Data is the New Cash Crop: Understanding the Market for Farm Data
Editor’s note: This post was contributed by Jason Tatge, the CEO of Farmobile, the farm data company. He’s been working one-on-one with farmers for more than 20 years. You can follow him on Twitter at @jasontatge.
Three years ago, Monsanto bought The Climate Corporation for around $1 billion, sending a signal to the market that farm data could be a significant revenue opportunity beyond its core business of seed and chemicals.
Despite this, many farmers I talk to still struggle to see the value of their data. Data is intangible, hard to capture, and difficult to see how it could ever be something that’s bought and sold in the same way that their physical commodities are today. The most common question I get is: “Who really wants this data and why?”
The most common question I get is: “Who really wants this data and why?”
One reason it’s hard to understand the value of farm data is because currently, no hard cash ever changes hands — there is not a transactional cost for data. Instead, it’s baked into the equipment contracts, precision software contracts, and personalized yield maps given “for free” to farmers.
It’s clear that even very basic farm data that can be collected today (and in fact is being collected today) is valuable, but right now that value is still intangible and abstract because it’s not treated as something that can be bought and sold in the same way that a commodity like corn, soybeans, wheat or cotton can.
Although the market for farm data has yet to be fully defined, farmers need to begin recognizing value in the unharvested information (i.e., data) from their fields. Armed with this newfound insight, the immediate action must be to safeguard your farms’ data before it walks off the land for the promise of someday bringing you improved services. Over the next five years, controlling your data will provide a valuable, and reliable, return. It’s almost like realizing a cover crop that you had largely ignored has just as much value as your primary cash crop.
As Monsanto noted when they acquired big data startup The Climate Corporation in 2013, they see the market as a $20 billion opportunity, and that has undoubtedly only grown since then. In fact, through agronomy alone, it’s pretty easy to project a $31 billion a year opportunity.
It’s pretty easy to project a $31 billion a year opportunity.
Everyone from insurance companies to seed companies to academic researchers want a slice of the pie, and farmers could have a significant piece too if they begin to take steps to protect and own what’s rightfully theirs. It’s time for farmers to start taking data seriously, and that starts with capturing their data and understanding the appetite for it.
In an attempt to generalize the buy-side of the market, I’ve outlined four sectors that are aggressively seeking field data today to transform their industries.
Chemical & Seed Companies
Seed companies are well on their way to making data the core of their business. Data is key to developing new seeds and chemicals and to figuring out how to reproduce the yields that match controlled lab results.
These companies perform testing at research facilities by using test plots. These small-scale plots can show massive yield potential for some crops, but the custom equipment used to plant, spray, and harvest these plots are highly specialized, and not what farmers use in the real world. When these research-intensive crops make it to market, the promise of massive yield potential drops like a rock.
In 2015, the national average for corn was 168/bu/acre, but the 2015 National Corn Growers Yield Contest showed that farmers could grow as much as 532+/bu/acre. Seed companies are hungry to capture data from farmers on a full field basis in order to better understand the massive difference between maximum potential and actual results, including what specific inputs, decisions, and other factors result in these dramatically higher yields.
Yield variability and product efficacy have traditionally been chalked up to weather events. The fact is, over 2/3 of the biggest influencers of yield in the field are from controllable factors, and just as agronomists need local information to base guidelines and predictions, seed companies need to understand the conditions in their farmer’s fields to better serve them.
For instance: What was the soil temperature at planting? What tillage convention is being used? What was your fertility package? What row spacing was used? What population was planted? What type of planting equipment do you run? Farmers have been running their own experiments and research for generations, the data associated with these trials is what makes that knowledge portable. Smart people will pay you for that information.
Agronomists + Co-ops
Your trusted advisors in the field need accurate farm data as much as you do. Agronomists and other advisors use a variety of data points to provide farmers with the best recommendations on everything from which seeds to plant, how to space seeds, and which fertility programs to consider.
The more timely data they have, the better recommendations they can make. Year-over-year field data helps agronomists look at trends on your specific fields, compare it to previous years’ productivity and help you figure out how to benchmark your yields and improve them compared to your region’s average. Technology advancements are also making it such that if they have precise field data, they can correlate that data with weather patterns, equipment data, historic crop patterns, and other data sources to develop better yield prediction models.
Three years of accurate yield data is the best baseline for just about any agronomy program. Without this baseline the services provided are less likely to produce the desired results. Additional field level data, from tillage, planting, and applicating can accelerate this learning dramatically when paired with good yield data. Once this data has been collected, stored and normalized across the entire machine fleet, regardless of equipment manufacturer, the data becomes exponentially more valuable. This enables real data portability and gets the data flowing to drive massive global innovation via access to this incredible new data set.
In partnership with your agronomist, field data can unlock greater yields, new approaches, and give you a competitive edge.
Farming is a risky business. One of the riskiest, I’d argue. Crop insurance is a must-have safety net that keeps the entire industry afloat when times are rough.
Your data is already used to meet reporting requirements, but there is a significant delay in the timeliness of this information. Insurance companies are chomping at the bit for better, more accurate, easily ingestible data. And they need a lot of it.
Real-time field data can enable crop insurance companies access to quicker acreage reporting, which leads to better portfolio risk management strategies and more accurate in season yield projections, all which can better manage loss reserves on their balance sheets.
Another important reason why crop insurance companies want your carefully collected field data is because when they are armed with accurate, reliable information, they can support existing rules or adjust the rules needed to qualify. A great example is the USDA’s changing definition of replanting and double-cropping. When the data is on-hand, insurance companies aid in keeping Federal offerings current, and can potentially expand the level of personalized private product offerings available at a competitive price.
OEM equipment manufacturers are now able to wirelessly collect data from most newer models. This allows these companies to identify engine optimizations, real-world use, and wear and tear on the equipment being operated in the fields. Equipment manufacturers have a vested interest in knowing what’s going on with the machines they engineer in real-time.
OEMs can also identify predictive maintenance opportunities for their dealers to improve uptime. For example, if you know that every 500 hours a certain part should be replaced in the harvester, and a customer’s harvester has 970 hours on it and usually puts on 200 hours/year, it would be in the best interest of all parties to replace that part before the next harvest, so no downtime is required in the middle of the busy season.
Predictive maintenance. Increased uptime. Enhanced alerting. These are improvements made possible by the sensor technology in modern equipment. Most OEMs collect and perform analysis from a large group of machines, share this data with a local dealership, and the dealer is able to better service their local farmers.
However, a significant concern comes into play when OEM’s go beyond collecting engine data and collect your agronomic data. Most farmers I talk with are generally OK with the OEM collecting engine data, with their consent, but not planting and certainly not harvesting data. These waters become completely muddy when large ag companies enter into data sharing agreements.
Some equipment manufacturers collect this data already — sometimes without farmers even knowing they consented to send it to these manufacturers during the purchase of the equipment. That’s why it’s important that farmers own and control their own farm data, so they can dictate where it goes, who sees it, and how much of the data they can use.
How Much is the Data Worth?
We’ve focused on the largest stakeholders in the post, but that’s really only scratching the surface. As farm data and the methods we use to collect, store, and analyze it get better, farmers should be aware that the list of stakeholders is only going to continue to grow. Think: bankers who can better assess risk for loans (and even lower your rates based on the data); landlords who can give potential new tenants/ buyers visibility into how the land has historically performed and identify ways to make the land more attractive; and academic researchers who are seeking new and better ways to feed the world.
The first step towards making the value of data concrete is to insist on owning it outright and presenting it in a normalized format, in one place that can be easily accessible for the buyers to negotiate prices directly with the owners. This market is being formed around standardized contract specifications (think yellow #2 corn on the CME) and ease of access and portability. You’re already growing this valuable asset now it’s time to harvest and store it just like you’ve done for generations with your crops. I believe the market from farm data sales will exceed $1 billion annually, within the next 3 years.
Farmers have gotten the short end of the stick for too long. It’s time to understand the value of farm data, harness it’s power, and leverage it to your advantage. It’s time to turn the tables, and that’s #FarmerPower.
Disclosure: Farmobile is an affiliated partner and supporter of The Dirt.