The US$4 Billion Race To Control Smart Irrigation

So when it doesn't rain or there's limited snowpack in a place like Colorado this past year, is our expectation...

So that's gonna lead to drought, I would assume.

So does a worse drought in this case mean more demand? Are we expected to see a spike in smart irrigation solutions and technologies?

Yeah, this is a really interesting relationship to look at, and one that's a bit counterintuitive.

So I think we might expect that as water scarcity increases, the adoption of efficient technology just continues to rise and rise and rise.

But there is actually a point where if water gets too scarce, adoption will drastically drop, because in these instances of severe scarcity, farmers have to go into sort of a survival mode with irrigation.

So that includes, uh, fallowing land, which means just taking it out of production completely so they don't have to water it, or flood irrigating and using up as much water as they can whenever they get that water allocation.

So this interaction between, you know, water and the adoption of tech, it's important to be aware of, and it's maybe not as, uh, intuitive as we might think.

Yeah, it kinda makes me think of, uh, the discussion about rising fertilizer costs or shortages because of the Strait of Hormuz.

What do we say the numbers are? What, 20 to 30% of, is it fertilizer?

Yeah, I think it might even be a little bit more than that.

Yeah.

Yeah, it passes through the Strait of Hormuz, and so, you know, people are concerned or, "Hey, the farmers are not gonna have enough fertilizer." But the reality of it is farmers can adapt, right? They will sort of, at least on the margins, if fertilizer costs are too high or they reach certain levels, they're gonna just use less fertilizer.

But I think what's interesting is I was learning or listening to a podcast, I think on Bloomberg, and it was someone talking about the impact of using less fertilizer on crop production, and they weren't speaking to anything specifically, at least crop-wise.

But the marginal, uh, negative i- the, the impact on crop production is minimal, right? That if you, if they just scale back fertilizer 10%, it's not like production drops 10%.

It's, it's a fraction of a percent at that point maybe.

So I thought that was pretty interesting, and I think that's kinda what's happening when there's less water.

Like you said, farmers start fallowing.

They start making different decisions, uh, going forward.

But agriculture, it's, it's a long-term...

It's a, it, it, it's mature, right? And so the, the decision-making processes are not fast.

I think that's one of the challenges for actually outsiders looking at the market as a whole.

So I mentioned $4 billion earlier, right? $4 billion on digital spending over the next decade.

Where's that going? How do you...

What's a simple way to break out that spending to give the listener some idea?