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Mentioned Companies: DD, DE, MON, TRMB

The Fast Farming Future - New Age Farming Technology

July 11, 2014
3 min read
By: Tasha Keeney, CFA

Thanks to advancements in farming technology and data collection, farmers are planting faster and more efficiently than ever before. In 2013, farmers planted 41 million acres of corn in one week, or 43% of the annual US harvest. By comparison, in 1983 they planted a mere 16 million acres, roughly a quarter of total domestic harvest. [1]

Today’s farmers are fitting tractors with GPS, autonomous steering, and seed rate monitoring systems. Companies like Deere [DE] and Trimble [TRMB] sell systems and equipment to help sow crops accurately, prevent overlap, and allow for better strip till [2] management. So farmers save fuel, fertilizer, and time, while improving yield. [3]

These tools, combined with data on climate and soil, enable prescriptive planting. This system guides farmers to plant different crops within the same field at various depths and spacings, increasing yields by up to 5%.3 Monsanto (MON) has invested over $1 billion in its system. [4] Dupont [DD], John Deere, and Land O’Lakes have similar data-driven farming technology solutions.

The precision agriculture market in the US generates roughly $1 -2 billion [5] in revenues today, depending on whether estimates include systems, software and hardware. And the industry is primed for rapid growth. At this early stage, farms such as the one described in this article already are spending $2,000-4,000 annually on software and subscription services for a 2,000-acre farm. The US accounts for roughly 7% of the world’s farmland [6][7] or about 900 million acres. At a rate of $2,000-4,000 in precision agriculture spending for every 2,000 acres, software and subscriptions alone would total $900 million -1.8 billion. This estimate does not include computer systems and hardware such as unmanned aerial vehicles (UAVs) for crop monitoring, which would add at least another $1 billion to this market opportunity. [9]

As yields increase and labor costs fall, farmers will continue to substitute capital for labor. Perhaps in ten years, seven days of planting will seem like an eternity: tractor drones will need just one day.

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