Farmers across the globe are grappling with mounting challenges, from rising input costs and extreme weather to volatile commodity prices. A 2024 farmer survey by McKinsey, involving over 4,400 farmers from Europe, India, Latin America, and North America, sheds light on how farmers are adapting to these threats and seizing opportunities for improved profitability through new technologies, sustainable practices, and strategic innovations.
A Shifting Risk Landscape: Input Prices and Extreme Weather Dominate
While increasing input costs remain the top concern, the gap between this and extreme weather as a threat has narrowed dramatically. According to the survey, 48% of farmers cited input costs as their primary risk, a decrease from 63% in 2022. However, despite a drop in fertilizer and crop protection costs, perceived inflation remains high, with some farmers reporting a 13% overall rise in costs over the past year. The rising expenses for labor and crop protection are also driving concern.
At the same time, extreme weather is closing in as a top threat, especially for farmers in Europe and Latin America. The devastating impacts of El Niño in 2023 are fresh in their minds, with a growing number of farmers seeking solutions such as crop insurance and land investments to combat future climate-related disruptions. Farmers who ranked extreme weather as a top risk were 50% more likely to plan for land expansion in the next two years, indicating efforts to diversify risk through geographic adaptation.
Volatile Commodity Prices: A New Risk Emerges
McKinsey’s 2024 survey also highlighted the increasing concern over volatile commodity prices, with 30% of respondents, primarily in North America, identifying this as a top risk. Farmers in this region are now more inclined to adopt hedging strategies and utilize crop insurance to manage this uncertainty. The U.S. corn and soybean markets, for instance, have faced declining prices due to global oversupply and weakened export sales, leaving farmers exposed to price shocks.
Optimism Amid Challenges: New Opportunities for Profit
Despite these challenges, farmers see opportunities for growth. The top three actions farmers plan to take to boost their profits over the next two years include experimenting with new yield-boosting products, crop protection methods, and innovative equipment. Interestingly, adoption of these strategies varies by region. Farmers in North America, for example, are nearly twice as likely as their European counterparts to invest in yield-enhancing technologies.
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Farmers in India and Latin America are also more optimistic about future profits, with 76% and 58%, respectively, expecting an increase over the next two years. This contrasts sharply with the outlook in Europe and North America, where the majority anticipate a decline in profits due to price pressures and increased costs.
Sustainability: A Growing Focus, but Gaps Remain
McKinsey’s survey reveals that adoption of sustainable practices is increasingly driven by the desire for higher yields, particularly in India and Latin America. Practices such as crop rotation, reduced tillage, and variable rate spraying are gaining traction globally, although the willingness to adopt new sustainable practices remains low among farmers not already using them.
Brazilian farmers, in particular, have emerged as leaders in the use of biocontrols and bionutrients. Government support and the high cost of traditional inputs have fueled this shift, with 64% of Brazilian farmers using bionutrients to enhance soil health and yields. However, barriers to further adoption of sustainability practices persist, including limited awareness of carbon programs and perceived low returns on investment.
Agtech: Slow but Steady Growth
Technology adoption in agriculture continues to grow, with North America and Latin America leading the charge. Since 2022, there has been a modest three-percentage-point increase in farmers using digital technologies, with the largest gains seen in Latin America, where adoption rates climbed by 10 percentage points. Larger farms, particularly those over 2,500 acres in the U.S. and Brazil, are the primary adopters of agtech, underscoring the importance of scale in realizing a return on investment.
Yield monitoring and disease management are the most widely used digital agronomy technologies, but regional differences remain stark. While 60% of North American farmers employ yield monitoring systems, only 27% of European farmers do the same, indicating that smaller European farms may struggle to justify the cost of these technologies.
10 Insights from McKinsey 2024 Farmer Survey for Agriculture and Agtech
- Input Costs and Extreme Weather are Key Risks – Rising fertilizer prices and increasing extreme weather events are the biggest threats to farmers’ profitability, with their impact growing since 2022.
- Volatile Commodity Prices Add Pressure – Fluctuating commodity prices have emerged as a new risk, especially in North America, pushing farmers to adopt hedging strategies and crop insurance.
- Farmers See Profit Opportunities Despite Challenges – Farmers plan to counter challenges by investing in yield-enhancing products, innovative crop protection, and advanced technology.
- Optimism Varies by Region – Farmers in India and Latin America are more optimistic, while North American and European farmers are less confident due to high costs and falling commodity prices.
- Sustainability Linked to Productivity – Farmers adopt sustainable practices primarily for yield gains, though they remain cautious unless clear ROI is demonstrated.
- Brazil Leads in Biological Input Adoption – Brazilian farmers are global leaders in using biologicals, particularly bionutrients, driven by government support and high input costs.
- Agtech Adoption is Growing, Slowly – Larger farms are adopting agtech like yield monitoring and disease management faster, but smaller farms struggle with the ROI of these technologies.
- Sustainability Programs Have Low Participation – Participation in carbon programs remains low (12%) due to limited awareness and financial incentives, especially in regions like India and Mexico.
- Farmers Trust Input Distributors – Input distributors remain the primary advisors for farmers, influencing decisions related to soil health and crop protection.
- Partnerships Can Drive Innovation and Risk Management – Agricultural companies can play a key role in helping farmers manage risks and adopt innovative practices, offering tools and support tailored to their needs.
Building Resilience for the Future
The McKinsey 2024 survey underscores the complexity of modern farming, where external pressures like climate change and fluctuating input costs require farmers to innovate continuously. While agtech, biologicals, and sustainable practices offer pathways to increased productivity, farmers need more targeted solutions to manage these risks effectively. Partnerships between farmers and agricultural organizations will be critical, whether through innovative insurance products, sustainable practice incentives, or digital tools to streamline operations.
For companies that serve the agricultural sector, the survey’s findings offer a clear message: invest in ROI-driven, region-specific solutions that meet farmers’ immediate needs while preparing them for future volatility. This is not only an opportunity to boost productivity but to help shape a more resilient and sustainable agricultural landscape for the years to come.
