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
Grower-Field-iPad-Connectivity-Photo-Credit-VLab
Business ManagementOpinion: Agtech Boom Is Yet To Come
December 6, 2017
Many agronomists, farmers, and VC groups monitoring the agtech world are proclaiming the startup boom is over. Investments are down, Read More
Blue River Tech See and Spray prototype in CA
Business ManagementIs the Agtech Startup Boom Over?
November 13, 2017
In the past few months there has been a flurry of acquisitions of agtech startups by major players in the Read More
Spray Drift
Business ManagementProtecting Your Business with Ag Data: What Dicamba Can Teach Us (Guest Column)
November 9, 2017
All over the country, in ag communities large and small, farmers are reporting crop damage, neighbors are fighting, lawsuits and Read More
Farming at Sunset
Business ManagementAgtech Issues: The Shiny Object Syndrome
September 6, 2017
Do you remember those cartoons where someone lures someone else by placing a piece of candy, small amount of money, Read More
Trending Articles
Harvested-Corn-Field-Clouds
Data ManagementWeather Services Advance Precision Agriculture
December 4, 2017
Some estimates suggest over half of growers’ activities are impacted by weather conditions, from field workability to fertility management to harvest Read More
Wheat-an-oats-Daniel-X-ONeil
Data ManagementWill Open-Source Finally Unlock Ag Technology’s Potential?
November 28, 2017
To Aaron Ault’s eyes, ag technology right now is something like a walled garden — not unlike the Microsoft of Read More
Africa/Middle EastPERSPECTIVE: Is Bayer’s Highly Anticipated xarvio App the Next Uber for Ag?
November 22, 2017
As many of our CropLife IRON readers might know, every summer at MAGIE we award the most popular product featured Read More
Used Combine
Service ProvidersFinding New Precision Ag Opportunities in Older Equipment
November 15, 2017
Whether to buy new or used equipment has been and continues to be an important topic for growers. When it Read More
Blue River Tech See and Spray prototype in CA
Business ManagementIs the Agtech Startup Boom Over?
November 13, 2017
In the past few months there has been a flurry of acquisitions of agtech startups by major players in the Read More
Spray Drift
Business ManagementProtecting Your Business with Ag Data: What Dicamba Can Teach Us (Guest Column)
November 9, 2017
All over the country, in ag communities large and small, farmers are reporting crop damage, neighbors are fighting, lawsuits and Read More
Latest News
Drones-belong-in-the-hands-of-growers
Industry NewsPrecisionAg.com’s 17 Most Read Stories in 2017
December 13, 2017
Roughly speaking, we’re a little over two weeks away from blowing out the candles on 2017. It’s been a bizarre Read More
Farmer Advisor
Service Providers2018 Plan: Engaging the Next Generation of Ag Service P…
December 12, 2017
Here at Meister Media Worldwide (MMW) HQ we’re deep in the throes of content planning for 2018. Our rookie season Read More
Field
Decision Support SoftwareCeres Imaging Details New Pest, Disease Detection Produ…
December 12, 2017
Ceres Imaging, which provides science-backed aerial images to growers, will offer Midwestern corn and soybean farmers an early warning system Read More
Claas RTK Field base
Industry NewsCLAAS Taps Syncron for Cloud-Based Spare Parts Manageme…
December 11, 2017
Syncron, a provider of cloud-based after-sales service solutions, today announced CLAAS, a manufacturer of agricultural machinery, has selected Syncron Inventory – Retail Read More
Farmer and computer
Service ProvidersPrecision Agriculture Writers Wanted To Join Our Team i…
December 10, 2017
About The Opportunity: PrecisionAg.com is looking for people to join our team in 2018 and submit original content to our Read More
american-robotics-Scout-Drone
DronesAmerican Robotics Unveils Fully Autonomous Drone System…
December 7, 2017
American Robotics, an industrial drone developer specializing in agricultural automation, has unveiled its flagship product Scout. It is a self-charging, Read More
Industry NewsJohn Deere Upgrades Generation 4 Display Capabilities
December 6, 2017
John Deere has introduced its latest advanced guidance and machine data sharing technology with the addition of three new AutoTrac Read More
Grower-Field-iPad-Connectivity-Photo-Credit-VLab
Business ManagementOpinion: Agtech Boom Is Yet To Come
December 6, 2017
Many agronomists, farmers, and VC groups monitoring the agtech world are proclaiming the startup boom is over. Investments are down, Read More
Data ManagementAgritechnica 2017: Executives Discuss Europe Ag Tech Ad…
December 6, 2017
While North American growers slog through yet another season of depressed farm incomes and commodity markets, across the pond it’s Read More
Bitcoin-for-Agriculture-Source-TheJavaCoincom
Data ManagementWill Bitcoin Work in Agriculture?
December 5, 2017
If you checked the Internet lately, you’ve probably seen the words, Bitcoin, cryptocurrency, and blockchain. I won’t describe them in Read More
Vineyard weeding Robot-Naio-Technologies
Robotics/Labor SaversRobots Are Coming for Your Crop Protection (and Other I…
December 5, 2017
The market for agricultural robotics market is small but burgeoning, and their impact is likely to be quite a bit Read More
John-Deere-Connect-Mobile
Service Providers10 New Mobile Apps for Precision Agriculture
December 5, 2017
Ag professionals continue to reap the rewards of new smartphone apps. And perhaps no segment of farming is benefitting more Read More
On-Farm-Trials-Brazil
AmericasOn-Farm Trials in Brazil: The Way to Improve Agronomic …
December 4, 2017
The idea of using on-farm trials to gather data about the performance of any crop input has been in place Read More
Harvested-Corn-Field-Clouds
Data ManagementWeather Services Advance Precision Agriculture
December 4, 2017
Some estimates suggest over half of growers’ activities are impacted by weather conditions, from field workability to fertility management to harvest Read More
Longford-Silt-Foam-map
Data ManagementUnderstanding Precision Farming and Soil Morphology
December 4, 2017
The USDA Soil Conservation Service, now Natural Resources Conservation Service, has been charged with creating the country’s soil survey. This Read More
Spensa platform
Industry NewsSpensa Adds TerrAvion Aerial Imagery
December 4, 2017
Spensa Technologies announces today its partnership with TerrAvion, a California-based start-up that provides aerial imagery for agriculture. As customers of Spensa Read More
Industry NewsCase IH Announces Updated AFS Data Transfer Capabilitie…
December 4, 2017
Case IH has announced seamless data transfer capabilities between its Advanced Farming Systems (AFS) Connect farm management system and six Read More
Data ManagementCropLife: FBN CEO Appears at ARA 2017 Conference (Recap…
December 2, 2017
Right on the heels of news it has raised $110 million in a Series D funding round, Farmer’s Business Network Read More