Navigating the New Tech Frontier, Part I

Published on: 14:59PM Nov 14, 2017

Agriculture has always been an industry of innovation, from mechanization to fertilizer to hybrid seeds. From a digital standpoint, however, agriculture — and row crop ag in particular — is probably a decade or more behind other industries, says Jonah Kolb, vice president, Moore & Warner Ag Group, an Illinois-based ag consulting and farm management company.

Kolb defines the new tech frontier as a rapid change in technology driven by significant investments in financial and human capital; financial capital being investment dollars and human capital being the pool of talent working in ag technology. “These two elements combined have the potential to meaningfully change long-term industry practices and dynamics,” he says.

In Part I of “Navigating the New Tech Frontier,” Kolb discusses the scope of ag technology and some of the more pronounced changes that are occurring as a result of its emergence.

Big investments, far-flung talent
According to AgFunder.com, a website that covers agriculture, technology and investment, on average, an estimated $1.6 billion was invested annually in ag technology between 2014 and 2016. For just the first half of 2017, it reported a $1.1 billion investment in ag tech. These numbers are focused on startups, not counting ongoing R&D expenditures by large companies such as Monsanto and John Deere.

These new investment opportunities for venture capitalists and technology professionals are bringing people to ag who may have never seen — much less set foot on — a farm before. “John Deere, for example, just opened a San Francisco innovation lab,” says Kolb. “It did that, in large part, because the talent pool on the West Coast, from a computer and digital programming perspective is broader and deeper than that found in ag hubs in the heartland.”

Changing dynamics
Ag technology is evolving at a dizzying pace, and Kolb highlights three areas that he finds particularly fluid.

1. Information and transparency. More data is available to more people than ever before, and those people are using real-world data sets to crunch numbers on things like the efficacy of inputs and in-field operations. Groups such as Farmers Business Network (FBN) are looking at yield response to fungicide or planting population with real-world data at commercial scale. “Regarding transparency, FBN also released a Seed Transparency Report, about how the same product is labeled, sold and priced differently across various brands and geographies,” says Kolb. “And while that has been a widely known industry practice, collating and publishing that data was a first.”

2. Innovative business models. Kolb sees continued experimentation with guaranteed offtake and risk sharing. Indigo Agriculture, for example, is not only offering wheat farmers a price premium based on yield from the products they grow, but is contracting based on the acre, not on production. “In this case, Indigo is saying to farmers, ‘We will buy every single bushel you produce from that acre at the agreed-upon premium — it doesn’t matter how many bushels you grow,’” says Kolb. On the other hand, other premium products have a more traditional bushels contract, where so many bushels are purchased at the premium, and farmers can sell any additional bushels on their own.

3. New competitive sets. Kolb believes there will be increased competition among peer groups. “There will be more competition between farmers for leased acres, for example; as well as between seed companies to sell seed and between equipment companies to sell equipment,” he says. However, evolving business models might also create competition between a farmer and a vertically integrated company that sees opportunity in controlling the value chain from land all the way through the consumer.

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