Agri businesses should tap innovative agritech solutions to modernise operations, boost supply chain resilience.

Asia’s food consumption is undergoing dramatic changes driven by the region’s bourgeoning population, growing middle class and rapid urbanisation. Yet the region is faced with capacity constraints in meeting the rapidly rising food demand of its people given the limited supply of arable land and water per capita as compared with regions such as North America. By 2030, the amount of arable land per person in Asia is expected to fall further by five per cent, according to a report published by Temasek in 2019.

While food security may not be unfamiliar for countries in Asia, its importance has never been more apparent than now, as highlighted by the ongoing COVID-19 pandemic. For example, we understand from UOB’s seafood wholesaler clients that during the circuit breaker period, seafood prices soared nearly 30 per cent due to supply shortages and transportation disruptions. Even in countries with richer agriculture resources such as Indonesia, there was significant price volatility during the country’s lockdown – broiler prices rose from around 11,000 rupiah per kg in April to 22,000 rupiah per kg in June.

With the world still trying to stop COVID-19 infections, the slowdown in economic activities presents an opportunity for us to step up efforts to ensure safe, secure and sustainable food supplies. To do so, we can focus on four critical areas.

1. Ramping up local food supply

Creating an agile supply chain will help ensure stable supplies of food, especially in times of crisis. In addition to diversification of sources, another way to achieve this is to shorten supply chains by building up local supply capabilities. UOB client, Khoon Lee Fisheries, is a local food wholesaler who had been planning to set up a frozen food storage facility overseas prior to COVID-19 to take advantage of potentially lower operational costs in other markets. The aim was both to strengthen its cold chain capabilities and to scale up its regional business.

However, with the disruption brought about by the pandemic, Khoon Lee Fisheries decided to set up the facility in Singapore instead in order to be closer to its end market. This will enable Khoon Lee Fisheries to ensure a more stable domestic supply as it continues to set its eyes on expanding into the frozen food market.

2. Driving food production and productivity

Ramping up food supplies in the domestic market also helps to reduce the dependency on food imports. For example, the Singapore Government is aiming to increase domestic food production from 10 per cent in 2019 to 30 per cent of total food needs by 2030.

A biotechnologist checks on crop health in an indoor vertical farm. Given the lack of arable land and unpredictable weather patterns, food production is increasingly being moved to more controlled environments indoors. Photo: Shutterstock

Given the country’s limited land resources and dense urban population, the Government is counting on agricultural technology (agritech) innovations to achieve this ambitious target. These agritech solutions include the implementation of controlled-environment agriculture that can provide favourable conditions for crops and vegetables to grow and the Recirculating Aquaculture System, a close containment aquaculture system that enables indoor seafood production.

Businesses can also adopt technologies such as Internet of Things (IoT) to increase productivity in food production and processing. Singapore Poultry Hub, for example, is setting up Singapore’s first smart and green factory for the poultry industry with a S$40 million loan from UOB. Tapping technologies such as robotics, Industry 4.0 technologies and the industry IoT, the smart factory is expected to increase its capacity by 70 per cent and improve productivity by 26 per cent.

3. Taking food safety to a higher level

Asian consumers typically have less trust in the quality and safety of local food production systems owing to the traditional agriculture practices used in many parts of the region. Rising sustainability awareness and changing dietary preferences are also impacting local businesses. Singapore Poultry Hub’s efforts in building a smart poultry factory comes as consumers demand greater transparency, visibility and traceability in food supply chains.

In this regard, Industry 4.0 technologies and IoT can help address the issue by enabling real-time monitoring and data collection of key variables in food production and vital signs of the animal health. Robotics and automation can also help ease manpower shortage and ensure standardisation of livestock production and processing, in turn contributing to improved food quality control.

An agricultural drone flies over a corn field. Drones can help farmers with tasks like identifying soil or irrigation issues, monitoring crop health, and improving the accuracy of pesticide spraying. Photo: Shutterstock

In addition, innovations in animal feed formulation such as the use of additives, enzymes and probiotics can enhance animal health as people place greater emphasis on biosecurity. Such developments can minimise misuse of antibiotics in raising livestock, which may result in the growth of resistant bacteria that causes serious illness in humans

4. Making the agriculture sector more sustainable

Other innovative feed formulations such as the development of insect meal, seaweed and other natural ingredients can also drive sustainability in the agriculture sector. With advancements in agritech, treated waste can now be turned into food ingredients, contributing to the circular economy. For Singapore Poultry Hub, its smart factory features a new waste management system to convert part of poultry waste into a protein ingredient for livestock feed. This will help reduce the company’s waste by 60 tonnes per day.

These agritech innovations can also help alleviate the pressure of reducing the carbon footprint created in livestock and fisheries production. According to research published on top scientific journal Science, livestock and fisheries production accounts for 31 per cent of food-related greenhouse gas (GHG) emissions. The research also showed that in total, food production is responsible for approximately 26 per cent of global GHG emissions, highlighting the importance of the role played by the agriculture sector in climate action.

Contributing to sustainable development through sustainable financing

Financial institutions can play a part to support agricultural sustainability by helping businesses from the sector access sustainable financing.

Sustainability-linked loans (SLLs) will help to encourage businesses to improve their environmental, social and governance performance as they get to enjoy reduced interest rates when they achieve pre-determined sustainable performance targets. UOB has extended more than $8 billion in sustainable financing, including through SLLs, as at end-September 2020, as part of the Bank’s focus on forging a sustainable future.

Faced with increasing food demand and operational challenges, Asia’s agriculture sector and animal protein is at a critical juncture where there is also an imperative to make the region’s food supplies safe, secure and more sustainable. In helping the region to advance responsibly, agriculture businesses should take concrete steps to tap innovative agritech solutions to modernise their operations and to build greater resilience into their supply chains.

This article was first published in The Business Times on 12 January 2021.

Important notes and disclaimers

This article shall not be copied, or relied upon by any person for whatever purpose. This article is given on a general basis without obligation and is strictly for information only. The information contained in this article is based on certain assumptions, information and conditions available as at the date of the article and may be subject to change at any time without notice. You should consult your own professional advisers about the issues discussed in this article. Nothing in this article constitutes accounting, legal, regulatory, tax or other advice. This article is not intended as an offer, recommendation, solicitation, or advice to purchase or sell any investment product, securities or instruments. Although reasonable care has been taken to ensure the accuracy and objectivity of the information contained in this article, UOB and its employees make no representation or warranty, whether express or implied, as to its accuracy, completeness and objectivity and accept no responsibility or liability for any error, inaccuracy, omission or any consequence or any loss or damage howsoever suffered by any person arising from any reliance on the views expressed and the information in this article.

About the authors

Bonar Silalahi

UOB

Bonar Silalahi is the Head of Industrials and Consumer Goods, Sector Solutions Group, UOB.

Ernest Tan

UOB

Ernest Tan is the Head of Agribusiness and Animal Protein of UOB’s Sector Solutions Group, covering six key markets regionally. In his role, he drives the strategic direction of these sectors in the Wholesale Bank, including business origination through identifying areas of development and management as well as developing new banking solutions. He is also part of the Wholesale Bank’s taskforce in driving sustainability related financing. Follow him on LinkedIn