Alan Guebert: A golden goose for chickenfeed
June 21, 2012
Every week for 19 years this 170-square-foot, two-dog, one-person office has declared its complete devotion to numbers.
For example, just last week we found it completely fascinating that in just three days this month 100 U.S. senators offered 302 amendments to an Ag Committee-approved 2012 Farm Bill that already ran more than 1,000 pages.
In comparison, the 3×5-inch booklet on my desk that contains the entire U.S. Constitution runs 38 pages.
More recently, two numbers – $210 million and $40 million – have bounced around this sunlit office.
The first is the price Monsanto paid for Precision Planting, a Tremont, IL maker of after-market planting and harvesting equipment that it explains will “help farmers plant, harvest and analyze data from each field to improve yield and productivity.”
The latter number, $40 million, is “a performance-based payment” – presumably to Precision founder and seller Gregg Sauder – to continue to pump out ideas on “software, hardware and… production equipment” into what Monsanto calls a “rich pipeline (that includes) a system designed to help simplify variable rate planting and increase farmers’ yields through more accurate planting.”
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At first glance the purchase price looks rich. Why would the world’s leading biotech seed company, a firm steeped in science and patent law, drop a quarter of a billion bucks on a tiny, albeit high-tech, farm equipment maker?
Monsanto’s explanation, as far as it goes, is plausible. Precision will become a key element in its Integrated Farming System unit which will use “advanced agronomic practices, seed genetics and innovative on-farm technology” to, hopefully, grow more crops more “sustainably.”
Precision’s explanation, however, gets closer to why the deal was so rich for it and so important to Monsanto.
According to the May 23 press release that announced the deal, Precision’s “new FieldView technology… offers an application designed to monitor all critical aspects of planter performance and crop data analysis…”
That means Monsanto bought the hardware and software it believes will accurately deliver “the optimum genetics to each square foot of soil.”
It also means that at any point in the growing and harvest seasons Monsanto likely will know the dates, times, acreages, soil types, weather, seeding rates, yield, moisture content – in short, just about every hard number connected to any field – that uses its Precision technology anywhere in the world.
And that information won’t be limited to fields planted only to Monsanto-branded seed; it will be for any field planted with any seed, including any competitor’s, that uses Precision technology.
What would that information be worth to Monsanto? Maybe $250 million a year?
Before you noodle too hard for an answer consider that the U.S. Department of Agriculture’s Farm Service Agency and Risk Management Agency will rely heavily on farm-gathered electronic data to manage USDA programs like crop insurance, CRP and, should Congress vote to continue, direct payments.
Already USDA is working to implement what it calls its Acreage Crop Reporting Streamlining Initiative that “allows producers to report common USDA program data” – planted acres, CRP acres, maybe crop insurance information – “just one time.”
Moreover, imagine some math wizard somewhere creating an algorithm that taps this trove of field-by-field information to extrapolate U.S. planted acreages before, say, the big USDA acreage report each June or get an angle on U.S. crop production before the big crop report each August. What would that information be worth to him?
Or, far more likely, what would that insight be worth to Archer Daniels Midland or Cargill? Just a tiny slice of that data pie – let alone the whole pie – might be worth far more than $250 million a year.
If so, then Monsanto acquired a golden goose for chickenfeed.
© 2012 ag comm