London, 29 Feb 2016
Half of the world’s population today resides in cities. By 2050, that figure is expected to increase to two thirds. As global urbanisation continues, people become wealthier and their dietary preferences change.
As part of this shift, protein - including beef, lamb and pork – is being consumed in higher quantities. Not only does this mean that more animals need to be bred but they also need to be fed, putting increased pressure on the world’s resources such as water, pastures and grains used for this purpose.
This phenomenon is taking place even as policymakers, consumers and investors in the developed world are increasingly concerned by our impact on the world and the need to create a more sustainable footprint.
The evolution also presents a dilemma for farmers and their stakeholders: how can the need for food be met as populations increase and grow richer, without further depleting the world’s resources?
Some advocate more small-scale organic farming. Others suggest developed world consumers should eat less meat. There is however, a third solution, which is practical, efficient and effective: large-scale, sustainable and technologically-driven farming.
Today, most farms are family-owned. In the US and Australia, for example, over 96 per cent of farms are owned and managed by families.
Many of these farms are relatively small.
"A lot of grain production land in Australia was developed through soldier settlement plans: on average 1,000 acre plots of land were provided to World War II returning soldiers," explains Elizabeth O’Leary, Head of Agriculture for Macquarie Infrastructure and Real Assets (MIRA).
"While many farmers expanded into neighbouring properties to build scale, there remains a significant challenge as many farms aren’t big enough to be profitable in the modern farming context.
"Added to this, farmers are predominantly an aging demographic, with fewer younger workers returning to the land."
Advantages of large-scale, sustainable farming models
"Aggregating farmers’ land to create large-scale production units can drive improvements both economically and environmentally, using state-of-the-art technology to maximise yield while minimising the ecological impact," O’Leary says.
These scaled production units are typically 10,000 hectares in size, only slightly smaller than the city of Paris, and some are as large as 15,000 hectares.
Large, efficiently configured farms confer particular advantages for farm owners such as:
- Allowing for the use of capital intensive precision agricultural technology, which utilises advanced GPS mapping, to increase productivity. An example of this is variable rate application techniques which selectively apply pesticide and fertiliser where needed and in the smallest amounts possible to gain the desired effect.
- Efficient land configuration can help to minimize soil compaction by allowing for controlled machinery operation. This then improves soil water absorption and crop yields.
More output, less input
MIRA’s Agriculture platform deploys capital provided by its investors into the creation of these large-scale, diversified and sustainable farming operations.
"In our cropping business, when we acquire farmland, we aim for aggregations of 5,000 to 15,000 hectares. Once we have acquired the necessary land, we reconfigure the farm, invest heavily in required capex to ameliorate deficiencies in the soil and implement precision farming techniques," O’Leary explains.
"All the machinery is a standard width – in multiples of 12 metres – and some machines are as wide as 36 metres. This allows us to run efficiently using GPS guidance on permanent wheel tracks to minimize soil compaction and improve water efficiency."
"We also use a no-tillage farming system which means we leave the fields unploughed so the stubble turns back to organic matter and is reabsorbed into the earth. This reinvigorates the quality of the soil."
There is compelling evidence to show that the use of precision agriculture technology, such as variable rate application of fertilizer and chemicals, can minimise inputs, while maximising crop yield. On our farms we have seen yields increase by around 10 per cent, while inputs are reduced by 15 to 20 per cent, which is not only better for the environment but also for the farms’ economic viability.
There is however, a third solution, which is practical, efficient and effective: large-scale, sustainable and technologically-driven farming.
These large farming enterprises, despite their size, can be efficiently run with as few as three staff, further improving their profitability.
Large-scale farming also creates the opportunity to diversify across production assets, an important strategy to manage the risks and volatility which can be associated with farming. By running an enterprise with diversification across geographic areas, commodity types and pathways to market, a farmer can ensure greater consistency of returns than can be achieved through operating singular standalone assets.
"It’s big-scale, efficient, highly mechanised farming, with a high reliance on real-time data to make production decisions" says O’Leary.
Advances in technology and data management are also impacting livestock production, improving both productivity and animal welfare outcomes. Tagging animals from birth with data chips allows farms to monitor many aspects of the animal’s progress including weight gain health and reproduction. Farms can use this data to analyse which bulls, rams or boars produce the best offspring and use them accordingly.
Traceability is also becoming increasingly important as food retailers and consumers want to know where meat came from and how it was reared.
Large scale farms remain in the minority but they are growing.
For policymakers, they offer a potential solution to the growing issue of food security. For consumers, they are able to provide reasonably-priced, high-quality food.
Overall large scale farms can deliver one clear outcome – producing more for less.
"Our challenge is clear: on a finite amount of farmland around the world, we need to more than double food production by 2050," says O’Leary.
"We really need to dial up productivity, while managing our impact on the environment. Technology and scale can help us to achieve that goal."
Case study: Lawson Grains
Macquarie Crop Partners, which is managed by Macquarie Infrastructure and Real Assets, owns and operates Australian based Lawson Grains.
With the current underlying macroeconomic trends, food production is expected to deliver a 60 per cent increase in production levels by 2050 to meet anticipated demand, requiring an underlying improvement in productivity of at least one per cent per annum.
In the dry Australian climate, the strategy is successfully increasing water retention and improving water utilisation and soil health, reducing fuel usage and the inputs of seeds, chemicals and fertiliser. Crop yield is improving and production costs are dropping. At the 11,000 hectare Hakea Farm, Western Australia, the total cost of wheat production per hectare has reduced by 19 per cent over two years. At Kealandi Farm, New South Wales in Australia, water use efficiency has more than doubled in two years.
The business has invested in technology to implement precision agriculture at its farms, including the deployment of:
- GPS guidance steering – increasing the accuracy of steering down to two centimeters
- swath control - using GPS and onboard computing to prevent double application of chemicals, fertilisers and seed
- controlled farming traffic - uniform axle widths and multiples of the same width creating permanent traffic lanes, reducing crop damage
- zero tillage and stubble retention – stubble from previous crop is retained, creating a protective layer on the soil surface, reducing soil erosion, improving water infiltration and improving bio-diversity of the soil, and
- variable application of inputs – inputs applied by the square metre, matching production potential by soil type rather than across an entire field, is decreasing input usage and improving crop yield.