3 Factors that Influence Agriculture and Food Supply Chain

, 9 minute read

Quick summary: Crop production and farming activities need to increase to meet the demands of the growing population. Agriculture companies need to increase their presence in meeting these demands through digitization of the food supply chains. Farm digitization, supply chain transparency with traceability, and real-time data capture at all stages in the food supply chain influence agriculture and food production and eliminate disruptions.

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According to World Bank, do you know that agriculture is the primary source of livelihood for 58% of India’s population? India is the world’s  second largest producer of food after China, according to the Ministry of Agriculture and Farmer’s  welfare and is the largest producer of several agriculture commodities including milk, spices, pulses and jute. The agriculture sector contributes to 17 to 18% to India’s GDP and  according to McKinsey has the potential to grow from current value of 370USD to 500USD by 2025. However the agriculture supply chain in India faces several challenges like fragmentation of land holdings, lack of access to technology and credit ,inefficient marketing and  distribution and lack of infrastructure.

India is one of the top agriculture countries, India ranks second in farm outputs and lists within five for the largest producers of agricultural items and first among producing certain fruits and dairy items. 

India has the highest net-cropped area and a fast-growing population which makes it difficult to balance. It is said that India’s population is growing faster than the rate at which India is currently producing. Even though we have the largest net crop and agriculture contributes majorly to the GDP, India’s agriculture has the potential to influence the world market.  

Various farming and its ancillary factors affect the slow growth of agriculture in India. 

  • Infrastructure: Management and development of facilities required for farming are poor. No proper roads for exchange of goods, lack of proper irrigation system, water shortage in few parts, disorganized irrigation system, lacking storage facilities, etc are not only increasing the costs but accounting for losses as well. 
  • Productivity: According to the ministry of new and renewable energy, India generates about 350 million tonnes of agricultural waste every year. This is resulting due to lack of proper agricultural training, stuck in conventional agricultural methods, inconsistent government policies, no proper supply chain model, etc. 
  • Marketing: Agriculture in India is a huge market; the lack of proper transparency throughout the food supply chain has created an opportunity for middlemen to interfere. Producers have a little link to big organizations and market place; middlemen take advantage of this situation leaving farmers in the dark. Farmers would never know, for what price his product was ultimately sold. 

Is there a need for a food supply chain? 

For such a colossal industry to work in tandem, the need for a proper supply chain and its efficient management becomes important. The supply chain refers to every such activity that the product makes its journey, from the sourcing of raw materials to the finished product reaching the final consumer. Briefly, it includes agricultural input, production, processing, marketing, transportation, and distribution. Supply chain management helps in handling the entire supply chain for smooth functioning of all processes with maximum efficiency and quality to provide effective results and to maximize profits. 

The structure of a supply chain differs from one product to another, it takes into account many factors like organizational behavior, product characteristics, shelf life, marketing, number of players, etc while formulating a supply chain model. The recent Indian agriculture market is forced to make certain changes resulting in globalization and increased risks. The Indian Government has been strategically developing models and policies like Pradhan Mantri Krishi Sinchai Yojana, Paramparagat Krishi Vikas Yojana (PKVY), and National Agriculture Market (eNAM), National Mission for Sustainable Agriculture (NMSA), aiding various supply chains and agriculture as a whole.

Global supply chain 

Food and agribusiness form a $5 trillion global industry that has been only getting bigger 

The global smart agriculture market in 2018 was approximately USD 6455 million which is expected to grow at a CAGR of 13.09% to reach USD 19625 million by 2027. The world population is expected to reach 10 billion by 2050. Crop production and farming activities need to increase to meet the demands of the growing population. Agriculture companies need to increase their presence in meeting these demands. The Asia Pacific was the largest region in the agriculture market followed by North America in 2021. The agriculture market is segmented into crop production, animal produce, and other rural activities. 

Food wastage around the world is no different, one-third of the global food is wasted throughout the year and 40% of it occurs in the production and processing stage. 

The global production systems have crossed many borders. The wheat produced in Ukraine is processed as flour in Indonesia and is exported to make bread in Africa. These global value chains connect food producers to consumers across the world. 

What changes when a supply chain moves global? Mainly the volume of connections and trade becomes difficult for accessibility and timely delivery. As the market gets bigger, logistics has to innovate and function accordingly, factors like product characteristics, demand variability, period of shelf life, storage conditions, travel time, and distance are a few to consider. 

Trade plays a critical role in providing livelihood to farmers and the other stakeholders in the food supply chain. It also contributes to maintaining food security and provides consumers with a greater choice. The advancements in agricultural technology have implemented smart agriculture through machine learning, AI, and blockchain to encourage quality growth. 

Three factors that affect such disruptions 

food traceability, food supply chain, blockchain traceability, agriculture traceability software
  1. Automation of farm operations  

The technique of using technological innovations to automatically manage various farming processes is known as farm automation. These are used to solve issues and reduce time-intensive operations present throughout the agricultural processes. Over the years, the necessity of the hour has manifested itself in many technical advances that cater to varied demands and provide assistance. Technologies like automatic irrigation, robots for planting and harvesting, drones for irrigation and monitoring and Blockchain are some of the major developments. 

Blockchain, a recent inclusion in the agriculture sector is providing data recording through an electronic decentralized system that is tamperproof. Both input and output data at each stage in the food supply chain are recorded and linked back to processes downwards, creating a link between processes while also ensuring transparency and traceability to any stage in the product’s journey, thus providing options for product recall.

Various data collection stages are automated under Blockchain through imagery sensory, IOT for water and pesticide control, automatic data inventory, etc.  

Many farmers today utilize a combination of spreadsheets, paper records, and memory to record their data. Blockchain minimizes the strain of record-keeping and maintaining multiple records, thereby saving time and energy in the supply chain operations. 

Blockchain helps in digitization, automation and tracking all of which are important bottom lines for farmers in agriculture. 

2. Transparency in supply chain traceability due to farm digitization  

The current market ships goods to the other side of the world. Complex supplier networks and growing demand have caught the eyes of regulating bodies. Stringent rules and guidelines have to be followed while shipping long distances. Farmers, processors and distributors have to maintain proper quality and methods throughout the supply chain. To monitor such progress, digitization of the supply chain is a must.

Transparency in the food supply chain is very critical to realizing a robust and efficient supply chain. Digitization drives traceability which helps to provide end-to-end visibility in supply chains. Blockchain traceability helps food supply chain management. The digital ledgers store transaction right from crop and farm management activities of planting, harvest, storage and distribution. The data captured in real-time in the immutable ledger assures accountability and builds trust in the system. 

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3. Providing reliable information from crop field to production at every touch-point. 

In the modern methods of the food supply chain, data recording and transfers play a prominent role. While food and agricultural waste are rising, there is a need for planning. Consumer demand and trends in the markets are analyzed and sent downward through the supply chain, this helps planning for production easier and more efficient. Data transfer isn’t just one way, manufacturers record the origin of raw materials, quality certificates, farming process, expected harvest, estimated delivery time, etc to the producer.

As the demand for organic foods grows, it is essential that the producers are able to verify the provenance of the product and what went into the various processes in the food supply chain.

Blockchain track and trace systems help to win consumer trust and also satisfy the regulatory authorities. Traceability systems help the producers to reach a better market and they get maximum return with real-time transactions and also payments. The shared data on a collaborative distributed and decentralized platform assures a single source of truth, thereby helping in audit trails and verifying ethical practices in the agriculture supply chain. 

While technology is undoubtedly beneficial to the agriculture business, its effective use and management while keeping the supply chain in mind is the responsibility of the companies. As the saying goes, “you can’t manage what you can’t measure.” Technology aids in the detection of problems and the closure of gaps while reducing risk and increasing efficiency.

Blockchain is truly revolutionizing the agriculture( How can Blockchain improve food supply chains?) supply chains with data-driven decisions and automated farm management.

Agriculture and food supply chain disruptions can have great impacts on food security, economic stability and social well-being. There are several factors that influence these disruptions like climate change, trade policies, market volatility and labour shortages. However, there can be steps undertaken to mitigate the impact of disruptions on food and agriculture supply chains like investing in resilient far management practices, agriculture technologies for crop management, promoting greater diversification in agriculture systems and developing robust contingency plans.

Let us work together to address these challenges and build climate resilient and sustainable supply chains for the future.

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