In the past several years, Asia has begun to turn its private and public resources toward agriculture systems to overcome the challenges related to rapid urbanization and subsequent labor loss, regional food security, a smallholder-dominated production system, and a myriad of ecological and economic concerns related to the implementation of inefficient production practices shared generally across the five regions (Fig 1). These must be – and generally currently are – viewed as emerging markets for agribusiness expansion. Among the five regions, the southern, eastern, and southeastern regions dominate production metrics and thus represent the most significant early opportunities (Fig. 1). However, engaging requires understanding each of the three regions' challenges as well as innovation momentum.
Our investigation indicates current and strong focus by innovators on financially accessible value chain solutions aimed at engaging and enabling smallholder communities, while government-sponsored efforts tend to support agricultural mechanization. There are significant additional regional challenges to consider, and importantly, venture momentum differs across agriculture-related technology areas
Figure 1: Area harvested and production percentages by Asia region
- East Asia (China): China's high population-to-arable-land ratio creates a significant need for food importation (China is a world leader in consumption of meat and grain crops). Contributing to this land challenge are low-yielding fields, which continue to contribute decreased available acreage through soil degradation. Rapid urbanization has brought a shortage of agricultural resources while increasing demand for production. The region remains challenged by water scarcity, and thus, 55% of arable land is reliant on precipitation. Despite these issues, 42.6% of the labor force is accounted for by agriculture, and farm mechanization is a key policy goal for the Chinese government.
- Southeast Asia (Indonesia and Thailand): The region sits between the East and South Asian regions based on key development parameters like urbanization rate and per capita land. However, the variation between Indonesia's and Thailand's other key parameters (i.e., farm size, mechanization, and farm counts) indicates a region filled with countries facing unique challenges. Of the two proxy nations, Thailand appears better situated to achieve improved mechanization in the near term.
- South Asia (India): Agriculture land use remains characterized by fragmented land holdings and crop sowing, with limited motivation for consolidation due to the long-standing history of smallholder landowners in the region. Urbanization is growing but remains slower than that of regional counterparts. In addition, low average income among growers is driven by limited education, agronomic experience, access to financial tools and quality inputs/seeds, and access to mechanization (40% to 50% of land applies machinery and is state-focused). These factors are often shared among smallholder communities.
Efforts to overcome challenges affecting these regions are underway and include mechanization, access to irrigation and connectivity, and improved market access both for sales of produce and for purchasing of inputs and services. The governments of all three regions continue to support mechanization efforts through subsidization programs. In one example of such efforts, India's government has set a goal of doubling grower revenue by 2022, which includes improving access to markets and national irrigation development projects. The challenges facing advancements in agriculture throughout these regions are significant hurdles; the urgency and need indicated by government action and the rapidly changing population structure (decreased agriculture labor force) support the need for technology development.
Within the three leading production regions, financial support is strongest for value chain solutions that improve smallholder access to markets, both for sales (access to buyers) and for purchasing (access to inputs) (Fig 2). E-commerce and trading platforms continue to generate interest and growth, although the effect of COVID-19 on investment momentum is apparent in the decrease in investments observed between 2019 and 2020, especially with respect to e-commerce. Globally, investments in agriculture have been impacted to different degrees dependent on the region. In North and South America, investment momentum has remained comparable to past years, while investment levels in the EU, similar to Asia, are unlikely to grow beyond those of the past two years.
Figure 2: Asia agtech investment by sector
These large markets will undoubtedly become more accessible and not only provide a revenue boon but also support significant societal (increased revenue, reduced yield gaps) and environmental (optimized input application/ product selection) benefits. But as Asia continues to increase its interest in agricultural innovation, do not believe for a moment that what works for developed nations will be applicable in developing agriculture systems. Smallholder-dominated production systems preclude expensive services unless those services target the growing number of farm cooperatives. In the near term, do not expect land consolidation that allows for application of Western approaches to agriculture. Instead, look for opportunities that align with government initiatives or value chain solutions that provide access to hundreds of millions of smallholder growers through connectivity.