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China's farming revolution: Why Agri-Tech is being irrigated with billions

Posted on 27 February 2020

Deep in rural China, an “agricultural brain” deploys AI voice recognition to interpret the grunts and squeals of piglets, allowing farmers to tend to their individual needs and pamper them into adulthood.

Launched by e-commerce giant Alibaba in 2018, the platform has already been adopted by several leading pig raising enterprises. Meanwhile, NetEase – China’s second-biggest gaming company – is establishing its own organic pig farms that keep tabs on swine with sensors and big data analytics, while tending to porcine sensibilities with soothing music and smart toys.

Why are Internet giants at the pinnacle of such multi-billion dollar industries as online shopping and mobile gaming entering the pigsty? The answer lies in a mixture of stark necessity and growing tech leadership.

China has awoken to the reality that agriculture is the world’s next frontier for digital disruption – and that its tech champions hold many of the keys to a farming revolution. As Beijing targets farming as a priority sector for digital transformation, investors are irrigating Chinese agri-tech with billions in venture capital.

Mother of invention

The challenges are formidable. China needs to feed one-fifth of the world’s people and sits on less than a tenth of its arable land. As cities become futuristic marvels, farming remains largely stuck in pre-industrial times. Small family farms work land with quaint methods passed on through centuries – while harming the earth with more recent pesticides. Young people are fleeing the land for the cities, leaving the elderly to live out their days on isolated cabbage patches. Meanwhile, food safety remains a paramount concern, as the world was reminded when the coronavirus outbreak was traced to a Chinese seafood market.

The underdeveloped state of Chinese farming makes it ripe for transformation. Just as a generation of Chinese that never knew PCs or credit cards became wildly imaginative adopters of smartphones and mobile payment solutions, Chinese farming may be poised to leapfrog several layers of agriculture modernisation with the adoption of 5G, artificial intelligence, advanced drones and digital trading platforms – all Chinese strengths. Dismantling legacy farming structures in France or Wisconsin is a nightmare-not-waiting-to-happen. China may have more opportunities to make tabula rasa for its own digital farming future.

“They are taking enormously bold moves,” says Larry Taylor, co-founder of YieldLab, a Singapore-based ag-tech accelerator. “Only in China can you do this kind of large-scale renovation of an industry.”

Digital technologies for organic life

The renovations Taylor speaks of reach into every step of bringing food to the table – from planting seeds to last-mile delivery – and are being fuelled by a new cohort of agri-tech startups. XAG, for example, is building upon China’s global drone leadership with AI-driven quadcopters that spray crops intelligently and autonomously, doing several days of human work within hours. Having raised $100 million in VC funding, it plans now to export its work to Japan, South Korea and Australia.

Farm 66, meanwhile, looks more like a trendy nightclub pulsating with purple LED light than what it actually is: an indoor vertical farm in the middle of Hong Kong that produces 150 tonnes of lettuce, endives and cabbage, for more than 100 supermarkets, every year. Its organic produce is watered autonomously from tanks teeming with carp whose waste becomes natural fertiliser for the vegetables.

One of the most prominent new solutions is Meicai – a mobile app that translates as “beautiful vegetable”. Founded by a rocket scientist, the platform connects farms directly to restaurants, cutting out middlemen such as distributors and wet markets – keeping down costs and alleviating safety concerns. Meicai handles its own cold chain logistics network, including delivery and storage, and data-streams allow it to stock just the produce it needs in each warehouse. In 2018, the “farm-to-table” platform raised at least $600 billion, according to Bloomberg, with one estimate of its value as high as $7 billion.

New investment frontier

Rather than being isolated pockets of creativity, such technologies represent “a fusion of innovations building on the digital ecosystem that has penetrated every aspect of Chinese lives,” says Matilda Ho, co-founder of Chinese agri-tech accelerator Bits x Bites.

All this is opening the floodgates of investment into Chinese agri-tech. In a report last year, Bits x Bites and co-author AgFunder, a Silicon Valley VC firm, found that China-based food and agriculture startups raised $5.8 billion in 2018 over 283 deals for a 222 per cent funding rise.

Downstream ventures (those that turn raw materials into a finished product, such as fried noodles) dominated the scene. But “upstream innovation gathered pace in 2018, increasing 800 per cent to nearly $1 billion,” the report said, and much of the upstream growth empowering farmers was attributed to agribusiness marketplaces such as Meicai.

China’s agri-tech transformation is a national priority. Last month, Beijing launched a 2019-2025 development plan to jumpstart the digitalisation of its farming sector. Calling for 5G networks in remote areas, the plan requires the digital farming economy to account for 15 per cent of China’s agricultural added value by 2025, and the proportion of farming goods sold online to hit 15 per cent. It calls for a “new generation of agricultural robots” and blockchain innovations for rural finance, food safety and supply chains.

Return to the land

China’s farming renaissance is also being fuelled by young people swimming against the tide of demographic trends. In 2018, China’s Agriculture Ministry announced that seven million people had returned to the countryside from cities, and of these, 60 per cent had moved to work in agriculture. While it did not provide a time-frame or demographic breakdown, the communiqué bolsters a wealth of anecdotal documentation of a growing return to the land. The injection of committed young talent – armed with global outlook and scientific backgrounds – into a tradition-bound industry is yielding new ways to think about farming in China.

“Although small family farms still largely dominate the sector, ‘new-style’ farms, such as large family farms, co-operative farms, and farms run by agribusiness companies are of increasing importance,” the OECD says in a recent policy report on Chinese agriculture.

According to the UN Food and Agriculture Organisation (FAO), these new-style farms are fostering a trend in China of Community Supported Agriculture (CSA) – an ethos that brings farmers and consumers closer together in the food ecosystem. The CSA vision is to give families a bigger stake in what they eat, often by subscribing to a harvest, and thereby promoting sustainably-farmed food.

Platforms such as Meicai can play a vital role by providing digital frameworks (such as digital matchmaking and data-driven logistics) to make idealistic-sounding ventures economically viable. Example: a group of graduate school buddies ditching academic careers to launch organic broccoli farms.

“The CSA model is … about building a link between farmers and consumers, restoring mutual trust and exchanging knowledge,” says FAO. “Food safety has indeed become a top priority for all. Community Supported Agriculture is progressively seen as an alternative to the current system in which they have lost trust.”

Trust seems a vanishing commodity the world over. Perhaps China’s new crop of bold, young agri-tech innovators can play a role in restoring it.

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