Banner Tackling The Challenges Of Rising Farming Costs

Tackling The Challenges Of Rising Farming Costs

“He is, after all, the only person in our economy who must buy everything he buys at retail, sell everything he sells at wholesale - and pay the freight both ways,” -- John F. Kennedy.

As we witness an annual inflation rate of 9.1%, the highest in the past 30 years, John F. Kennedy’s quote about the American farmer is more relevant than ever, (except for the fact that a growing number of farmers are now women as well). Most industries have been heavily impacted by rising costs, and agriculture is no exception. Although inflation has led to higher commodity prices, it has not necessarily benefited farmers whose input costs have also risen significantly over the past 12 months.

What Can We Do?

Although inflation happens on the macroeconomic level, there are still several things we can do to ease the financial pain. On one hand, we can reduce the per-unit cost of inputs by using resources more efficiently, such as upgrading irrigation systems to reduce the use of water. On the other hand, we can leverage technology to increase crop yields and improve quality. For example, I’ve previously mentioned, many ag-tech applications such as satellite imagery, automated irrigation management based on machine learning, and agronomy analysis powered by artificial intelligence. Undoubtedly, these tech advances are helping us to farm more efficiently and spend less.

Is There Anything Else Can We Do?

While continuing to work hard in the fields and the lab, ag professionals are also exploring other solutions. I’d like to highlight 3 of them - capital management, business model innovation, and international collaboration.

  • Working Capital & Cash Flow Management

As interest rates rise in response to the current inflationary environment, farmers may find it more challenging to model cash flow throughout the season. This is where innovative financial tools can help. At Netafim USA, in addition to providing innovative technology, we’re also supporting growers and dealers by offering tools to finance irrigation systems and dealer inventory with attractive interest rates.

  • Irrigation As A Service

In addition to providing state-of-the-art irrigation systems, we’re also introducing a new business model. The Irrigation As A Service model is something we have had success with globally, and now that the proof of concept has been proven globally, we plan to bring this same innovation to farmers in the U.S. In this model, a company like Netafim owns the irrigation equipment and the farmer pays a monthly fee for utilization of the equipment and agronomic advice. This model reduces capital investment for the farmer and moves capital expenses to operating expenses.

  • International Collaboration

Agriculture has no borders. As we look for new ways to improve efficiency in farming, international collaboration plays an increasingly important role. We are currently learning from our global partners how to best utilize greenhouses, vertical farms, and artificial substrates to increase yields and quality. Another possibility for international partnership lies at the government level. For example, the EU-US Collaboration Platform on Agriculture (CPA) aims to reinforce the dialogue and facilitate collaboration in relation to agricultural challenges like sustainable farming and carbon sequestration. Of course, when it comes to the actual practice of farming, case-by-case evaluation is always necessary to determine country-specific opportunities and risks. But we should always be aware of the importance of being open-minded and having an international mindset.

A Look Into Global Food Security

We have a looming food security crisis. In 2021, Around 2.3 billion people were classified as moderately or severely food insecure, and almost 3.1 billion people could not afford a healthy diet. It’s projected that nearly 670 million people will still be facing hunger in 2030. As ag professionals, we’re here to protect and feed our communities. It’s our mission to make food available and affordable for everyone, regardless of where they live and how much they earn. I hope my peers in our industry can join us in this battle to address food insecurity. To fight this insecurity our industry must adopt an innovative mindset