98 Katarzyna

Roczniki Naukowe Kosior

Stowarzyszenia Ekonomistów Rolnictwa i Agrobiznesu
105604/01.3001.0011.8122
doi: Roczniki Naukowe SERiA • 2018 • XX (2)

received: 29.03.2018 acceptance: 26.04.2018 published: 07.05.2018

Katarzyna Kosior
Institute of Agricultural and Food Economics – National Research Institute, Poland

Digital Transformation in the Agri-Food Sector

– Opportunities and Challenges
Cyfrowa transformacja w sektorze rolno-spożywczym – szanse i wyzwania
Key words: digital technologies, Big Data, smart farming, data-driven agri-food sector
Slowa kluczowe: technologie cyfrowe, Big Data, inteligentne rolnictwo, sektor rolno-spożywczy oparty
na danych
JEL codes: L16, O31, O33, Q16

Abstract. The aim of the paper is to discuss the major opportunities and challenges that emerge in the
agri-food sector as a result of digitization processes. Digital technologies with Big Data and the Internet
of Things are widely considered promising new tools for both increasing productivity and competitiveness
in the agri-food sector and ensuring a more sustainable use of resources. Knowledge and insights derived
from ever-increasing volumes and a variety of digital data may help to optimize farm production processes,
improve risk management, predict market trends and enhance strategic decision-making capabilities. Yet,
advanced data analytics has also the disruptive power to reshape the whole string of markets within the
agriculture value chain. Digitization may fundamentally change the relations between technology and input
suppliers, farms, traders, processing units, retailers and consumers. The first evidence shows that farm data
markets suffer from specific drawbacks and limitations which may constrain the transformative potential
of Big Data in the food and agriculture sector. The major concerns raised relate to farm data ownership
and privacy issues, market power of major agriculture technology providers and uneven distribution of
benefits accruing from digitization.

Introduction
The exponential growth of digital technologies is reshaping the way various economic sec-
tors and industries operate and perform. Digitization has also entered the agri-food sector, albeit
the technology adoption and use is still in its initial phase. Yet, some researchers suggest that
digital technologies will lead to the next agricultural revolution, potentially reversing some of
the most negative effects of the “green revolution” witnessed by the sector a few decades ago
[Powell 2017, Walter et al. 2017]. Digitization and new technologies raise hopes not only for
improving agricultural productivity, but also for alleviating some of the most pressing global
problems related to climate change and biodiversity loss. The current technological advances
in the sector have their roots in the precision agriculture concept, but at the same time go far
beyond it. With the emergence of Big Data, i.e. massive volumes of digital data coming at high
speeds from a wide range of sources and in different formats, new opportunities for the agri-food
sector have opened up. Thanks to the Internet of Things, cloud computing and machine learning
Big Data can be analyzed in real or near-real time to extract new insights and economic value
for the benefit of virtually all actors in the agri-food chain. These opportunities might change
farming into smart farming and other agribusiness operations into smart businesses. Nonethe-
less, there are also various barriers that may impede a digital transformation in the agri-food
sector. In addition, also questions about ethical and social consequences of digitization arise
as new smart technologies are – to a large extent – based on artificial intelligence and systems
beyond direct human inspection. Therefore, a discussion about all fundamental opportunities
and challenges related to digitization processes is essential to avoid possible lock-in effects
 Digital Transformation in the Agri-Food Sector – Opportunities and Challenges 99

on the road to a smart, data-driven agri-food sector. This paper aims to add to this discussion
by taking a closer look at the emerging farm big data market and digital-technology induced
changes in the agri-food chain. Both major benefits of big data analytics and potential problems
of digitization in the sector will be highlighted.

Material and methods

Materials used in the analysis come from two sources – literature review and collection of
use cases and applications as deployed in agribusiness ventures and/or developed and tested
in selected research projects. The literature review included research notes, conference papers,
peer-reviewed articles and industry reports related to digitization in the agri-food sector. The
following electronic databases and online sources were searched: Web of Science, Scopus,
ResearchGate, Google Scholar and thematic websites and blogs written by experts in the field.
Overall, more than 250 materials having reference to Big Data, agriculture, Internet of Things,
agri-food chain were extracted from the chosen databases, covering the period between Janu-
ary 2012 and February 2018. Following a closer examination, 19 materials including articles,
papers and reports were selected as highly relevant for the analysis of both opportunities and
challenges of digitization in the sector. Since important research and development activities in
this field are carried out by companies involved directly in the agri-food operations, the review
also took account of major precision agriculture products and digital applications used in the
agri-food chain. Also, 19 use cases for the smart agri-food system under the project Internet of
Food and Farm funded under the EU Horizon 2020 programme were scrutinized to highlight
potential directions of digitization in the sector.

The uses of digital technologies in the agri-food sector

Recent years have seen an increased use of Information and Communication Technologies and
robotics in farming. The bases of the current digital transformation in the sector were, however,
laid down almost two decades ago along with the use of first precision agriculture technologies
on farms. Now precision farming comprising Global Positioning System for yield mapping, Vari-
able Rate Technology, ground-based sensing systems, satellite telemetry, wearable sensors for
animal health and monitoring, sensors embedded in tractors, Unmanned Aerial Vehicles (UAV)
and many other technological devices have become a game changer in the sector. In addition,
the prospects for a smart agri-food system have been recently further expanded following the
emergence of cloud computing, Big Data and the Internet of Things (fig. 1).
In contrast to traditional precision agriculture which operates on individual farm data, Big
Data agriculture uses aggregated data from a large number of farms and from additional sources
(e.g. from weather stations, social media feeds, mobile phones) to extract new knowledge and
insights relevant for taking production and management decisions [Sonka 2016, Sykuta 2016].
Moreover, it also allows both to predict outcomes of specific farming operations and to react to
various events in real time. Second, potential applications of Big Data analytics and the Internet
of Things extend to the entire agri-food supply chain [Nukala et al. 2016, Wolfert et al. 2017].
There are currently many decision support tools and applications available that help farmers
to reduce input costs, improve yields and increase profitability (i.a. Talking Fields using satellite
images of farm land, FarmFacts providing detailed weather forecasts and predictions concern-
ing pest infestations and fungus, Farm Management Information System or Climate Fieldview
offering digital platform with tools for yield analysis and advanced crop health imaging). The
review of available products and services indicates that farmers are supported at all stages of
the production cycle starting from tillage and field preparation, planting, crop care and nutri-
ent application, crop harvesting, drying, monitoring and control. Livestock farms benefit from
similar guidance and support [Kamilaris et. al. 2017]. In addition, relevant information and
100 Katarzyna Kosior

Big Data & internet

of things
internet Rzeczy

input suppliers Farms traders Processors Retailers consumers

Dostawcy gospo- Dystry- Przetwórcy Sprzedawcy konsumenci
środków darstwa butorzy
produkcji

robotics, drones, sensors market & data on market marketing improved

farm management software, production trends, high -quality data, omni- products, health
real-time decision-support data, smart and safe food, channel benefits,
tools, predictive analytics logistics optimization of the strategies, personalized
robotyka, drony, czujniki dane manufacturing increased sales offers, seamless
oprogramowanie do zarzą- dotyczące process dane shopping
dzania gospodarstwem, rynków i dane na temat marketingowe, experience
narzędzia wspomagania produkcji, trendów strategie lepsze produkty
decyzji w czasie rzeczywistym, inteligentna rynkowych, omni-channel, żywnościowe,
analizy predykcyjne logistyka bezpieczna żywność zwiększona korzyści
o wysokiej jakości, sprzedaż zdrowotne,
optymalizacja spersonalizowane
przetwórstwa oferty handlowe,
data-driven agriculture, animal data,
bezproblemowe i
plant & soil data and other data,
wygodne zakupy
increased productivity and sustainability
rolnictwo oparte na danych, dane food tracking &traceability reduced food waste
dotyczące zwierząt, roślin, ziemi, śledzenie i identyfikowanie produktów
pozostałe dane, zwiększona żywnościowych, ograniczenie
produktywność i zrównoważony rozwój marnotrawstwa żywności

Figure 1. Smart agri-food system based on digital technologies

Rysunek 1. Inteligentny system rolno-spożywczy oparty na nowych technologiach cyfrowych
Source: own elaboration
Źródło: opracowanie własne

recommendations extend beyond the farm gate. Online platforms and dedicated applications
provide information concerning prices, markets, access to inputs, finance and risk mitigation
measures. Moreover, use cases under the research project Internet of Food and Farm indicate
that digital technologies support an integrated network of actors, processes and information
which might translate into more efficient food processing, intelligent food logistics, complete
supply chain monitoring and food waste reduction.
Innovations based on data and digital technologies are expected to increase in the years to
come. Recent investment decisions by IT and food retail companies focus e.g. on the potential
uses of Blockchain technology to support the management of the global food supply chain
and to improve food safety. This is expected to happen i.a. through increased transparency and
more efficient tracing of sources of food contaminations [Peterson 2017]. Digital technologies,
e-commerce, mobile apps, beacons and recommendations based on Big Data analytics are also
changing consumer experiences. Food consumers may now benefit from personalized offers
that take heed of their diet, specific nutrition or health needs. Overall, the growing flows of
farm and food data combined with digital technologies and computing techniques seem to offer
new and promising routes to make the agribusiness more productive, profitable and sustainable.
 Digital Transformation in the Agri-Food Sector – Opportunities and Challenges 101

Many agri-food problems are already dealt with specific data-driven tools, others still await
for new solutions and business applications. The availability of digital solutions for farming
and agri-food operations does not however imply that digital transformation in the agri-food
sector runs without problems and always in desirable directions. Since digitization and new
technologies lead to disruptive changes in the sector, there are many issues and challenges that
need to be identified and addressed.

Farm Data Ownership and Privacy Issues

Fundamental challenges for a data-driven transformation in the sector, as identified in the
academic literature, relate to ownership and privacy of farm-related data [cf. Dyer 2016, El-
lixson, Griffin 2016]. Currently, no legislation specifically regulates the issue of who owns
non-personal data generated on farms with the use of advanced machinery and other devices
[Kritikos 2017]. The lack of clear property rights to farm data (mostly agronomic data) is con-
sidered to be one of the major limitations and drawbacks of the emerging big data market in
agriculture. Specific properties of digital data make it challenging to design a data management
system that would ensure both benefits for private actors and socially optimal provision of data-
related goods. Although digital data may be excludable, it is non-rivalrous. Once it is released,
it may be exploited further without diminishing its initial value. Contracts between farmers
and agriculture technology providers generally acknowledge farmers’ ownership rights to raw
data generated on their farms, but do not extend them to aggregated data sets. As the economic
value of Big Data analytics rests primarily upon aggregated data stemming from large number
of farms, political economy questions arise regarding the distribution of costs and benefits of
digitization in the sector. Agricultural technology providers invite farmers to subscribe to and
also pay for information and advice generated with the aid of Big Data analytics. Products and
services based on individual and aggregated farm data may facilitate farm decision-making,
but at the same time they might also serve specific business needs of agricultural technology
providers or other actors in the Big Data value chain. Surveys among farmers show that they
are concerned about the way their farm data is collected, processed and used. Many categories
of data such as e.g. data concerning yields, soil properties or farming techniques might be
considered trade secrets. As there are no clear rules concerning acceptable primary, secondary
or tertiary uses of such data, fears over potential price discrimination by input suppliers or
speculations in commodity markets are quite widespread among farmers [Carbonell 2016, Vogt
2016]. At the same time, there are also challenges related to securing farmers’ privacy in the Big
Data value chain. Currently, data gathered from hi-tech equipment, satellite imagery, mobile
apps and many other sources can provide a lot of information about a farm and its activities,
also without the active consent of a farmer to data collection [Kritikos 2017]. These problems
might have a negative impact on farmers’ trust towards data-driven agriculture and might also
limit their willingness to share their data with third parties. There is however no consensus as
yet among scholars and practitioners as to which data management system would be the most
appropriate to deal with the challenges of digitization in the agri-food sector. Some researchers
call for empowering farmers through clear property rights to farm data to increase their control
over data flows within the data value chain [Foresight Study 2016]. There are however also
opponents to granting exclusive property rights to non-personal digital data on the grounds that
such rights may negatively affect innovation potential of the digital economy [cf. Kerber 2017].

Power relations in the agri-food supply chains and networks

Digital revolution introduces new actors, new processes and new interests into the agri-food
sector, potentially leading to changes in power relations in the agri-food supply chains and
networks [Bronson, Knezevitz 2016, Wolfert at al. 2017]. The emerging big data value chain
102 Katarzyna Kosior

Table 1. Strategic precision agriculture partnerships among the leading input suppliers
Tabela 1. Partnerstwa strategiczne na rzecz rolnictwa precyzyjnego wśród wiodących dostawców środków
produkcji
Company/ Input market/ Precision agriculture product(s)/ Partnership(s)/
Firma Rynek środków produkcji Produkt(y) rolnictwa Parterstwo(a)
precyzyjnego
Monsanto,
AGCO machinery/maszyny rolnicze Fuse
DowDuPont
Agrium fertilizer/nawozy Echelon Monsanto
seed&chemicals/nasiona i środki
BASF Maglis John Deere
chemiczne
seed&chemicals/nasiona i środki
Bayer Zoner John Deere
chemiczne
CNH machinery/maszyny rolnicze Advanced Farming Systems Monsanto
seed&crop protection/nasiona i
DowDuPont Encirca (SM) (DuPont Pioneer) John Deere
środki ochrony roślin
Monsanto, Bayer,
John Deere machinery/maszyny rolnicze FarmSight
BASF, DowDuPont
seed&chemicals/nasiona i środki CNH, John Deere,
Monsanto FieldView
chemiczne AGCO, Agrium
seed&chemicals/nasiona i środki
Syngenta AgriEdge Excelsior
chemiczne
Source/Źródło: [Pham, Stack 2018, p. 132]

in the sector includes now a variety of actors ranging from agricultural technology providers
and biotech businesses (i.a. John Deere, Monsanto, Cargill, DowDuPont) data start-ups, tech
start-ups, large IT companies (Google, IBM, Oracle), farms, cooperatives, traders, food industry
companies to agricultural data alliances, the public sector and international organizations [cf.
Kempenaar et al. 2016]. The number of actors interested in extracting economic value from
agricultural data has significantly risen in recent years. The presence of IT and Internet-based
companies in the agri-food sector is definitely a novel development. Another noticeable trend
is a concentration of market power among major input suppliers. Strategic partnerships among
corporations active in the machinery, fertilizer, seed and chemicals input markets have been
increasingly used in recent years to capitalize on Big Data generated in the sector (tab. 1).
These developments raise concerns not only about potential abuses of market power from
input suppliers, but also about potential discrimination of particular farming systems and prac-
tices [Bronson, Knezevitz 2016]. Currently, precision agriculture products are primarily directed
towards large area farms and large agricultural companies equipped with advanced machinery
and tools. Due to economies of scope agricultural technology providers and data companies
are not interested in collecting and processing farm data from smaller farms and units. There is
therefore a risk that the new paradigm of smart farming based on Big Data analytics and digital
technologies might lead to the displacement of smaller farmers by large commercial farmers,
potentially decreasing the diversity of food and farming domain [Bronson 2018]. However, the
consequences of uneven distribution of benefits accruing from digitization among farmers and
throughout the agri-food chain are yet not well understood. This might limit the transformative
potential of Big Data revolution in the agri-food sector.
 Digital Transformation in the Agri-Food Sector – Opportunities and Challenges 103

Conclusions
Digitization and new technologies bring both opportunities, challenges and risks. Data-driven
transformation in the agri-food sector has already started and is changing agri-food markets
and relations in the agri-food chains. Yet, there is hardly any public debate on data-driven
transformation in the agri-food sector. As shown in the paper, digitization might indeed solve
many problems in farming and in the food system. At the same time, unclear property rights
to farm data, growing market power of input suppliers and uneven distribution of benefits
accruing from digitization might lead to blockades or unwanted developments in the sector.
There is therefore a need for value-embedded discussions about desired directions of digital
transformation in the sector.

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104 Katarzyna Kosior

Streszczenie
Celem artykułu jest omówienie głównych szans i wyzwań, które pojawiają się w sektorze rolno-
spożywczym w związku z postępującymi procesami cyfryzacji. Technologie cyfrowe, w tym Big Data i
Internet Rzeczy, uznawane są w wielu kręgach za obiecujące nowe narzędzia zwiększenia produktywności
i konkurencyjności sektora rolno-spożywczego, jak i zapewniania bardziej zrównoważonego wykorzystania
zasobów naturalnych. Wiedza oraz spostrzeżenia wydobywane z wciąż przyrastających woluminów rożnych
danych cyfrowych mogą pomóc w optymalizacji procesów produkcji w gospodarstwie rolnym, zarządzaniu
ryzykiem, przewidywaniu trendów rynkowych i wzmocnieniu możliwości podejmowania strategicznych
decyzji biznesowych. Równocześnie zaawansowana analityka wielkich zbiorów danych jest potężnym
narzędziem, potencjalnie przekształcającym funkcjonowanie poszczególnych rynków w ramach rolniczego
łańcucha wartości. Cyfryzacja może zasadniczo zmienić relacje między dostawcami technologii i środków
produkcji, rolnikami, firmami handlowymi, przetwórcami, sieciami sprzedaży i konsumentami. Pierwsze
dowody wskazują, że rolnicze rynki danych mają określone wady i ograniczenia, które mogą zahamować
pozytywne efekty transformacji cyfrowej w sektorze rolno-spożywczym. Podnoszone obawy dotyczą m.in.
kwestii praw własności do danych rolniczych i ochrony prywatności, pozycji rynkowej głównych dostawców
technologii rolniczych oraz nierównego podziału korzyści wynikających z procesów cyfryzacji.

Correspondence address
Katarzyna Kosior, PhD
orcid 0000-0003-4825-730X
Institute of Agricultural and Food Economics – National Research Institute
Świętokrzyska 20 Str.
00-002 Warsaw, Poland
Phone: +48 22 505 45 93
e-mail: katarzyna.kosior@ierigz.waw.pl