Smart farming and risk management

02 November 2016

Smart farming, otherwise known as precision agriculture, is the use of advanced technology to increase productivity and yields whilst reducing losses and cutting costs in both traditional arable and livestock farming. Using various data collection methods farmers are able to make more informed and faster decisions when monitoring disease, fertilising requirements, harvesting, irrigation, animal health and much more.

Today, only 20% of global farmed acreage is managed using smart farming techniques and is currently dominated by larger firms with access to the robust IT infrastructure required. That said, in 2015 global smart farming was estimated to be worth USD 2.81 million with the expectation to grow at a compound annual growth rate (CAGR) of 12.5% to reach USD 6.43 million in 2022. These new techniques are transforming the practice of farming and therefore risk management. As a consequence risk transfer solutions will have to respond accordingly.

There are a number of smart farming techniques that can be implemented by farmers. For instance precision livestock farming (PLF) enables farmers to care for a large number of animals per farm whilst providing individual attention to each animal through the use of a microchip. This technology measures body temperature, activity, tissue resistivity, pulse and global positioning system (GPS) per animal. PLF management can raise milk yields in cows, increase their life expectancy and decrease methane emissions by up to 30%. At pig farms, acoustic sensors can be implemented that identify respiratory illnesses by monitoring coughing pigs.

In addition, farmers can use a variety of monitoring systems to track their livestock. Solar-powered wireless collars are now available to monitor behaviour and track locations and ‘walk over weighing stations’ can be deployed to measure cattle conditions and monitor growth rates. This market is expected to grow from its current value at USD 1 billion to USD 2.5 billion by 2025.

Sensor and tracking technologies collate data from a distance in order to evaluate soil and crop health i.e moisture, nutrients and crop diseases. Drones can be deployed to collect detailed images of crop and field characteristics and consequently assist with calculations of fertiliser requirements and delineating the presence of disease. As well as collating detailed images, the sensor technology in drones can be used to identify unusual body temperature and conditions whilst monitoring herds. The worldwide market for agricultural drones is currently USD 494 million and expected to reach USD 3.96 billion by 2022. Japan already has 2,400 drones in operation to spray 40% of their rice crops.

Use of smart farming practices are currently concentrated in the US, Northern and Central Europe. Around 60% of tillable land in the US is managed using smart farming practices and similarly 60% of farmland in the UK is managed using these methods. The expectation is that smaller farms will start to follow suit and countries in the Asia-Pacific region are also rapidly adopting these practices. In this region China and India currently hold the greatest market shares in the smart farming market. There is still some time before smart farming practices become business as usual but it is clear that these practices already have significant implications for risk management on farms and consequently those adopting these techniques need an insurance product that goes beyond a traditional livestock or crop policy.

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For further information, please contact Simon Lusher, Food & Agri Practice Leader on +44 20 7459 5550 or email simon_lusher@jltgroup.com


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