More ag companies are testing the winds of change. They believe agriculture is on the cusp of another technological revolution, this time fueled by digitization and online connectivity.
This revolution will bring risk, and it will bring opportunity. And, for sure, it will bring disruption. It will change what it takes to be successful, both for farmers and for the companies they do business with.
It’s already got companies looking for new partners, worried that there’s going to be a boom in intelligence-based support services to farmers, and that they’ll be left watching from the cheap seats.
Imagine yourself in a corporate boardroom. In such a high-stakes game, how would you pick the winners to align yourself with?
That’s exactly the question that’s getting asked in boardrooms across the country.
Next, in many boardrooms, comes silence. But not in all.
How will companies adapt to a marketplace where farmers are so much more powerful than ever before?
Wade Barnes is watching it as if it was his own ECG.
“Five or six years ago I didn’t know anybody who shopped on Amazon; today I don’t know anybody who doesn’t,” says Barnes, CEO and founder of Farmers Edge, a leader in precision agriculture since 2005.
“Who would have thought 10 years ago that huge businesses like Sears would be disrupted by online shopping?”
Now, a similar scale of disruption is coming to agriculture, Barnes predicts. And he knows he isn’t alone in thinking so.
“I think if you talk to any of the big agricultural companies, I would bet that the upcoming digital disruption is in the top three of their concerns, if not number one.”
Precision agriculture has become an accepted part of farming over the past few decades. But Barnes says that’s nothing compared to what we’re going to see in the next four years.
For its part, Farmers Edge has been getting ready. It’s been partnering with an array of different companies, from insurance provider Ag Risk Global Solutions to technology companies, including Raven, the Weather Company, and Planet, which has the world’s largest privately owned fleet of earth-imaging satellites.
Farmers Edge has also expanded into the U.S. as well as into Australia, Russia and Brazil. It has attracted investment partners, too, and also concentrated on offering “Smart Solutions” such as FarmCommand, its fully integrated, data management platform, Fleet Manager, and Insur-Tech.
“Whether it’s financial institutions, insurance companies, grain companies, seed companies, agronomists, retailers… they’re all going to have to figure out how they fit into this environment,” says Barnes. “They are going to have to change the way the business has been done for the last 30 years. Instead of the farmer asking the agronomist, ‘What seed variety do you think should I grow this year?’ all the yield data is flowing into the cloud and being processed, so a farmer can use an app to see his area and the best varieties that are being grown and the highest yields.”
In the 2020s, Barnes is confident digital technology will change every aspect of how farmers do business, how they buy seed, fertilizers and chemicals, how they do agronomy, how they borrow money from banks, how they utilize insurance, and much, much more.
For an example, Barnes points to Bayer’s outcome-based pricing pilot, being trialed with a limited number of farmers in the U.S. this year. With this model, Bayer sets an expected yield outcome for a product or seed, based on a farm’s data and history, which is stored on the company’s digital ag platform, FieldView, and its own product research data.
If the farmer’s final yield falls below the expected value, the company will rebate a portion of the original price of its product. If the yield surpasses the value, the farmer shares a pre-agreed portion of that additional income with the company, so that in essence the farmer and Bayer are sharing some of the risk of producing the crop.
It’s a model that is only possible because of digitization and the advances that have been made in access, collection and processing of the vast amount of data that is produced every day in farmers’ fields, research trials, laboratories and research institutions.
As more farm-specific information becomes available, it will create transparency for farmers and for the marketplace like never before. The industry will no longer have to rely solely on third parties, like insurance companies, banks, agronomists or retailers to give them information, which to date has rarely been based on anything better than regional averages or wide-scale trends.
Very soon farmers will have immediate access to data about their specific farm right down to the field and sub-field level. And the impact, says Barnes, will be to make farmers a lot more powerful in the supply chain.
“Very soon, a farmer will have as much information to make decisions on marketing as Cargill,” says Barnes. “Cargill for 50 years has known what the climatic conditions were in the Mondo Grosso of Brazil, and if the soybeans were poor, they were taking positions on canola in Saskatoon because they knew the oil market was going to go up. When farmers have access to that information, they’re going to be much more powerful on the marketing side, where grain companies then have to make their money off the utilities or the logistics they trade, not with market intelligence, and that’s going to be a huge change.”
Tough times for retailers
The digital disruption won’t be good news for everyone, especially wholesalers, retailers and consultants. To a certain degree, farmers have been price takers to date, but that’s going to change as they become increasingly connected to manufacturers, seed and input and other primary agricultural companies, and as the supply chain shortens.
In today’s world, a seed company or input manufacturer sends its products to a wholesaler, who sends it to a retailer, who then sells it to a farmer. The insurance goes with equipment manufacturers, who sell to farmers through dealerships. The value of these third party agents, and also of the agronomists working for ag-retailers, is that they have traditionally been the ‘experts,’ i.e. the people with access to the detailed specifications and information on the products they sell, along with local knowledge about farming conditions and practices in their area, so farmers have had to rely on them to figure out what products are the best fit for their farm.
“When the farmer becomes completely digital, the connectivity to the third party becomes less important because the manufacturer, or the primary companies, now have the knowledge and the understanding of the customer that those third parties always had,” says Barnes. “If I’m a seed company, I need the local agronomist to tell me which varieties are going to work in that area or help the farmer make a decision of what’s going to work on his farm. Well, suddenly when those companies have that connectivity directly to the customer, they know when they plant, how much fertilizer, what the yields are, what their soil conditions are. Suddenly now that changes things and 10 years from now, I think you’ll see situations where John Deere or Bayer have a more direct relationship with big customers.”
Pipeline to the consumer
Connectivity isn’t just going to link farmers to their suppliers, banks or insurers, though. It’s also going to connect them more directly and immediately to consumers, which Barnes sees as another huge opportunity for farmers to seize the driver’s seat.
“With digital capability farmers can tell Mr. Consumer how much fertilizer was used on the field, when they sprayed and what they sprayed,” says Barnes. “They can provide their carbon footprint, and trace the product all the way back to the field. That’ll be game changing. People have been talking about this for a long time, but it’s happening now.”
The role for agronomists, at least initially, will be to help farmers make their digital transition, Barnes believes.
“They are going to be there to help the farmer trust the product,” he says. “A retail business may be hiring a data analyst to crunch the numbers and to showcase that in presentations to the grower, rather than having an agronomist go out and check weeds.”
There is no doubt in Barnes’s mind that the industry is going to change, and rapidly, and although he admits that scares a lot of people, it’s really a question of recognizing that it’s coming and working proactively to stay ahead of the game.
It’s time to get on board, Barnes says.
“What I found with technology, if you come late to the party on a disruption, once you realize you’ve been disrupted, you can never fix it,” says Barnes. “It’s like a torpedo ripping through a ship. You can’t fix the hole. It’s too late, the water is coming in.”