McKinsey Global Farmer Insights 2024 Highlights and Analysis
With augmented and ancillary data from Upstream Ag Insights and Stratus Ag Research.
Overview
The McKinsey Global Farmer Insights Report for 2024 highlights and addresses the challenges farmers face globally, such as rising input costs, weather, and commodity price fluctuations. It explores the priority of improving productivity through agricultural technologies, biological products, and sustainable practices.
Since 2018, McKinsey has surveyed and interviewed thousands of farmers around the world. In the first quarter of 2024, McKinsey interviewed ~4,400 farmers in Europe (France, Germany, and the Netherlands), India, Latin America (Argentina, Brazil, and Mexico), and North America (Canada and the United States). The survey is the newest since the 2022 rendition.
The survey covered five areas:
farmers’ views of profit risks and opportunities
farmers’ outlook on future profits
adoption of sustainable practices
adoption of products and technology
purchasing channels and main influencers on the purchasing journey.
Key Takeaways from the Report:
Input prices remain the top concern, with 48% of farmers noting price increases as the main risk to profits.
European and North American farmers more pessimistic on future profits. In North America, the proportion of farmers expecting lower profits over the next two years has risen by 16% compared with 2022.
Adoption of biocontrols and bionutrients has been growing globally. 31% of farmers are using bionutrients, while 20% are using biocontrols. In the United States a blended 23% of farmers are using biostimulants and/or biocontrols, with Canada coming in at 14%. Farmers in Brazil lead in the use of both bionutrients and biocontrols, with bionnutrition products coming in at 64%.
About 90% of farmers using biologicals said they expect to maintain or increase spending on bio-based products. Some 63% will maintain or increase spending on biologicals regardless of changes in crop protection and fertilizer prices.
Across all regions, the percentage of farmers who said they are currently participating in carbon programs is low—just 12% compared to 54% who have heard of carbon programs but are not participating.
Farmers globally are more inclined to adopt new technologies that directly improve operations. The United States has the highest adoption of operations-focused technology, with 61% adoption of digital agronomy, 51% adoption of precision agriculture hardware, and 38% adoption of remote-sensing technologies.
Farmers around the world cite input distributors as a key influence for recommendations on soil health. The finding is a similar result for almost all decisions related to agronomy in other survey work.
The majority of growers continue to prefer in-person interactions and use digital as a complementary channel for specific steps of the purchasing journey.
Each key takeaways is elaborated on with incremental data from the McKinsey report, or augmented with external data, information or thoughts to dig deeper into each takeaway.
1. An increase in input prices remains farmers’ main concern. Extreme weather events come in as a close second.
“Input prices remain the top concern, with 48 percent of farmers noting price increases as the main risk to profits, compared with 63 percent in 2022. Despite a general decrease in costs for fertilizer and the active ingredients for crop protection over the past year, farmers report an average perceived increase in overall costs of 13 percent in the same time frame”
As input prices remain top of mind for farmers, one implication of this concern is a continued trend towards interest in generic crop protection products.
Their data suggests this too, with 37% of North American farmers saying they are open to trying “new crop protection products”:
The most significant response to managing profits was trying new “yield increase products.” (notably there is a lot open to interpretation on what a “yield increase product” is…at a fundamental level, the main reason to use any crop protection product is increased yield compared to the alternative of not using).
Two weeks ago I shared Influencing the Market vs. Letting the Market Influence You, highlighting and contrasting views about the market and how market perception is influential in agribusiness outcomes.
Sometimes the market gives companies and their product lines an avenue even in a challenged economic environment, if they lean into it.
Consider phosphorous fertilizer.
Phosphate mines are apparently still not operating after Hurricane Milton ravaged Florida.
Florida’s phosphate mining today accounts for about 80% of the phosphate used in the United States, as well as about 25% of the phosphate used around the world.
In the Q2 2024 Agribusiness Report fertilizer pricing dynamics were already topical, specifically Phosphate:
Phosphate fertilizer prices are being supported by tight global supply due to Chinese export restrictions, low channel inventories in North America and seasonal demand in Brazil and India. The anticipation is for some impact on demand for phosphate fertilizer in the second half of 2024 as affordability levels have declined compared to potash and nitrogen.
Mark Thompson, CFO of Nutrien:
Global supply demand is very tight for phosphate. So that has led to good participation in fill programs because phosphate is needed.
We've got a pretty large price disparity between potash and phosphate currently in the market…there are concerns about affordability and concerns about potential demand destruction in portions of the phosphate market as we get into later in the fall season.
This suggests further increases in phosphate prices, which also signals an opportunity:
Farmers want to increase yield and minimize costs.
When phosphorous fertilizer rise in expense, specialty solubilizing products become more attractive to try. At high phosphorous prices, farmers will forego applications and cut rates. This is an opportunity for companies like Sound Agriculture, or any of those that sell P solubilizing products, become well positioned to lean into high price messaging— a potential boon for a product segment that might otherwise have been challenged given farm profitability pressure.
2. Yield improvements and production efficiency are driving adoption of sustainable farming practices.
Unsurprisingly, farmers want immediate yield benefits when changing or shifting practices:
In a low margin, tight operating cash flow business that has unlimited weather and market uncertainties each year, there is a necessity to derive immediate financial benefits from new practices and product implementation.
McKinsey also highlighted the adoption of various practices across each region.
What is difficult to assess is how effectively each of these practices are executed.
Let’s consider “crop rotation.”
A very strong crop rotations will have 4+ crops integrated into it over the entire rotation. A good rotation might have 3. If there is two in “rotation,” I would call that an alternation and a generally weaker rotation execution.
Or “use of biologicals,” which doesn’t specify the usage on all of the farm, half the farm or trialing it on one field in a 40ac strip, for example.
A notable quote:
There is low willingness to adopt individual sustainable practices in the next two years among farmers who are currently not using that specific practice (less than 10 percent of farmers for most practices).
3. Adoption of biocontrols and bionutrients as sustainability-oriented soil health practices has been growing globally.
The usage of biostimulants comes in at 26% in the United States. This is consistent with Stratus Ag Research data on biostimulants from their 2023 Tracking Biostimulant Use and Satisfaction Survey:
For a deeper dive into the results, see the Upstream Ag Professional Highlights and Analysis of the Stratus Ag Research 2023 Tracking Biostimulant Use and Satisfaction Survey
One stand out comment surrounding biologicals was the following:
Farmers are not adopting biologicals as a substitute to traditional protocols: interviews with farmers found that they use biologicals to supplement existing fertilizer and crop protection protocols rather than replace them because the combined protocols improve yield.
This is unsurprising and consistent with my experience.
It’s Jevon’s Paradox, a concept I have talked about frequently in the context of precision spraying technology, but very relevant given the incentive structure for farmers and their usage of efficiency enhancing products.
Jevons Paradox is an economic theory that suggests improvements in efficiency for using a resource can lead to an overall increase in the consumption of that resource, rather than a decrease.
As long as farmers are incentivized to grow more, it is likely we continue to see efficiency enhancing products used in conjunction with the same or incrementally crop inputs.
4. About 90 percent of farmers using biologicals said they expect to maintain or increase spending on bio-based products.
Biological products are seemingly sticky, at least according to the survey data.
In North America only 15% suggested they would consider reducing spend on biologicals (8% regardless of input pricing, and 7% if input prices decrease):
I was a bit surprised to see the number be that low, but it is an interesting, and generally speaking, positive finding.
If prompted before seeing this data, I would have guessed a much higher percentage would reduce spend, specifically with changing input prices.
The reason for this comes back to my experience has being that farmers, on average, have a hierarchical approach to input utilization, that looks something like this: