Data Becomes Cash Crop for Big Agriculture

(Bloomberg Businessweek) -- For six generations, Ben Riensche’s family has tended corn and soybeans outside Jesup, a town of 2,500 on the windswept plains of eastern Iowa. But today he’s harvesting a valuable new crop from his 12,000 acres: information. “The future is simply data analytics and tech,” says Riensche, who still has his grandfather’s handwritten notebooks containing everything from the bushels of corn he brought in to the number of eggs the chickens laid. In the half-dozen years since he signed up for a data analysis service from Climate Corp., a unit of Bayer AG, Riensche has reduced the seed he uses by 6 percent and the fertilizer by 11 percent while growing his best crops ever. “Before, there was no secret sauce other than just keeping notes and making field observations,” he says. “Now we have all these digital tools.”

Information collected by farmers—yields, fertilizer use, crop rotation, rainfall, and dozens of other data points—is catnip to the likes of Bayer, Syngenta, DowDuPont, and BASF. The companies feed it into software that predicts combinations of seeds, fertilizers, and sprays to maximize yields. That can boost sales of their products while also padding the bottom line from subscription fees farmers pay for recommendations on what to sow and when to spray. “I can’t tell you how many times I’ve gone to a farmer’s machine shed and all their yield data for the past 15 years is sitting in spiral notebooks on the shelves,” says Mike Stern, who heads Climate Corp. He says Bayer can digitize that material and combine it with historical information, then sell it back to farmers. “Data is the new currency,” Stern says.

The digital transformation of farming isn’t new. In the 1980s, soil data was recorded on six-inch floppy disks to help calculate fertilizer needs, and since the advent of the internet, companies have created ever-larger databases to improve recommendations. Today, the trend is accelerating as growers get feeds directly to tablet computers in their tractors and tap technologies such as crop-spraying drones to maximize yield on every square foot. As more farmers supply data in exchange for tailored advice, the computers combine that with material from other farms, then apply artificial intelligence to make better predictions. “It’s a virtuous cycle, as expanding creates more data and improves algorithms, leading to better recommendations to farmers and gaining more data,” says Sanford C. Bernstein analyst Gunther Zechmann.

By the mid-’20s, the digital agriculture market is expected to be worth billions of dollars a year. But as the companies assemble their databases, subscription fees—$1 and up per acre—don’t yet cover the cost of running the systems. The business “is definitely commercially viable, but part of it is also building for the future, because going forward this is more and more about data mining,” says Hans-Ulrich Engel, chief financial officer at BASF SE. “Over time you’ll see how to price products and services. The market is still moving.”

In the race to get ahead, the companies are amassing data on thousands of farms. After its $66 billion takeover of Monsanto, Bayer leads the way with access to information from 160 million acres. BASF, Syngenta, and DowDuPont are battling for second place, though it’s hard to say who’s ahead, as they assess their acreage differently. “While we’re building these models, the more data the better,” says Dan Burdett, who spearheads the digital efforts of Syngenta, which is expanding rapidly after China National Chemical Corp. bought the Swiss company last year for $47 billion. “We’re trying to establish the history and the baseline and do analytics.”

As the giants lock down contracts with farmers who tend millions of acres, smaller players say they can provide higher-value services to a more limited market. KWS Saat SE, which started selling seeds to German farmers in 1856, offers high-resolution satellite images of fields to spot when, say, barley has developed just the shade of yellow that indicates it’s ready to harvest. And it’s working on projects such as data-gathering robots that can spring across uneven, muddy fields to analyze crops and give early warning of trouble. “If a plant is in distress, it puts all its effort into its top leaves facing up toward the sun,” says Lorelei Davis, who oversees technology development at KWS. “That’s what you’ll see with a drone or a satellite, but below those leaves is where you see the problems.”

Riensche expects that by the time his children take over the farm, the data revolution will have transformed the business. With consumers demanding transparency in the food chain, information on how a crop was grown and its environmental impact will be enormously valuable. And if millers or brewers want corn or barley that’s a bit more sun-kissed or has a higher starch content, they could order it from a farmer at the start of the season and monitor its progress as it grows. “I’ve got buyers for my crop if I can provide them with this information,” Riensche says. With the right technology, “I can provide the whole story of how that crop was raised.”

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