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How Satellites Can Improve Decision-Making For Agricultural Investments

By Alexander SakalCommoditiesApr 15, 2020 12:27PM ET
How Satellites Can Improve Decision-Making For Agricultural Investments
By Alexander Sakal   |  Apr 15, 2020 12:27PM ET
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This March, market participants await the USDA monthly report as eagerly as ever before. The approaching coronavirus pandemic stirred up the uncertainty on the markets. The official predictions should serve as a guiding light for those looking for direction. However, the March report came practically unchanged compared with February, leaving lots of growers and traders confused — and nervous.

The April WASDE was traditionally almost unnoticed by the marker, despite its adjustments for the COVID-19 situation and its impact. The major players are waiting for the May WASDE that should give a sneak preview of the 2020/21 crop year expectations.

USDA information about crop supply and demand estimates is fundamental to both policy-makers and agricultural investors. Nevertheless, the current situation with markets and crops is changing faster than USDA report releases, especially with the uncertainty around coronavirus pandemics. Hence the question: How to act on the market that changes more frequently than WASDE reports are made?

The uncertainty caused by the outbreak of the COVID-19 reinforces the need for reliable, precise, politically neutral, and promptly available data for investors. Since the information gathered is classified until released, private companies try to predict the WASDE reports using different tools.

Here’s where digital tools can come in handy. Geospatial intelligence, supply-and-demand estimates, crop tours, experimental plots, direct contact with grain producers are among the most effective ways to gather much-needed data. This is where satellite technologies can close informational gaps – and do it faster than once a month.

How Satellite Imagery Can Enhance Available Data

Being the most respected forecast source, WASDE reports have a serious impact on the farming market and heavily impact the prices. On average prices move around 1.6% right after the release representing a difference of around $300 million in trading value.

Thus, the key to success lies in keeping up with the data gathering trends. When it comes to agricultural investment, there are dozens of aspects to consider. It requires evaluating the producer's track record, analyzing markets for the output, feedstock availability, soil fertility indicators, weather conditions, etc. Simply relying on report numbers and even physical examination of the fields is not enough.

However, if we add satellite imagery paired with powerful machine learning algorithms, one can see the trends and anomalies, even on a micro-level.

For instance, professionally interpreted satellite information allows us to assess current crop conditions for better forecasts. Day-by-day crop monitoring results along with machine learning algorithms can impact marketing strategy, future prices. All that makes satellite technologies an indispensable addition to the standard government reports.

It is especially critical to monitor commodities and stocks in response to major events to maximize ROI. During the COVID-19 outbreak with subsequent governmental and economical restrictions, decision-makers have to focus on the short-term changes to know if their investments can meet profit expectations.

European Experience

Satellites have already proven their power in the ag industry, becoming the choice of the well-respected institutions. The World Bank with financial support from the EU carried out a Supporting Land Governance in Ukraine Program. Part of the task was to develop a tool to ensure transparency and monitor for farming performance remotely. It turned out to be that this tool based on satellite imagery was also a convenient solution for farming investors.

EOS Crop Map tool, a part of the EOS Crop Monitoring platform, combined satellite imagery with machine learning algorithms. The software can recognize main crop types, field areas, track crop rotation, and essentially, assess land potential on certain farms and the country’s whole agricultural sector.

90% precision and compatibility with third-party services via API allowed its productive use for both governmental and commercial purposes. For example, the service discovered over 10 million acres of fields unregistered in Ukraine’s national cadastre with a multi-billion dollar turnover. The tool has also proved its effectiveness in identifying crop rotation violations that impoverish soil potential and defining fair land prices.

Using the platform’s imagery and analytics, traders can see current field conditions and historical crop records to conduct economical and financial calculations. The data opened the door for local agricultural commodities price predictions as well as the equipment and farming supply-demand estimation on any given district of Ukraine.

At EOS Crop Monitoring, we believe that timely and precise information can benefit everyone — the users, the business, and the environment. As for farming investors, they can use such tools to make local price forecasts together with the approximate supply and demand assessment based on satellite imagery analytics.

Satellite Prediction Era In Ag Industry?

Agricultural investing follows the example of the retail industry. It is entering the ‘remote prediction’ era where the one with superior AI tools has the edge. Elevated knowledge leads to greater investment opportunities, reduces risks and enhances profitability. Geospatial information along with satellite imagery and machine learning accelerates decision-making.

Researchers have already shown that combining satellite imagery data with WASDE reports increases returns. The European experience suggests that satellite imagery can be a valuable supplement to the regular investment approach in agriculture.

One can expect that satellite technologies with their great potential, being a cost- and time-efficient mechanism to get precise information about soils, crops, and fields, are to become a competitive advantage on the ag market.

How Satellites Can Improve Decision-Making For Agricultural Investments

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How Satellites Can Improve Decision-Making For Agricultural Investments

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