Article Utilizing ETRM platforms to optimize financial yields in agriculture

Utilizing ETRM platforms to optimize financial yields in agriculture

Agriculture software is helping drive Southeast Asia’s global footprint in the agro-food and energy space. While innovative agtech solutions are working to optimize physical product yields, energy trading risk management (ETRM) platforms work to optimize financial yields.

Post-harvest real-time intelligence on market supply and demand enables suppliers to connect directly with buyers for improved pricing and risk mitigation. Tracking and analyzing data associated with higher agricultural volumes to enhance front-to-back office productivity can help bolster top- and bottom-line growth.

The Economic ascent of southeast Asia

The Association of Southeast Asian Nations (ASEAN) was formed in 1967, representing the 10 nations of southeast Asia with over 622 million people (larger than the EU or North America) and the third-largest labor force in the world, according to the World Economic Forum. The collective gross domestic product (GDP) of the ASEAN surpasses $2.55 trillion, ranking it the seventh-largest economy on the planet with expectations of becoming the fourth-largest by 2050, according to McKinsey. It is the world’s fourth-largest exporting region behind the European Union, United States, and China/Hong Kong.

Agriculture interwoven

Agriculture is embedded into the daily lives of the ASEAN economies. Sankalp Forum reports that more than half of the populations of Laos, Cambodia and Vietnam are employed in the agricultural and allied industries (IE: fishing). The Philippines, Indonesia and Thailand have more that 35 percent of their populations employed by these industries.

The Fragmented engine

Limited and fragmented arable land and access to water resources have been a constant strain on the output of ag-product in southeast Asia. With an average holding size of one hectare, as noted by Rabobank, the region has the smallest land holdings in the world compared to the average of 3.2 hectares globally. Throughout most of Asia, these small holders comprise nearly 90 percent of farm land.

The fragmentation of farm land runs almost in parallel to the fragmentation of data, from being overlooked or collected inconsistently on incompatible systems. Agriculture software plays a role in optimizing these limited and fragmented vital resources as farmers are gradually accepting the modernization trend to remain competitive.

Harvesting crops and data concurrently

Traditional farming requires many natural factors combined with precise preparation and timing to produce the highest yields. But innovations in agriculture software have been a boon to improving product outcomes. For example, the use of drones for spatial and irrigation mapping; robotic-enabled weeding; predictive analytics and artificial intelligence (AI) powered forecasting; and smart sensors collecting real-time weather and crop data. For centuries, farmers have focused on harvesting crops. These platforms have made it possible to harvest the abundance of robust data simultaneously to enrich total ROIs.

Weaponizing data

Financial management of harvested products can be further enhanced with agriculture software platforms that harvest internal data for financial applications. ETRM platforms bolster the monetization and risk mitigation of product by levering and converting robust data into actionable intelligence.

Planning, budgeting and scheduling to analytics, trading, hedging, forecasting, reporting and accounting functions on a single connected resource platform generate a cumulative effect on productivity. Operational risk can be minimized and silos curtailed through the improved transparency and accountability that a single source of truth resource provides.

The Value of ETRM platform

Best-in-breed ETRM software solutions seamlessly synchronize front-to-back office functionality, while also enabling businesses to organize and monetize data to enhance financial yields. Robust data piped through a single source of truth platform provides the visibility necessary to deliver more accurate analytics and forecasts.

These solutions should include a powerful simulation engine that allows for extensive risk scenario modeling and stress testing against a multitude of risk components — such as, interest rates, commodities, FX volatility to counterparty, liquidity, market and credit impacts — to improve timely decision-making. This additionally should help uncover effective hedge solutions and alternatives that can help mitigate market, credit and counterparty risk with access to a universe of derivatives and legging strategies. Automated hedge accounting treatment ensures hedge effectiveness meets reporting compliance standards.

Agriculture software platforms that can optimize data as a single source of truth in real-time are essential for firms seeking to engage and capitalize on the flourishing agricultural growth in southeast Asia. Applying this actionable intelligence to create more effective hedges, execute better trades, manage supply chains and better plan capex spending will allow organizations to maximize the utility of agriculture data and continue to find new ways to grow.

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