Monsanto made a big bet on data analytics to unlock agriculture’s potential $20 billion revenue growth opportunity by reducing input costs and increasing yields when it acquired Precision Planting LLC in 2012 for $210 million (which it just recently strategically divested to John Deere) and Climate Corp. for $930 million in 2013. The importance of data for the farming industry is vital in order to meet the needs of the rapidly growing population of >9 billion people by 2050 with limited resources of only ~3.5 billion acres of arable land.[i] Data aggregation and predictive analytics will help farmers adapt to climate change and ultimately make better decisions both pre and post-planting, gain productivity, and increase output.
With the acquisition of Climate Corp, Monsanto was able to integrate years of seed and crop protection data with Climate Corp’s extensive agriculture database pulled from government satellites, weather stations, sensors, and other resources. Climate Corp’s Climate Basic mobile application maps soil and climate data to a 10-meter-by-10-meter resolution for the 30 million agriculture fields in America.[ii] The mobile application knows the fields’ temperature, soil moisture, and other agriculture yield-indicators and can make recommendations to the farmer as to when to water, what type of fertilizer/pesticides to use, when to irrigate, as well as roughly predict harvest per crop based on historical, current, and forecasted weather conditions.
Monsanto estimates that farmers typically make 40 key choices over the course of the growing season from what seed to plant, when to plant it, and how to maintain the seed until yield. For each decision, there is an opportunity to save money on inputs—water, fuel, seeds, and chemical treatments as well as an opportunity to increase yield—when to farm, what to plant and where, identify conditions like pests before they result in loss, etc.
Since the acquisition, the mobile application has been advanced and recently re-launched as Climate FieldView, comprising of eight features. [iii]
- Field-Level Weather- View historical, real-time, and forecasted weather data at the field level, hourly and daily.
- Notifications- Receive weather notifications.
- Scouting- Capture geo-located images for things like pests and diseases.
- Data Connectivity- Connects data to iPad through blue-tooth technology.
- Field Data Visualization- Collect, store, and access data all in one place.
- Field Health Advisor- Current and historical data for evaluating crop health and identifying issues before they impact yield.
- Nitrogen Advisor- Advance tracking capabilities for customized nitrogen application.
- Script Creator- Use of soil maps to generate custom prescriptions.
In addition to Climate FieldView, Monsanto has launched a new device called Climate FieldView Drive, originated through its acquisition of Precision Planting in 2012. FieldView Drive aims to collect, store, and visualize data all in one place. The drive is plugged into a tractor or other agriculture equipment and paired via Bluetooth to an iPad. The device hopes to not only help farmers collect data but also to do so on a consistent basis so that it could be used more easily on an aggregate level in an open-sourced platform. Just recently, Monsanto has sold off Precision Planting to John Deere in a strategic divestiture since John Deere can utilize the device in all of its tractors/equipment while still allowing Monsanto to access the data through their FieldView Platform. Mike Stern, President and CEO of Climate Corp noted—“to maximize the value of digital agriculture, farmers need solutions for simple and seamless collection of in-field agronomic data.” This will be achieved through the connectivity between John Deere and the Climate FieldView platform.[iv]
Monsanto sells their product to their seed customers and not surprisingly, there are strong direct network effects such that the more customers that Monsanto has using FieldView then the more robust data set they will have and be able to improve their algorithms ability to offer better planting advice to farmers and recommend certain seed varieties based on topography. However, there is controversy associated with open-sourced farming data. As is the case for Climate Corp, their farmers own the data and control what data will be shared – building trust with the farmer is of utmost importance to the success of their products and digital platform. Farmers are hesitant to share data as it is their competitive advantage – pure insight into their capabilities could be copied or even used against them by retailers, vendors, or competing farmers (e.g. a neighbor farmer bidding against you for land you want to rent), severely hurting their business.[v] Nevertheless, there is potential for indirect network effects to strengthen and Climate Corp is well aligned to the Open Ag Data Alliance (OADA) – an independent body that ensures common data formats and security across the industry — to realize those effects .[vi] With open-sourced data, indirect network effects can be realized and value-accretive products can be offered to the farmers such as insurance (one of Climate Corp’s original value propositions but recently sold the portfolio to AmTrust North America). A more robust weather data set allows for more efficient pricing of an insurance policy and products that better meet the needs of the farmers. Furthermore, advancements in weather stations and sensor technology like those that climate cop has developed and utilized allow insurance to be offered on a weather-indexed basis — a derivative product that automates payouts to actual event, streamlines the claims handling process, and reduces frictional costs.
By harnessing big data and predictive analytics, Monsanto’s forward-looking strategy has allowed it to truly differentiate itself from its competitors and develop a more robust value chain for its customers. Going forward, there are some potential concerns with the increase used of data to drive decision-making at the farm level. For example, could big data limit diversification of crops as each farmer chooses similar crops that yield the best results? If only big businesses can afford these technologies, what will happen to small agriculture businesses? Putting the concerns aside, there is a big opportunity for Big Data to revolutionize the agriculture industry and the positive effects are already being realized – A 2014 study in the US by the American Farm Bureau Federation found that big data reduces the costs of agriculture inputs by 15% and increases crop yields by 13%.[vii] There is no doubt that big data will play a critical role in feeding the world’s growing population.