Smart Ag: Solving China’s Sustainability, Boosting Global Growth

In early 2019 I drove across the United States on a 5500 km journey that took in hundreds of large farms across 14 states. Driving on the immense central plains, we barely saw signs of human habitation except for oncoming trucks once in a while. Instead, huge agricultural machinery and sprinkler irrigation facilities were frequently seen on both sides. This reminded me of an argument about the wealth of the US and my own country China. The US has a population of 330 million but only about two per cent of those people are – of 3.5 million – are engaged in agriculture. It means each American farmer can feed 94 people and there is still a surplus to be exported. There are 1.3 billion Chinese people and 330 million are farmers, so each of them can only provide for 4 people. So agricultural productivity in the US is 20 times that of China. But these numbers also show the inevitable competition between two agricultural economic models – large-scale agriculture and small-scale farming. While the continental US offers a richer continuous agricultural landscape than a similar trip across Australia would, the same arguments about productivity apply to Australia.

As a country that has gone through land transfer for nearly 200 years, the US is now home to about 2.2 million large farms – each covering an area of more than 150 hectares. From the 1920s, the farms started to use large agricultural machinery and concentrated on selected crop varieties. Together with the extensive use of fertilisers and pesticides, the country welcomed a sharp increase in both agricultural scale and output. Later in the 1960s, it became the world’s largest agricultural country. While boosting efficiency, scaled production posed threats to the natural environment. From the 1970s, due to monoculture and overuse of pesticides and fertilisers, the local rural ecology kept deteriorating, leading to reduced biodiversity and frequent natural disasters. In fact, traditional large-scale agriculture is similar to industrial production, which requires the efficient allocation of gathered resources and capital to obtain greater output. However, since most natural resources are unlikely to be recovered, this conventional model is deemed unsustainable in the long run.

When it comes to market supply and demand, traditional large-scale agriculture faces another challenge – the flexibility of production and sales. For maximum productivity, large farms in the US usually choose to produce one single crop, and farmers tend to grow basic food crops such as maize and wheat, or base oils such as soybeans and other protein crops to address the risks caused by changes in market demand. The US financial crisis in 2008 led to lower domestic consumption capacity in the country, forcing farmers to be a part of the global supply chain, which exposed them to changes in international market demand. This shrank the scale advantages of many American farms. Smaller farms with less infrastructure (and loans) responded quickly by growing diverse agricultural products that catered to the international market and making extensive use of new technology. These farms rose rapidly after 2010 and became a new driving force for American agriculture.

The other model – small-scale farming, is adopted by most countries and regions around the world. Limited by land and output value, small farming households do not use large agricultural machinery, nor do they participate directly in the futures trading in international markets. The agricultural products produced are usually for self-sufficiency or sold in local markets. China is a typical country that practices this farming and small farming households account for 98 per cent of all the agricultural entities in the country. The agricultural mechanisation and product circulation here are far less active than those in large-scale agricultural countries such as the US, and there is a large gap in farmer incomes between the two countries.

Small farmers ride technology into the future

The small-scale farming economy was once regarded as the largest restriction on China’s agricultural and rural development. However, in recent years, new technologies such as unmanned aerial systems (UAS), robotics, artificial intelligence (AI), the internet of things (IoT), and cloud computing have brought new competition opportunities to small farming households through technological innovation and differentiated cultivation. Machine power not only improves farmland productivity and reduces costs, but also helps produce high-quality and diverse agricultural products. In contrast, large-scale agricultural economies represented by the US are more likely to lose competitiveness due to monoculture and lower flexibility in the ever-changing global consumer market.

Yesterday’s drawback, today’s advantage

Small-scale farming economy, urbanisation, consumption upgrades, corporate innovation, and policy support are the five engines driving the rapid development of smart agriculture in China. The small-scale farming economy was born thousands of years ago. Compared to the US, it is more decentralised and isolated, with fewer opportunities to use large ground machinery. Instead, Chinese farmers have much larger demand for small-scale intelligent production tools. The past two decades have seen an increasing shortage of labour in Chinese rural areas caused by urbanisation and industrialisation, and labour costs have continued to rise. As fast economic growth catalyses consumption upgrades, urban consumer demand for high-quality food has in turn urged farmers to improve their production methods. Meanwhile, enterprise innovation and intelligent manufacturing are quickly transforming both new technology and new finance into new tools for extensive application in rural areas. The above four factors, coupled with sustained policy support, are powering the rapid development of smart agriculture in China. Traditional agricultural production that is blind, crude and inefficient, has been gradually phased out and replaced by efficient, low-consumption and sustainable technology. Such a developmental environment – where the five factors exert a combined force, is unique in the world.

In the past, agricultural mechanisation was rare in Yunnan, Guangxi, Guizhou and other places due to their mountainous land. Local farmers relied entirely on manpower to apply pesticides to the crops grown in terraces. As the production process was constrained by labour, there was great uncertainty in the output, quality, and price of agricultural products. Today, 3D mapping of farmland in hills is possible with drones. Integrated with AI and variable precision spraying, fully-automatic plant protection can be enabled for fruit trees, tea gardens, and terraces – at a price lower than human labour. This is the result of the coordinated development of a series of new technologies and business models in rural areas. Regardless of land size and features, HD maps, satellite navigation, mobile internet, intelligent agricultural machinery, and autonomous driving can play a huge role in areas where traditional agricultural machinery is largely limited. Therefore, we can now enjoy “Chu’s Oranges” grown in the microclimate zone at an altitude of 1,800 meters in Xinping County, Yunnan, as well as specialty coffee beans planted in the mountains of Xishuangbanna. This is the future of small farming households in China, as they can grow small scale, premium, and diverse agricultural products favoured by urban consumers.

XAG started out producing drones for leisure and small- scale commercial use. But it wasn’t until I visited a cotton farm in Xinjiang in 2013 with the company’s founder Peng Bin that we appreciated how exhausting and inefficient traditional farming is. We reinvented the company to focus on unmanned aerial systems for agriculture and now Chinese tech investors such as Alibaba and JD.com have started developing digital tools to boost agricultural production. With young Chinese people leaving rural areas in search of urban jobs, the country faces challenges feeding itself unless farmers can become more productive. Our latest crop protection drones can spray about 18 hectares of land in an hour which would otherwise take farmers days to do by hand.

China uses 30 per cent of the world’s pesticides on only seven per cent of the world’s arable land. But the introduction of drones guided by remote mapping technology to deliver sprayed pesticide means some farmers have been able to cut waste pesticide pollution as much as 30 per cent. This is a sweet spot for making agriculture in China sustainable. The farmers can reduce their input costs and the country’s agricultural land will remain fertile than longer than might have been the case. It may surprise foreigners unfamiliar with the changes in Chinese farming but about 40 percent of Chinese farms now have high quality digital connectivity which allows XAG drones to send and receive data to provide crop protection services.

As XAG introduces its farm management drone products to Australia in the next year, it will be interesting to see how the country’s communications infrastructure in rural areas compares with the situation in China. I understand that Australian farmers have long been at the forefront of the world in adopting new agriculture technology, but the new generation farming technology is often very reliant on internet connectivity. We plan to initially focus on using drones to manage vineyards in Australia, but then move into broad acre crops from cotton to wheat with a plan to have training centres in all states within five years. One of the biggest challenges for the sustainability of Australian agriculture is the way malignant weeds have reduced grain production and damaged ecosystems. The Department of Agriculture has estimated that the cost of weed control is up to $4 billion a year. XAG has been working with weed control scientists at an I.A. Watson Grains Research Institute farm in Narrabri, New South Wales, on a trial of weed control by drones. We have found that Australian farmers are reluctant to experiment with our technology due to concern about breaking the many state and federal laws. But we are confident that interest is growing in the use of drones and XAG has also been commissioned to reseed land burnt in the summer bushfires.

The emergence of smart agriculture has also made data the most essential means of production and the basis for the growth of new finance in rural China. As precision agricultural equipment and intelligent hardware gain popularity, agricultural monitoring and management has become more scientific and convenient. Digital records allow farmers to obtain equal credit, loans and insurance support at a lower cost. Leveraging data on crops, environment, growth, management methods and yield forecasts, insurance companies and financial institutions can accurately quantify the production behaviour of farmers, better control credit risks, and improve the quality of financial insurance services in rural areas.

Over the past three decades, China’s productivity has been dominated by the industrial zones in cities and their surroundings, but as new technology and new finance take root and gain momentum in rural areas, agriculture is expected to accelerate growth of China’s new economy. XAG has collected data which shows that farm yields in China have had improved 17-20 per cent after the use of drones for crop management.

Solving Chinese issues, boosting global growth

At the same time, the upgrading of consumer markets and the advance of smart agriculture in China are also bringing changes to other countries and driving global economic growth. For example, Latin America and some African countries grow many high-value crops such as grapes, coffee beans, and cocoa. Although these are important raw materials supplied to multinational food companies in developed countries, the profits they generate for the farmers are marginal. Due to changes in the global climate and rising local labour costs, farmers in these regions are also facing challenges. However, China’s consumption upgrade has created new choices for local farmers in these developing countries. Some of them have started to grow various kinds of high-quality grapes, coffee beans, and other agricultural products in small scale to be sold to China. Our agricultural drones and intelligent planting management technology are also helping them better manage their farmland and reduce costs. We are seeing increasing demand for agricultural drones and other smart devices from around the world, especially Southeast Asia, Latin America, and Africa. XAG now offers agricultural drones and smart agriculture solutions to 42 countries. Moving forward, drones and robots are expected to manage crops in these countries, with production costs perhaps lower than those in the US today. Moreover, agricultural products grown in areas with diverse landforms and climate are of higher quality than elsewhere. With their rural areas unleashing huge potential, these countries are expected to grow into economies with larger global influence. From this perspective, the development of China’s smart agriculture is likely to greatly change the global landscape of agricultural economy and trade.

As China keeps developing smart agriculture in these years, I have once again seen the force driving human evolution – it is generated by the collision between technological and social progress. Once smart agriculture unshackles small-scale farming, the energy released will not only bring new growth to the global economy, but also address many development problems of human society.