Technology

Web 3, Weather Data and the Dawn of a New Agricultural Revolution

By Manolis NikiforakisCEO and Co-Founder of Weather XM

Climate change induces additional challenges as forecasting models fail and extreme weather events such as droughts and floods occur more frequently and become more severe. 

With the current increasing rate of erratic weather patterns, the impacts on agriculture and food security have greatly affected farmers worldwide. Accurate climate and weather information helps respond to these challenges by allowing rural areas to plan ahead and adapt to climate change. However, to improve weather forecasting, one has to be able to monitor it first. 

Rainfed agriculture accounts for more than 95% of farmed land in sub-Saharan Africa, 75% in the Near East and North Africa, in Latin America 90%, 65% in East Asia, and 60% in South Asia. The ability to make better decisions through climate services creates more value for farmers. The World Bank estimates that improved weather, climate, water observations and forecasting could lead to up to $30 billion USD per year in increased global productivity and up to $2 billion USD per year in reduced asset losses. The Global Commission on Adaptation (2019) estimates that the benefit-cost ratios are in the order of 10 to 1 and in some cases even higher. 

Farming globally is undergoing a digital transformation. Data plays an increasingly important role in the quantity and quality of farming products. Yet, the majority of the global food production comes from traditional low-tech farms that still struggle with challenges that are easily solved by precision agriculture solutions, like accurate next day weather forecasts. 

One would assume the way forward is the large-scale adoption of vertical smart farming solutions and there are many in the market already. Still, almost none addresses the issue of data sovereignty for the farmers themselves. 

In the new era of precision agriculture, a handful of large food corporations are becoming the data whirlpools which feed off farm-field sensors' input. Smallholder farmers in particular, who are responsible for 50% of global food production, run the risk of becoming irrelevant, “factory workers” alienated from their work, since farming practices will be dictated by data insights rather than hands-on experience and know-how. To mitigate this risk, a new generation of farmers should be empowered to use digital tools and harness the power of data for their own benefit. The crop data that they will produce will be utilized way beyond just improving yields.

The UN estimates that between 2008 and 2018 the impact of natural disasters cost the agricultural sector of developing countries over 108 billion USD in damaged or lost crop and livestock production. Most crops have been destroyed by weather at least once in the last five years.

Agriculture insurance seems like the most immediate and viable solution to the climate challenges faced by farmers worldwide. However, according to a 2018 report published by ISF Advisors, 80% of farmers globally have no access to crop insurance, with 97% of farmers in sub-Saharan Africa without crop insurance Furthermore, smallholder farmers do not trust insurance companies. Insurance companies do nοt have enough crop and weather data to model for them. Thus, traditional crop insurance is not working for most of the world. Where available, weather-risk insurance for small farms is too expensive due to manual legal work and complexities in claims.

The evolution of blockchain, Web3 technologies and open finance (DeFi), will soon bring the insurance industry on the verge of disruption. Successful large-scale pilots with parametric weather crop insurance on-chain confirm the change that is about to come in the insurance industry. 

The global market for uninsured crops is estimated at $1 trillion. Emerging parametric weather insurance companies that take advantage of new Web3 technologies will surely try to acquire a part of this market, but they will need more farm-specific data. The same data that a smart farming solution produces, the same data that the farmers need. Thus, the value of local weather and crop data will significantly increase as more and more critical services are built around them.

We believe there should be open-source, Web3 compatible, integrated software and hardware solutions that offer farmers the opportunity to undergo digital transformation without losing control over their farming activity. At the same time, these solutions enable them to benefit from emerging insurtech products that they ideally collectively own and control. Web3 smart farming solutions combined with on-chain weather crop insurance powered by a community-owned weather data network.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.