Innovation ourishes where there
are big problems to solve, and
few problems are as large as the
need to feed the world. In the
latest in our
Proles in
Innovation
series, we explore
how agriculture offers fertile
ground for a conuence of
technology trends, from sensors
and the Internet of Things to
drones, big data and autonomous
driving. We see the potential for
Precision Farming to lift crop
yields 70% by 2050 and create a
$240 billion market for farm tech,
adding to agriculture’s long
historyof holding off a
Malthusian crisis.
Goldman Sachs does and seeks to do business with companies covered in its research reports. As a
result, investors should be aware that the rm may have a conict of interest that could affect the
objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision. For Reg AC certication and other important disclosures, see the Disclosure
Appendix, or go to gs/research/hedge.html. Analysts employed by non-US afliates are not
registered/qualied as research analysts with FINRA in the U.S.
The Goldman Sachs Group, Inc.
EQUITY RESEARCH
|July 13, 2016
Cheating Malthus with Digital Agriculture
PROFILESININNOVATION
Precision Farming
Jerry Revich, CFA
(212) 902-4116
jerry.revich@gs
Goldman, Sachs & Co.
Robert Koort, CFA
(713) 654-8480
robert.koort@gs
Goldman, Sachs & Co.
Patrick Archambault, CFA
(212) 902-2817
patrick.archambault@gs
Goldman, Sachs & Co.
Adam Samuelson
(212) 902-6764
adam.samuelson@gs
Goldman, Sachs & Co.
Michael Nannizzi
(917) 343-2726
michael.nannizzi@gs
Goldman, Sachs & Co.
Mohammed Moawalla
+44(20)7774-1726
mohammed.moawalla@gs
Goldman Sachs International
Andrew Bonin
(917) 343-1445
andrew.bonin@gs
Goldman, Sachs & Co.
July 13, 2016Profiles in Innovation
Goldman Sachs Global Investment Research 2
Contents
PRECISION FARMING in numbers 3
Precision Farming: Cheating Malthus with Digital Agriculture 4
The Ecosystem: Precision Farming - Key Players 12
The Ecosystem: Precision Farming – TAMs and potential value added 13
Field Notes: Views from 60 experts 15
KEY TECHNOLOGIES$240 bn addressable market 16
Technologies changing the face of farming 17
Precision Fertilizer Application: $65bn addressable market, $200bn potential value-add 20
Precision Planting: $45bn addressable market, $145bn potential value-add 22
Compaction Reduction via Small Tractors: $45bn addressable market, $145bn potential value-add 24
Precision Spraying: $15bn addressable market, $50bn potential value-add 27
Precision Irrigation: $35bn addressable market, $115bn potential value-add 28
Field Monitoring 30
Data Management 32
Select companies with exposure 35
Summary of select investments in Precision Farming technologies 39
Disclosure Appendix 40
This is the fifth report in the
Profiles in Innovation
series analyzing emerging technologies that are creating
profit pools and disrupting old ones. Access previous reports in the series below or visit our portal to learn
more and see related resources.
Contributing authors:
Jerry Revich CFA, Robert D. Boroujerdi, Hugo Scott-Gall, Patrick Archambault CFA, Robert Koort
CFA, Adam Samuelson, Michael Nannizzi, Stephen Grambling CFA, Mohammed Moawalla, Jesse Hulsing, Noah
Poponak CFA, Stefan Burgstaller, Yuichiro Isayama, Andrew Bonin, David Tamberrino CFA, Jay Yang, Brooke Roach,
Mathew Porat, Lincoln Kong CFA, Deepshikha Agarwal, Gautam Pillai, Christopher Evans Ph.D, Ryan Berney, Drew
Cohen, Gungun Verma.
PRECISION FARMING in numbers
A CHALLENGING SCENARIO
Average age of a farmer (in years) in the
US –a number that has consistently
moved up over the past 30 years. (p. 14)58yrs
Proportion ofirrigation outside the US
using flood method resulting in loss of
efficiency. (p. 29)90%
Potential tech-driven improvement in
yields by 2050. (p. 7)
70%
Percentage of grain consumption in 2015
that China –the world’s most populous
country –imported. (p. 5)40%
Total addressable digital agricultural
technology market. (p. 8)
$240bn
9.7bn
Expected world population by 2050,
translating into 70% required growth
in global food supply from current
levels. (p. 5)
THE HUGE OPPORTUNITY
Potential reduction in water waste with
precision irrigation systems paired with
water sensors. (p. 28)50%
WATER WASTED
One 600hp tractor weighing
~45,000lb
LIGHTER ONTHE SOIL
Manual vs autonomous tractors
Ten 60hp autonomous tractors
weighing ~5,000lb each
Global crop production value in 2015.
(p. 8)$1.2tn
CURRENT PRODUCTION
Percentage of over-fertilized fields.
(p. 20)40%
Yield loss suffered from inadequate
fertilizer application. (p.20)15%-20%
IMPRECISE APPLICATION OF INPUTS
July 13, 2016Profiles in Innovation
Goldman Sachs Global Investment Research 4
Precision Farming: Cheating Malthus with Digital Agriculture
Farming has long been a proving ground for the adage “necessity is the mother of
invention.” From the introduction of the steel plow and reaper over 200 years ago to
modern advances like large scale planters and genetically modified seeds, man continues
to find new ways to feed the world’s growing population. As we near the limits of
available arable land, a confluence of technologies is driving a new leg of productivity in
Precision Farming to enable growers to meet the demand challenge from existing land.
A problem of Malthusian proportions
The world has a long-term food supply challenge. And according to the modern day
Malthusians, it’s a problem that mankind can’t solve. But we’ve been here before many times.
Thomas Malthus was an 18th century scholar and cleric who argued that population growth is
exponential while food growth is arithmetic, resulting in an inevitable period of food shortage.
His theory garnered a lot of attention not the least because it spoke to a core need and fear. But
it has been wrong so far as human ingenuity and economic incentives have driven a stronger
supply response. And we think the modern day doomsters are wrong again. However, their
diagnosis of the problem is right: the world faces a substantial challenge to feed itself in the
face of an expanding population, growing demand for protein as incomes rise, and a
geopolitical mismatch between food supply and demand.
But our research suggests that they are wrong in arguing that there is no solution. Our
conviction is reinforced by more than 60 field interviews (often literally in a field) with farmers,
academics, venture capitalists, dealers, start-ups, and established ag and technology players.
We think yields can rise by over 70% to 2050. How in a world of falling arable land per capita is
this possible Our answer is the end of the analog age for farming. Advances in hardware,
software, computing power enable far greater precision in planting, fertilizing and irrigation.
The extension of technologies such as autonomous vehicles, drones, and logistics
management systems add to this transformative confluence. In this report, we detail our field
research on precision farming solutions under development. New winners and losers will
emerge from this shift to digital agriculture, as will new entrants who want a slice of a total
addressable market growing to $240 bn by 2050.
Exhibit 1: Farm productivity improvement is critical as available land per capita declines
Global arable land acreage vs. population
Source: Goldman Sachs Global Investment Research, FAO.
1961196719731979198519911997200320092015
WorldPopulation
AgriculturalLand(inhectares)
In
illi
on
s
July 13, 2016Profiles in Innovati