Roma, 2 agosto 2022. Rome Business School, has published the study “Agribusiness and Climate Change in Italy. The impact on the supply chain between youth entrepreneurship, technology and sustainability” edited by Diana Lenzi, Lecturer at the Specialized Master in Food and Beverage Management; Roberto Reali and Claudia Laricchia, lecturers at the Master Online in Agribusiness Management and Valerio Mancini, RBS Research Center Director. The study sheds light on the challenges, goals, and solutions faced by the Italian agribusiness sector, looking in particular at the role of young people in the sector’s recovery, the impact of climate change on the entire supply chain, and the technologies needed for climate adaptation and mitigation.
While until the 1990s the priority of the European agricultural sector was to intensify production, from 2022 the focus is instead on the transition to sustainable production. Today, with a halt to grain supplies from Ukraine, inflation and rising greenhouse gases, we must rely on new technologies, digital and innovation to plan the most efficient way throughout the supply chain in order to feed the world’s population, which is on its way to 8 billion people.
In 2020, an average of 236 companies led by under-35s were born every day in Italy for a total of more than 86 thousand companies. The agricultural sector, in fact already in 2020 was in the top positions for new companies under 35 in a year (over 6 thousand). As of today, there are more than 55 thousand agricultural and forestry companies led by young people in Italy, representing 8 percent of the sector and 10 percent of the total number of companies run by young people. The regions where more young agricultural entrepreneurs operate are: Valle d’Aosta (12 percent); Liguria, Sardinia and Calabria (11 percent); Basilicata and Campania (10 percent); and Sicily (9 percent). At the bottom of the ranking are Marche, Friuli-Venezia Giulia and Abruzzo (6 percent), Veneto (5 percent) and Emilia-Romagna (4 percent).
Farms led by under-35s in Italy rank first in terms of Standard Production generated per hectare. On average, young Italians generate a standard production per hectare of 4,964 euros, more than double that of young farmers in France (2,129 euros/ha; -57 percent) and even more marked is the difference with Spain (2,008 euros/ha; – 60 percent). Overall, the standard output generated per hectare cultivated by young people in Italy is just under twice the European average (2,592 euros/ha; -48%).
There is an inverse correlation between the ‘age’ variable and the economic results achieved. Young people tend to have a higher yield per hectare of cultivated land (€4,964/hectare) than the over-55s (€3,546/hectare) with 40% better results, according to the latest Eurostat data. Moreover, although the number of farms led by the over-55s is significantly higher, it can be clearly seen that their farms have a significantly smaller average size than those led by young people. Young Italian farmers are therefore able to manage farms of a more important size, enhancing the value of their production and thus generating greater profitability per hectare. Roberto Reali, one of the authors of the research, says that “this phenomenon could be attributed to the training that young people have in the field of agriculture and management, proving in turn to be open to innovation and the incorporation of technology and new processes to improve results.”
Over the past two years, Agriculture 4.0 has continued its path of growth and evolution: from 540 million euros in sales in the first half of 2020 to 1.3 billion at the end of 2020, and up to 1.6 billion in 2021 (+23 percent). The numbers also tell of very strong growth compared to 2017, when this market was struggling to reach 100 million euros.
In parallel, the area cultivated with 4.0 tools by farms has grown, reaching 6 percent of the total in 2021, double the previous year’s figure; 60 percent of Italian farmers in 2021 are using at least one agriculture 4.0 solution, up 4 percent from 2020; and more than 4 in 10 are using at least two, particularly management software and machine monitoring and control systems. Agriculture 4.0 is characterized by the use of new technologies, algorithms, internet of things, agro bots and drones to optimize land control, management and monitoring.
According to the Smart Agrifood Observatory of the Politecnico di Milano and the RISE Laboratory of the University of Brescia, Lombardy leads the ranking for the adoption of innovation-driven agricultural solutions (68 percent), followed by Piedmont (62 percent) and Emilia-Romagna (55 percent). Despite this, messuna Italian region is in line with the intermediate targets set at the European level for climate neutrality by 2030, but there are 6 more virtuous regions with better climate performance: Campania, Abruzzo, Friuli-Venezia Giulia, Lazio, Liguria and Marche; at the bottom of the ranking, still far from the European target, are Tuscany, Umbria, Lombardy and Veneto (Ispra data, Italy for Climate, 2021).
The same study shows that half of Italy’s regions have not reduced their greenhouse gas emissions, 14 out of 20 regions have increased their energy consumption, and most Italian regions are a long way from the 2030 target for the use of renewable energy sources, with the exception of a small group consisting of Valle d’Aosta, Trentino-Alto Adige, Basilicata, Calabria and Molise. Among the cities with the highest domestic consumption are: of the north, Milan (136 million cubic meters); in the center, Rome (196 million); and in the south, Naples (51 million). At the bottom of the ranking are: in the north, Sondrio (1.3 million); in the center, Frosinone (1.6 million); and in the south, Enna (1 million). Thus, practically all the regions of Italy are still confirmed to be unsustainable, and we can see the strong impact that agriculture has in climate change.
Globally, it is precisely the spaces available for agriculture that are suffering the most. Drought (46% of the EU is in a state of alert), land consumption and overbuilding are the main challenges to be faced. The latter causes population displacement in cities and abandonment of peripheral systems, which are one of the main environmental keys to rational agriculture. “Entrusting these elements to a smart cities project that aims at process planning means revaluing the entire food supply chain and enabling sustainable and convenient behaviors by producers as well,” says Diana Lenzi, among the authors of the research.
However, we must also take into account the environmental impact of the agricultural sector, which is responsible for an average of 20 to 30 percent of greenhouse gas emissions, the water impact and land consumption resulting from agriculture, this one responsible for 80 percent of the deforestation of 70 percent of the water consumption on the planet, of which for irrigation alone 50 percent comes from groundwater and extremely sensitive sources for ecosystems, which are being depleted, the amount used having doubled from the 1960s to 2000.
In order to respond to this, according to Valerio Mancini, we need to “make a change of mindset and alert a purpose driven innovation, a purpose-driven innovation, a vision of prosperity that can and should determine the construction of new models of sustainable development and integral ecology.”
Changing mindsets means redesigning the models and systems that today drive the production and distribution of agricultural products. A key concept is circular living: in Italy today, 1,866,000 tons of food are wasted per year (Waste Watcher, 2022), thus “feeding” an economic loss of 7 billion euros. This, without taking into account the food losses that lurk upstream in the supply chain and thus more in the production phase (60 percent of total waste).
There are some virtuous examples of the use of technology to combat waste, such as the use of artificial intelligence to change the prices of products on the shelves, which automatically decrease as products approach expiration (Marketspy, Myfruit, Hopenly). But there are also many other innovative solutions to facilitate processes within the agricultural sector.
In 2020, a smartphone application was launched at the initiative of the Ministries of Agriculture, Labor and the Interior, aimed at facilitating the meeting between farmworkers and companies, promoting the legality and sustainability of agricultural work. In the same year, Rareche Cilento, the first network of companies and farmers practicing Organic and Regenerative Agriculture, was born in Vallo della Lucania, with the aim of spreading the principles of sustainable agriculture, carbon farming, seasonality and wholesomeness of products, restoration of ecosystem services, sustainable management and regeneration of natural resources.
It jumps out at the rise of controlled environment farming, a method that involves human control of certain parameters to achieve a good harvest, using science and engineering. Globally, the business has exceeded $4 billion, and that is only taking into account equipment, labor and consumables (seeds, fertilizers, substrates). Thus, the pandemic does not seem to have affected the growth (+25 percent per year) of the sector, which is based on investor confidence: according to PitchBook data, as much as $1.86 billion was invested globally in above-ground agriculture in 2020. The trend even accelerated in 2021 where, in the August 2020-August 2021 period, investment in the sector totaled $2.71 billion.
A fact ignored until a few months ago now puts the world agricultural system in the balance: 30 percent of global wheat trade is accounted for by Russia and Ukraine, as well as 32 percent of barley trade, 17 percent of corn trade, over 50 percent of sunflower oil trade, and 20 percent of sunflower seed trade.
At the national level, in 2021 Italy imported 142 thousand tons of soft wheat from Ukraine and 116 thousand tons from Russia. These quantities are equivalent to about 5 percent of Italy’s total imports of soft wheat, but they are enough to drive up prices, which have in fact increased by 33 percent in one month (February 2022), surpassing for the quota 40 euros per quintal, a maximum ever reached in Italy (Confagricoltura, 2022).
In addition to affecting the amount of available product, the conflict is also having direct repercussions on the world fertilizer trade: in the past year, Italy has imported 13% of the total amount of usually important fertilizers from Ukraine and Russia, which are highly dependent on natural gas prices that mostly come from Russia. As a result, as gas prices have risen, access to fertilizers is shrinking and their cost has risen considerably (+142% in the last year), so much so that farmers are unable to provide for their needs.
“Addressing the challenges of the agricultural world requires taking into account war and diplomacy, climate change and its consequences, and the slow policy response so far to improving this sector that directly touches the entire population. There is an urgent need for a systematic transition where sustainability, digital, innovation and youth are put at the center,” says Claudia Laricchia, among the authors of the research.