Can Digital Farming Deliver On Its Promise?

Precision ag has been the hot topic in the ag tech sector, particularly with the acquisition of the first “Ag Unicorn” Climate Corp. by Monsanto and the subsequent gold rush of new digital ag startups. As farmers face lowering commodity prices and squeezed farm margins, a plethora of startups are now attempting to persuade farmers they can deliver more value per acre. In doing so, these early innovators hope to convince investors that they can get the attention of the other “Big 6” players and rapidly grow onto millions of acres with software-like margins.

Turning Investor Interest into Market Traction

Silicon Valley investors have been at the forefront of this expansion, bringing expertise in Big Data and IoT (the Internet of Things) with low-cost mobile platforms and novel business models, linked to broad access to innovation capital and talent. It is an intoxicating mix for a traditional industry like agriculture. However, agt ech is also following a well-trodden and proven formula – riding the cost curves of other industries (Life Sciences, for example) to adapt and innovate for the farm and food industries.

Precision ag is not an overnight phenomenon – established industry players like John Deere and IBM have been engaged in smart-farm equipment development and software integration for large-scale farms for years, and more recently web and mobile-based tools. However, it is novel that VCs and entrepreneurs have now turned their attention and talent in disruptive high tech to agriculture in such a concentrated fashion. In fact, industry source AgFunder expects the ag tech investment trend to top $3B in 2016.

Digital and precision ag companies easily make up the largest segment of ag tech deals by number. However, the jury is out on whether this wave of innovation will lead to strong market adoption. Farmers demand a step change in value; only startups delivering on a clear value promise will be able to scale and drive profitability. After all, it’s a sobering counterpoint when considering the adoption rate of new technology by farmers – self-steering tractors and combines, for example, are less than 20% adopted after a decade or more of effort.

Digging into Ag Data

Precision ag is about improving the key decisions farmers make about planting, fertilization, crop protection, and irrigation on the inputs, as well as yield and quality outputs at harvest. The farmer traditionally relied on experience and historical knowledge to undertake these steps according to the schedule for each season. Unprecedented low-cost access to real-time data, particularly on weather and soil/environmental conditions, is changing the farmer’s ability to both digest information and to automate via internet-connected farm equipment, devices, and infrastructure. This is profound when considered alongside the trend in increasing farm acreages with the number of 5,000+ acre farms growing over 150% in the last 30 years. Farms are getting larger, and with less labor engaged in ag, real-time decision support and automation will grow.

Of course with more data comes the challenge of making sense of it, and acting upon it in a timely manner. A major area of focus for the first wave of digital ag companies has been around data visualization tools. Focused on satellite and aerial imagery (deployed by aircraft and drones) and application to weather prediction, variable-rate fertilizer application early on, these tools have now extended to water usage and even crop protection indicators. However, because these startups access needed information from public sources like USGS soil maps and commercially available sources including farmer machinery data, they also run the risk of “me too” products and have difficulty differentiating their offers to farmers thanks to corresponding pricing pressure.

Another key trend has been accessing machine data from the farmers’ equipment to drive greater precision in planting, topographical mapping, and soil data. This was recently underlined by the Monsanto-Precision Planting /John Deere deal over data. With a rapidly growing list of providers and solutions, the landscape is both rich but potentially confusing for the farmer trying to decide if this latest wave of the data revolution can deliver on-farm value. It also underlines a fundamental challenge – getting to farmer customers cost effectively and retaining their business once earned. The traditional ag players will likely play a major role in the emerging distribution models for the new kids on the block.

Taking The Next Step

In this context, it is important to understand where the next generation of precision ag companies can create and capture value. At Finistere, our thesis is that whatever the startup is focusing on — be it irrigation, on-farm automation, or fertilizer application — it is paramount to demonstrate economic utility, as well as improved functionality or ease of use. Whether it is time and efficiency created through automation, access to mobile platforms that can be used in the field, or ubiquitous data access, improved functionality is a key feature of precision ag for the farmer.

However, for the farmer trying to make sense of the myriad of solutions, the demonstrated ability for a precision ag solution set to deliver true utility on a non-linear, scalable basis is the ultimate selling point. Utility is simply economic gain per acre farmed. The accepted benchmark in the ag industry is that the farmer expects $3 of gain for every $1 invested.

With companies hyping their claims to “millions of acres” under management, the question these companies need to answer is what can they sustainably charge farmers for these services based on the utility created per acre? Answering this question will help determine winners and losers in the space. Seed companies are able to charge $25 and more per acre. It is no mistake that a key reason for the success of traits is demonstrable yield/cost benefit. So far, data visualization companies have not been able to command this kind of pricing.

The challenge is clear for the precision ag startup – not just to capture acres, but to show farmers there is significant value embedded in the data that they can unlock. With dozens of companies funded in 2013-15, it will be intriguing to see how many of the new digital ag players can survive a likely Series B funding crunch in 2016. Delivering high value to farmers will likely be key.

Topics:

Leave a Reply

Business Management Stories
Alabama bottomland
Business ManagementGreenPoint AG: Dealing in Ag Tech Down on the Delta
June 5, 2017
Precision-farming veteran Ben Carlisle is the Agricultural Technology Manager for GreenPoint AG, LLC, a retailer with locations in Arkansas, Louisiana, Read More
GPS, Guidance
Business ManagementPromoting Precision Agricultural Innovation in a Risk Averse Marketplace
April 24, 2017
As precision agriculture consultants we constantly are being asked our opinions on where to invest, and how to strategically invest Read More
Business ManagementBionic Leaves: Future Source of Endless Fertilizer?
April 21, 2017
*Article Notes: This monthly column takes some crazy sounding ideas and applies them to the field of Ag Tech. The Read More
Ag Retailer and Grower WinField United
Business ManagementMirror Mirror on the Wall, Who is the Most Trusted Ag Advisor of Them All?
April 4, 2017
Who is the most trusted ag advisor of them all? It’s a question I think we’ve all heard before, mind you Read More
Trending Articles
PrecisionAg Vision Conference
EventsPrecisionAg® Vision Conference: Focused on the Future
June 13, 2017
PrecisionAg® is pleased to announce the return of its PrecisionAg Vision Conference, October 10-12, 2017. Based on overwhelmingly positive response Read More
Gavin Newsom Forbes AgTech-Summit
ProfessionalsAgTech Summit Aiming High for Modern Farming Solutions
June 12, 2017
THRIVE AgTech, in partnership with SVG Partners and Forbes, is hosting the third annual Forbes AgTech Summit June 28-29 in Read More
Quantix Drone Farmer
DronesTop 10 Most Intriguing Technologies in Agriculture
June 3, 2017
This may be a bit of stating the obvious here, but we’ll throw it out there anyways: as much as Read More
Farming iPad
Data ManagementOpinion: ROI or Die in Precision Agriculture
May 12, 2017
The thought of $3.50 corn for the foreseeable future seems pretty disheartening. However, if you look at the precision ag Read More
BASF Maglis grower retailer tablet
Data ManagementQ&A: What BASF’s Latest Foray into Precision Ag Means For Growers
May 11, 2017
In late April, BASF agreed to acquire U.S. precision ag player ZedX, a leader in the development of agronomic weather, Read More
Mung beans Australia
InternationalPrecision Ag in a Tough Season in Australia
May 8, 2017
This year’s summer crop season has been a tough one for most growers in Australia. Prolonged periods of high temperatures Read More
Latest News
Data ManagementCDMS Announces SeedIQ Acquisition
June 26, 2017
Crop Data Management Systems, Inc., (CDMS) announces the acquisition of SeedIQ as part of its growth plan to provide complete Read More
Cotton closeup
Imagery/SensingCotton Growth Management with Precision Agriculture
June 20, 2017
A cotton crop presents some important differences to other commodities that are widely produced in Brazil, such as soybean and Read More
Corn Field
Industry NewsCNBC: Inside Amazon’s Whole Foods Takeover
June 20, 2017
Amazon’s takeover of Whole Foods sent the stock of competing grocery chains plummeting. To understand why, you need to know Read More
DronesNavigating a New World: Drone Technology in Agriculture…
June 20, 2017
My first exposure to unmanned aerial vehicles (UAVs) was as a master’s student at Kansas State University. I was researching Read More
Precision Ag Innovation Series
EventsInnovation Series Agenda Zeroes In On Maximizing Key Se…
June 14, 2017
In a recent survey of service providers conducted by PrecisionAg® Professional magazine, more than seven in 10 indicated that variable Read More
Soil Scientists
Data ManagementAccessing USDA Soil Data for Precision Farming
June 13, 2017
Many precision farming websites have integrated the USDA NRCS soil survey database using the USDA Soil Data Access web portal. Read More
GEOSYS In-Season Imagery
Decision Support SoftwareGeosys Announces Imagery and Weather Data Offering
June 13, 2017
Geosys, a provider of agronomic decision support tools, today launched Geosys Labs, a new program that will make its global Read More
PrecisionAg Vision Conference
EventsPrecisionAg® Vision Conference: Focused on the Future
June 13, 2017
PrecisionAg® is pleased to announce the return of its PrecisionAg Vision Conference, October 10-12, 2017. Based on overwhelmingly positive response Read More
Decision Support SoftwareMyriad Mobile Raises $1.5 Million to Launch New Ag-Tech…
June 12, 2017
Myriad Mobile, a software technology company focused on mobile and web applications, has raised $1.5 million in a Pre-Series A Read More
center-pivot-irrigation-drop-sprinklers-on-corn
Variable Rate ApplicationVariable-Rate Fertigation Can Be Simple
June 12, 2017
A rule is a rule is a rule, right? Well, not always. Sometimes, rules are meant to be changed. Most Read More
Gavin Newsom Forbes AgTech-Summit
ProfessionalsAgTech Summit Aiming High for Modern Farming Solutions
June 12, 2017
THRIVE AgTech, in partnership with SVG Partners and Forbes, is hosting the third annual Forbes AgTech Summit June 28-29 in Read More
Sensors/IoTLeveraging IoT to Improve Data Collection for Agricultu…
June 12, 2017
Between population growth and climate change, farms of all sizes are being challenged to increase yields. Internet of Things (IoT) Read More
DronesAg Drone Update: The Hunt for 1,000 (OPINION)
June 10, 2017
Having obtained my FAA Part 107 Commercial Drone Operators license back in September of last year, I’ve spent the past Read More
Industry NewsMergers & Acquisitions: Land O’Lakes Tosses E…
June 9, 2017
Land O’Lakes has made a minority equity investment in EFC Systems, an ERP (Enterprise Resource Planning) and precision solution provider Read More
Mixmate-featured-image
Decision Support SoftwareHandy Software, Hardware for the Field
June 7, 2017
More than two decades ago, Iowa grower Doug Applegate wished for a “little portable chemical blending system” that could easily Read More
Decision Support SoftwareHarnessing A Team To Build Your Own Software
June 7, 2017
What’s a powerhouse retail network to do when it can’t find a software system to meet incredibly diverse needs? Build Read More
Tim Ferrell Marshall County Co-op
Decision Support SoftwareWhen It’s Time To Switch Software
June 7, 2017
No one in their right mind wants to change software. That’s the opinion of Tim Ferrell, manager of Marshall County Read More
PA Special Report Enterprise
Decision Support SoftwareSpecial Report: Enterprise Management Systems
June 7, 2017
A functional and stable software system can allow a retail operation to run at maximum efficiency, build customer loyalty and Read More