Agtech: Breaking Down the Farmer Adoption Dilemma

By McKinsey & Company

Agriculture technology (agtech) has an adoption challenge. There are multiple barriers to scaling from an industry perspective—such as fragmentation, lack of standard data architecture, and cross-platform interoperability. In this article, McKinsey & Company evaluates the challenges related to farmer adoption, sharing the “voice from the field.”

With recent increases in on-farm profitability and strong investments over the last decade, there is a high openness to innovation, yet adoption is slow. On one hand, most farmers have benefited from the macroeconomic tailwinds of global commodity cycles; in 2021, on-farm income in many regions was at its highest level in almost a decade and was projected to remain at near record highs in 2022. On the other hand, inflationary pressures are mounting and farmers are facing an onslaught of challenges—having to scrutinize weather forecasts, be aware of shifts in the regulatory landscape, or face evolving consumer preferences, rising costs from inflation, and unreliable supply chains.

Meanwhile, external capital has been pouring into the upstream agriculture food-technology industry to the tune of about $18.2 billion in 2021, an approximate 38 percent year-on-year growth since 2013. This influx of capital has brought with it a plethora of technological solutions to the agriculture space. Over the past decade, the number of farmer-facing agtech start-ups has ballooned. Farmers can now harness software, hardware, and service-based solutions that promise to increase efficiency, ease pain points, and lower their environmental footprint.

Even with need driving funding availability, agtech start-ups are struggling to scale. In our recent publication on agtech funding over the last decade, we showed that most deals are occurring in the Seed and Series A rounds. Far fewer start-ups, however, are receiving later-stage funding or going public, suggesting that agtech start-ups are not able to build the requisite customer base to transition to these funding rounds.