As agriculture data becomes more digitalized, how can banks, insurance and reinsurance companies improve underwriting and risk management? Will access to more reliable, granular agronomic data enhance lending and loss mitigation? Experts examine the financial products coming to agriculture that can support farmers adopt sustainable practices.

“The global and agricultural economics have experienced an unprecedented amount of volatility and disruption in recent years, driven by the COVID pandemic, supply chain disruptions and trade issues, not to mention all the additional disruptions inflicted by Russia’s invasion into Ukraine. These factors, along with climate change and ESG considerations, increase the operational risks facing agribusinesses and therefore present challenges for ag lenders, insurers and other financial service providers. As data becomes more accessible digitally, financial service providers have opportunities to capture efficiency gains in front-end processing (underwriting), loan servicing and claims management, and back-end processing (loan / policy renewal.) Great efficiency should also result in better service levels and improved customer experience.

Farmer adoption of data-intensive processing technologies can improve field results. The insights provided by remote sensing systems can help growers reduce risk through more precise planting, input application and harvesting, all of which should help reduce crop loss and thus enhance the integrity of the collateral (either the land or the actual crops) pledged against loans. Generally speaking the higher the quality of incoming data, the better the analysis and application of insights to tasks, such as land management, valuation and carbon capture and monetization activities, all else being equal.” Kenneth Zuckerberg, Lead Industry Analyst, COBANK

“There’s a massive shift taking place in the financial world as governments and corporates come under pressure to disclose and manage climate-related risks. Simultaneously, agriculture and food systems are in focus because of their intimate ties to climate change- from production risks to greenhouse gas impacts.

The collision of these two forces will drive more innovation at the intersection of agtech and fintech, in both developed and developing world contexts. There’s no shortage of areas for potential impact. Trade & finance. Marketplaces. Novel risk management tools that blend the biological and digital. And as these new tools emerge, the value chains that bring these products to market may also need to evolve and adapt, creating even more new opportunities for innovators.

In ag, there’s a unique opportunity to not only “do less bad”, but also do actual good, thanks to the sector’s huge potential to provide nature-based solutions. Beyond this, farmers also stand to benefit directly– new tools and practices that promote sustainability outcomes can also help drive resilience, increase profitability, underpin differentiation, and open up new revenue streams. But unlocking these opportunities is far from simple, especially as practice change comes with both real and perceived risks. We will need a range of new financial tools and products to support this transition, including direct incentives and rewards, embedded risk management and insurance solutions, and models that unlock new sources of aligned finance.” Sarah Nolet, General Partner, TENACIOUS VENTURES

“The digital (r)evolution that began overtaking retail banking 10 years ago has now begun trickling into other segments of the market. The same technical benefits that enhanced the consumer experience in digital banking are now seeping into AgriFintech. Farmers, banks and insurance companies are all benefiting from the speed, the cost efficiencies and the precision of the data to dial-in great rates, quick claims and full transparency. The next 3-5 years will start showing the enormous benefits of these new AgriFintech products coming to market in the Ag sector.”
Ramsey Masri, CEO, CERES

“We are on the cusp of wide scale adoption for data-driven risk insights that match field-level data to many types of risk and pricing decisions. All innovative insurance products start with the inclusion of new data points when they are determined to be correlated with a desirable or undesirable outcome. Therefore, every newly measurable data point opens the door for innovation. Protection against ever more-specific weather or precipitation events, rather than whole-farm or total revenue are emerging, as are farm-management practice insurance products such as the RMA’s option for split application of Nitrogen (called PACE), that was recently introduced. We will see more products beyond purely yield/revenue protection, such as cover cropping, no-till, and product warranties increase, as the objective metrics on attributable outcomes becomes increasingly measureable. Measurability is the key, and satellite-based monitoring and modeling is a primary driver of this capability.

Early adopters are already using this data to guide better agricultural risk management, but in silos. For example, we have already automated risk premiums and claims validation using remote sensing technology and AI models globally, but realizing full automation and standardized interoperability across supply chains is still in the future. This will happen in the next 36 months at most. To do our part, Agrograph has delivered a standardized “credit score of agriculture” to meet this need and accelerate this adoption. Data such as the crop planted, yield forecasts, county peer comps, historical performance and farm management practices all combine to form a standardized score – no different than how credit behaviors such as late payments, high credit utilization and legal judgements impact our own personal credit scores.”
Michael Barrow, VP, AGROGRAPH

“If there is a meaningful financial incentive provided through new financial products (that’s significant enough to matter to the bottom line) farmers will be more likely to change their practice. In our latest State of the Farm survey, 77% of farmers said they would be willing to change the way they farm if it would have a positive impact on the environment. Yet 96% said they would change if they believed it would be more profitable. Farmers are smart business people like anyone else who runs a business. They are not going to change practices (or track them) for incremental monetary gains. That’s where Bushel comes in to organize and digitize the “messy middle” of the supply chain. We work with agribusinesses and farmers to allow data to be properly permissioned for use cases such as tracking sustainable farming practices.” Jake Joraanstad, CEO, BUSHEL

“The digitalization of agriculture, coupled with shifts in farming operations, consumer behavior, and climate change, creates new business opportunities for digital financial services. Innovations in lending, insurance, payments, and marketplaces support more efficient financing and capital flows to producers and processors who are limited by historical asset-based lending models, opaque distribution channels and data constraints. Fintech solutions can help finance progressive growers, who are leading the transition to regenerative practices, and data-driven decision-making. Novel insurance products can mitigate risks associated with extreme weather and market dislocations. Additionally, e-commerce companies such as Agriconomie improve costs, transparency and access to sustainable inputs for farmers as well as valuable market information for manufacturers who lack visibility and data on how their products are used.”
Phil Erlanger, Managing Director, ALIMENT CAPITAL

 

Kenneth, Sarah, Ramsey, Jake and Phil, along with more than 1,800 high-profile agri-food investors and leaders in the industry will come together to exchange insights, be inspired, and identify future partners at the the World Agri-Tech Innovation Summit on March 14-15 in San Francisco. See who else is joining.