Farmers worldwide are navigating challenges such as increased input prices, extreme weather events, and commodity price volatility. Given the current macroeconomic environment, the priority for farmers today is improving productivity, whether through agriculture technologies (agtech) for improving operations, biological products, or sustainable practices. This report offers insights for organizations collaborating with growers, outlining strategies that could deliver more-personalized products and services to boost productivity and seize emerging opportunities.
Since 2018, McKinsey has surveyed and interviewed thousands of farmers around the world to better understand their views. In the first quarter of 2024, we interviewed about 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) (see sidebar, “Survey details”). This effort follows a global survey we conducted in 2022.
The survey covered five main areas: farmers’ views of profit risks and opportunities; farmers’ outlook on future profits; adoption of sustainable practices; adoption of products and technology; and purchasing channels and main influencers on the purchasing journey. We summarize the survey’s key takeaways below.
An increase in input prices remains farmers’ main concern, and extreme weather events are emerging as a close second.
Farmers cite increased price of inputs, extreme weather events, and volatile commodity prices as the top three risks to profitability in the next two years. Having input prices and extreme weather events as the top two risks is consistent with our 2022 survey, but the gap between the two has closed considerably, given that farmers have experienced a greater number of extreme weather events (only seven percentage points now separate the two risks). Volatile commodity prices are a newly added risk not previously included in our survey.
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,1 farmers report an average perceived increase in overall costs of 13 percent in the same time frame. They continue to worry about the price of inputs such as fertilizer, which has the highest perceived inflation in the past 12 months: 24 percent of growers reported that prices have risen more than 20 percent in the past year. Perceived increases in labor (14 percent) and crop protection (13 percent) costs follow.
Extreme weather events are the second top concern overall and have increased in relevance by six percentage points since 2022. In Europe and Latin America, they have become the top concern. This change in sentiment may reflect the impact of events such as El Niño in 2023, which resulted in widespread droughts, flooding, and temperature fluctuations around the world. Growers who think that extreme weather is a top risk said they spend about 30 percent more on agricultural purchases than their counterparts and were about 50 percent more likely to say they are planning to buy or lease more land over the next two years. This may reflect additional spending on related products, such as crop insurance, as well as farmers preparing for geographic shifts in land suitable for production.
Adoption of biocontrols and bionutrients as sustainability-oriented soil health practices has been growing globally.6 Some 31 percent of farmers are using bionutrients, while 20 percent are using biocontrols. The main reasons farmers said they adopt bionutrients is for improving yield, soil quality, and soil health. Farmers adopt biocontrols primarily as a means of achieving a lower overall pest management cost per acre and better efficacy compared with only applying the traditional crop protection protocols.
Farmers in Brazil are leaders in the use of both bionutrients and biocontrols. Farmers’ high use of bionutrients (64 percent) is grounded in the historical adoption of inoculants, which has been supported by the government. For example, the Brazilian Agriculture Research Corporation (Embrapa) developed inoculants and new co-inoculation techniques and ran educational programs to raise soy farmers’ awareness about their effectiveness. In recent years, government support (for example, Programa Nacional de Bioinsumos and Plano ABC) and high prices of fertilizers have accelerated the adoption of other bionutrients. For biocontrols, difficulty in controlling specific nematodes and diseases with traditional chemicals drives the 61 percent adoption among Brazilian farmers.
Major pain points for the adoption of agtech globally are unclear ROI and high implementation and maintenance costs. In North America, 53 percent of farmers said they are very concerned about having a clearly demonstrated ROI before investing in agtech, compared with 26 percent and 25 percent of farmers in Europe and Latin America, respectively.
In a similar vein, a third of farmers in Europe said they cannot justify investing in agtech because their farms lack the scale to make full use of it. In our survey sample, European farms are about 450 acres, as compared with about 3,500 acres in the United States and about 3,700 acres in Brazil.
Farmers around the world cite input distributors as a key influence for recommendations on soil health
Farmers globally view input distributors as the main influence when purchasing agriculture products; farmers say that distributors shape their decision making on managing soil health. Integrated distributors are the top advisers to farmers in Europe and North America.
Family and neighbors are another key influence on farmers’ decisions—a top three reason globally. In India in particular, most farmers (75 percent) said they are likely to take advice from family and neighbors on matters regarding soil health, while 24 to 35 percent of farmers elsewhere said they would do the same. In Latin America, agronomists employed by farmers are the top influence, especially in Brazil, where use of an agronomist is ingrained in the traditional ways of farming. On the other hand, in India, farmers have smaller farms and typically rely on local government resources.
What this means for serving farmers
Organizations providing technology and services to farmers have an opportunity to expand their impact in these challenging times with solutions tailored to individual farmer needs and differing geographic contexts. Their opportunities include the following.
Partnering with farmers to manage volatility
Agriculture players could continue to think creatively about ways to partner with farmers on risk management. For example, they could help farmers capture emerging opportunities by offering products and services to navigate volatile crop prices, such as hedges in places where they are less popular. In addition, they could market products focused on multiyear farming transitions, including assisting farmers that are adopting new practices or shifting geographic footprints to find climatic conditions more suitable to their crops. There is also room for innovation in areas such as scaling climate risk value pools, including insurance, and launching new weather-adaptable products (for example, crop varieties and irrigation practices).
Helping growers realize the financial benefits of adopting sustainable practices
Farmer-facing organizations could help farmers capture the financial benefits of adopting additional sustainable agriculture practices. For example, they could do the following:
- Identify opportunities to bridge the gap between untapped consumer demand for sustainable products and farmers who are on the verge of achieving a positive ROI from adopting more-sustainable farming practices, recognizing that this effort requires coordination across the entire value chain.
- Help growers understand and take advantage of available public and private sector monetization opportunities for greenhouse gas reductions, biodiversity, and other sustainability programs.
- Align commercial offers (products and advisory services) with the requirements of sustainability programs—including potential support on data collection and monitoring, reporting, and verification.
- Continue to offer education and specific ROI-focused data to help growers understand the full balance sheet effects of changing practices.
Emphasizing ROI-centric solutions
It is conventional wisdom that farmers will adopt products and services that offer two to three times ROI. Yet growers report a persistent gap in understanding the ROI of new products and solutions, including a lack of quality data, compelling value propositions, and clear communication. There continues to be an opportunity for providers and resellers of inputs, digital solutions, advisory services, and hardware to demonstrate the ROI in a clearer way that would make them easier for farmers to adopt.
Deepening relationships with channel partners
The role of the distributor is as important as ever. Farmer-facing organizations, especially integrated distributors, continue to hold a privileged position, with outsize influence and insights into farmers’ decision making. Simultaneously, they can tailor their communications to where farmers are in their journey, including offering digital tools for providing services and repurchase. Survey results suggest this channel will continue to be the most efficient outlet to introduce new products and technologies, influence practice adoption, provide grower education, collect data, and connect players across the value chain.
This year’s survey underscores the complex landscape that farmers globally must navigate, adapting to risks from increased input prices and extreme weather while striving to increase productivity. Farmer-facing organizations have a pivotal role to play in supporting farmers by offering tailored, ROI-centric solutions, fostering sustainable practices, and using digital tools to help deliver a resilient and profitable future for farmers worldwide.
