Saturday Sprouting Reads (Big Ag's Digital Ag Gameplays, Collateral Management, Green Revolution)

Hello Readers,

Welcome to the April edition of Saturday Sprouting Reads.

Hi!?My name is?Venky. I write Agribusiness Matters every week to help us make sense of vexing?questions of food, agribusiness, and digital transformation in an era of Climate change. Feel free to dig around the?archives?if you are new here.

Big Ag’s Digital Ag Game Plays

If you want to understand what it takes to digitalize agriculture on a?superlinear?scale, try and understand how?Pinduoduo?is growing.

“They look to set the industry pricing and want an established expansion mode. They are concerned with two issues: whether they can set the industry pricing if they invest 1 billion or two billion? The second is how do they expand in the future? If they acquire 1,000 mou of land, how do they expand to the next 1,500 mou of land?” -?Cheng Biao?in?an interview

While it is easier to digitalize agriculture on a superlinear scale in China, it gets more complex to digitalize agriculture on a?sublinear?scale in a country of smallholders.

How do you digitalize agriculture on a?sublinear?scale in a country of smallholders?

Alongside?agritech startups with big ambitions, a good playbook is quietly being written by Big Ag players like?Bayer?($),?UPL?($), and?Corteva Agriscience($) who are competing on the same turf with agritech startups with bigger ambitions.

The crucial thing about digitalizing agriculture on a sublinear scale is this:

How do you grow digital agricultural initiatives without expending too much energy, targeting existing value chain structures? In other words, how do you double in size spending only 75 per cent of energy?

I dug deeper into Corteva’s Udayan App to see if there are commonalities and divergences in how Big Ag’s Digital Gameplays are emerging in smallholder contexts.

Collateral Management in Cross Roads

Few months ago, I wrote?The Death of Collateral Manager ($)?to talk about how traditional collateral management businesses have been winding down, struggling to survive a risk-averse banking environment along with ballooning costs of regulation.

In the weeks leading to the publication of the article, I also chatted with Siraj Chaudhry, Managing Director and CEO at National Commodities Management Services Limited, to discuss the changing stripes of the agricultural warehousing industry.

Few days back, Siraj?wrote a good overview of how collateral management could be revived with?“a need to limit the scope of unlimited liabilities and promote the system of proportionate liabilities”.

The central reason behind the collapse of traditional collateral management businesses boils down to skin in the game. Should collateral managers be the only ones to take the hit when the price of the commodities tank below? What about the bank’s skin in the game? Why should the bank always outsource the risk involved to a collateral manager?

Siraj makes an interesting point when comparing Collateral Managers globally vis-a-vis their Indian counterparts.

This brings an interesting question: In emerging counties like India which are at the early stages of digitalization of agriculture, can we build this industry-wide system of collateral monitoring?

Much like?India’s contentious farm laws?which talked about an industry-wide system of price information and market intelligence, can we build a process for rating collateral managers based on their operational performance?

The article further makes a fervent plea for regulators to recognize the role of the Collateral Manager.

How do we reinvent collateral management in an age of agtech? How do we build marketplace models that will allow discovering an estimate of the private stock of any commodity in the market? I will write a follow-up to my earlier piece on warehousing players soon.

Image Illustration From?Death of Collateral Manager

Towards a Critical History of Green Revolution

One thing I’ve observed as an outsider student of Agriculture is that the industry at large has been touchy-feely about the green revolution. There hasn’t been an honest dialogue about what we gained and what we lost due to the green revolution.

Thankfully, a new book promises to address this gap.

The book’s promise is something that is music to my ears

“Accordingly, we argue that agricultural research policies need to accommodate the complexity of the real world of smallholder farming if they are to achieve their dual goals of enhanced food security and poverty relief.”

In an earlier article written by the author?of this upcoming book, she writes,

“The contribution of Green Revolution crop varieties to preventing famine is overstated. For example, India’s food production was increasing steadily more than 15 years before Indian farmers started adopting Green Revolution wheat in 1967. The Green Revolution’s successes were also concentrated among wealthier farmers. This was in part because research organizations directly targeted “successful” farmers to test new technologies, with the idea that best practices would trickle down to poorer farmers.

But this often didn’t happen.

Poor, smallholder farmers often lacked access to credit, could not afford inputs such as fertilizers, or grew different crops than the ones developed by Green Revolution research. Overall, the Green Revolution did little to reduce food insecurity and actually increased rural inequality, leaving behind the poorest and most vulnerable.”

Why do we have an almost negligible amount of agritech startups from the eastern part of India?

Your answer is in the excerpt above.

Agricultural growth is uneven in this country, thanks to Green Revolution. And agricultural technology (or call it digital ag, if you will), by its intrinsic nature, has only moved to those areas which have?already well developed agricultural playgrounds.

This excerpt is also fascinating for another reason: It clearly shows how technology diffusion models often don’t generally work well in contexts of agriculture.

Unlike technological revolutions in other domains, when there is a technological revolution in agriculture, the real agricultural prices go down south (as happened in this country in the case of wheat) and this further inhibits technological development for the rest of the population.

Rhishi Pethe did?an interesting exploration of technological diffusion, focusing on trapped value, albeit in a matured markets context.

Marci sums up our simplistic understanding of the green revolution thus:

“Central to this story is a simplistic, linear view of agricultural innovation itself: scientists conduct controlled research in the lab or field, then publish or patent the results, which are then picked up by industry or government and made available to farmers, who benefit from improved crop varieties, greater productivity, and so on.”

Keeping into account the complexity of smallholder agrarian contexts, what is the right way to think about net sum technological diffusion that, for a change, could benefit smallholders?

We will explore this further.