Monsanto vs. Mother Nature

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They say you can't do anything about the weather, but don't tell that to Monsanto (NYSE: MON  ) . It's spending nearly $1 billion to buy privately held big data weather shop Climate Corp., which uses super computing strength to predict the weather and generate agricultural analytics it uses to sell crop insurance to farmers.

While the genetic modification of seeds has been Monsanto's main means of controlling the food chain, and it's easy to see the deal as a means of tying the farmer closer to the seed giant -- bundling the sale of seeds with a weather-based crop insurance policy -- there's a broader trend melding Big Data with Big Agriculture, and we're likely to see it grow more pervasive.

Using data from the National Weather Service, Climate analyzes hyper-local weather measurements from 2.5 million locations and forecasts on a daily basis, processing the data along with 150 billion soil observations ripped from Department of Agriculture surveys. It then crunches the data to generate 10 trillion "weather simulation data points," which are used in the company's weather insurance pricing and risk analysis systems.

With the acquisition, Monsanto will gain insight into every single one of the 20 million parcels farmed in the US, including what their yields were and their soil's water-holding capacity. Valuable information indeed, but information others have used before; DuPont (NYSE: DD  ) introduced a subscription service earlier this year through its Pioneer division that combines field-by-field data with real-time agronomic and weather information to help growers make informed planting decisions. 

Even outside of the industry, big data firms recognize the fertile field agriculture represents. Oracle (NYSE: ORCL  ) is cross-pollinating its systems with dairy and agriculture giant Land O' Lakes, which is using it to drive profits higher through cost savings of some $4 million. Monsanto says data science could be a $20 billion market beyond its core focus.

What sets Monsanto apart from the competition is the insurance component of Climate, whose policies are underwritten by Swiss RE (NASDAQOTH: SSREY  ) , which is coupled with data gleaned from freely available sources and crunched on's Amazon Web Services computers. While the insurance component by itself is not necessarily a novel turn -- the World Bank has promoted weather index-based policies globally -- it could be a catalyst for future growth.

In Kenya, for example, the World Bank's International Finance division partnered with Syngenta (NYSE: SYT  ) to offer such index policies to farmers in the event of drought or excessive rainfall, while in Malawi, insurance policies are bundled with loans to farmers to cover the cost of higher quality seed, and the premium for the policy is added to the interest payment for the loan.

Monsanto does have global ambitions to expand its insurance business, and says Brazil and Argentina are prime targets as insurance availability in both is currently limited. They'd likely find a receptive audience, too. This past summer, analysts at Celeres estimated Brazil will plant 14% more GMO crops this year, up from its previous 12% forecast, following the worst drought in 56 years. Monsanto's seeds and insurance could be a lucrative opportunity.

The seed company says at heart it is a data business helping farmers extract more yield and higher profits from their crops. With intimate knowledge of local weather patterns and crop data, its previous purchase of Precision Planting -- which can enhance a crop's yield through variable plant spacing -- and a new insurance business, Monsanto might just harvest the bumper crop of the 1-billion-acre, $20 billion sales opportunity it foresees.

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The control being exerted over the food chain by the seed behemoth has many scared about food's future. The recent collapse of the markets left many too scared to invest and put their money at further risk. Yet those who've stayed out of the market have missed out on huge gains and put their financial futures in jeopardy. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal finance experts show you why investing is so important and what you need to do to get started. Click here to get your copy today -- it's absolutely free.

Read/Post Comments (10) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 03, 2013, at 5:36 PM, dockofthebay wrote:

    "Hyper-local" weather forecasts are a big thing these days. Many ski areas use them also. Ironically, as Rich states, these private companies are heavily dependent upon data from the National Weather Service, funded by the taxpayers of the US. None of these private companies have the ability to put in place all the varied weather monitoring devices upon the land, on the sea and in the sky, as the NWS has. In Monsanto's case, the company will also be benefiting from the reams of data provided by the Deparment of Agriculture, also funded by taxpayers. It sickens me to know that I

  • Report this Comment On October 03, 2013, at 5:44 PM, dockofthebay wrote:

    I unintentionally sent my above post before concluding it. I meant to say that I am sorry that taxpayers are funding the base data which Monsanto is using in the weather forecasting aspect of this venture, because I detest the company.

  • Report this Comment On October 04, 2013, at 6:58 PM, funfundvierzig wrote:

    "The control being exerted over the food chain by the seed behemoth has many scared about food's future."

    Here the author, Rich DuPrey, apes and repeats the brainwashing propaganda and scare tactics of DuPont Management and their PR operatives. That's dishonest, deceptive, and downright distorting.

    Merely the independent viewpoint of one individual retail investor...funfun..

  • Report this Comment On October 04, 2013, at 7:12 PM, donjoanie wrote:

    When I saw the title of this Motley Fool article, I immediately knew that it was the biased, anti-Monsanto propaganda of Rick Duprey. Never mind that Monsanto projects that this harmless technology will increase corn yields 5 to 10 bushels per acre (isn't that a good thing?), as far as Duprey is concerned, it is part of the "control that Monsanto is exerting over the food chain". Ridiculous!

    And as for dockofthebay, he/she is "sickened" that Monsanto is using already existing government data to turn a profit. Well, dockofthebay could use the same information to increase yields of organic crops. Don't knock technology that can help every farmer to better feed the world. That goes for you, too, Duprey!

  • Report this Comment On October 04, 2013, at 10:16 PM, nomofunfun wrote:

    Monsanto, the FATHER of FRANKENFOODs?

    Why pollute more of the earth with mutant seeds when DuPont/Pioneer seeds are all natural, no frankenfood traits to destroy future harvests.

    Superior-managed DuPont offers far better returns and ethics, compared to Mon$anto.

  • Report this Comment On October 05, 2013, at 7:28 AM, funfundvierzig wrote:

    What the surrogates and supporters of DuPont Management operating over the internet and bashing Monsanto for "Frankenfoods" will not tell you:

    Most of the better seeds of the DuPont Pioneer line-up come embedded with licensed superior GM traits from Monsanto. The lagging DuPont Company pays Monsanto hundreds of $millions in license fees each year to copy-cat Monsanto.

    The first major effort of DuPont Management and their stumbling scientists to develop and commercialise a competing genetically engineered trait, DuPont OptimumGAP, ended in failure. DuPont OptimumGAP cannot be planted on an alone basis by farmers in their fields without risk.


  • Report this Comment On October 05, 2013, at 7:31 AM, meofcourse wrote:


    Monsanto and Dupont/Pioneer license each others technologies, so how do you support your statement that 'DuPont/Pioneer seeds are all natural'.

    Oh wait, I understand now: Dupont is paying Monsanto for licenses they are not using ... Mmm, not likely ...

    Condemn both or none, but be consistent.

    Funny how the Monsanto articles and reactions against Monsanto are supported neither by facts nor common sense.

  • Report this Comment On October 05, 2013, at 7:39 AM, funfundvierzig wrote:

    As for the "ethics" of DuPont, many readers will recall the disclosure of Judge Richard Webber of the U. S. District in the big Monsanto patent infringement case last December 2012 to the effect that DuPont "had knowingly defrauded the Court" and defrauded investors and the public as well with respect to DuPont's seed business and their right to use certain Monsanto GM traits without paying. That doesn't sound "ethical" to us.

    The global seed industry is rigourously competitive, with not only three major players, Monsanto, DuPont, Syngenta, but also Dow Chemical and BASF, along with scores of smaller seed producers and distributors.

    Merely the observation of one retail investor, long MON, and long and short, DD....funfun..

  • Report this Comment On October 05, 2013, at 7:55 AM, funfundvierzig wrote:

    "Why pollute more of the earth with mutant seeds when DuPont/Pioneer seeds are all natural, no frankenfood traits to destroy future harvests."

    Pioneer seeds, "all natural"?? What?

    The fact that a zealous proponent of DuPont and DuPont Management feels comfortable and confident in putting out this brazen falsehood to investors and readers is a sure sign of the corrupt culture and deficiency in business ethics which infest this Delaware-based conglomerate and its representatives and fans.

    Merely our individual opinion...funfun..

  • Report this Comment On October 07, 2013, at 1:45 PM, u4iadestiny wrote:

    I love it when the Monsanto and DuPont shills go after each other. It's like a dogfight.

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