The Total Addressable Market (TAM) for agriculture technology-as-a-service was valued at USD 1.67 billion in 2022. It is expected to reach an estimated value of USD 10.92 billion by 2031 at a CAGR of 23.2% during the forecast period (2023 – 2031). High growth in the market is expected to be driven by the growing need to adopt agriculture technologies throughout the industry, conversion of capital expenditure into operational expenditure for customers, and greater customer retention for service providers. In emerging countries, the market's growth is expected to be driven by rising awareness among governments and manufacturers-turned-service providers about the need to elevate farm produce while evaluating the farm expenditure of their growers. Furthermore, increasing concerns over global food security and sustainability have led to extensive investments by governments across the world.
Increasing Demand for Global Food Production
The Food and Agriculture Organization (FAO) of the United Nations (UN) estimates that to feed the 9.1 billion people that will inhabit the planet by 2050, global food production would need to increase by a factor of two from 2005 levels while arable land can only be increased by 5%. Food consumption is rising dramatically, and farmers are under constant social pressure to meet this demand. Increased cropping intensity and higher yields are required for 90% of the growth in worldwide crop output, making agricultural technology techniques and equipment essential for the sector.
To increase agricultural output, technology services are being adopted heavily. Farm management software, agricultural robots, drones, precision irrigation equipment, and remote sensing are just a few popular technological services farmers use worldwide. Offering agrarian technology as a service also reduces the financial barrier that prevents farmers from using new technologies to fulfill the rising need for food production on a global scale, which drives market growth.
Low Capital Investment for Customers
Precision agriculture practices and smart farming technologies have brought a new wave of modern agricultural equipment. However, introducing these new agriculture technologies has escalated the expenditure for growers, which they incur for profitable agriculture production. Planning to possess any agricultural technology equipment or software for farming practices such as harvesting, weeding, pruning, or picking puts immense pressure on the growers' significant capital expenditure and upfront costs. The burden becomes heavier on growers from emerging economies of Asia, Africa, and Eastern Europe. This factor makes growers hugely reluctant to plan to possess this modern equipment. This looming concern has been one of the primary reasons behind the inception of the agriculture technology-as-a-service (ATaaS) business model among companies worldwide. The continuous pressure on agricultural technology companies to maintain profit margins while maximizing adoption leads to work for their widening search for market opportunities beyond the traditional model of selling the equipment or software. ATaaS business model provides them with this flexibility. Hence, all such factors drive market growth.
Price Inflation of Agricultural Produce
After the global ripple effect of the economic meltdown in the U.S. in 2008, there was a spike in food prices in most countries, and the food price index stood at 54% more than in 2007. As of 2017, the food price inflation has gradually normalized and recovered from the global shocks and stood at 3.6%, while only the Africa region showed an increase in inflation from 6% in 2013 to 7% in 2017. Suppose capital-intensive agricultural technology like drones, robotics, and remote sensing is adopted in agriculture with normalized inflation rates. In that case, the overall cost of inputs is anticipated to rise, having a trickle-down effect on the prices of finished food commodities. Low farmer incomes due to higher food inflation force them to reduce production costs, which is incompatible with the significant initial capital expenditure and ongoing maintenance expenses associated with adopting agricultural technologies. Hence such factors impede market growth.
Economic Need for Precision Agriculture
Net farm income worldwide has been subdued for the past five years. Low return on investment and income volatility for farmers have been majorly accredited to high commodity prices. The income that farmers have been generating for their produce is not enough to pay their bills, and thus many are forced to quit farming. The USDA estimated the net farm income in the U.S. in 2018 to fall by almost half since 2013. Farmers in low-income countries face adverse situations such as poor availability of funds and unsupportive price structures for farm produce, making farming a non-remunerative profession. This forces farmers to put extra pressure on farmland to yield higher and raise farm productivity.
The utilization of technologies, especially precision agriculture technologies, is touted to lead the path in bringing economic relief to the farmers. Precision agriculture technology-based solutions and services comprising agricultural robots and autonomous systems enable farmers to optimize the utilization of resources such as seeds, water, fertilizer, and pesticides. An increase of 3-4% in crop yield due to operational efficiency created by precision agriculture can aid the farmers in improving gross crop margins by approximately 10%, which creates immense market potential.
The global agriculture technology-as-a-service market is segmented by service type, technology, farm produce, application, and region.
By service type, the global market is segmented into software-as-a-service and equipment-as-a-service. The SaaS service type dominated the global and is estimated to grow at a CAGR of 21.7% during the forecast period. The benefits of lower costs, scalability, integration, and accessibility associated with SaaS are the significant reasons behind the reported growth of this service type. EaaS as a service type has yet to be widely adopted compared to SaaS since the systems could not precisely predict equipment failures leading to frequent customer dissatisfaction. Implementing machine intelligence and the internet of things is expected to improve predictive maintenance.
By technology, the global market is segmented into data analytics and intelligence, guidance technology, sensing technology, variable rate application technology, and others. The data analytics and intelligence segment dominated the global agriculture technology-as-a-service market, registering a CAGR of 22.5% during the forecast period. High market share and growth potential related to data analytics and intelligence as an agriculture technology-as-a-service technology is attributed to the growing requirement for data management in agriculture, especially since the introduction of sensing technology in the industry.
By farm produce, the global market is segmented into cereals, oil crops, fiber crops, pulses, fruits, vegetables, nuts, roots, and tubers. The cereals segment dominated the global agriculture technology-as-a-service market, registering a CAGR of 21.4% during the forecast period. Cereals are the leading staple food in most diets, and these crops are mainly grown in semi-arid and sub-humid areas. It constitutes wheat, rice, barley, maize, rye oats, and millet. To keep pace with global food, demand for cereals production would need to increase at the same rate as the population is increasing. For the cultivation of these types of crops, advanced agriculture technologies such as sensing, data analytics, guidance, and variable rate applicator, among others, can be employed for sustainable production. Farmers across the globe, especially in developed regions such as North America and Europe, are rapidly adopting different advanced agriculture technologies to improve the yield and quality of crops.
By application, the global market is segmented into yield mapping and monitoring, soil management, crop health management, navigation and positioning, and others. The yield mapping and monitoring application segment dominated the global agriculture technology-as-a-service market, registering a CAGR of 21.7% during the forecast period. Yield mapping and monitoring as an agriculture technology-as-a-service application have a high market share and growth potential, which can be attributed to the growing need to comprehend the yield pattern before applying any agriculture technology and the widespread use of the software-as-a-service business model. These are a few leading causes for the increased uptake of products for yield mapping and monitoring in the global market for agriculture technology as a service.
By region, the global agriculture technology-as-a-service market is segmented into North America, Europe, Asia-Pacific, South America, Middle East, and Africa.
North America dominated the global agriculture technology-as-a-service market and is expected to grow at an estimated CAGR of 20.9% during the forecast period. It is popularly recognized that North America leads the way in agricultural technologies. North American countries are far ahead among the different regions, looking to implement various automation, control, and sensing systems products and services beyond conventional farm machinery and services for efficient crop production. North America is one of the most prominent regions for the global agriculture technology-as-a-service market. Leading OEMs and technology providers in agriculture generate a substantial share of the revenue from this area. The growing popularity of agricultural technology among farmers in the region has left many options for them. Thus, compared to a one-time purchasing model, the service model enables them to test and realize the most viable goods and services for their farms at lower capital expenditure. Because the awareness of technology among farmers is strong, the market penetration of precision farming in North America is vast. With a pre-existing consumer base, demand is booming in the area for the global agricultural technology-as-a-service market. Thus, the region has enormous potential for manufacturers and service providers.
Asia Pacific is the second largest region and is estimated to grow at a CAGR of 28.6% during the projected period. Over 60% of the world's population, which the UN estimates to be in the Asia-Pacific region, is expected to rise exponentially over time, raising worries about food scarcity in the area. Consumption has increased in Asia-Pacific due to rapid population expansion, rising disposable incomes, and growing urbanization. To meet the rising demand for food, farmers are now focusing on improving crop yields and offering an all-year supply of agricultural products. Several nations in the region have seen a rise in technology adoption to help them achieve this. Growing online farming practices and generous government funding boost regional demand for agricultural technologies. The value propositions connected with agricultural technology-as-a-service are becoming more and more well-known to farmers and farming businesses, propelling regional expansion at a rapid rate.
Europe is the third largest region. The agricultural sector in Europe is at the height of transition. Numerous factors include the decreasing number of farm employees, the young generation's disinterest in the agricultural profession, and environmental problems inciting the European farming industry to accept eco-friendly farm production. It also promotes restoration and smart farming techniques, adopting agricultural technologies and services. Besides, agricultural technology products and services, including sensing technology, variable rate technology, and advanced solutions such as agricultural robots, enable farmers in Europe to grow crops with minimal resource wastage, such as water, pesticides, and labor, to meet the demand for rising production. With their ability to assist farmers with real-time data and insight into yield status and growth opportunities, data intelligence applications and robotics are also fundamentally changing the agricultural industry. The European Union has recognized the advantages of implementing technology in the agricultural sector to make it profitable, fostering a culture in EU countries. Simultaneously, companies' and universities' continuous development of products has increased knowledge among growers. Therefore, the area is expected to see enormous demands for agricultural technology as a service in the coming years with government backing and increased awareness.
The key players in the global agriculture technology-as-a-service market are
|Report Coverage||Revenue Forecast, Competitive Landscape, Growth Factors, Environment & Regulatory Landscape and Trends|
The report also discusses some detailed aspects of the global agriculture technology-as-a-service market, which are as follows:
A case study has been reflected in the research paper' Precision Agriculture: A Break-Even Acreage Analysis' by Jean-Marc Gandonou, Carl R. Dillon, Timothy S. Stombaugh, and Scott A. Shearer. The study assist the growers and equipment companies in understanding the least-cost strategy between owning the equipment and custom hiring based on the acreage of the farm area.
A similar case study has been reflected in the paper 'Benchmark of Satellites Image Services for Precision Agricultural Use' by Marco Sozzi, Francesco Marinello, Andrea Pezzuolo, and Luigi Sartori. The study help growers understand the need to procure the agriculture technology service depending on their farm size and the costs incurred.
Agricultural robots are an integral part of this next-generation equipment. Planning to possess an agricultural robot for farming practices such as harvesting, weeding, pruning, or picking puts immense pressure on significant capital expenditure and upfront costs on the growers. These factors make growers hugely reluctant to plan to possess this modern equipment. This looming concern has been one of the primary reasons behind the inception of the agriculture robot-as-a-service (ARaaS) business model among companies worldwide. The continuous pressure on agricultural robot companies to maintain margins while maximizing adoption leads to their widening search for market opportunities beyond the Agriculture robot-as-a-service model, i.e., the one-time purchase model. ARaaS business model provides them with this flexibility.
Furthermore. the struggling global farm economy restricts farmers from investing heavily in acquiring new advanced technology equipment. This global trend has contributed majorly to developing the business model known as agriculture drone-as-a-service (ADaaS). This business model allows customers to acquire drones on service at lucrative pricing models such as pay-per-use and subscription models.
Government Initiatives Landscape
The significance of utilizing advanced technologies in the agricultural sector is crucial for resolving food scarcity, labor shortages, efficiency, and resource management. The government of different countries around the world has comprehended this fact. Also, governments have realized a rising need to automate routine work as daily work is increasing daily. Hence, governments worldwide are investing in developing policies and initiatives catering to their needs. They are also investing a lot in R&D to compete with other countries.