By Jean-Michel Boyer, CEO, BNP Paribas Leasing Solutions UK
The agriculture industry faces a number of challenges in 2017: the UK’s looming departure from the EU places critical funding packages under threat, the lack of single market membership may make trade more difficult, and access to labour will be more difficult when our borders close.
Over the last few years, long-term total factor productivity has been trending slowly, but steadily upwards: between 2014 and 2015, it improved by 0.7%. Overall income from farming has been less buoyant however. In 2015, a combination of factors including lower commodity prices and poor exchange rates led to a 24 percent decline.
So how can the agricultural industry cope with this tough business environment?
Embracing digital farming may be the best way to boost productivity and income alike. Advances in technology have revolutionised every other industry, and farming is no exception. Machinery is becoming more efficient; big data enables identification of relevant patterns and trends; tasks that were once time-consuming are now partly or fully automated.
Next generation Global Navigation Satellite Systems (GNSS), driverless vehicle technology, and Internet of Things (IoT) technology offer the potential for colossal productivity growth. Agricultural vehicles can be automated and equipped with sensors that harvest data as well as crops – in the course of performing their basic functions, they can also collect information about plant health, soil composition, yields, and even field topography.
Drone and satellite technology can complement this work by generating millions of data points. They make it possible to analyse a lone patch of land at a 30cm resolution, offering in-depth insights into the current growing season and a comparative analysis of years gone by. Drones can also double as flight planning tools: when equipped with certain software, they can evaluate crop conditions – mitigating reliance on fertilisers and thereby boosting yields. This technology brings a greater level of accuracy to farming, and gives the farmer concrete information to work from.
The benefits of this technology aren’t just hypothetical: they effectively take the guesswork out of farming. In Dubai, there are plans to scale up drone technology to the point where food security is completely self-sufficient by 2030. Ex-Google employees have developed products such as the American Climate FieldView, which can offer farmers real-time visibility into weather and how it affects their crops: it can track precipitation and nitrogen levels, it can even recommend nutrients to be added to the soil, and it can identify crop health issues before they damage yields.
A farm and a leg? Investing in technology with finance
The industry may well be reluctant to embrace technology. Given the level of investment it requires, their reasons are understandable. That said, the consequences of failing to adapt are too severe to ignore: lost productivity and efficiency all too often equate to lost revenue. Investing in new technology should be an operational priority. Farmers must ensure they maximise their Annual Investment Allowance, allowing them to write off plant and machinery expenditure against taxable profits.
Cashflow sensitive businesses should also investigate the various finance options at their disposal. A company that can spread the cost of their drones, their combine harvesters, and their tractors across a period of several years is a company that has far more flexibility. They’re also not committed to tools or machines that quickly become obsolete: at the end of their agreement, they can simply upgrade to a new and improved product on comparable terms.
What’s more, it isn’t limited to one vehicle, tool, or machine: farmers can use finance to invest in a comprehensive digital agriculture solution. This gives them a significant competitive advantage without causing a black hole in their finances.
The importance of this technological advantage shouldn’t be understated. A farmer who can automate trivial tasks, work from more accurate information, and boost their profits by maximising efficiency, will be ahead of the competition.
The average farmer thinks in seasons, but the technologically-savvy farmer thinks in years and decades. If they seize the advantages before them, they’ll be rewarded with a rich harvest.
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