The Year Ahead in Agriculture: Three Market Forces That Will Shape Our Industry

As we look ahead to the new year, several themes from 2016 are shaping the market in big ways.

Last year, we saw a number of acquisitions and increased consolidation in Big Ag, but at the same time, many new precision ag companies emerged. A recent report from First Round Capital found that agtech and life sciences were the most under-hyped startup verticals — meaning we haven’t reached the peak for agtech quite yet.

Meanwhile, AI and machine learning technologies are propelling agriculture like never before, but data control and ownership remain cloudy issues for many farmers and the industry at large. Regulation has likewise become much more uncertain under the incoming administration. How the country’s changing stances on global trade will impact agriculture remains to be seen.

With these and many more market drivers in mind, we wanted to take a look at what might be around the corner for agtech in 2017.

Consolidation will continue, but AgTech startups won’t be deterred and neither will farmers

As a whole, venture capital started to dry up toward the end of 2016, putting startups on red alert. It’s a different story for the AgTech industry. According to AgFunder’s mid-year report, seed rounds in AgTech companies made up a good deal of investments in 2016 and there’s been an 50% uptick in Series B round too, telling us that market is growing and maturing simultaneously.

At the same time, there were many high-profile acquisitions this year — including the Bayer takeover of Monsanto and Dow Chemical’s acquisition of DuPont — signaling that buyers would prefer to buy rather than build. As a result, farmers’ choices have been effectively cut in half when it comes to seed, fertilizer, and other inputs. Unfortunately, we don’t see the consolidations slowing down in 2017.

There’s good news too, and we don’t expect to see farmers pushed out of the market by any means. We expect funding to continue for emerging startups and independent technologies next year as the market comes of age, and as more buyers drive up demand for new tools and key differentiators. New entrants into the market will continue to push innovation in precision agriculture.

The companies that best establish value and trust with farmers over the next year will become the drivers of Precision Ag for the next decade.
Photo: Herefordcat

As the market settles, farmers will decide which tools will become industry standard. We can expect 2017 to be the year that farmers crown the winners and losers. The companies that best establish value and trust with farmers over the next year will become the drivers of Precision Ag for the next decade.

Farmers will become increasingly data-driven

Right now as an industry we’re still trying to make farm data tangible — getting it out of the cab, into databases, into dashboards. This was the big problem of 2016.

As data collection becomes easier and as standard formats emerge, data will pour out of farms across the country by the terabyte. We’ll have more data than ever before to cross-analyze, revealing the hidden correlations between key performance factors such as weather and seed variety.

Photo: United Soybean Board

When all of this data is finally available in meaningful and understandable ways, farmers begin to have more control, and they get more agility, more flexibility, and more leverage. The past two years were really the first time that farm data was collected at any sort of scale or consistency, which means that the 2017 harvest will be our first test balloon of its success.

Once these advantages are discovered, the market will all compete to be the most data-driven. Data will become your greatest competitive advantage. The opportunity will only grow over time.

And looking even further out, 2018 will be when the data really matures and we can begin to make correlations between input decisions and yield. That’s when the market truly turns on and data will have its biggest impact. Right now, though, the challenge is to create better tools to help farmer see their data and make decisions from it.

Data Silos Become More Interconnected, But…

The other major challenge facing Precision Ag, and AgTech in general, is control of data. Over the next year, this will begin to reach a tipping point for farmers. Although some data standards are in place already, and technology has advanced significantly in the past 15 years, corporate data strategies have stagnated. Furthermore, Big Ag has no real incentive to follow those standards, even though they created them.

For example — not a single company has followed the ISOBUS requirements as prescribed since 2000. It is not a scientific problem. It is a politically motivated, financial problem. Until agriculture incumbents are politically and financially motivated to adopt open data frameworks and policies, ag data will remain siloed. Right now, we have no good indicators that this is changing.

Photo: United Soybean Board
As the farming community becomes more data-driven, farmers will demand access and control that data.

Farmers, however, may very well begin to push back. As the farming community becomes more data-driven, they will demand access and control that data,

Most of the companies pushing for interoperability today are still young, but maturing. Of course, it takes years of collaboration between like-minded groups to develop and deploy standards, and none right now have complete industry backing. For this reason, in 2017 OADA, ADC, and AgGateway will likely be unable to achieve anything material in relation to interoperability, but we may begin to see the first shockwaves of a transition in the industry if farmers begin to demand more control.

2017 will be a decisive year for AgTech on many fronts, and the decisions the farming community makes over the next year and the evolution of the precision ag market will have repercussions for years to come.

Do you have other predictions for 2017? Share them in the comments belwo or tweet at us (@dirtforfarmers). And happy holidays!

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