New research from McKinsey & Company highlights that global farmers are increasingly focusing on sustainable practices, innovative technology, and new yield-enhancing products to boost profits, driven by broader macroeconomic pressures.
According to McKinsey’s 2024 Global Farmers Survey, which gathered insights from 4,400 farmers, there is cautious optimism regarding future profitability. However, expectations vary significantly by region. In North America and Europe, the majority of farmers expect lower profits this year (64% and 55% respectively). In contrast, farmers in Latin America and India are more optimistic, with 58% and 76% expecting higher profits over the next two years, up from 42% and 37% in 2022.
Farmers are increasingly investing in sustainable practices to boost productivity and create new revenue streams. In regions such as India, North America, and Latin America, sustainability efforts are aimed at increasing crop yields, while European farmers are more focused on generating additional income sources. As climate-related risks remain a top concern, sustainable practices are seen as a way to address extreme weather challenges associated with climate change.
The survey also revealed that technology adoption is playing a key role in improving future profits, but this trend is more prevalent among larger farms. Farms over 2,500 acres are 45% more likely to implement agricultural technology (agtech) compared to smaller farms of less than 100 acres, as larger operations can achieve better returns on investment from agtech solutions.
Despite a recent decline in fertilizer and crop protection costs, input prices remain a major concern for 48% of farmers, with 13% reporting an overall increase in costs over the past year. Additionally, extreme weather remains a critical issue, particularly for European and Latin American farmers, where its impact on profits is significant. Farmers who consider extreme weather a top risk are 30% more likely to increase agricultural spending and 50% more likely to purchase or lease additional land within the next two years.
As farmers navigate the challenges of a volatile economic environment, including extreme weather and fluctuating commodity prices, many are turning to sustainable practices and new products to maintain profitability. However, any changes must offer a significant return on investment to justify the overhaul of current farming operations.
