Chris Brown of KPMG’s Global Strategy Group outlines some of the risks and opportunities which technology investments present for Irish agribusiness.
KPMG’s Global Strategy Group works with a variety of organisations locally, from processors and manufacturers to investors, helping them test and achieve their strategic goals. In its recent Tectonic Shifts research paper, the group looked at the potential effects of a range of new technologies on the agribusiness sector and explored possible responses.
Among the key lessons for Ireland is the need to be patient and not to fall into the trap of chasing the hype. Agribusiness remains a highly localised sector. Solutions which work for harvesting in the American Great Plains do not necessarily transfer well to Waterford, for example.
Similarly, investing in productivity enhancing technologies only to reduce price will not produce long-term benefits for producers or processors.
Experience also indicates that many of the latest innovations and inventions are doomed to failure. In some cases, this will be due to flaws in the technology itself while in others it will be because the companies behind them don’t have the scale or resources to develop them properly. It wouldn’t be the first time that inferior technologies have outlived better solutions due to access to superior resources.
Whilst early adopters of new technologies can sometimes gain first mover advantage over market rivals, the associated risk is high, and this is probably best left to the large global players who can afford it.
For many Irish producers and processors, the best strategy is probably to keep a close watching brief on what is happening and make incremental investments as and when a technology begins to prove its return on investment.
There is also the question of which kind of technologies to invest in. The group of technologies explored in Tectonic Shifts can be broadly categorised as Industry 4.0 technologies and include robotics, IoT sensors, AI and data analysis.
All of these technologies are already in use to a limited extent in Irish agribusiness with Teagasc, for example, leading research and pilot projects to assess how best they can be employed.
They all have undoubted potential, particularly when combined, but the question for Irish agribusiness is where they can be deployed to best effect in this country. The answer is to look first to our existing strengths and establish how available technologies can be used to build on them and enhance existing market positions.
Naturally, technologies which deliver clear productivity improvements cannot be ignored, but the key innovations for Irish agribusiness will be those that can be utilised, directly or indirectly, to enhance Brand Ireland’s premium market positioning and reputation for clean, green, high quality produce.
The first and most obvious of these is blockchain. The immutable nature of blockchain records makes it a strong candidate for supply chain management and monitoring. Combined with IoT sensors, blockchain technology can be used not only to track movements but the precise storage conditions of shipments. It also has the potential to maintain a complete register of ingredients, their points of origin, and their complete history through the production and processing chain.
At a time when increasingly affluent consumers are demanding ever higher standards of food, not just in terms of product quality, but also in relation to production methods, animal welfare, and environmental impact, blockchain could be a gamechanger for Irish beef and dairy producers. What better way to capitalise on the grass-fed production practices employed in this country, or build on Origin Green initiatives?
Ultimately, blockchain could enable the personalisation of a brand story and provenance down to individual farms, or at least specific milk pool regions in the case of dairy. Consumers will be able to scan a carton of Irish manufactured yogurt with their phone and see information, images or video of a grass-fed dairy farm in the relevant milk pool. While this mightn’t appeal to all customers, tech-enabled brand storytelling is already increasingly popular across export markets.
This particular example will require the integration of a number of different technologies. It requires the existence of a critical mass of IoT sensors and supporting controls and processes along the value chain to provide the necessary and reliable input data. While some of the IoT capability may already be growing, the missing piece is the coordinated deployment across multiple companies in a value chain. In our view, the application of this technology is still meaningfully about five to 10 years away.
We are already seeing the use of soil and water quality information supplied by Teagasc being utilised to assist precision agriculture. New data analytics technologies can guide farmers in the application of fertilisers in terms of timing, quantities, and geography. This can both lower costs and improve the environmental efficiency of the farm. The same will apply to planting and grassland management strategies.
Some fears have been expressed that these new technologies will replace the expertise of farmers, reducing them to the position of landowner-overseers. This is not a situation we see coming to pass in Ireland, however.
It is our belief that technology will augment rather than replace the intuition and know-how of farmers. Farming is not like other industries, no two farms in the same county are exactly the same and the differences grow from region to region and country to country. While some production systems may lend themselves to automation more than others, this is less the case for Ireland’s mainly grass-based system for dairy and livestock.
Another area where AI and data analytics is coming into play is genomics. Great strides have been made in this area in recent years and this is likely to accelerate. New technologies will enable selection for particular traits which improve the overall environmental performance of beef production, for example. These gains may be incremental but over time may make a significant difference to the greenhouse gas emissions of the Irish beef herd, for example.
Automation is set to play an increasingly important role at both processor and farm level. Robotic milking has already gained a foothold in the dairy sector while many other routine farmyard tasks are being automated.
In addition, the use of automated or robotic harvesting machinery has the potential to significantly lower the costs of certain crops thereby enhancing competitiveness. However, many of these technologies are in their infancy and remain expensive or unproven. But, as one contributor to our research noted, if you can put a man on the moon you can get a machine to pick a strawberry.
It is only a matter of time before the technology becomes sufficiently advanced and its costs come within reach of Irish farmers.
In an economy approaching full employment where skilled farm labour is difficult to find, these technologies will likely be essential for many modern farmers.
At the processing level, the impact of new technologies varies. The use of IoT to monitor and control dairy and beverage production processes has the potential to enhance quality, reduce costs in terms of energy usage and other impacts, and improve production cycles through the ability to predict points of failure in advance and enable timely interventions. The same applies to products like grains, breads and processed foods.
On the other hand, the complexity and varying carcass sizes for beef and pork will make it tougher for robotics to be employed widely in those processing plants, for example. For the moment at least. Advances in sensor, machine vision, machine learning and AI technologies mean we are likely to see this change in a decade or so.
While the main impact of robotics and automation may be cost reduction, its ability to enhance quality and improve environmental performance through reductions in areas like energy and water consumption should not be underestimated.
The question now for Irish agribusiness is how best to take advantage of these technologies and avoid being negatively impacted by their disruptive effects, especially as larger, international peers make earlier investments.
The most important piece of advice is not to get caught in the technology trap. Investing in a technology without being absolutely clear on how it can add value to your business can lead to expensive mistakes.
Given the early stage of development of many of the technologies under discussion, the best strategic approach for Irish farmers and processors is to keep up to date on developments. Given the scale of Irish agri-enterprise, it is clear that close collaboration will be required if the potential benefits offered by the new technologies are to be maximised. Larger processors in particular should ensure they are up-to-date on relevant tech developments, but should wait until technologies with clear business benefits become affordable before making the investment case.
In short, whatever your scale or enthusiasm for technology, ensure you can deliver real returns on investment in the short to medium term.
This article originally appeared in the Irish Farmers Journal and is reproduced here with their kind permission.
For information on how we can help your business get to grips with the topics mentioned above, contact Christopher Brown, or any member of our Strategy team. We'd be delighted to hear from you.