Week 328 - Precision Agriculture

Situation: Production Agriculture has created its own problems. Worldwide supply has exceeded demand for years. In early 2017, the USDA projected that farm income would fall for a 4th straight year. But it hasn’t turned out to be that bad, since crop prices have coalesced near last year’s levels, and sales volumes have risen. Much of the oversupply results from technological improvements in farming, starting with the buildout of center-pivot irrigation in the 70s and 80s. Weather prediction started improving in the 1990s, and the National Oceanic and Atmospheric Administration (NOAA) now has a number of online tools available to farmers at no cost. 

To integrate weather information with soil characteristics on a given farm, we now have professional agronomists who provide specific advice on the use of seeds, fertilizer, water, insecticides, herbicides and fungicides. Agronomists are sometimes employed by equipment or seed vendors, who offer Wi-Fi connections that link information collected on tractors to agronomists. More often, Agronomists are employed on retainer by farmers. Many have university degrees, and others with less training work under supervision for an agronomy service, such as Servi-Tech, Inc. 

The application of Global Positioning Systems to agriculture began with patent approval in 1998. Increasingly, agronomists encourage farmers to adopt GPS-based services addressing their entire set of specific needs, a tactic called “Precision Agriculture.” For example, satellite imagery and soil sampling can be used for variable rate seeding and watering. Results at harvest time are analyzed using Wi-Fi linked to a crop-yield computer program on GPS equipped combines. Trimble, Inc. (TRMB) is a leader in this technology, and new combines are increasingly equipped with Trimble receivers.

Mission: Present a table of publicly-traded companies that provide precision agriculture equipment, and explain in the Administration section the specific offerings of each company in the Table.

Execution: see Table.

Administration: 

SYNGENTA AG
* Provides a variety of digital tools through strategic collaborations with 1) Lindsay Corporation (manufacturer of center-pivot irrigation systems) to match soil and seed characteristics with water needs; 2) Ag Connections to present a complete range of farm management software in a digital platform.  
DEERE
* Recently purchased Blue River Technology, because it makes “tractor-towed robots that can analyze crops and apply fertilizer and pesticides plant-by-plant.”
MONSANTO
* Has started using its experience with thousands of corn seed varieties in various soil conditions in “self-teaching algorithm” to predict how a particular seed variety will perform after a farmer plants it. But the key to Monsanto’s emerging dominance of precision farming is due to a subsidiary: The Climate Corporation. It’s FieldView Platform is mounted on tractors and provides software for integration of various planting and harvesting inputs. 
AGCO
* Has purchased Precision Planting LLC, which had been part of a Monsanto subsidiary--The Climate Corporation, and is licensed to retain connectivity with The Climate Corporation’s FieldView Platform.
VALMONT INDUSTRIES
* Has developed the AgSense software app for optimal GPS-managed control of variable center-pivot irrigation systems.
ARCHER-DANIELS-MIDLAND
* Provides daily information and analytic tools essential for precision agriculture planning, augmented by its recent purchase of the Agrible news service.
IBM
* Precision agriculture is increasingly dependent on GPS systems and images of farmland generated by orbiting satellites. Detailed images of quarter sections of farmland are now available, using satellites designed to transmit different types of information with specific uses in farming. Agriculture research has been a specific mission of NASA since 2015. IBM owns “The Weather Channel” and has worked with NOAA since 1996 to improve weather forecasting at a “hyper-local” level. IBM provides most of the hardware and software that makes this possible, and has started applying this to precision agriculture, specifically in Brazil.
RAVEN INDUSTRIES
* Is a pioneer in field navigation equipment and tractor-mounted computers. Its product line has been successful with farmers and is being upgraded almost annually.

Bottom Line: Precision Agriculture is in its early years, but the consolidation phase is well underway. We’ve presented the leading publicly-traded companies above, along with investor information (see Table). These are powerful tools in the hands of the farmer, and will no doubt improve the efficiency and scope of crop production worldwide.

Risk Rating: 8 (where 10-Yr US Treasury Notes = 1, S&P 500 Index = 5, gold = 10)

Full Disclosure: I dollar-average into MON and IBM, and also own shares of CAT and RAVN.

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