Navigating the Agritech Landscape in Agri Inputs 🌾
I am Siddhant Davda! Welcome to the Building Dots newsletter💪
I will be sharing about startups building the future and also some insights about the Venture Capital industry.
Agriculture is a critical sector, it contributes close to 18% to the country’s GDP and it employs roughly about 45% of the workforce💰
45% of the workforce contributes to 18% of the GDP and that's where efficiency is needed which can be bought through tech💻
Agri input and agri output are expected to be $86 billion and $430 billion industry in 2026 from $58 billion and $300 billion in FY22.
India has the highest dependence on agriculture compared to any other major economy but despite such huge numbers it suffers from low productivity.
When you compare output per agricultural employee in India or cereal yield per hectare India severely falls behind🌾
Considering all of these we can say that agri tech explosion is inevitable. Why do we say so?
We have an underlying agri market of nearly $500 billion and only 0.8% tech penetration (or less than 1% tech penetration)
This combined with rapidly rising smartphone and internet penetration leads us to a massive growth opportunity📶
In the next 3 years by 2027, 40 million users/ farmers will be positively impacted leading to a 100% potential increase in total farmer income with 8-10 unicorns and 2-3 public listings
Agritech funding in India
Agritech startups in India have raised roughly $1.6 billion in the past 4 years. VC firms invested more than $1.2 billion in 2022 alone through 114 deals, a 50 percent increase from 2021 and triple the investment made in 2020. (Mckinsey)
While the number of investment deals rose from 121 in FY22 to 140 in FY23, the total funding raised fell from $1,279 million in FY22 to $706 million in FY23.
There are no agritech unicorns in India🦄
Currently, Flipkart and Walmart-backed Ninjacart is the top-valued startup in agritech space at $915 million followed by Dehaat, which is estimated to be valued at around $700 million.
Agri Input 🌱
What is agri input?
Agricultural inputs are products used by farmers during the farming cycle to increase crop quality. They can range from seeds and fertilizers to even agri tools like high-tech tractors.
Agri inputs costs – covering the seed, fertilizers, and agrochemicals account for 25% of total farming cost.
Within agri inputs, fertilizers are the largest cost component (50‐55%).
However, the tendency of farmers towards urea procurement remains higher than for complex fertilizers (NP/NPK/NPS) due to the former’s lower prices. For example, DAP is priced at 5x of urea
Agrochemicals account for 15‐17% of total agri-input costs. The consumption level of agrochemicals in India is one of the lowest –300gm/ha compared to the world average of 4kg/ha
Seeds are basic agri inputs, accounting for 33% of total agri inputs cost.
About 70% of landholders are marginal farmers with less than one hectare of land
Pre-Production Challenges
Non-uniformity of input prices across locations
3+ tiered value chain leading to a higher price point
Limited farmer knowledge and lack of access to quality inputs, i.e. seeds, chemicals, and feed
Solution
Direct partnership with leading as well as SME manufacturers providing improved access to the right inputs to farmers/retailers
Let’s look at a few notable startups in the agri-input space
DeHaat
The most important aspect that determines the quality of output is the input material. This in turn determines the income and livelihood of farmers.
There are significant gaps in the agri-input value chain as a result of mismatched supply and demand, inferior locally produced goods, adulteration, duplication, and black-marketing of essential products.
DeHaat makes sure farmers are not misguided about the quality of agr inputs like seeds, fertilizers, and pesticides by providing them agri advisory services
They provide micro-entrepreneurs with the opportunity to thrive in rural areas by making franchise operations possible at the grassroots level. Branded collectively as “DeHaat Center”, each franchise facility in the rural bazaar is essentially a one-stop shop where the farmer can find direct access to all material inputs, technical advisory, and market linkage for farm produce. This enables farmers to save upto 15% on total cost.
Agrim
Agrim empowers small agri-input retailers with technology to provide a wide product selection, the best procurement price, shop delivery, and flexible payment options.
B2B marketplace connecting agri input manufacturers and retailers
Works across 500 districts, 2,500 manufacturers catering to 170k+ retailers
Wide catalog to cater to all needs of retailers. End-to-end platform with solutions for distribution, credit, logistics, and marketing needs of input manufacturers and input retailers
BigHaat
BigHaat founded in 2015 is one of the leading Agri Digital Platform transforming the agriculture value chain from pre-harvest to post-harvest leveraging science, data, and technology. It offers farmers with extensive variety of high-quality inputs and several services ranging from end-to-end crop guidance and market linkages for various commodities, thus offering 360-degree solutions to farmers with a very unique approach.
Explaining his perspective, Nandwana (Co-founder) said “BigHaat uses a full stack data platform that deploys 7-8 channels to capture data and then accordingly uses the information to monitor consumer behavior, sales pattern, and cropping patterns. The data helps it analyze and predict how much produce will be generated by a particular farmer and the impact of other factors such as pests and weather patterns on the yield. This data helps the company deploy its pre-emptive information system to better tailor its products and warn farmers about an impending situation that could adversely impact their crops.”
Conclusion
Does Agritech invest in multiple touchpoints and a breadth of offerings? Unlike e-commerce, agritech gets low transaction volumes for farmers but pays high acquisition costs, such as to get a farmer to install an app and try a product.
To overcome this most platforms like DeHaat, Farmart, BigHaat, and many more are providing services across the value chain and broadening their product portfolio.
Even platforms that start with a single use case are expanding into adjacent parts of the value chain.
If you have any thoughts or questions share them in the comments :)
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