AgriDrone.nz – Market Potential of Pasture Measurement

Introduction

The purpose of this blog to analyse the New Zealand market within which AgriDrone.nz is seeking to operate.  At this point, we have limited information about any potential international markets for our software and other opportunities.  We will address international opportunities elsewhere.

Market Composition

The 2012 Agricultural Census[i] showed that there are around 38,391 farms could benefit from precision measurements of their pastures; this translates to around 12 million Hectares. However, not all farmers are committed to precision farming technics, in specific to precision measurements of their pastures.  Anecdotal evidence[ii] from those in the know suggests at least 10% of livestock farmers and 40% of dairy farmers measure their paddocks currently using various methods. This translates to a little more than 2600 livestock farmers and a little more than 4800 dairy farmers that perform regular pasture measurements. Put that in Hectares, and you get around 2 million HA split pretty evenly between livestock and dairy farmers.

We believe that as services, driven by our and other innovations will become cheaper as easier to do which should then lead to higher uptake of these services and a larger market over time.

Differentiation

The opportunity associated with pasture measurement has been recognised for some years now, and several well-funded efforts, both government, industry and privately sponsored, have not succeeded in making significant improvements in the way farmers measure their pastures. Until now.

We are coy about how we have achieved our solution, and we will continue to be so as long as it provides us with an advantage.  What we can describe are some of the benefits that our software will have over current systems (including recently trialled satellite systems). These benefits include:

1. The ability to perform pasture measurements much faster than previously possible – this makes things cheaper and less disruptive for the farmers
2. The increased accuracy of measurements – both at the points of measurement and across the whole pasture
3. The speed with which our results get delivered to the farmer
4. The automated integration of our data with existing farm management systems, like for instance FarmIQ
5. Less hassle for farmers from legislative and occupational health and safety perspectives

Given our differentiation in the market and a focus on professional and sustainable business, we estimate a rapid uptake that will translate into 7-12% growth in market share per annum.

Total Market Potential

Commercial fees[iii] for measuring pastures for large farms in the South Wairarapa (North East of Wellington) are about 80c per Hectare.  Conservatively speaking it is hard to imagine anyone paying less than this figure for their pasture measurements[iv].

The frequency of measurements is to some extent seasonal.  During summer and autumn consensus is that one should measure once every two weeks. During spring there may be added value to measuring once a week due to the aggressive pasture growth rates, and during winter, due to slower pasture growth, one may argue taking measurements once a month to be sufficient. On average, taking measurements once a fortnight throughout the year seems reasonable.

A practical formula for estimating market size then would resemble a formula looking something like this:

Market Size = (Number of Hectares of farmers committed to pasture measurements) X Price X Measurements Per Annum

Market Size = 1,928, 000 HA X 80c X 26
Market Size = NZD $40,092,000.00

Hence, one ends up with a total market value of approx. $40m per annum.  The trend is for dairy farming to increase and for livestock farming to decrease[v]. And that has been happening for some years so the actual market could be as much as 50% greater.

Our target is to capture 25% of this market over the next three years.  That leaves us with an estimated turnover more than NZD 10 million per annum.

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[i] https://beeflambnz.com/sites/default/files/data/files/nz-farm-facts-compendium-2017.pdf

[ii] Separate, conservative estimates from market players in the dairy and livestock industries.

[iii] Tow-behind using laser measurement.

[iv] Smaller farms will pay more and farmers doing it themselves will have outlays for equipment and hours spent on doing it themselves.

[v] http://archive.stats.govt.nz/browse_for_stats/environment/environmental-reporting-series/environmental-indicators/Home/Land/livestock-numbers.aspx