nullnull, pp. nullnullnullnullnullibid.Feeding the world in a sustainable manner and convincing farmers that this works is the key challenge of precision farming.6 Roland Berger Focus Farming 4.0and row guidance systems, nullertical farming, and hydro-nullaeroponics. In this report, we will pronullde a general onuller -nullew of some of the most promising technologies being adopted and used by agro-chemical companies, original equipment manufacturers, suppliers, technology pro-nullders, and select startups. nulle will highlight the manullr opportunities and challenges that participants face and speculate on potential implications of these new tech-nologies. See interview on page 8 nullen loonullng at the aforementioned challenges, it is enulldent that all of the solutions mentioned need to be pursued in unison. nullr focus here is on precision farm -ing, which we belienulle to be essential for the future of all participants in the agricultural nulllue chain. B nullechnology solutions include a nullst range of applica -tions such as the management of fleets, drones and data, farm management nulloil, seed, crop health and pest mon -itoringnull prescriptinulle seeding and spraying, implement 2. Precision agriculture is the future of farming Doing more with less by leveraging technologyB: Precision farming technologies impact the entire agricultural value chain from the input supply to the end customer Agricultural value chainSource: Roland BergerOESAfter­salesSeeds company Dealership/agenciesChemical companyService providers(e. g., banks, insurers, agronomists)DistributorOEM Dealership Farmers EndcustomerCooperativesTrading companiesFood companiesDistributors/super­ marketsInput supplying*Production Post-harvest ProcessingDistribution/marketing B2C customer* Including machinery/spare parts, seeds, herbicides, advisory/prescription services, etc.Farming 4.0 Roland Berger Focus 7used for autonomous drinullng solutions was nullnullnull,nullnullat the beginning of the decade and was about nullnullnullnullnullin nullnull, a nullnullreduction in only a few years.nullnullmilarly, computing power has continued to follow nullore's law on anullerage onuller the last decade.nullnullile the exponential growth may only continue for a few more years, comput-ing power today is already at a lenullel that enables ad-nullnced technologies.nullnullis increase in computing power will only expedite machine learning and artificial intelligence applications. nulle good news is that machine learning and artificial intelligence hanulle already pronullen themselnulles with many nullfter extensinulle research, we'nulle identified four primary technologies that define precision agriculture and ulti-mately the future of farming. nulley are imagery nullsensors, robotics nullautomation, digitalinulltion nullbig data, as well as biologicals. C nullree of these technologies wornullclosely together, namely sensors, robotic automation, and digital data, and are enabled by adequate connectinullty as well as the impronullements in edge computing and the cloud.nulldditionally, precision agriculture has progressed with the help of other technological trends. For one, hardware costs hanulle come down dramatically in recent years. For instance, an automotinulle lidar sensor that is Precision farming is the future, there is no chance to put this genie back in the bottle. Feeding 10 billion people in a healthy manner cannot be done with existing farming tech­niques. However, agricultural OEMs, agro­chemical compa­nies, technology players, startups, universities everybody is facing the same question: Which horse should we bet on? Looking at rapidly changing technologies, this fast develop­ment is a key critical uncertainty that will keep many man­agers in these companies awake at night.Another key challenge is to truly understand the voice of the farmer. Looking at lead users among various farm types and understanding how to create value and how to commu­nicate this value to customers is a task that some companies have difficulties with. In­depth understanding of a good co­hort of farmers, in my opinion, will lead to better results than millions of data points.Co­creation is another point that is crucial here. The mountain bike, the snowboard, Gatorade, roller blades, etc. were all invented by people who were trying to solve real world problems that they faced. Working with farmers, understanding their challenges, and then turning this into insights regarding products and services holds the key a