CHAPTER 3

Evolutionary scenarios for agricultural

business models
Marco Medici1, Giacomo Carli2, Maria Rita Tagliaventi3, Maurizio Canavari1
1
Department of Agricultural and Food Sciences, University of Bologna, Bologna, Italy; 2Department for Strategy and Marketing,
The Open University Business School, Milton Keynes, United Kingdom; 3Department of Sociology and Business Law,
University of Bologna, Bologna, Italy

3.1 Introduction
Growth and productivity remain major challenges in the global economy. According to
some estimates, the demand for agricultural products is expected to grow by 60% in 2050
compared with yearly figures between 2005 and 2007, thus representing an average in-
crease of 1.1% per year (Alexandratos and Bruinsma, 2012). This will drive demand for
greater food production in terms of both quantity and quality, in a context characterized
by several intervening contingencies, such as the stagnation of expansion of arable lands,
the scarcity of water resources, the declining agricultural labor force, and the rapid urban-
ization (FAO, 2013).
Improvements in agricultural technologies, tools, and practices are considered as
promising opportunities to foster sustainable food production. Precision agriculture,
which can be defined as “a new management technology based on georeferenced infor-
mation for the control of agricultural systems” (Varella et al., 2015, p.185), is bringing
agriculture into the digital and information age and is expected to trigger wide societal
changes influencing work conditions inside and outside farm boundaries. Precision agri-
culture favors best management practices of agricultural inputs (Delgado et al., 2013),
while enabling remote collaborations involving the whole food supply chain with use
of big data (Carlson, 2012; Wolfert et al., 2017; Barmpounakis et al., 2015). Under these
circumstances, technology innovation can foster an integration of the food supply chain
to meet information requirements concerning location and process characteristics, allow-
ing to keep track of all the actions undertaken by the different actors in the supply chain
(Dabbene et al., 2014).
Being precision agriculture more capital-intensive than labor-intensive, farm acreage
becomes a major factor for investment amortization. Accordingly, corporate farming, i.e.,
the practice of large-scale agriculture on farms owned by large companies, will be more
likely to adopt highly specialized technologies compared to smallholder organizations.
Mergers in the form of plot consolidation will drive the achievement of economies of
scale as well as processing and usage of big data, which can be afforded only by large com-
panies, thus appealing to financial investors (Corsini et al., 2015; EPRS STOA, 2017).

Bio-economy and Agri-production © 2021 Elsevier Inc.

ISBN 978-0-12-819774-5, https://doi.org/10.1016/B978-0-12-819774-5.00003-5 All rights reserved. 43
44 Bio-economy and Agri-production

In this context, the presence of small farmers will increasingly become riskier: often un-
able to fix or adjust equipment, they will likely be subjected to additional expenses of
time and money for appropriate technical support.
The combination of the above factors, increased productivity and demand for capital-
intensive technology, will reshape the role played by small farms, with many retiring
farmers forced to sell their land (Corsini et al., 2015): many senior farmers have no suc-
cessors in their family (the so-called “continuers”), while a growing number of “new-
comers” are seeking to enter farming, even without any prior experience. Examples of
extra-family successions, often turning toward slightly different forms of farming charac-
terized by higher levels of innovation and different approaches, such as organic farming
and short supply chain, are documented in Belgium, France, Italy, Romania, Spain, and
United Kingdom (Cavicchioli et al., 2015; Access To Land, 2018).
Other social macrotrends influence the dimension of business model types in agricul-
ture. Urban areas are expected to host more population in the near future (UNDESA,
2015), and this will prompt a demand for tools and services able to improve food produc-
tion within cities. Urban agriculture, defined as “a permanent and dynamic part of the
urban socioeconomic and ecological system, using typical urban resources, competing
for land and water with other urban functions, influenced by urban policies and plans,
and contributing to urban social and economic development” (FAO, 2007, p.59), has
been studied from different points of view (Zasada, 2011; Bryant et al., 2013; Martellozzo
et al., 2014; Optiz et al., 2015; P€ olling et al., 2016). Current estimates of agriculture
within and near city boundaries suggest that food production is not only a rural phenom-
enon: according to Thebo et al. (2014), 6% (67.4 million ha) of global cropland is located
in cities exceeding 50,000 inhabitants. Another much debated concern is whether
organic or conventional farming would be able to feed the world population by 2050,
implying challenges for farmers in redefining their business to address this goal (Goulding
et al., 2009; Badgley et al., 2007).
This chapter presents possible innovative agricultural business models to be applied in
Europe and in low-income countries, which are undergoing uneven changes and
modernization, with the aim of understanding how the evolution of agricultural technol-
ogy will change the way agribusiness is conducted. It depicts a dynamic picture of agri-
culture combining several sources and giving insights on how the scenarios may develop
in a couple of decades. In today’s modern markets, farmers must cope with considerable
constraints and opportunities, dealing with the evolution of food supply chains. This re-
view contributes to the debate by providing evidence on the strengths and weaknesses of
different business models in agriculture and helps to understand how the agricultural
development process unfolds in relation of business and technology. To do so, key facts
and figures about worldwide agriculture have been gathered and main socioeconomic
and technological trends over the last years were identified. All projections are character-
ized by uncertainty; nevertheless, expected developments in both food offer and demand
 Evolutionary scenarios for agricultural business models 45

seem to be nowadays quite clear, in particular with respect to demand stemming from
novel uses of agricultural products and the underlying resources requirements; to name
but a few, the cases of organic and urban farming are intuitively significant in this regard,
in terms of upstream demand of organic resources and land use, respectively. This contri-
bution enables farmers and technology providers to converge their interests, and it could
help also actors of food value chains understand drivers and trends of the agriculture of the
future.

3.1.1 What is a business model?

In broad terms, a business model can be defined as the way an organization creates and
captures value (Gambardella and McGahan, 2010, p. 263). More in depth, there are
several interpretations offered in the literature, with still a lack of agreement by scholars
on operational definitions of business models. Some peculiarities distinguish business
model research from traditional perspectives in strategic research. While the latter
approach assumes that value creation is a supply-side phenomenon, i.e., value is created
exclusively by producers of goods and services, and competitive advantage is single-
sourced, the business model concept implies that value creation is both a supply- and
demand-side phenomenon and competitive advantage can be multi-sourced (Massa
et al., 2017). The business model concept has become increasingly important, particularly
in the fields of technology and innovation management and environmental sustainability
(Tripsas and Gavetti, 2000; Massa and Tucci, 2014), offering a new perspective on how
organizational processes can be managed to attain sustainable performance. To this re-
gard, it is worth mentioning the definition provided by Nielsen and Lund (2014, p.9):
“The business model is (.) the platform which connects resources, processes, and the
supply of a service which results in the fact that the company is profitable in the long
term. This definition emphasizes the need to focus on understanding the connections
and the interrelations of the business and its operations so that the core of a business
model description is the connection that creates value. This statement merges traditional
elements like cost structure, profit potential, and market segment identification with
other concepts such as the definition of the value chain, the need to identify potential
complementors and competitors. The business model construct seems to represent an
additional contribution to the realm of strategy in terms of value captured and economic
sustainability” (Demil et al., 2015).
The business model construct significantly helps in interpreting the domain of preci-
sion agriculture in which farmers, like all other stakeholders within the agricultural value
chain, face the diffusion of information technologies and the need to improve food pro-
duction in terms of quality, quantity, and efficiency. As highlighted by Velu et al. (2016),
the business model concept can help to represent new propositions in which organiza-
tions are increasingly collaborating with customers, suppliers, and complementors to
46 Bio-economy and Agri-production

drive innovation and growth and to cope with the demands of changes in the technolog-
ical landscape. This idea resonates also with the concept of “inclusive business model”
suitable for smallholders in low-income countries. Business models can be considered in-
clusive to the extent to which they involve close partnerships with rural smallholders and
food chain operators, entailing value sharing among all partners (Vermeulen and Cotula,
2010), including “the poor on the demand side as clients and customers and on the supply
side as employees, producers, and business owners at various points in the value chain”
(UNDP, 2008, p.14). In this context, the benefits related to inclusiveness clearly go
beyond immediate profit, with a focus on securing staple food chains. Inclusive business
models can build bridges between companies and disadvantaged people in quest for
diffuse benefit: higher productivity, sustainable earnings, and greater farmer empower-
ment constitute undeniable priorities, while possible business reinforcing relies on driving
innovations, opening new markets, and tightening supply chain relationships.

3.2 Business models for European farming

European agriculture is affected by several long-term trends. Gradual consolidations to
form larger farms, a decline in the number of holdings, and weak generational turnover
imply substantial changes in farm dimension and ownership in the years to come. The
average yearly rate of decline in the number of holdings was 3.7% between 2005 and
2013, with the average holding area rising from 14.4 to 16.1 ha (EPRS STOA, 2016).
On top of that, a growing number of family members choose to pursue a career outside
agriculture: 31% of farmers in the European Union (EU) are older than 65 years and only
6% are younger than 35 (EPRS STOA, 2016; Carbone and Subioli, 2008).
Another relevant point deals with consumer eating habits and product differentiation.
In Europe, increased demands for high-quality products will be driven by consumers’
preference for organic products, whose demand is constantly growing (Mockel, 2015;
IAASTD, 2009). Organic farming can be considered as a distinct farming approach
with its own processing and distribution channels which is compliant to separate legal
standards. The EU is the second largest market for organic food (26.2 billion euros) after
the United States (27.1 billion euros), with the amount of organically cultivated land in
the 28 EU member countries growing, on average, by 6.3% per year from 2002 through
2015 (DG Agriculture and Rural Development, 2016). At the end of 2014, more than
340,000 European farmers were managing approximately 11.6 million hectares of
organic agricultural land with arable, grassland, and cereals (Willer and Lernoud, 2016).
The issue of traceability is becoming a tool for securing safety, quality, and reliability
of food products, representing an added value for customers whose demand for details
about location and process characteristics is increasing (B!an!ati, 2014), especially for
long food chain; traceability is also subjected to producer’s choices, even beyond mini-
mum law requirements (Asioli et al., 2014). On the other hand, short food chains are
 Evolutionary scenarios for agricultural business models 47

associated to the need to find models addressing global problems related to food produc-
tion concerns on urban scale, ensuring reliable food supply within urban centers
(Despommier, 2011; Winiwarter et al., 2014). Along with the urbanization trends
already discussed, urban production and distribution of food has received growing atten-
tion in recent years (Zasada, 2011; Bryant et al., 2013; Thebo et al., 2014). The socio-
economic and technological trends and the environmental concerns cited above
delineate possible pathways for the consolidation or the introduction of various types
of business models, which are reported in Table 3.1 and discussed below.

3.2.1 Large-scale agricultural enterprise

This business model configuration, whose key characteristics are reported in Table 3.2, is
linked to a rapid adoption of precision farming technology to gain in operational effi-
ciency. An increase in the scale of production contributes indeed to lessening fixed costs
due to benefits arising from large plots and high machinery operating times. Scale econ-
omies can be achieved through mechanization of cropping systems, particularly for sug-
arcane, cereals, and soya (Vermeulen and Cotula, 2010). The gradual shift toward this
large-scale business model can produce not just a horizontal integration in the form of
plot consolidation or land lease but also in vertical integration. Upstream integration
can address adjacent business areas including technology and service suppliers (a signifi-
cant case of how a company can expand into adjacent business is provided by Monsanto)
and, at the same time, close collaborations with other firms, such as chemical companies,
producers of precision equipment, big data modelers, and software industry, are expected

Table 3.1 European business models and main characteristics.

Technology
Business model adoption
features Main cropping systems rate
Large-scale agricultural Corporate farm Arable, grassland, cereals, Very high
enterprise Cooperative sugarcane, soya
Organic farming Corporate farm Arable, grassland, cereals, High
Family farm sugarcane, soya,
Contract vegetables, orchards
farming
Effective smallholder Family farm Vegetables, orchards, Moderate
organization Contract perennial crops
farming
Urban agriculture Family farm Vegetables, nursery crops, Low
fruits, high-value crops
48 Bio-economy and Agri-production

Table 3.2 Main characteristics of the large-scale agricultural enterprise.

Main patterns Business model features References
Main cropping system Arable, grassland, cereals, Vermeulen and Cotula (2010),
sugarcane, soya Willer and Lernoud (2016)
Farm governance Corporate farm Corsini et al. (2015)
Precision technology Sensors, monitoring technology, McBratney et al. (2005),
variable rate (VR) fertilizer Llewellyn and Ouzman
application, VR pesticide (2014), Molin (2017),
application, VR manure/lime Schimmelpfennig and Ebel
application, guidance (2016), Colaco and Bramley
technology and controlled (2018), Chamen (2015),
traffic farming, unmanned Bonadies et al. (2016)
ground vehicles

to take place (Corsini et al., 2015). Moreover, processing and use of big data products
appeal to financial investors (Lesser, 2014; Corsini et al., 2015; Wolfert et al., 2017).
The product and process efficiencies could make the large-scale agricultural enterprise
a cost leader in consumers’ markets, with larger yields achieved through the serial use of
precision agricultural technologies. In the long term, the effects of the use of reinforced
crops, biomolecular tools (e.g., molecular-assisted breeding, sequencing, and annotation
techniques), or genetic modified organisms (GMOs) to further increase yields is hard to
predict (Fischer et al., 2011), but it is reasonable to expect that the reaction against
GMOs, which is currently strong in the United Kingdom, Austria, Italy, Hungary,
Greece, and France (Associated Press, 2010), will be balanced and maybe reduced by sci-
entific evidence of larger yields and better crop quality.
Given the large size of crops, the management of inputs will be integrated, and farm
owners will gain better control on them thanks to analytics software. Online sensors will
provide information about soil and crop health, and guidance systems will rapidly confer
economic advantage without the need for any former integration with decision support
systems (McBratney et al., 2005). Part of the technologies (sensors and variable rate or
VR fertilization) listed in Table 3.2 is documented by Colaco and Bramley (2018)
who reviewed several studies analyzing the application of technology in various agricul-
tural contexts. Recent surveys indicate that the adoption of VR technology amounts to
about 15%e25% of grain growers (Llewellyn and Ouzman, 2014; Molin, 2017; Schim-
melpfennig and Ebel, 2016), while Chamen (2015) has recently highlighted the rapid
expansion of controlled traffic farming (CTF) for large-scale farming. The diffusion of
monitoring technology has been acknowledged by Schimmelpfennig and Ebel (2016),
whereas Bonadies et al. (2016) demonstrated increased profitability stemming from the
implementation of unmanned ground vehicles (UGVs) technology.
 Evolutionary scenarios for agricultural business models 49

3.2.2 Organic farming

Environmental movements increased their focus on organic production targeting con-
sumers in early 1970s (Lockeretz, 2007). Since then, the growth of organic farming
out of the niche has been impacting on the whole food value chain, as testified by the
opening of the related markets to new customers, by the sale of organic products in con-
ventional stores and the diffusion of organic supermarket chains (Willer and Lernoud,
2018; Haas et al., 2010; Badgley et al., 2007; Wier and Calverley, 2002). Its core features
are summed up in Table 3.3. On the supply side, changes are affecting small farms and
family farming that are likely to give way to larger farms with increased mechanization,
industrialized monocropping, and vertical integration or contract farming (Buck et al.,
1997). These tendencies have been argued by several empirical studies investigating
the development of organic farming conducted in Germany (Best, 2008), Italy and
Portugal (Dinis et al., 2015), Czech Republic (Zagata, 2009), the Netherlands (De
Wit and Verhoog, 2007), and Spain (Luetchforf and Pratt, 2010). It is important to
note that adoption of organic practices seems to be unrelated to farm size (Mal!a and
Malý, 2013; Dinis et al., 2015), which does not emerge as an entry barrier to organic
food production. As organic farming avoids artificial fertilizers and chemical pesticides,
yields reach only 70%e80% of the level attained by conventional cropping systems.
A quest for strong innovation to increase productivity is therefore foreseeable (de Ponti
et al., 2012). In turn, the growing demand of organic fertilizers such as by-products of the
meat industry, algae, and plant-based composts, as well as raw mineral phosphorous- and
potassium-based fertilizers will drive the development of site-specific fertilizer application

Table 3.3 Main characteristics of the organic farming.

Main patterns Business model features References

Main cropping system Arable, grassland, cereals, Willer and Lernoud (2016)
sugarcane, soya, vegetables,
orchards
Farm governance Corporate farm/family farm/ Buck et al. (1997), Best (2008),
contract farming Zagata (2009), De Wit and
Verhoog (2007), Luetchforf
and Pratt (2010), Dinis et al.
(2015)
Precision technology Sensors, monitoring technology, de Ponti et al. (2012), Colaco and
variable rate (VR) fertilizer Bramley (2018), Bonadies
application, VR manure et al. (2016), Vermuelen and
application, guidance Mosquera (2009)
technology and controlled
traffic farming, unmanned
ground vehicles
50 Bio-economy and Agri-production

systems. Mechanical and biological appraisals will be adopted to maintain and improve
soil fertility and plants protection. UGVs such as autonomous mechanical weeding and
crop harvester can strongly reduce environmental impacts in line with the aims of organic
farming (Bonadies et al., 2016). Guidance technology and CTF are, for example, already
used in organic arable and vegetable farms in the Netherlands, as reported in Vermuelen
and Mosquera (2009).

3.2.3 Effective smallholder organization

In a context characterized by low economies of scale and labor-intensive crops, the so-
called “effective producer organization” can enable smallholders to participate in agricul-
tural value chains, particularly when crops are characterized by intensive production with
significant contribution of manual labor, as is in the case of fruits, vegetables, and peren-
nial crops (Vorley et al., 2007; Vermeulen and Cotula, 2010). Family farming shows
some peculiar characteristics, as highlighted by Pritchard et al. (2007), who acknowl-
edged distinctive social properties mainly based upon family ownership: agricultural ac-
tivities are carried out mostly through family labor or the resort to seasonal wage labor,
and controlled by family members, without landlords or external investors. de Janvry
et al. (2001) argued that small farms may be favored in self-employed farming and in
negotiating and monitoring costs associated with hired labor. Family farming may face
higher transaction costs than large-scale corporate farming because of higher costs related
to bargaining with farm management to access new land, obtaining information about
tenure regulations, implementing delineation of the land, and dealing with inheritance
and co-owners. Conversely, family farming emerges as more effective organization in
labor-intensive product types for which labor control is important and specialization
hardly occurs (Ciaian et al., 2009). Being more labor-intensive, the rate of adoption of
innovative technology is likely lower than for the previous business models. However,
it is expected that sensors and equipment linked to GPS systems will enable more precise
decision support systems, able to model and simulate for automation, monitoring, and
forecasting (Maru et al., 2014). Several studies demonstrated the economic convenience
of the VR technology adoption even for small plots, for example, in fertilizing (Aggelo-
poulou et al., 2011; Dobermann et al., 2002), lime application (Weisz et al., 2003), pesti-
cide application (Aita et al., 2015), and site-specific weed control (Timmermann et al.,
2003; P!erez-Ruiz et al., 2015). Finally, Matese et al. (2015) revealed how the use of un-
manned aerial vehicles (UAVs) appears to be the most cost-effective solution due to their
low cost for data acquisition in small-scale farming. All the above features are reported in
Table 3.4.

3.2.4 Urban agriculture

Urban environments can reshape traditional farming activities and result in alternatives to
conventional business models as shown in Table 3.5. The urban dimension of food is
associated with small-scale family-run production (Halweil, 2002). Several strategies
 Evolutionary scenarios for agricultural business models 51

Table 3.4 Main characteristics of the effective smallholder organization.

Main patterns Business model features References
Main cropping system Vegetables, orchards, perennial Vorley et al. (2007), Vermeulen
crops and Cotula (2010)
Farm governance Family farm/contract farming de Janvry et al. (2001), Lobley
and Potter (2004), Vorley et al.
(2007), Vermeulen and Cotula
(2010)
Precision technology Sensors, monitoring technology, Maru et al. (2014), Aggelopoulou
variable rate (VR) fertilizer et al. (2011), Dobermann et al.
application, VR manure/lime (2002), Weisz et al. (2003),
application, VR pesticide Aita et al. (2015),
application, site-specific weed Timmermann et al. (2003),
control, unmanned aerial P!erez-Ruiz et al. (2015),
vehicles Matese et al. (2015)

Table 3.5 Main characteristics of urban agriculture.

Main patterns Business model features References
Main cropping system Vegetables, nursery crops, fruits, van der Schans (2010), Zasada
high-value crops (2011)
Farm governance Family farm Halweil (2002)
Precision technology Sensors Duan (2012)

are exploited to maintain farm viability in cities, trying to overcome the limited possibil-
ity of attaining economies of scale (Mougeot, 1999; Zasada, 2011). Some farm activities
like production of high-value crops and niche crops have already showed good adapt-
ability to urban conditions (Heimlich and Barnard, 1992). Similarly, different strategies
from global marketing and vertical integration of services are exploited to maintain
farm viability in cities. In this chapter, we focus on “low-cost specialization” and
“differentiation.”
The “low-cost specialization” refers to products characterized by comparative advan-
tages in the form of highly added values generated by production, such as vegetables,
fresh fruit, nuts, and nursery crops (van der Schans, 2010). As highlighted by P€ olling
et al. (2016), efficiency, productivity, and intensification are closely linked to such
approach. Productivity and efficiency are often used as synonyms, but they cover
different dimensions: productivity is commonly defined as a ratio of a measure of output
and a measure of input (OECD, 2001), whereas efficiency can be seen as the ability to
produce something without wasting production inputs. Intensification means a large
concentration of inputs (and outputs) per unit area, which is often attained at the expense
of environmental integrity; in the last years, the concept of sustainable intensification,
52 Bio-economy and Agri-production

implying more production on the same land area while reducing environmental impacts
and maintaining ecosystem functioning, has been developed (Struik and Kuyper, 2017).
Accordingly, technologies able to improve efficiency and productivity in nursery can be
associated to low-cost specialization. In general, this kind of business foresees also the
commercialization of dairy products, characterized by high transportation costs, freshness,
and high perishability (Heimlich and Barnard, 1992).
On the other hand, urban differentiation is related to greater quality with respect to
conventional agricultural production; examples include imported products like heirloom
vegetables, exotic, ethnic, and ancient varieties. These examples refer to all kinds of prod-
ucts that are hard to be found in an ordinary grocery store and that create a unique selling
proposition or perishable and vulnerable products requiring more attention during trans-
port, such as some strawberry varieties (van der Schans, 2010) and dairy products (Heim-
lich and Barnard, 1992). In this context, according to Porter’s generic strategies (Porter,
1985), the sale of organic products can be considered an instance of market differentiation
too (P€ olling et al., 2016). By making the supply chain shorter, city farmers can deliver
products to consumers on the same day that they are harvested. In addition, besides spe-
cific product features, transparency and reliability in producereconsumer relationship
represent other tenets of this business model (Zasada, 2011). Due to the urban context
characterized by relatively small space availability, the adoption of innovative technology
is still currently scant in comparison with other business models: we have only found spe-
cific applications of sensors for urban agriculture as acknowledged by Duan (2012).
Vertical farming can be considered a particular instance of urban agriculture, driven
by the growth of urban areas that places additional emphasis on the reduction of urban
carbon footprints, with main concerns targeting water and land use (Chambers et al.,
2000; Saraei and Zaree Farshad, 2009). City-scale food systems in the form of vertical
farming are viewed as a means to (a) break the dependence from land and soil quality
that characterizes traditional farming systems and (b) reduce emissions related to food
processing and transport (Boyer and Ramaswami, 2017; De Anda and Shear, 2017;
Despommier, 2011; Winiwarter et al., 2014). Kalantari et al. (2017) reviewed 60 studies
on vertical farming and concluded that it can potentially increase food production main-
taining high quality and safety, thus contributing to sustainable urban farming. Vertical
farming is based on hydroponic and aeroponic technologies which allow crops to
grow indoor with mineral nutrient solutions or in air without a growing medium,
with water used to transmit nutrients. This innovative instance of urban farming repre-
sents a possible scenario for future vegetable production, enabling an increase in yield and
profitability per unit area (Touliatos et al., 2016; He, 2017). Many operative advantages
over conventional agriculture can be detected: year-round production, safer crops, low
use of fossil derived energy to harvest, transport and refrigerate, low use of pesticides or
herbicides, and a significant reduction in the use of waterdup to 70% with respect to
outdoor farming (Despommier, 2011). Nowadays, the high cost of technologies involved
 Evolutionary scenarios for agricultural business models 53

in vertical farming represents the main barrier to the diffusion of multitier systems, but
evidence of equipment costs reduction has been reported in the past years, such as
LED lightning (Gerke et al., 2015; He, 2017) and zero energy buildings (Reeder, 2016).

3.3 Inclusive business models in developing countries

Rural smallholders in low-income countries grow crops for their food security, selling
surplus if present. To promote inclusive business models, the reviewed literature high-
lights four points, intrinsically intertwined with each other. First, it is essential for farmers
to have a say in the decision-making processes at an institutional level, as often farmers’
associations are not fairly represented in the regulatory authorities (Sulle, 2010). Second,
close working partnerships between farmers and other food operators should be
established to share value along the food chain (Vermeulen and Cotula, 2010). Third,
innovation is needed in products, processes, and services to reduce obsolescence and
perishability (George et al., 2012). Fourth, innovation is needed also in agricultural
education, from the knowledge of ecosystems to data and information management
(FAO, 2013). Finally, the adoption of Information and Communications Technology
(ICT) is considered a key element to achieve sustainable business models, as it has
been playing an important role in promoting innovation in the agriculture sector
(Hudson et al., 2017; Tembo and Maumbe, 2009).
Governments, research organizations, and nongovernmental organization (NGOs)
are expected to move forward along these pathways, supporting local smallholders by
raising food safety standards, improving farmers market linkages, and providing technical
assistance (Kaganzi et al., 2009; Randall and Stepanovic, 2015). In particular, NGOs are
able to establish ties between governments and private companies. The Food and Agri-
culture Organization (FAO), for instance, helps rural communities define rankings of pri-
orities, conveys technical support and knowledge, and offers financial solutions
evaluations. To implement the “inclusiveness” undergirding this business model, robust
intervention approaches like provision of free services and inputs should be balanced with
commercially oriented services, to avoid the risk for smallholders’ supporters to be over-
protective and prevent farmers from gaining awareness of real market forces; it is hence
important that NGOs go beyond the provision of support to build competencies in
farmers and adopt a gradual exit strategy with the aim of increasing smallholders’ inde-
pendence (Sulle et al., 2013). Improvements in ICTs can enable rural communities to
communicate with, and be heard by, their peers, local institutions, and other producers.
In general, advisory services enabled by ICTs facilitate not just networking at all levels but
also grant access to information and organization of the knowledge base, thereby leading
to collaborative approaches to problem solving. In addition, ICTs can empower rural
communities so that they can negotiate better deals with other actors in value chain:
ICTs give farmers a better understanding of costs and knowledge of variations in market
prices (Nyirenda-Jere, 2010; Rudgard et al., 2011).
54 Bio-economy and Agri-production

With over 80% of smallholders located in Asia and Africa operating on plots of land
smaller than 2 hectares, the surveyed literature stresses farmers’ collaboration to achieve
food security, suggesting that organizations like agricultural cooperatives are definitely
a viable possibility. This point emerged also from an interview with Dr. Gerard Sylvester,
the Knowledge and Information Management Officer at FAO conducted by the authors
in 2017: farmers need to cooperate to generate profit, booking the use of common ma-
chinery and sharing technologies and know-how. In this context, advanced technology
solutions like sensor networks and Internet of Things (IoT) are able to provide appro-
priate information at the right time and become a priority for rural communities that
can help overcome technology constraints in the form of limited access to technology
and the capacity to introduce them in their productive processes. In terms of future tech-
nology adoption, next steps can be traced back to blockchain technology and food trace-
ability in order to improve shared information along food value chains enhancing
transparency and shifting the focus to the uptake of precision agriculture equipment
like VR machines and precision harvesters.
We report on two kinds of inclusive business models based on farmers’ cooperation in
the form of plot consolidation, which are producer-driven models and buyer-driven
models and on instances of urban farming. These models may constitute realistic answers
to present and future challenges posed by rural agriculture. The adoption of precision
technology is still limited, with just a few solutions likely to be adopted by smallholders:
this is mainly due to the low levels of education in low-income countries (Tak!acs-
Gy€orgy et al., 2013; Daberkow and McBride, 2003). In addition, the topic of family
farming will be addressed for developing countries subjected to increasingly growing ur-
banization, as citizens’ food security take center stage. The socioeconomic trends cited
above delineate possible pathways for the consolidation or the introduction of three types
of business models, which are reported in Table 3.6 and discussed below.

Table 3.6 Business models in developing countries and main characteristics.

Technology
Business model features Main cropping systems adoption rate
Producer-driven Cooperative Arable, cereals, Low
models vegetables, sugarcane,
orchards
Buyer-driven Contract farming Arable, cereals, Moderate
models Smallholder vegetables, sugarcane,
procurement orchards
Urban farming Family farm Vegetables, nursery Very low
crops, fruits, high-
value crops
 Evolutionary scenarios for agricultural business models 55

3.3.1 Producer-driven models

These models, whose core features are displayed in Table 3.7, describe how small-scale
farmers’ put together their plots to form a block and cultivate, irrigate, fertilize, harvest,
and manage the production collectively, while also sharing means of transportation, with
the aim of improving market access through collective actions. How farmers can be orga-
nized depends on the local context (e.g., laws governing group associations, cultural
norms), local commodities, and market structure (FAO, 2008). Examples of smallholder
organizations are vertically integrated cooperatives, farmers’ associations, registered pro-
ducer groups, and informal farmers’ groups (FAO, 2008, 2011a). Following this model,
farmers gain the opportunity to face demand from large buyers and a better control of
market prices, thanks to their increased bargaining power, lower transaction costs, and
economies of scale (FAO, 2013; Sylvester, 2017). The adoption of conventional technol-
ogy is widely considered as a possible solution to address smallholders’ challenges: har-
vesting and transportation machines are affordable technologies able to improve the
quality of agricultural outcomes (Sulle et al., 2013). Novel ICTs for rural and agricultural
development have been advancing quite rapidly over the last decade, as reported by
several case studies in Bangladesh, India, Pakistan, Sri Lanka, Thailand, and Indonesia
(FAO, 2013, 2014).

3.3.2 Buyer-driven models

In these models, buyers constitute a link between food producers and final markets.
Buyers are agricultural enterprises such as traders, retailers, or agricultural processors
that buy farmers’ produce. In general, farms integrated downstream with retailers govern
supply networks defining what is to be produced and at which conditions. These con-
figurations include contract farming, outgrower schemes and cooperatives, in which ac-
cess to inputs (seed, fertilizers, pesticides), technical advice, and financial resources are
provided depending on buyers’ needs (FAO, 2011a, 2014; Sulle et al., 2013). Supply
agreements between farmers and buyers usually report on the purchase price or how it

Table 3.7 Main characteristics of producer-driven models.

Main patterns Business model features References
Main cropping system Arable, cereals, vegetables, FAO (2008, 2011a, 2013), Sulle
sugarcane, orchards et al. (2013), Sylvester (2017)
Farm governance Cooperative (or similar formal FAO (2013), Sylvester (2017)
and informal farmer groups)
Precision technology ICT, sensors Tembo and Maumbe (2009),
FAO (2013, 2014), Hudson
et al. (2017)
56 Bio-economy and Agri-production

Table 3.8 Main characteristics of buyer-driven models.

Main patterns Business model features References
Main cropping system Arable, cereals, vegetables, FAO (2008, 2011a, 2013), Sulle
sugarcane, orchards et al. (2013), Sylvester (2017)
Farm governance Contract farming/smallholder FAO (2011a, 2014), Sulle et al.
procurement (2013)
Precision technology ICT, sensors Tembo and Maumbe (200)9,
FAO (2013, 2014), Hudson
et al. (2017)

will vary according to prevailing market prices and may also include terms on delivery
dates, volumes, and product quality. Literature has highlighted different contract farming
deals in developing countries, such as detailed outgrower schemes and smallholder pro-
curements (FAO, 2011a, 2014). Regarding technology adoption, the same consider-
ations on business models formulated above apply: on one hand, the strong need for
appropriate technology like harvesters and transportation machines is expected to be
met, and, on the other hand, empirical evidence shows the diffusion of ICT (Table 3.8).

3.3.3 Urban farming

The urban context in low-income countries is generally characterized by populations
spending a large percentage of their income in food, readily available in local markets
(see Table 3.9). Yet, the high costs of shelter and transport undermine the affordability
of the necessary food quantity, and most households could face scarce access to the
food safety nets characterizing rural agriculture (Cohen and Garrett, 2010). These social
systems protect vulnerable households against livelihoods risks, maintaining an adequate
level of food consumption and improving food security. Examples of safety net instru-
ments include the distribution of cash or food vouchers and the provision of public works
and employment guarantee schemes (FAO, 2011b). Urban agriculture is defined as
“small areas (e.g., vacant plots, gardens, verges, balconies, containers) within the city
for growing crops and raising small livestock or milk cows for own consumption or

Table 3.9 Main characteristics of the urban farming.

Main patterns Business model features References
Main cropping system Vegetables Gallaher et al. (2013), Gockowski
et al. (2003)
Farm governance Family farming FAO (1999), Cohen and Garrett
(2010)
Precision technology ICT Briz et al. (2014)
 Evolutionary scenarios for agricultural business models 57

sale in neighborhood markets” and can provide a source of food and income for urban
dwellers (FAO, 2020, p.5). In this model, food security can be achieved in different ways,
as acknowledged by Poulsen et al. (2015). For instance, households can reduce food ex-
penditures freeing up money for other kinds of food, allowing a more varied and higher
quality diet, or other needs. In addition, urban agriculture can enhance food security of
the whole urban community by increasing diversity, quantity, and quality of perishable
foods in urban areas. To this regard, dietary diversity is recognized as a useful indicator of
household food security (Godfray et al., 2010) and micronutrient intake (Warren et al.,
2015). Family farming in low-income countries can take on a variety of forms: producers
may either rely on both crops and livestock or only crops in the form of cultivated plots
(home gardening, vacant lot cultivation), varying between seasonal and year-round
cultivations, although traditional leafy vegetables are the most widely produced crop
(Gallaher et al., 2013; Gockowski et al., 2003).
As highlighted in the previous discussion about inclusive business models, most food
producers in low-income countries engage in agriculture to produce food for their own
consumption, and economic returns are only secondarily targeted. This paradigm ac-
quires major emphasis in the urban environment, characterized by small areas that hinder
scale economies. Several studies showed, indeed, that most of the food produced through
urban agriculture is consumed by farmers rather than sold (Poulsen et al., 2015; Warren
et al., 2015). There is scarce evidence regarding the adoption of novel technologies in
urban agriculture contexts, where food production still relies heavily on traditional tech-
nology. An exception may reside in the resort to ICTs that may play a significant role in
the years to come, promoting sustainable development through innovative exploitation
of natural resources; examples of technological innovations are broadband infrastructures,
enhanced internet access, and mobile applications (Briz et al., 2014).

3.4 Conclusion
The understanding of agricultural business models helps to explain how agricultural
organizations increasingly collaborate with customers and suppliers to cope with the de-
mands of changes in the technological landscape, driving innovation and growth. Several
socioeconomic and technological trends influenced also by environmental concerns
delineate possible pathways for the consolidation of various types of business models in
Europe. The large-scale agricultural enterprise model is associated with a rapid adoption
of novel technology to improve operational efficiency and is based on the reduction of
fixed costs allocated to unit products through economies of scale and the increase of
yields in the production of food commodities. The organic farming model constitutes
a kind of differentiation tentative from the large-scale firms and it is characterized by
the focus on sustainable products and processes. The adoption of organic practices seems
to be unrelated to farm size and a quest for innovation to increase agricultural yields is
58 Bio-economy and Agri-production

foreseeable. Family farming emerges in a context characterized by small possibility of

achieving scale economies. This model is associated to labor-intensive crops such as fruit,
vegetables, and perennial crops. Urban contexts require the deployment of specific
approaches focused on overcoming the limited possibility of attaining scale economies.
Urban business models share the combination of short value chains and reduced quanti-
ties with the high value-added type of crops, and, additionally, important tenets like
transparency and reliability in producereconsumer relationship are fundamental for
this type of business model.
In developing countries, food security plays a prominent role in the definition of busi-
ness models. In general, rural smallholders sell surplus only if present and the benefits
related to inclusiveness go beyond immediate profit: inclusivity can be seen as the devel-
oping of products, services, and practices suited to the growth needs of people living in
poverty, with a focus on securing staple food chains. It is possible to distinguish producer-
driven models from buyer-driven models. In the first case, small-scale farmers united in
collective forms and supported by local institutions play a pivotal role in the food supply
chain, whereas, in the second case, other downstream actors like retailers acquire more
negotiating power. An instance of urban farming is possible also in developing countries,
mainly associated with enhanced food security for the whole urban community and an
increase in diversity, quantity, and quality of perishable foods available.

Acknowledgments
This work reports on further developments of the 2015 ICT-Agri project “PAMCoBAdPrecision
agriculturedMethodology for Cost Benefit Analysis” with the addition of specific business contexts. The
project aims to deliver a web-tool guiding farmers in the choice of precision technologies, We acknowledge
Italian Ministry of Agriculture, Food and Forestry Policies for supporting this research.

References
AASTD e International, 2009. Assessment of Agricultural Knowledge, Science and Technology for
Development. Agriculture at a Crossroads: Global Report, p. 590. Press, I, Washington.
Access To Land, 2018. Europe’s New Farmers: Innovative Ways to Enter Farming and Access Land. Avail-
able at: https://www.accesstoland.eu/IMG/pdf/a2l_newentrants_handbook.pdf (checked August
2018).
Aggelopoulou, K.D., Pateras, D., Fountas, S., Gemtos, T.A., Nanos, G.D., 2011. Soil spatial variability and
site-specific fertilization maps in an apple orchard. Precis. Agric. 12 (1), 118e129.
Aita, V., Magano, D.A., Machado, M.R.R., Guedes, J.V.C., 2015. Caterpillar’s control with localized appli-
cation in soybean crops. Interciencia 40 (11), 784e788.
Alexandratos, N., Bruinsma, J., 2012. World Agriculture towards 2030/2050: The 2012 Revision. ESA
Working Paper No. 12e03. FAO, Rome.
Associated Press, 2010. GM Potato to Be Grown in Europe. The Guardian. ISSN 0261-3077. Retrieved
2016-02-15.
Asioli, D., Boecker, A., Canavari, M., 2014. On the linkages between traceability levels and expected and
actual traceability costs and benefits in the Italian fishery supply chain. Food Control 46, 10e17. https://
doi.org/10.1016/j.foodcont.2014.04.048.