The end of the era of ‘nice to have’ products? 5 insights from McKinsey’s latest farmer survey that you can’t ignore

What does McKinsey’s new global insights 2024 report tell us about how agtech can best serve farmers?

Farmers worldwide are navigating challenges such as increased input prices, extreme weather events, and commodity price volatility, according to McKinsey, which interviewed about 4,400 farmers in the US, Canada, Europe, India and Latin America in the first quarter of 2024.

Given these issues, farmers are increasingly prioritising productivity. The survey reveals a shift toward operations-focused solutions, which underscores a broader trend in agriculture, where efficiency and sustainability are becoming paramount.

McKinsey has quizzed farmers around the world to better understand their views since 2018. The last global survey conducted in 2022 revealed that farm management software was the most widely adopted technology, followed by precision agriculture hardware. Remote sensing and sustainability-related technologies were also gaining significant traction.

Farmers are adopting technology... slowly ​

The survey reveals that farmers continue to adopt technology, albeit at a slow pace​. It found just a three-percentage-point increase since 2022 in the number of farmers using or willing to adopt at least one new digital technology to improve operations. North American farmers lead adoption of technology, while Latin America experienced the fastest growth.

Back in 2022, farmers showed a readiness to experiment with new products and technologies to capture opportunities from high crop prices, even in the face of macroeconomic uncertainty and inflation.

Now, farmers are more cautious​. Back in 2022, 70% of farmers were positive about their profits over the next two years, with 80% predicting profits would either rise or remain steady.

Now, North American and European farmers expect lower profits in 2024, with 64% and 55% respectively anticipating a decline.

Latin American and Indian farmers are more optimistic, with 58% and 76% respectively expecting higher profits over the next two years.

Input prices remain the top concern, with 48% of farmers noting price increases as the main risk to profits, compared to 63% in 2022.

ROI is crucial in the current environment ​

The emphasis on the industry, therefore, is to provide return on investment. Adoption correlates strongly with ROI​, the latest survey shows.

Adoption is highest for practices requiring only behavioral changes, like reduced or no-till farming (68% adoption rate). Practices requiring equipment changes, such as controlled irrigation, have the lowest adoption rates (35%).

Worryingly, 90% of US farmers are aware of sustainable farming practices, but holistic adoption remains low.

The current macroeconomic problems are further impacting the main obstacles that are preventing wider adoption of sustainable farming methods. These include difficulty in obtaining market premiums for sustainably grown crop; implementation challenges; and perceived higher costs (1-3% higher even after 5+ years of implementation).

These findings highlight the complex challenges farmers face globally, from profitability concerns to the adoption of sustainable practices and new technologies. The report therefore underscores the need for tailored, ROI-focused solutions and support from across the agricultural industry to ensure a resilient and profitable future for farmers worldwide.

“When it comes to agtech, farmers are demanding clearer ROI, lower cost of implementation and maintenance, and easier to setup technologies,” says Vasanth Ganesan, partner at McKinsey. In the context of the subdue profit sentiment over the next two years, agtech companies need to focus on short-term net-benefit for farmers, he stresses. This will be “a key determinant for purchase in addition to long term value creation.”

Why aren’t more farmers aware of carbon programmes? The incentives are not good enough​

The report also suggests that better carbon programmes – and more knowledge about them – is needed.

Government sustainability programmes have significantly higher participation rates (57%) compared to industry-sponsored programmes (4%).

Across all regions, the percentage of farmers who said they are currently participating in carbon programmes is low – just 12% compared to 54% who have heard of carbon programmes but are not participating. Low adoption of carbon programmes is likely due to lack of clear incentives and awareness. Even in the US, which recorded a fast increase in carbon program adoption (a seven-percentage-point rise from 2022 to 2024), ROI is still perceived as not high enough by about 60% of farmers. On average, these farmers expect economic incentives of about $35 an acre to participate.

In some countries, farmers’ lack of knowledge about carbon programs is an additional important barrier to adoption. For example, in India and Mexico, about 90% and 60% of farmers, respectively, have never heard about these programmes, the survey reveals.

Finally, more farmers are adopting biostimulants or biofertilisers compared with biocontrols​ in their fertiliser and crop protection protocols.

Adoption of biocontrols and bionutrients as sustainability-oriented soil health practices has been growing globally, the report says. Some 31% of farmers are using bionutrients, while 20% are using biocontrols. The main reasons farmers said they adopt bionutrients is for improving yield, soil quality, and soil health. Farmers adopt biocontrols primarily as a means of achieving a lower overall pest management cost per acre and better efficacy compared with only applying the traditional crop protection protocols.

Farmers in Brazil are leaders in the use of both bionutrients and biocontrols.