We sat down with the SmartFarming director to talk about technological trends for agribusiness, demand for agricultural innovations, competition in the field of agricultural technologies, and whether investors should develop agricultural innovation start-ups in Ukraine today.
– Your company has built a successful reputation for agricultural innovations. How did you come up with the idea of developing technological innovations for agribusiness?
Everything is very simple. It was 2012. I was working for an investment company dealing with hi-tech products - options, futures, derivatives, hedging of portfolios for investment companies and private investors. And we decided to offer price risk management services in agricultural markets, which was a new product. It turned out that while robots were doing the trading at the exchange and overall the processes there were highly automated, at agricultural companies we saw paper maps and a lack of understanding of what was going on, where the fields, machinery and other things were. I became interested in the agrarian market and began to dig deeper, analyzing business demand for technology. In 2013, I decided to work with this market, understanding its potential.
– What technological innovations does the agricultural sector need today?
Demand is dictated by the market today. We have a vision of stage-by-stage automation, systematization of the company, where to start, how to roll out a technology properly and systemically. And we are forming the market culture with the help of projects, events, content, marketing and partner projects. The culture of technology introduction is much better than it was four years ago.
I am sure that we have already formed a certain culture in the market for the management of land banks, and we have defined the trends. We have an understanding of a notional maturity matrix of companies, their stages of development, there is a certain leading position in the market, and we understand where this all goes. In other areas, we are only forming this culture yet.
– Today, top attention to technology can be seen in crop farming? What about livestock farming?
We focus on crop farming, logistics and trading. The task is to gradually roll out technologies for every stage of the process "from field production to the sale of finished products". We have several companies. One is engaged in management consulting, we develop various expertise, in particular, in the management of land banks, operations and equipment management, anti-fraud, finance and energy efficiency. Another one focuses on effective or precision agriculture. If we talk about sectors, the focus is on crop farming, but we may go further in the future. Unfortunately, livestock farming is not strong in Ukraine today, this sector needs powerful investments. Given the political and economic situation, new investors in this sector are not on the horizon yet, unless the existing ones expand their business.
– Tell us about the phenomenon of AgroTech, please. Is it relevant to Ukraine? What about Europe and the USA?
AgroTech is developing all over the world. Our agricultural holdings are only a little behind those in developed countries, our farmers are as good as Western ones. Not because we are so cool but because the situation is not very good everywhere. Our market is significantly inferior in terms of the development of start-ups and technology projects. Our company's capitalization in the US market would have been dozens of times higher than it is now in Ukraine. A huge problem is the lack of infrastructure for investment, for the development of new projects. But technologies are being introduced in agriculture, agricultural holdings have money to introduce new products, the only question is whether they need them.
– Can the market of internal technological innovations develop in Ukraine in the current conditions?
Not yet, if we are talking about technologies "made in Ukraine". It makes little sense for an investor or an entrepreneur to start a project here, for example, a pure product software start-up for farmers. Because the product would have a much bigger capitalization, if it was created in some Tallinn or Norway, not in Ukraine. Ukraine is a good technological platform to test new solutions, but not to make money on developing technologies.
– How quickly do agricultural technologies become part of the daily life of agricultural companies?
The rollout usually takes one season to go through one production cycle. Several years are required for a technology to become part of the culture.
– Which agricultural companies would you describe as the most advanced and flexible in terms of innovations?
All the major players in the information space overestimate their achievements. Not all large companies are successful technologically wise. There are companies that introduce technologies in a systemic and correct manner. In my opinion, these are MHP, Kernel, IMC and Agroprosperis. These companies have a systemic approach to technologies, they have experienced staff responsible for innovations.
– Is it enough to simply invest money or it takes more for a technology to be effective?
The personnel must be motivated. This is very important. If a company does not change its motivation policy during the rollout, technologies will not be effective. At the end of the rollout stage of a new technology, those who have been trained and adopted new ways of working must be paid more than before. These specialists became smarter, stronger and more qualified. Motivation must depend on KPI. A farm equipment operator properly doing an operation should be paid a bonus. In most cases, companies pay farm equipment operators 3,000 hryvnyas whereas in fact they should have been paid 6,000 long ago because they had new systems installed on their equipment and have been trained to use them. Half of the result by the end of season depends on how they planted crops. In practice, these people rarely get bonuses. Technologies only work in combination with personnel management and motivation policy.
– What projects is SmartFarming running now?
We are working on collecting and processing big data, not on a new interface (software). We do not believe that today we need to run into the market with a new interface. We have partners whom we help to develop software for different tasks – to control drones and flights, manage relations with shareholders and tasks for GPS monitoring. That is, we are working on certain niche things with partners, but we do not seek to create a new super-software.
– Could you describe the competition in the sector of agricultural technologies in Ukraine? Is it difficult to compete with other companies?
We have one strong competitor in Ukraine. But the strongest competition is offered by an agricultural company itself when you come to the client with your experience and vision, and it has its own experience and vision, and they do not match. There is a competition for budgets. There is a competition with specialized niche players when an agricultural company chooses the cheapest drone or soil test, for example. Where we join a comprehensive project, there is no direct competition yet.
– What does a "comprehensive project" mean?
This is when we roll out a set of solutions in an agricultural company. Our line of services includes business consulting, and we can audit the land bank, including full automation, analytics and management of relations with shareholders. We offer equipment control services - we can equip machinery with sensors and do the check - how it works and how it should work effectively, install GPS monitoring systems, set up a control center, train people and bring the project to the "turn-key" stage.
We have precision agriculture services, including re-equipment of machinery. We can set up autopilots, course markers, base stations, introduce parallel driving, disconnect sections, monitor seedings, applications and so on. There are more services like monitoring of crops, soil tests, soil scanning, satellite and weather data. When we come to clients, we always offer them more than any other player in the market.
– How does the attitude of agricultural companies to precision farming change? What does SmartFarming offer in this regard?
A big problem is that the term "precision farming" has been made trite by overuse. There is a category of consultants, so-called "burners", who come to clients to "force" something on them. There are such consultants in every segment of the market. They discredit the technology as such. Because of this, many manufacturers are ill-disposed towards precision farming. There are also cases when agricultural companies decide to get involved in precision farming on their own.
Everyone thinks that precision farming means an agro-chemical analysis of soil and the rate of application of fertilizers. In fact, everything starts with proper driving, there must be an option to disable sections to prevent a repeat application of crop protection agents where they have already been applied. Precision farming relies on correct technological operations. Therefore, we begin by doing a full analysis of the technological map and available equipment. But the rate of fertilizer applications is a very controversial technology because the tests of soil from the same field can have absolutely different results in different laboratories.
When we talk to our clients, we speak about "effective agriculture" instead of precision farming. It is our understanding that this is the right culture of driving, maintenance of machinery and equipment - winterizing, preparing equipment for the season. These are absolutely basic things, which are often even primitive, but the proper implementation of these technologies increases efficiency by 20-30%.
– You once noted that Ukraine had all the prerequisites to become a technological agricultural hub. Has the country advanced in this direction? Do you expect Ukraine to reach a new level in the development of agricultural technologies in the next, say, 10 years?
Certain conditions must be in place for this to happen. One of them is the adequate and transparent work of relevant ministries, another one is a good investment climate. I am certain that nothing will change next year and then there will be the presidential and parliamentary elections, which means nothing will change either. I think everything will develop in its own way.
In fact, the market is already developing: Agrohub was launched, Vasyl Ivanovych Khmelnytskyy opened the Unit.City innovative park, where more and more events are being held, and market participants are consolidating. A cool market would require bundles like start-ups - investors - the state. The state needs to regulate the market and stimulate it. The ministry could do much to develop the market of agricultural technologies, but it does not. There are no prerequisites for Ukraine to become a technological hub in the coming years.
Interviewed by Nataliya Boguta
Photos: provided by Artem Belenkov, shutterstock.com