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How technology is shaping the future of farmland
Q: When we think of technology, the food on our plate is not the first thing that comes to mind. How has technology impacted agriculture historically?
Expanding populations and changing diets have put increasing pressure on the world’s farmland; discovering and employing technologies that increase productivity is becoming more essential. Farmers have been using technology to increase production and reduce inputs from the earliest days of plant cultivation, when digging tools for seed planting were first used back in 8,000 BC. During the Agricultural Revolution of the 18th and 19th centuries, machines such as the seed drill were first used, ushering in more modern techniques that have been incrementally improved upon ever since.
In recent years, advancements in machinery and plant breeding have been most prevalent. The impact of technology implementation on agriculture can be seen clearly in key measures of agricultural productivity. Total Factor Productivity (TFP) is a measure of efficiency and shows the ratio of total agricultural output relative to total production inputs has increased significantly over the years. In fact, global TFP in agriculture has increased by 73% since the 1960s, or more than 1.0% per annum.
Q: What specific technologies are being deployed now that you think will drive future productivity?
Just like the Green Revolution before it, the Data Revolution is likely to provide a significant and sustained lift in agricultural TFP. Among the plethora of new technologies being introduced are sensors, robotics, drones, artificial intelligence, precision agriculture and predictive analytics, smart irrigation, farm management software, and genetic engineering from mapping crop genomes.
The gathering of data and automation underpin many of these technologies. For example, automation of combine harvesters uses cameras and sensors to identify changes in crop conditions, which then automatically adjusts the combine settings to deliver optimal performance in varying conditions. Drones provide a platform for scouting land and crops, checking for weeds, monitoring overall crop health, managing livestock, and monitoring for health issues. Virtual reality may bring forth remotely operated farm machinery, which can help staff farms and provide consumers an opportunity to ‘visit the farm’ to learn more about how food is produced at a time when provenance and traceability of food is in high demand.
Farmland provides investors with a strong income yield relative to fixed-income alternatives globally, and low volatility compared to other financial assets such as equities.
Q: How do these advancements impact farmland investment outcomes?
Technology helps to expand the income a farmer can expect to earn from each acre of land by either improving yields or reducing costs. This higher income generation improves the value of the underlying farmland. For owners of farmland, rising farm income also generates higher lease revenue. Crop yields may also be improved via increased resilience to negative weather events, reduction of input costs, and data to improve decision-making and efficiency. These factors combined help stabilize farm income against negative shocks associated with weather, commodity pricing, or input cost escalation, reducing the risk of rent delays or defaults to farmland owners. Furthermore, technology can improve many environmental and sustainability factors. For example, the targeted application of fertilizers and pesticides reduces their use, lowering the risk of watercourse contamination and reducing the impact on biodiversity, while fuel-saving technologies can achieve lower greenhouse gas emissions.