How do you boost food supply and reduce unemployment in developing countries? Agriculture 3.0 might be the answer

HOW DO YOU BOOST FOOD SUPPLY AND REDUCE UNEMPLOYEMENT IN DEVELOPING COUNTRIES? AGRICULTURE 3.0 MIGHT BE THE ANSWER

New Bain & Company analysis finds developing markets often lack the appropriate government support to capitalize on the full potential of its agricultural sector

New York – Nov. 21, 2017 – By 2050, population and consumption growth in developing nations is expected to push crop demand nearly 50 percent higher than 2010 levels. The exploding demand for food will require a corresponding rise in the global supply, creating the potential for China, Brazil, Argentina, India and other developing nations to feed the world, while improving their own economies. The size of the prize is significant: new analysis from Bain & Company, Conquering the Food Challenge through Agriculture 3.0, shows that in developing countries, a twofold increase in agro-industrial GDP can generate enough jobs to reduce total unemployment by 25 percent. However, many countries still lack the solid planning and support from their governments necessary to deploy new innovations and technologies that could bring their agriculture sectors to full potential.

Agriculture 3.0, with its state-of-the-art digital capabilities, represents some of the biggest agriculture advances in decades. Yet, most countries still need to expand their practices for Agriculture 2.0 – including developments such as seed genetics, fertilization, and modern irrigation and mechanization – before they can even think of deploying the latest techniques. The challenge is particularly great in the developing countries of Latin America, Asia and Africa, where a limited understanding of what they could achieve prevents the different stakeholders from advancing together toward a more ambitious agenda.

“New agricultural technologies have arrived at a critical moment in history. The world needs more food, and new digital techniques are available to help meet that demand. But without solid planning, many countries aren’t able to rise to the occasion,” said José de Sá, an agribusiness expert and co-author of the research. “In response, governments everywhere need to help growers make optimal use of their land and improve yield efficiency, leapfrogging into the wonders of Agriculture 3.0.”

Bain’s research shows that the majority of countries unintentionally restrict themselves from creating substantial economic value from their agriculture in two fundamental ways. First, many countries still manage their agriculture sectors based on tradition and empirical knowledge, rather than a comprehensive analytical approach. Second, the lack of coordination among the many stakeholders – including local governments, sector agencies, farmers, NGOs and multinational organizations like the United Nations – can thwart efforts. All have their own agendas and, sometimes, conflicting goals.

Solving these fundamental problems starts when governments understand the broader strategic picture of full-potential agriculture and align that vision with private industry. Bain suggests that regardless of the type of government, several elements must be in place before the sector can progress to Agriculture 3.0. These include: 1) development of logistics infrastructure; 2) appropriate financing and insurance tools; 3) market liquidity and access (avoiding bottlenecks through intermediaries that ultimately harm farmers); and 4) addressing the often thorny issue of land ownership.

“In the most successful cases, governments establish a pro-business environment that allows the private sector to contribute the best possible intelligence on the status quo, and then actively participate in discussions involving where to play and how to win,” said Dalton Maine, who leads Bain’s global Agribusiness practice and co-authored the report. “When a government fails to be proactive, it often ends up becoming either a roadblock to development or an unfocused protectionist machine that, from a socioeconomic perspective, ultimately creates more harm than good.”

Reaping the benefits of both increased agricultural production and improved economic outcomes requires defining the particular agro-industrial strategy that will yield the best results. According to Bain:

  • The first major step for any country is to complete an area prioritization exercise, using Big Data and evolving digital capabilities to evaluate the agro-ecological characteristics of fertile micro-segments of its land.
  • Next, it needs to factor in the socioeconomic value of each crop—not only what it contributes to employment but also to primary GDP (through the agricultural production itself) and potential downstream GDP (through the processing, refining and manufacturing associated with the crop), together with the profits it generates for the farmer.
  • Finally, with that analysis in hand, all parties together can gauge the best use of land and the specific trade-offs between the options—essential for promoting a long-term agro-industrial agenda, defining the most appropriate incentive policies and engaging all stakeholders.

“In our experience, this approach optimizes the economic results for export-oriented countries, like those of Latin America, as well as countries aiming for self-sufficiency,” said de Sá. “It takes into account the mix of crops that would yield the largest economic benefit, including the trade-off between producing what you do best and importing what you need, or producing locally what you need in lieu of exports.”

Editor's Note: To arrange an interview, contact Dan Pinkney at dan.pinkney@bain.com or +1 646 562 8102

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