Importance of Agriculture

Agriculture is the management of natural resources to sustain human life and generate economic profit. It combines creativity, imagination and skill in growing crops and raising animals with modern sustainable production methods and new technologies. 

This industry is of critical importance as it fulfills multiple roles such as: Providing raw materials, creating a strong supply chain and promoting economic development. It also provides fruit and vegetables, animal feed, cotton for clothing and materials for biofuels, industrial products or pharmaceuticals. Although agriculture’s share of total GDP continues to decline, it remains an important sector of any economy.

Healthy, sustainable and inclusive food systems are critical to achieving global development goals. Agricultural development is one of the most effective tools to end extreme poverty, promote shared prosperity and feed an estimated 10 billion people by 2050.

However, the industry is facing several major challenges. Multiple shocks like COVID-19 related disruptions, extreme weather, pests, and conflicts caused higher food prices and growing hunger. Up to 783 million people faced hunger in 2022, which is 122 million more than before the COVID-19 pandemic. Of these, a quarter of a billion (258 million) faced acute food insecurity. At the same time, our food systems are responsible for about 30% of greenhouse gas emissions.

While the agricultural sector in North America generated a value of US$ 260.66 billion (1.0% of total GDP) in 2021, its share of value added in the European Union amounted to US$ 285.63 billion (1.7% of total GDP) in 2022. In Latin America, on the other hand, value added in 2022 amounted to USD 441.45 billion (6.5% of total GDP), which is why the industry has a greater impact on overall GDP than in North America or Europe. However, the sector needs to adapt to the mentioned global challenges. Therefore, several trends can be observed in this particular industry.

Trends in Europe

• Adaptation to Climate Change
  Agriculture in Europe will need to adapt more strongly to climate change. This includes adjusting cultivation practices to changing climatic conditions and introducing climate-resilient plant varieties.
• Aging Agricultural Population
  The agricultural population is aging, with fewer young people opting for a career in agriculture. This could lead to long-term demographic imbalance and potentially pose challenges to agricultural productivity.
• Digitization and Technologization
  Agriculture in Europe has increasingly embraced digitalization. Technologies such as precision farming, satellite navigation, drones, and sensors are utilized to enhance efficiency, yields and sustainability. Precision agriculture is gaining importance as farmers leverage technologies to optimize their operational processes. This involves the precise application of resources such as water, fertilizers, and pesticides.

• Strict Environmental Regulations
  In agriculture, stricter environmental laws mean that agricultural practices are more tightly regulated to minimize environmental impact. This may involve measures such as the use of more environmentally friendly technologies, reduction of pesticide and fertilizer usage, protection of water bodies from pollution, and promotion of sustainable cultivation methods.
• Sustainable and Organic Agriculture
  The heightened focus on sustainable agriculture and the growing consumer interest in organically produced food have led to an increase in organic farms and products in the market.
• Transition from Industrialized Farming to Emphasizing Animal Welfare
  A growing trend in agriculture is moving away from industrial mass production towards environmentally and animal-friendly practices. Mega-farms are considered symbols of excessive mass production, such large-scale facilities are already banned in Switzerland and Norway and they are rare in many European countries.

Trends in North America

• Digitization and Technologization
  Agriculture in North America is increasingly committed to digitalization. A new trend is the use of Artificial Intelligence to enable insights-driven farming. Technologies such as precision farming, satellite navigation, drones and sensors are being used to increase efficiency, yields and sustainability, just like in Europe. Precision farming is becoming increasingly important as farmers use technology to optimize their operations (sowing, harvest, fertilization, insecticide, etc.).
• Increasing Global Demand for Protein
  Consumers look for new kinds of food and thus, in particular, the demand for plant-based protein sources is rising. As a consequence, there is a trend to plant and harvest new protein sources, for instance soja. The rapidly increasing world population, coupled with a need for environmental sustainability, has renewed our attention on animal-protein substitutes.
• Shorter Food Supply Chain
  Another ongoing trend is a transition from long and even confusing food supply chains to shorter and simpler food supply chains. Consumers want to know where their products come from and prefer regional food. The goal here is to reconnect (local) producers and consumers. In addition, advanced food traceability plays an important role to help maintain consumer trust.

• Sustainable Agriculture
  Sustainability is an important topic in North America. The focus is particularly on reducing the environmental impact of agricultural processes, optimizing water consumption and decarbonization.

Trends in Latin America

• Digitization and Technologization
  It is a trend to invest in technology and digitalization in Latin America as well. These technologies (for instance, smart farming, precision agriculture) enable the people to use resources more efficiently and optimize their processes.
• Focus on Biofuels and Sustainable Energy
  This issue is part of the trend towards sustainability. Due to the expected long-term effects of climate change on Latin America, sustainable agriculture is seen as an important issue in Latin America. The region will experience the consequences of climate change directly, which is why various measures are being taken to prevent this.

• Modernisation in IT and Communications
  Similar to North America and Europe, investments are being made in IT and communication. These investments are necessary because agriculture today is all about efficiency and profitability. It is a slow but steady process to unlock the full potential of the market and keep up with other emerging agricultural regions, such as Asia.
• Rising Demand for GMOs (Genetically Modified Organisms)
  Genetic modification is a popular trend. It is an efficient way to maximize profits and optimize production. As there is a lack of regulations, there are various options for genetic modification.

Image of the Dutch Agriculture Industry

It can be said that the Dutch agriculture industry is highly regarded worldwide, as it is very progressive, efficient and highly technical. Nevertheless, there is also occasional criticism and Dutch agriculture is perceived differently in each region.

Europe

Positive Aspects:

• Efficiency and innovation: The Netherlands lead in efficient and innovative agriculture.
• Export: As one of the largest agricultural exporters, the Netherlands benefit globally from its high-quality production.
• Sustainability efforts: Initiatives to reduce pesticides and promote ecological farming methods demonstrate an increased environmental awareness.

Critical Aspects:

• Environmental impact: Intensive agriculture results in ecological issues such as soil and water pollution.
• Land use conflicts: Limited space leads to conflicts between agriculture, residential development, and nature conservation.
• Dependency on imports: Despite export success, the Netherlands is heavily reliant on imports, especially for feed. This can affect resilience against international price fluctuations.

North America

Positive Aspects:

• The Netherlands are described by National Geographic as “the small country that feeds the world” and is a leader in agricultural innovation, smart farming, software development, big data, sensor technology, chain innovation and circular farming.
• “The Netherlands have used advances in vertical farming, seed technology and robotics to become a global model”.
• Described as “Silicon Valley, but for seeds”

Critical Aspects:

• “The Netherlands’ hyper efficient food system is both a triumph and a cautionary tale”: While the Dutch eat less meat than many of their neighbors, their huge livestock population has led to immense nitrogen pollution that’s contaminating the country’s water and air and destroying its biodiversity.
• The solution to that challenge primarily isn’t technological advancement, but political and behavioral change. “If we reduce our meat production and dairy production 50 percent, actually, that’s the solution,” said Wijnand Sukkel, an agroecology researcher at WUR. “That’s the biggest step we can take forward.”

Latin America

Positive Aspects:

• The Dutch technology (e.g. water system) is regarded as expensive and not always worth the investment since agriculture is perceived as not profitable by some countries, but still impressive.
• The Netherlands are seen as a strong competitor and therefore respected.

Critical Aspects:

• Deforestation is a significant problem in Latin America. The Netherlands actively contribute to that issue by importing a lot of palm oil, which leads to issues between politicians, farmers and the public on both ends.

Business Opportunities

Europe

Europe offers many business and investment opportunities. The European agricultural industry is already highly developed in most areas, but there are always new challenges and therefore new innovative solutions and companies. First of all, there is a need for sustainable solutions in all areas of agriculture. Especially as the EU is a highly regulated market, farmers need to adapt quickly to new regulations.

Another interesting business field is highly advanced technology with AI. As already mentioned, most parts of the agriculture industry in Europe is highly developed which is why there is no need for simple technological solutions, but rather for recently introduced high-tech, such as AI-driven agriculture.

Furthermore, offering advisory services to farmers and companies in the agricultural sector would be Another business opportunity. A consultancy service for legal regulations and sustainability would be particularly interesting, as these two aspects are the dominant concerns in the European agricultural industry. The industry has to comply with new regulations and frameworks almost every year, which can be overwhelming for many as they don’t have time to manage both their daily operations and the growing legal demands.

Finally, there is the problem of the aging agricultural population. Sometimes there is no one to take over the local farm because there are no descendants or the younger generation is no longer interested in the industry. There will be a need for educational programs for farmers. It can be a program for all ages, but it should appeal to the younger generation. This program would address the basic and advanced practices of agriculture, but most importantly the impact and positive aspects of working in this industry. Speaking of industry knowledge: Starting your own farming business can be a lucrative business opportunity as well even when there are fewer people willing to do so.
The chart below illustrates the annual financing in the agricultural industry worldwide from 2012 to 2021. It can be observed that the number of financings has risen continuously over the years. Investors have discovered the investment opportunities and it is predicted that the numbers will continue to rise in the future.

North America

Like the European market, the North American agricultural industry is highly developed. Nevertheless, there are differences such as fewer regulations or the larger size of farms. There used to be little or no legislation on sustainability or animal welfare in North American countries, but this has improved in recent years. In addition, consumers have changed their behavior and are now paying more attention to sustainability. These aspects are leading to an increased demand for sustainable solutions and practices.

One of the main challenges is to optimize efficiency in agriculture, and therefore there is a demand for advanced technological solutions. It should be noted that the industry in North America is already well equipped when it comes to technological solutions, so the market could be difficult for someone who does not have the latest high-tech products. AI-driven agriculture is the latest trend and has a lot of potential.

Another relatively new business opportunity in agriculture is new foods. The food industry is constantly changing depending on consumer behaviors and trends. As consumer preferences shift towards more sustainable and plant-based foods (e.g. vegan protein sources), the demand for companies offering knowledge and tools for new foods is also increasing.
The chart below shows the global investment in the agriculture industry by region from 2012 to 2021. It can be observed that the Americas are the most attractive region for investments in agriculture, followed by Asia and Europe.

Latin America

Latin America is facing challenges in terms of productivity and sustainability. To keep pace with growing demand, it is estimated that agricultural production will need to increase by 80% by 2050 to meet the expected population growth of more than 35% over the same period. Latin America’s food systems are dominated by production models based on unsustainable practices. Therefore, there is a strong demand for technology and digitalization solutions.

One of the biggest challenges for agriculture in Latin America is the fragmentation between large farms with advanced practices and technologies and small farmers who work mainly informally and often lack the resources and technology to improve their productivity and adopt more sustainable agricultural practices. That is why the demand for basic affordable technology is rising.

Sustainability can be achieved in many ways, but they can be quite costly. An alternative way is to provide green energy infrastructure for the agricultural sector. Any other sustainable approach also has potential in Latin America, but there is currently a strong trend towards sustainable energy, which makes it easier to find business partners and customers for these projects.

Another interesting but controversial business approach is activities in the field of GMOs (genetically modified organisms). As there is a lack of regulations and laws for the use of GMOs outside Europe, there is great potential in this sector. Latin American research needs to catch up with North American research in order to realize its potential. Thus, innovative entrepreneurs can take advantage of these opportunities or invest in such companies.

Companies that can offer solutions to increase the productivity and sustainability of agricultural practices to meet the projected demand will therefore have many opportunities in Latin America and a high return on their investments.

For more Information : Seeds of Change: Unveiling Tomorrow’s Agriculture with BNR Nieuwsradio’s Wereldspelers

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