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I was recently reading the ESG section of one of our Japanese holdings, Kubota, when I came across some interesting statistics highlighting major issues in the food chain.
Labour supply shortages
In Japan 2.6 million people were engaged in agriculture in 2010, but only 1.68 million by 2019, a fall of 35%. Of the latter number, 70% were 65 years or older. Despite a rising workforce in Japan in that period, the agricultural labour force has plummeted.
Of course, this is not confined to Japan. Farmers across the world are struggling to find workers and this summer a lot of fruit went unpicked and rotted. Aside from labour factors such as pay, conditions and labour mobility, it is clear the answer to this problem is increased agricultural efficiency.
Share of the labour force employed in agriculture
Share of people of working age who were engaged in any activity to produce goods or provide services for pay or profit in the agriculture sector (agriculture, hunting, forestry, and fishing).
Source: Our World in Data based on International Labor Organization (via the World Bank) and historical sources OurWorldInData.org/employment-in-agriculture • CC BY
Food demand challenges
The second set of statistics Kubota quoted were around global population projections and the consequential impact on food demand. The Japanese Ministry of Agriculture anticipates that global demand for food in 2050 will be 70% higher than the demand in 2010
Land availability
Another statistic that gives an indication on the landscape of agriculture is the availability of cropland. Global cropland area per capita decreased continuously over the period between 1961 and 2016: from about 0.45 hectare per capita in 1961 to 0.21 hectare per capita in 2016.
Cropland per capital, 1950 to 2016
Average cropland per person, measured in hectares. Cropland is equivalent to the UN Food and Agricultural Organization (FAO) definition of 'arable land and permanent crops'
Source: Land Use Data - HYDE (2017)
The environmental impact
A vast array of critical environmental issues are tied to agriculture, including climate change (26% of global greenhouse gases), dead zones, genetic engineering, pollutants, deforestation, eutrophic impacts such as soil degradation, waste, and many others. Solutions to the future of agriculture will need to focus on increasing agricultural and resource efficiencies.
Annual agricultural production emissions could reach 9 gigatons or more by 2050
Note: numbers in columns may not sum correctly due to rounding Source: GlobAgri-WRR model
Potential solutions
Below are two examples where innovation may offer solutions.
Indoor farming
Indoor farming enables the agricultural industry to cope with diminishing resources in an increasingly unstable climate. As mentioned, cropland is declining over time, and governments will need to get creative when it comes to increasing the nation’s agricultural capacity. We are likely to see a shift to urban environments becoming part of agricultural operations. Basements, attics, office buildings, and warehouses can potentially be converted into urban, indoor farms.
One feature of indoor farming is the ability to grow in three dimensions instead of two, allowing for greater utilisation of space, boosting crop yields. Crop environments can be controlled and protected from the climate in a variety of way, for example the amount of moisture, lighting, and soil control that crops get. The idea of year-round crop cycles from the same farm may soon become a reality. Not all crops will be compatible with indoor farming, tall crops like wheat may still require outdoor environments.
‘AgTech’
In the world of agricultural technology (‘AgTech’) automation is already with us and is improving every year in terms of accuracy and affordability, such that it will inevitably dominate the landscape over time. Precision farming allows farmers to have greater optimisation, accuracy and control when growing crops and raising livestock. It uses computerised systems and remote sensing to closely monitor crops for fertilisation, harvesting and watering.
In 2016 Kubota launched a rice planter with automatic steering and a function to keep it straight. By 2018 they had GPS-enabled versions of all three major farm products – tractors, rice planters and combine harvesters. That is just on the ground, in the air there are pesticide spraying drones.
AGCO’s Valtra Section Control eliminates overlaps resulting in up to 5-10% reduction in fertilizer application. It automatically turns off sections of the sprayer boom as needed to minimize potential drift of application and reduce chemical waste.
Deere and Co have developed See & Spray Select System, a targeted broadcast-spraying solution, which can reduce contact herbicide usage by up to 77 percent while still hitting 98 percent of the weeds in the field.
Beyond automation, data analysis and smart farming will shape the next generation of farmers. Technologies such as the IoT (‘internet of things’) and AI (‘artificial intelligence’) can be used to improve the quality of products and crop yields, all while optimising the human labour required by production. Data from farming equipment and famers’ smartphones can be uploaded into the cloud, where it can be added to data they may not already have, analysed, and then optimised. Weather patterns, predictions of crop growth and pest occurrence can be layered on top of what the farmer already knows about what was planted, when it was planted, the soil type that is being use and identify the optimal time for harvest.
As time develops and society works to mitigate the issues outlined above, the number of farmers will continue to decline, and so will what they do. Yesterday’s diggers and pickers are tomorrow’s technology operators and data analysts.
More about the authors
Robin BlackInvestment Manager
Robin Black, investment manager, is a member of the global equities team, with emphasis on the Asian and US markets. He runs the Aegon AM Japanese portfolios and is co-manager of a US Sustainable Equity Income strategy and the Global Equity Income strategy.