Investing in Digital Agriculture Innovation to Secure Food, Yields, and Livelihoods
Summary
Smallholder farmers and their households account for more than 2 billion people—almost one-third of humanity and more than two-thirds of the world’s poor. Smallholder farmers are the economic engine of local livelihoods and critical local sources of nutrition and food security. Their persistently low agricultural productivity is a major driver of global poverty and food insecurity. Many known agricultural practices and technologies could improve farmers’ yields and incomes, but systemic barriers and information gaps hamper their adoption. Today, with the rapid growth of mobile phone penetration throughout the developing world, we are in a unique moment to deploy new digital technologies and innovations to improve food security, yields, and livelihoods for 100 million smallholder farmers by 2030.
To spearhead USAID’s leadership in digital agriculture and create a global pipeline from tested innovation to scaled impact, USAID should launch a Digital Agriculture for Food Security Challenge, establish a Digital Agriculture Innovation Fund, and convene a Digital Agriculture Summit to jump-start the process.
Challenge and Opportunity
Two-thirds of the world’s ultra-poor depend on agriculture for their livelihood. Low productivity growth in this sector is the biggest obstacle to poverty reduction and sustainable food security. The Food and Agriculture Organization’s 2022 report on The State of Food Security and Nutrition in the World estimates that around 2.3 billion people—nearly 30% of the global population—were moderately or food insecure in 2021 and as many as 828 million were affected by hunger. Improving smallholder farmer incomes and local food security is critical to achieving the United Nations Sustainable Development Goals by 2030, particularly ending poverty (SDG 1) and eliminating hunger (SDG 2). Yet smallholder farmers typically harvest only 30%–50% of what they could produce. Smallholder farmers are particularly at risk from climate-driven shocks, and fundamental changes to growing conditions make climate adaptation a key challenge to improving and securing their yields.
More than $540 billion is spent in the agricultural sector each year through public budgets, mostly subsidies on farm inputs and outputs. Of USAID’s over $1 billion annual budget for agricultural aid, much attention is given to direct nutrition and economic assistance as well as institution and market-shaping programs. By contrast, efforts in climate adaptation and food security innovation like the Feed the Future Innovation Labs and Agriculture Innovation Mission for Climate (AIM for Climate) rely on traditional, centralized models of R&D funding that limit the entry and growth of new stakeholders and innovators. Not enough investment or attention is paid to productivity-enhancing, climate-adaptation-focused innovations and to translating R&D investment into sustainable interventions and scaled products to better serve smallholder farmers.
USAID recognizes both the challenge for global food security and the opportunity to advance economic security through evidence-driven, food-system level investments that are climate-driven and COVID-conscious. As directed by the Global Food Security Act of 2016, the U.S. Government Global Food Security Strategy (GFSS) 2022–2026 and its counterpart Global Food Security Research Strategy (GFSRS) highlight the potential for digital technologies to play a pivotal role in the U.S. government’s food system investments around the world. The GFSS describes “an ecosystem approach” that prioritizes the “financial viability of digital products and services, rather than one that is driven predominantly by individualized project needs without longer-term planning.” A core part of achieving this strategy is Feed the Future (FTF), the U.S. government’s multi-agency initiative focused on global hunger and food security. Administrator Samantha Powers has committed $5 billion over five years to expand FTF, creating an opportunity to catalyze and crowd in capital to build a thriving, sustainable global agriculture economy—including innovation in digital agriculture—that creates more resilient and efficient food systems.
However, USAID stakeholders are siloed and do not coordinate to deliver results and invest in proven solutions that can have scaled sustainable impact. The lack of coordination means potential digital-powered, impactful, and sustainable solutions are not fostered or grown to better serve USAID’s beneficiaries globally. USAID’s Bureau for Resilience and Food Security (RFS) works with partners to advance inclusive agriculture-led growth, resilience, nutrition, water security, sanitation, and hygiene in priority countries to help them accelerate and protect development progress. USAID’s FY 2023 budget request also highlights RFS’s continued focus on supporting “partner countries to scale up their adaptation capacity and enhance the overall climate resilience of development programming.” The FTF Innovation Labs focus on advanced agricultural R&D at U.S. universities but do not engage directly in scaling promising innovations or investing in non-academic innovators and entrepreneurs to test and refine user-centered solutions that fall within FTF’s mandate. USAID’s emerging Digital Strategy and Digital Development Team includes specific implementation initiatives, such as a Digital Ecosystem Fund and an upcoming Digital Vision for each sector, including agriculture. USAID is also planning to hire Digital Development Advisors, whose scope aligns closely with this initiative but will require intentional integration with existing efforts. Furthermore, USAID country missions, where many of these programs are funded, often do not have enough input in designing agriculture RFPs to incorporate the latest proven solutions and digital technologies, making it harder to implement and innovate within contract obligations.
This renewed strategic focus on food security through improved local agricultural yields and climate-resilient smallholder farmer livelihoods, along with an integration of digital best practices, presents an opportunity for USAID and Feed the Future. By using innovative approaches to digital agriculture, FTF can expand its impact and meet efficiency and resilience standards, currently proposed in the 2022 reauthorization of the Global Food Security Act. While many known agricultural practices, inputs, and technologies could improve smallholder farmers’ yields and incomes, adoption remains low due to structural barriers, farmers’ lack of information, and limitations from existing agriculture development aid practices that prioritize programs over sustainable agricultural productivity growth. Today, with the rapid pace of mobile phone penetration (ranging between 50% and 95% throughout the developing world), we are in a unique moment to deploy novel, emerging digital technologies, and innovations to improve food security, yields, and livelihoods for 100 million smallholder farmers by 2030.
There are many digital agriculture innovations – for example digital agricultural advisory services (DAAS, detailed below) – in various stages of development that require additional investment in R&D. These innovations could be implemented either together with DAAS or as stand-alone interventions. For example, smallholder farmers need access to accurate, reliable weather forecasts. Weather forecasts are available in low- and middle-income countries (LMICs), but additional work is needed to customize and localize them to farmers’ needs and to communicate probabilistic forecasts so farmers can easily understand, interpret, and incorporate them in their decision-making.
Similarly, digital innovations are in development to improve farmers’ linkages to input markets, output markets, and financial services—for example, by facilitating e-subsidies and mobile ordering and payment for agricultural inputs, helping farmers aggregate into farmer producer organizations and negotiate prices from crop offtakers, and linking farmers with providers of loans and other financial services to increase their investment in productive assets.
Digital technologies can also be leveraged to mobilize smallholder farmers to contribute to climate mitigation by using remote sensing technology to monitor climate-related outcomes such as soil organic carbon sequestration and digitally enrolling farmers in carbon credit payment schemes to help them earn compensation for the climate impact of their sustainable farming practices.
| Digital agricultural advisory services (DAAS) leverage the rapid proliferation of mobile phones, behavioral science, and human-centered design to build public extension system capacity to empower smallholder farmers with cutting-edge, productivity-enhancing agricultural knowledge that improves their food security and climate resilience through behavior change. It is a proven, cost-effective, and shovel-ready innovation that can improve the resilience of food systems and increase farmer yields and incomes by modernizing the agricultural extension system, at a fraction of the cost and an order of magnitude higher reach than traditional extension approaches. DAAS gives smallholder farmers access to on-demand, customized, and evidence-based agricultural information via mobile phones, cheaply at $1–$2 per farmer per year. It can be rapidly scaled up to reach more than a hundred million users by 2030, leading to an estimated $1 billion increase in additional farmer income per year. USAID currently spends over $1 billion on agricultural aid annually, and only a small fraction of this is directed to agricultural extension and training. Funding is often program-specific without a consistent strategy that can be replicated or scaled beyond the original geography and timeframe. Reallocating a share of this funding to DAAS would help the agency achieve strategic climate and equity global food security goals. Scaling up DAAS could improve productivity and transform the role of LMIC government agricultural extension agents by freeing up resources and providing rapid feedback and data collection. Agents could refocus on enrolling farmers, providing specialized advice, and improving the relevance of advice farmers receive. DAAS could also be integrated into broader agricultural development programs, such as FAO’s input e-subsidy programs in Zambia and Kenya. |
Plan of Action
To spearhead USAID’s leadership in digital agriculture and create a global pipeline from tested innovation to scaled impact, USAID, Feed the Future, and its U.S. government partners should launch a Digital Agriculture for Food Security Challenge. With an international call to action, USAID can galvanize R&D and investment for the next generation of digitally enabled technologies and solutions to secure yields and livelihoods for one hundred million smallholder farmers by 2030. This digital agriculture moonshot would consist of the following short- and long-term actions:
Recommendation 1: Allocate $150 million over five years to kickstart the Digital Agriculture Innovations Fund (DAI Fund) to fund, support, and scale novel solutions that use technology to equitably secure yields, food security, and livelihoods for smallholder farmers.
The fund’s activities should target the following:
- Digital Agriculture Pilot and Research Fund (DAPR Fund) ($35 million): Provide funding for research, user design, and pilot testing to industry, NGO, and university innovators to create and verify digital innovations like customized weather forecasts, digital extension, microinsurance, microcredit, and local input dealer directories. This could employ the Small Business Innovation Research model and use technical assistance from within the agency and in partner organizations to support the development of promising new ventures or products/services from existing players.
- Digital Agriculture Scaling and Commercialization Fund ($100 million): Invest in grants or, with collaboration from U.S. International Development Finance Corporation, in equity funding for proven digital agriculture solutions as bridge capital to enhance their scaling to new markets or products. Funding should be directed not only to FTF Innovation Labs solutions but also to those outside the FTF network with a focus on LMIC-founded ventures, digital and technology-enabled startups, and existing footprints in FTF target countries to ensure broader impact. Selected solutions should have demonstrated outcomes in proof of concept and moved into the “demonstrated uptake” phase of the product life cycle. Annual investments should be up to $10 million across a small portfolio of ventures to crowd-in unlocked private capital and foster competitive, sustainable enterprises. Contract authority should be flexible and mission-oriented.
- Market-Shaping and Public-Private Partnerships ($15 million): Create an Advanced Research Projects Agency-Energy (ARPA-E) style Tech-to-Market Team, a separate group of staffers working full-time to find marketing opportunities for novel technologies in the innovation pipeline. This group could coordinate new public-private partnerships, like the Nutritious Foods Financing Facility (N3F), which can support the digital agriculture ecosystem for smallholder farmers. This funding would also allow for the hiring of a cadre of dedicated digital development advisors at USAID to spearhead this work in the digital agriculture sector and collaborate with agency country missions in planning and executing RFPs and other agricultural aid programs.
The fund’s investment priorities should align with stated GFSS and GFSRS objectives, including solutions focused on climate-smart agricultural innovation, enhanced nutrition, and food systems, genetic innovation, and poverty reduction. Program activities and funding should coordinate with FTF implementation in strategic priority countries with large agricultural sectors and mature, low-cost mobile networks such as Ethiopia, India, Kenya, Nigeria, and Pakistan. It should also collaborate with the FTF Innovation Lab and the AIM for Climate Initiative networks.
Recommendation 2: Convene the Digital Agriculture Summit to create an all-hands-on-deck approach to facilitate and accelerate integrated digital agriculture products and services that increase yields and resilience.
USAID will announce the dedicated DAI Fund, convening its interagency partners—like the US Department of Agriculture (USDA), Development Finance Corporation (DFC), Millennium Challenge Corporation (MCC), US Africa Development Foundation (USADF) as well as philanthropy, private sector capital, and partner country officials and leaders to chart these pathways and create opportunities for collaboration between sectors. The Summit can foster a community of expertise and solidify commitments for funding, in-kind resources, and FTF country partnerships that will enable DAI Fund solutions to demonstrate impact and scale. The Summit could occur on the sidelines of the United Nations General Assembly to allow for greater participation and collaboration with FTF country representatives and innovators. Follow-up activities should include:
- Partner Country Commitments: Secure commitments from FTF partner countries to direct annual funding toward digital infrastructure and the development of a local digital agriculture economy, whether in the form of R&D, implementation, or infrastructure funding.
- Philanthropic and Private Sector Commitments: Following the Grand Challenges model, the Digital Agriculture for Food Security Challenge should seek commitments from philanthropy and private sector funders to expand the funding pool and finance pipelines for startups. Invitation to the Summit would be contingent on commitments of financial support and in-kind resources for digital agriculture innovation.
- SXSAg for Digital Agriculture: Annual gatherings of innovators, investors, and stakeholders to share knowledge and results as well as attract more private capital.
- Innovator Community of Practice: Create a Community of Practice of innovators and experts inside and outside the agency to advise DAI Fund staff and USAID on current challenges in the digital agriculture space for non-established entrants and opportunities for future fund investments.
- Webinar Series: As a follow-up to the Summit, a webinar series could disseminate knowledge and build institutional buy-in and support for DAAS with key stakeholders within the agency. Subject matter experts from PxD and other service providers can share evidence, use cases, and lessons learned in developing and delivering these services and provide recommendations on how USAID can better incorporate digital agriculture into its operations.
Conclusion
With the exponential adoption of mobile phones among smallholder farmers in the past decade, digital agriculture innovations are emerging as catalytic tools for impact at an unprecedented scale and social return on investment. Devoting a small percentage (~2%–5%) of USAID’s agricultural aid budget to DAAS and other digital agriculture innovations could catalyze $1 billion worth of increased yields among 100 million smallholder farmers every year, at a fraction of the cost and an order of magnitude higher reach than traditional extension approaches.
Achieving this progress requires a shift in strategy and an openness to experimentation. We recommend establishing a Digital Agriculture Innovation Fund to catalyze investment from USAID and other stakeholders and convening a global Digital Agriculture Summit to bring together subject matter experts, USAID, funders, and LMIC governments to secure commitments. From our experience at PxD, one of the world’s leading innovators in the digital agriculture sector, we see this as a prime opportunity for USAID to invest in sustainable agricultural production systems to feed the world and power local economic development for marginalized, food-insecure smallholder farmers around the world.
More from Jonathan Lehe, Gautam Bastian, and Nick Milne can be found at Precision Development.
Using the reach and power of the US government and its leaders as a platform to convene, multi-sector stakeholders can be brought together to outline a common agenda, align on specific targets, and seek commitments from the private sector and other anchor institutions to spur collective, transformational change on a wide range of issues aligned to the goals and interests of the federal agency and Administration’s priorities. External organizations respond to these calls-to-action, often leading to the development of partnerships (formal and informal), grand challenges, and the building of new coalitions to make financial and in-kind commitments that are aligned with achieving the federal government’s goals. A commitment could be modeled after how the State Department’s convened the Global Alliance for Clean Cookstoves:
- a financial contribution (e.g.) the U.S. pledged nearly $51 million to ensure that the Global Alliance for Clean Cookstoves reaches its ‘100 by 20,’ which calls for 100 million homes to adopt clean and efficient stoves and fuels by 2020.
- shared expertise: the organization mobilizes experts in a variety of issues: gender, health, security, economics, and climate change to address significant risk factors. The U.S. will also offer assistance to implement cookstoves.
- research and development: the U.S. is committed to an applied research and development effort that will serve as the backbone of future efforts in the field that includes analyzing health and environmental benefits of using clean stoves, developing sustainable technologies, and conducting monitoring to ensure success of the Alliance’s goals.
USAID is a leader in the US government in running open innovation challenges and prizes. Other U.S. government agencies, foreign government aid agencies, and philanthropies have also validated the potential of open innovation models, particularly for technology-enabled solutions. USAID’s Grand Challenges for Development (GCDs) are effective programmatic frameworks that focus global attention and resources on specific, well-defined international development problems and promote the innovative approaches, processes, and solutions to solving them.
Conceived, launched, and implemented in coordination with public and private sector partners, Grand Challenges for Development (see list below) emphasize the engagement of non-traditional solvers around critical development problems. The Grand Challenges for Development approach is a complement to USAID’s current programming methods, with each GCD is led by experts at the bureau level. These experts work directly with partners to implement the day-to-day activities of the program. The Grand Challenges for Development programs show how the power of the framework can be leveraged through a variety of modalities, including partnerships, prizes, challenge grant funding, crowdsourcing, hack-a-thons, ideation, and commitments. The Digital Agriculture for Food Security Challenge could mimic a GCD program like Saving Lives at Birth by providing consistent funding, resources, and energy toward new meaningful, cost-effective breakthroughs to improve lives where solutions are most needed.
Information provision, including DAAS, is a difficult product for private sector entities to deliver with a sustainable business model, particularly for smallholder farmers. The ability and willingness to pay for such services is often low among resource-poor smallholder farmers, and information is easily shareable, so it is hard to monetize. National or local governments, on the other hand, have an interest in implementing digital solutions to complement in-person agricultural extension programs and subsidies but tend to lack the technical capacity and experience to develop and deliver digital tools at scale.
USAID has the technical and institutional capacity to provide digital agriculture services across its programs. It has invested hundreds of millions of dollars in agricultural extension services over the past 60 years and has gained a strong working knowledge of what works (and what doesn’t). Digital tools can also achieve economies of scale for cost relative to traditional in-person agriculture solutions. For instance, in-person extension requires many expenses that do not decrease with scale, including fuel, transportation, training, and most importantly the paid time of extension agents.
One estimate is that extension agents cost $4,000 to $6,000 per year in low-income countries and can reach between 1,000 to 2,000 farmers each—well above the World Bank recommended threshold of 500 farmers per agent—bringing annual costs to $2–$6 per farmer per year. This estimate assumes a farmer-to-agent ratio well above the World Bank’s recommended threshold of 500:1. In other contexts, it has been estimated as high as $115. We estimate a cost-effectiveness of $10 in increased farmer income for every $1 invested in programs like DAAS, which is an effective return on American foreign development assistance.
Digital solutions require not only the up-front cost of development and testing but also maintenance and upkeep to maintain effectiveness. Scaling these solutions and sustaining impact requires engaged public-private partnerships to reduce costs for smallholder famers while still providing positive impact. Scaling also requires private capital – particularly for new technologies to support diffusion and adaptation – but is only unlocked by de-risking investments by leveraging development aid.
As an example, PxD engages directly with national governments to encourage adoption of DAAS, focusing on building capacity, training government staff, and turning over systems to governments to finance the operation and maintenance of systems into perpetuity (or with continued donor support if necessary). For instance, the State Government of Odisha in India built a DAAS platform with co-financing from the government and a private foundation, scaled the platform to 3 million farmers, and transitioned it to the government in early 2022. A similar approach could support scale across other geographies—especially given USAID’s long-standing relationships with governments and ministries of agriculture.
A growing body of evidence shows that DAAS can have a significant impact on farmers’ yields and incomes. Precision Development (PxD) currently reaches more than 7 million smallholder farming households with DAAS in nine countries in Africa, Asia, and Latin America, and there is a well-established market with many other service providers also providing similar services. This research, including several randomized control trials conducted by PxD researchers in multiple contexts as well as additional research conducted by other organizations, shows that DAAS can improve farmer yields by 4% on average in a single year, with benefit-cost ratios of 10:1, and the potential for these impacts to increase over time to create larger gains.
There is also evidence of a larger impact in certain geographies and for certain crops and livestock value chains, as well as a larger impact for the subset of farmers who use DAAS the most and adopt its recommendations.
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