Conservis Interview: A changing agricultural landscape

Moody’s Analytics Agricultural Strategist & Industry Practice Lead Doug Johnson talks to Kristen Johnson – Senior Marketing Manager, David Gray – Senior Vice President, Corporate and International Markets, and Patrick Christie – Founder and President from farm management software supplier Conservis to find out how a new generation of farmer is reacting to these changes.

Digitizing the farm

“The next wave of agriculture has to be about digitization of the farm,” says David Gray. Farmers have access to data and technology that were not available to their predecessors. As well as quantitatively proving new farming techniques, data can be used to improve the business of running a farm.

Patrick Christie also stresses the importance of data: he names “management of information” as the main factor that separates successful producers from the less successful. “Top producers are aggressive in their approach to data – they try to make sure every piece can be used for action or insight. They are using data, not gut feelings to drive decisions, and aim at measurable targets rather than going for what is good enough.”

Successful farmers also seek out innovations to stay ahead of their competitors, and display business acumen and a willingness to invest. However, many farmers still lack trust in data. This distrust stems from the quality of data available, but farmers also struggle to make sense of data. “The ability to interpret data is the next wave of farm management,” says Christie.

Even as farms gain digital tools, and as those tools become interconnected, not every farmer is convinced of the opportunities they offer. Christie talks of a transition from more traditional ways of thinking to technology-driven farming, as “digital natives cannot consider what life would be like without technology.”

Farms are not only using digital technologies. Biotech and genetic engineering are shifting the focus away from yields. “Rising input costs mean that genetic engineering will have to get better,” says Christie. Gray warns of the sensitivity around technologies like genetically modified organisms. “When you use the word ‘genetics’, it gets pretty emotive, because GMOs are contentious. You have significant areas of misunderstanding.”

Consumer sentiment and expectations are also influencing farming practices. Kristen Johnson tells of a market changing with the demands of consumers like herself. “Generation X and Millennials want to know where food comes from. We care about the ‘triple bottom line’: people, planet, profit.” Such considerations are leading to demand for organic and fair trade produce.

Health concerns are driving demand for organic produce, but sustainability matters to consumers too. “Climate change is one of the biggest issues of our generation,” says Johnson. Consumers want a transparent supply chain, and farmers will have to step up efforts to offer traceability. As they gather data to do so, that data can also be put to use to improve their business.

Sustainable practices will be spurred on by the changing structure of the agricultural industry, says Gray. With the average age of farmers in the US, Australia, and Europe already around 60 years and increasing, issues of succession are coming to the fore. This situation has created an opportunity for institutional investment, which often comes with requirements for sustainable practices, or at least doing more with less.

Gray also points to regulations that can promote sustainability. “Governments and regulators are playing an increasing role in ways they never did before,” he says. The EU targets 25% of farmland for organic crops by 2030, and has introduced disclosure and labeling requirements. Banks that lend to agriculture are also facing increasing regulation around ESG metrics like carbon footprints. “New regulation is going to reshape how industry participants, broadly defined, need to think about their business,” says Gray.

It is clear that change is coming to farming, and the methods of the past will not be the methods of the future. How is a new generation of farmer reacting to these changes? Perhaps the best way to think of the changes is in the aggregate. “Agriculture is having to rethink itself,” says Gray. “It’s not just about growing crops, but about the human food supply chain: delivering food to consumers globally.” This rethinking is the result of the far-reaching changes that are converging on agriculture, including institutional investment. As institutions invest in farms around the world, producers are no longer competing only with their neighbors.

At Moody’s Analytics we work closely with the agricultural community to understand your unique lending challenges, and we build solutions that help our clients drive both efficiency and profitability. Reach out to us to learn more how we can help your business.