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Agricultures Connected Future How Technology Can Yield New Growth F
Agricultures Connected Future How Technology Can Yield New Growth F
Agriculture’s connected
future: How technology
can yield new growth
One of the oldest industries must embrace a digital, connectivity-
fueled transformation in order to overcome increasing demand and
several disruptive forces.
© baranozdemir/Getty Images
October 2020
The agriculture industry has radically transformed value to global GDP over the next decade,
over the past 50 years. Advances in machinery according to research by the McKinsey Center
have expanded the scale, speed, and productivity for Advanced Connectivity and the McKinsey
of farm equipment, leading to more efficient Global Institute (MGI) (see sidebar “The future
cultivation of more land. Seed, irrigation, and of connectivity”).
fertilizers also have vastly improved, helping farmers
increase yields. Now, agriculture is in the early Demand for food is growing at the same time the
days of yet another revolution, at the heart of which supply side faces constraints in land and farming
lie data and connectivity. Artificial intelligence, inputs. The world’s population is on track to reach
analytics, connected sensors, and other emerging 9.7 billion by 2050,1 requiring a corresponding
technologies could further increase yields, improve 70 percent increase in calories available for
the efficiency of water and other inputs, and build consumption, even as the cost of the inputs
sustainability and resilience across crop cultivation needed to generate those calories is rising.2 By
and animal husbandry. 2030, the water supply will fall 40 percent short
of meeting global water needs,3 and rising energy,
Without a solid connectivity infrastructure, labor, and nutrient costs are already pressuring
however, none of this is possible. If connectivity profit margins. About one-quarter of arable land is
is implemented successfully in agriculture, the degraded and needs significant restoration before
industry could tack on $500 billion in additional it can again sustain crops at scale.4 And then there
value to the global gross domestic product by are increasing environmental pressures, such
2030, according to our research. This would as climate change and the economic impact of
amount to a 7 to 9 percent improvement from its catastrophic weather events, and social pressures,
expected total and would alleviate much of the including the push for more ethical and sustainable
present pressure on farmers. It is one of just seven farm practices, such as higher standards for
sectors that, fueled by advanced connectivity, will farm-animal welfare and reduced use of chemicals
contribute $2 trillion to $3 trillion in additional and water.
As the world experiences a quantum At the same time, new generations of these will allow the expansion of use cases even
leap in the speed and scope of digital technologies will appear, with upgraded to remote areas and will enable constant
connections, industries are gaining new standards. In addition, new types of more connectivity universally. Massive use of
and enhanced tools to boost productivity revolutionary—and more capital-intensive— Internet of Things (IoT) applications and
and spur innovation. Over the next decade, frontier connectivity, like high-band 5G and use cases will be enabled as new technol-
existing technologies like fiber, low-pow- low-Earth-orbit (LEO) satellites, will begin ogies allow very high device densities. And
er wide-area networks (LPWAN), Wi-Fi to come online. mission-critical services will take advan-
6, low- to mid-band 5G, and short-range tage of ultralow-latency, high-reliability,
connections like radio-frequency identi- Together, these technological develop- and high-security connections.
fication (RFID) will expand their reach as ments will unlock powerful new capabilities
networks are built out and adoption grows. across industries. Near-global coverage
1
The World Population Prospects: 2015 Revision, United Nations, Department of Economic and Social Affairs, Population Division, 2015.
2
World Resources Report: Creating a Sustainable Food Future, United Nations, World Resources Institute, and the World Bank, 2013.
3
World Could Face Water Availability Shortfall by 2030 if Current Trends Continue, Secretary-General Warns at Meeting of High-Level Panel,
United Nations, 2016.
4
The State of the World’s Land and Water Resources for Food and Agriculture: Managing systems at risk, Food and Agriculture Organization of
the United Nations and Earthscan, 2011.
To address these forces poised to further roil heavy reliance on manual labor has further
the industry, agriculture must embrace a digital affected farms whose workforces face mobility
transformation enabled by connectivity. Yet restrictions. Additionally, significant environmental
agriculture remains less digitized compared with benefits from decreased travel and consumption
many other industries globally. Past advances were during the crisis are likely to drive a desire for more
mostly mechanical, in the form of more powerful and local, sustainable sourcing, requiring producers to
efficient machinery, and genetic, in the form of more adjust long-standing practices. In short, the crisis
productive seed and fertilizers. Now much more has accentuated the necessity of more widespread
sophisticated, digital tools are needed to deliver digitization and automation, while suddenly shifting
the next productivity leap. Some already exist demand and sales channels have underscored the
to help farmers more efficiently and sustainably value of agile adaptation.
use resources, while more advanced ones are in
development. These new technologies can upgrade
decision making, allowing better risk and variability Current connectivity in agriculture
management to optimize yields and improve In recent years, many farmers have begun to consult
economics. Deployed in animal husbandry, they can data about essential variables like soil, crops,
enhance the well-being of livestock, addressing the livestock, and weather. Yet few if any have had
growing concerns over animal welfare. access to advanced digital tools that would help to
turn these data into valuable, actionable insights.
But the industry confronts two significant In less-developed regions, almost all farmwork is
obstacles. Some regions lack the necessary manual, involving little or no advanced connectivity
connectivity infrastructure, making development or equipment.
of it paramount. In regions that already have a
connectivity infrastructure, farms have been slow Even in the United States, a pioneer country in
to deploy digital tools because their impact has not connectivity, only about one-quarter of farms
been sufficiently proven. currently use any connected equipment or devices
to access data, and that technology isn’t exactly
The COVID-19 crisis has further intensified state-of-the-art, running on 2G or 3G networks
other challenges agriculture faces in five areas: that telcos plan to dismantle or on very low-band
efficiency, resilience, digitization, agility, and IoT networks that are complicated and expensive to
sustainability. Lower sales volumes have pressured set up. In either case, those networks can support
margins, exacerbating the need for farmers to only a limited number of devices and lack the
contain costs further. Gridlocked global supply performance for real-time data transfer, which is
chains have highlighted the importance of having essential to unlock the value of more advanced and
more local providers, which could increase the complex use cases.
resilience of smaller farms. In this global pandemic,
The challenge the industry is facing is thus twofold: — Mission-critical services. Ultralow latency and
infrastructure must be developed to enable the use improved stability of connections will foster
of connectivity in farming, and where connectivity confidence to run applications that demand
already exists, strong business cases must be absolute reliability and responsiveness, such as
made in order for solutions to be adopted. The good operating autonomous machinery and drones.
Exhibit 1
ADVANCED FRONTIER
Exhibit 2
Agriculture connectivity
Agriculture connectivitycould
couldunlock
unlockmore
morethan
than$500
$500billion
billionininGDP
GDPbyby2030.
2030.
Distribution of potential value from connectivity in 2030, by subindustry, $ billion
8.9 9.2
7.7
Potential value,
% of the industry’s output 4.1
12.2
5
This represents our estimate of the total potential for value added in agricultural production; it is not an estimate of the agritech and precision-
agriculture market size.
Exhibit 3
A number of advanced
A advanced connectivity
connectivity use
use cases
caseshave
havethe
thepotential
potentialtotoradically
radically
transform many aspects of farming by 2030.
transform many aspects of farming by 2030.
Agriculture connectivity use cases
Smart-crop Drone farming Smart-livestock Autonomous- Smart-building
monitoring monitoring farming machinery and -equipment
management
115
130
90
85 60 60
70
50
40
Use case 1: Crop monitoring Smart monitoring could also help farmers optimize
Connectivity offers a variety of ways to improve the the harvesting window. Monitoring crops for quality
observation and care of crops. Integrating weather characteristics—say, sugar content and fruit color—
data, irrigation, nutrient, and other systems could could help farmers maximize the revenue from
improve resource use and boost yields by more their crops.
The value of our agriculture-connectivity We applied those levers to the profitability tunity, with advanced connectivity poten-
use cases resides primarily in labor drivers of agricultural production to derive tially adding some $350 billion of value to
efficiencies, input optimization, yield in- an economic potential for the industry as global food production without additional
creases, reduced overhead, and improve- a whole. For example, a use case might inputs or labor costs.
ments in operation and maintenance of enable a 5 to 10 percent reduction in
machinery. Each use case enables a series fertilizer usage, saving costs for the farmer,
of improvement levers in those areas that or enable 3 percent higher yields, leading
promise to enhance the productivity of to greater revenues for the farmer. In fact,
farming (exhibit). higher yields represent the largest oppor-
Web <2020>
Exhibit
<IOTAgriculture>
Exhibit <4> of <4>
Our assessment
assessment ofofthe
thepotential
potentialimpact
impactofofconnectivity
connectivityisisbased
basedononregional
regional
and subindustry-specific
subindustry-specificcharacteristics.
characteristics.
Farm-costs Improvement Take rate of Forecasted 2030 Output- Estimated
structure¹ potential from use cases³ gross output⁴ to-GDP 2030 GDP
use cases² conversion potential
¹Data sourced from Agreste, DE&S India, Egerton University, IEG FNP, Renmin University, WIND, The World Bank Group, and USDA and supplemented by
expert interviews and McKinsey analysis.
²Data sourced from past client work and publicly available sources and supplemented by expert interviews and McKinsey analysis.
³Data sourced from expert interviews and McKinsey analysis.
⁴Data sourced from FAO, IHS Markit, Organisation for Economic Co-operation and Development, and The World Bank Group and supplemented by McKinsey
analysis.
6
“Das Breitbandförderprogramm des Bundes” [in German], Bundesministerium für Verkehr und digitale Infrastruktur, 2020, bmvi.de; 5G in
Korea: Volume 1: Get a taste of the future, Samsung Electronics, 2019, samsungnetworks.com.
Lutz Goedde is a senior partner and global leader of McKinsey’s Agriculture Practice in the Denver office; Joshua Katz is
a partner in the Stamford office; and Alexandre Menard is a senior partner in the Paris office, where Julien Revellat is an
associate partner.
The authors wish to thank Nicolas D. Estais, Claus Gerckens, Vincent Tourangeau, and the McKinsey Center for Advanced
Connectivity for their contributions to the article.