In depth: Agriculture’s sustainability requires a digital transformation

A new report by the Intesa Sanpaolo Innovation Center examines the industry trends in Agriculture, Food & Beverage, with a focus on the impact of sustainability, safety and security issues from farm to fork. More broadly, it provides a guide as to how the Agriculture, Food & Beverage industry is responding to heightened attention on the way in which it manages the two interrelated issues of packaging and waste.
The Intesa Sanpaolo Innovation Center, an Intesa Sanpaolo Group company, explores the world of cutting-edge innovation, invests in applied research projects and high-potential startups, and works to accelerate the adoption of the circular economy.

Agriculture is facing major changes and challenges. With the global population due to reach 10bn by 2050, food production needs to increase by 70%. It also needs to get greener: the agricultural sector currently generates 10% of the European Union's (EU) total greenhouse gas emissions.

Initiatives such as the EU’s Farm to Fork Strategy, announced in 2020, aim to ensure that food is produced more sustainably. In addition, the European parliament wants to cut pesticide use to protect biodiversity and increase land use for organic farming by 2030.

As well as feeding the world, the EU’s agricultural industry feeds the economy. It created an estimated gross value added of €178.4bn in 2020, when it contributed 1.3% to the EU’s total GDP.

By embracing new technology and farming methods, growers can further increase productivity while reducing their environmental impact.

Pesticide alternatives

One of the biggest challenges in agriculture – and one of the oldest – is pest control. Chemical pesticides are still predominantly used: in 2018, 89.6% of a total $12.3bn revenue in the European market came from conventional pesticides, while just 11.4% was from natural alternatives. However, the Farm to Fork Strategy aims to halve the use of pesticides by 2030, and biopesticides are gaining ground.

The green transition is perhaps most prominent in bioherbicides, which are derived from plants or microbes. Sales are expected to grow at 19.9% to reach $1.5bn in 2023, with a 10.3% share of the market (up from $589m and 4.8% in 2018). Revenue for biofungicides is forecast to reach $474m by 2023, with a 3.3% share of the overall pesticides market, while bioinsecticides are expected to make $681m in revenue, with a 4.8% share of the market.

The impact of green agriculture extends beyond biopesticides to include biostimulants and biofertilisers, which are designed to help crops grow. The European Biostimulants Industry Council has helped simplify the numerous regulations in respect of biofertilisers, and it is hoped a structured market will now emerge.

Intesa Sanpaolo has financed a number of new start-ups such as the French company Toopi Organics, which invented a process for the microbiological transformation of human urine for the production of non-chemical fertilisers. With growing interest and investment, Frost & Sullivan expects a bright future for this sector, which was valued at $1bn in 2019 and is expected to grow by 12.6% by 2025.

Technological advances

Advances in agricultural technology will help make food systems become transparent, safe, efficient and sustainable across the value chain. This in turn will reduce waste, increase productivity, regain customer trust and boost profit margins.

A current buzz phrase in farming is “precision agriculture”. This uses a series of high-tech analysis tools, such as drones, satellites and in-field sensors, to collect data which helps make decisions on how to optimise soil quality and productivity.

Other key technology in precision farming includes the internet of things and artificial intelligence, which enable analysis tools to process the data using machine learning and send it to smart systems, which can then apply the right amount of fertilizer and water.

Automated tractors also play an important role, improving work efficiency, boosting productivity and reducing costs.

Agriculture robotics is a key growth area. According to Statista, the total value of its global market is expected to rise from $7.4bn in 2020 to $20.6bn in 2025, when it’s predicted that more than 560,000 units will be shipped. Robotic systems are already widely used in the dairy industry, but it’s anticipated that weeding, harvesting and picking will catch up over the next five years.

Creating sustainable farming

One of the key challenges in agriculture is ensuring a sufficient supply of diverse, safe and healthy food for a growing population, while minimising the environmental impact.

The EU is the only major farm sector in the world to have reduced its greenhouse gas emissions, however they still account for 10.5%. The Farm to Fork Strategy is part of the European Green Deal – launched in response to the Covid-19 pandemic with a goal of making the EU climate neutral by 2050.

As well as halving the use of pesticides, the strategy’s key goals for 2030 are to see at least a 20% reduction in the use of fertilisers; reduce the sales of antimicrobials used for farmed animals and aquaculture by 50%; and use 25% of agricultural land for organic farming.

Precision farming can help achieve these goals by enabling more efficient use of critical inputs such as land, water, fertiliser, pesticides and fuel. It can also help reduce waste, which is a huge problem in agriculture: 20% of food is wasted in the EU.

Moving to a circular economy presents an opportunity to address this problem while generating more than $1tn for the global economy. By embracing the circular economy, agricultural waste can be turned into bio-products such as fertilisers, energy and materials. For example, Livestock Water Recycling in Canada treats manure from farms to recover the water and form dry solids that can be used as biofertilisers.

Not only does a circular economy address environmental issues in farming; it helps drive innovation, create new business practices and generate new jobs through the use of agricultural waste, by-products and co-products. However, this economic model will only be possible if the latest technological advances are used.

Agriculture is one of the world’s oldest industries – which can mean it sometimes gets left behind in terms of technological advances. In order to ensure its success and sustainability, farmers now need to embrace a digital transformation.

This article is based on the Intesa Sanpaolo Innovation Centre's industry trends report on Agriculture, Food & Beverage. All data is from the report unless otherwise indicated.

Download here the abstract of the report and watch the video: