Commodities - JUNE 17, 2016

The digital farm

by Arama Kukutai

Precision Ag has been the hot topic in the AgTech sector, particularly with the acquisition of the first “ag unicorn” (Climate Corp. acquired Monsanto) and the subsequent gold rush of new Digital Ag startups. As farmers face lower commodity prices and thinning profit margins, a plethora of startups are now attempting to persuade farmers they can deliver more value per acre.

Silicon Valley investors have been at the forefront of this expansion, but Precision Ag is not an overnight phenomenon. Established industry players such as 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. What is new is that venture capitalists and entrepreneurs have turned their attention to agriculture in a big way. AgFunder, an online investment marketplace that matches investors with AgTech companies, expects the investment trend to top $3 billion in 2016.

Digital and Precision Ag companies easily make up the largest segment of AgTech deals by number. However, the jury is out on whether this wave of innovation will lead to strong market adoption. Only startups whose products deliver clear value and drive profitability will succeed in a big way. After all, it is a sobering counterpoint when considering the adoption rate of other new technologies by farmers, such as self-steering tractors and combines, which have an adoption rate of less than 20 percent after a decade or more of effort.

Precision Ag is about improving the key decisions farmers make about planting, fertilization, crop protection and irrigation, as well as yield and quality at harvest time. 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 conditions, is changing the farmer’s ability to both digest information and to automate via Internet-connected farm equipment, devices and infrastructure.

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 applied to weather prediction and variable-rate fertilizer application, these tools have now extended to water usage and even crop protection. Another key trend has been accessing machine data from the farmers’ equipment to drive greater precision in planting, topographical mapping and soil data.

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. 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.


Arama Kukutai is a partner at Finistere Ventures and a member of the speaking faculty at Global AgInvesting.

Glossary, videos, podcasts, research in the Resource Center

Forgot your username or password?

Close your account?

Your account will be closed and all data will be permanently deleted and cannot be recovered. Are you sure?

We respect your privacy! Please give consent for processing data as described in our Privacy Policy