Climate Corp

Image courtesy of The Climate Corporation

Chances are you have already heard about Monsanto's (NYSE:MON) latest quest with big data. That isn't the name of the next controversial seed that Monsanto wants to plant in farms. Big data is exactly what the name suggests -- huge amounts of information that go into the making of what's known as data science.

Having finalized its deal to acquire The Climate Corporation, Monsanto is set to rock the world of data science, the field where valuable agricultural data can be transformed into applications or systems that enable farmers to make informed decisions about crop and farm management, and improve yields.

That may have confused you, as it did when I first read about the matter. What kind of data am I talking about here, and how can data ever boost yields? More importantly, what exactly does Climate Corp do, and what can Monsanto investors get out of the deal? Here are the answers, sans jargon.

What is Monsanto really getting into?
Monsanto will buy Climate Corp in an all-cash deal worth $930 million within the next few months. Climate Corp's forte lies in its web and mobile service, climate.com. Through the application, farmers can access data that encompasses almost everything important to their work -- field-specific soil conditions and yield forecasts, crop growth projections, acreage and production reports, and even hourly reports on individual field conditions.

Best of all, farmers can get real-time weather monitoring and updates. With unpredictable weather disruptions emerging as the biggest risk in agriculture in recent times, one can imagine how useful such information can be for farmers. What's more, Climate Corp also provides U.S. federal crop insurance policies and sells weather insurance that covers the profits farmers may lose out on because of weather-affected low yields.

Sounds darn good! And all this will soon belong to Monsanto.

Others in the race, but with limits
Although not the first to incorporate technology into agriculture, Monsanto's deal to acquire Climate Corp is among the biggest in the upcoming field of precision agriculture. Farm-equipment makers like Deere (NYSE:DE) and AGCO; and Monsanto's closest competitor, DuPont (NYSE:DD), have pumped in good amounts of money in agricultural technologies in recent years, but in small doses.

For instance, DuPont's recently launched Pioneer Field360 services, rendered through its sales professionals, guide farmers with seed selection, and support water, fertility, and overall crop management. DuPont also launched a field-level weather service last year.

Comparatively, Deere is among the front-runners in bringing technology to farms. From self-propelled sprayers to GPS-based automated steering systems, from mobile weather applications to the newly launched wireless data transfer that can send data wirelessly from farmers' machines to their personal logins on the Deere portal, the tractor leader has revolutionized a farmer's life.

The real proof
Probably the best evidence of how agricultural technology has caught the market's eye is Trimble Navigation's (NASDAQ:TRMB) amazing growth in recent years. Trimble designs advanced automated devices, including GPS and wireless applications, as well as data collectors. From just about $1.1 billion in 2009, Trimble's revenue shot up to $2 billion last year. Its operating income more than doubled during the period.

While these examples highlight the increasing popularity of using tech on farms, you may really want to know now, especially as a Monsanto investor, about the growth potential of precision farming moving forward. I think I can give you an idea of that as well.

A multibillion-dollar opportunity awaits Monsanto
Recent industry research reports predict a near boom in precision agriculture in the years to come. For instance, a September report by marketsandmarkets.com pegs the market for precision farming to grow at a nearly 13.4% clip over the next five years, hitting $3.72 billion by 2018.

The report further projects the Asia-Pacific region to lead with a compounded growth rate of 25% over the five-year period. A little more than 6% of Monsanto's revenue last year came from the region. Though not much, the fact that Monsanto is already present in the area should make it easier for the company to tap the opportunities in the future.

Foolish takeaway
With the world's population projected to increase 34% by 2050, food production is required to grow a whopping 70% to feed the greater numbers of mouths. Given the limited natural resources at our disposal, increasing yields from every inch planted will be the only way out. While increased use of hybrid seeds, crop protection, and fertilizers should help tremendously, technology will play an equally important role in helping farmers get the best out of their fields.

Having already cornered the seed market, getting a deeper foothold in precision farming is thus a very logical step for Monsanto, especially since the company already has a solid customer base across the globe. With the Climate Corp deal, Monsanto is taking a big leap into the future, and investors should be happy with that.

Fool contributor Neha Chamaria has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.