The word "farm" evokes pastoral imagery of cows grazing on rolling fields as a farmer looks out over the horizon. But farms are getting a software update. And if Monsanto (NYSE:MON) and its competitors can deliver, that farmer will be directing robotic tractors with an iPad and satellites. This is how our food will be produced from now on: more akin to playing Angry Birds than reading the Farmers' Almanac.
For those concerned about feeding a growing world population, this is the technology that will boost crop yields. It will also help to mitigate the effects of changing weather, give insurers a clearer picture of risks, and could lead to a new label at the supermarket of "human-planted and grown." And for seed companies, it is the new sector for growth.
How can you farm with an iPad?
No more pitchforks
Monsanto's Integrated Farming Systems is partly cobbled together with a few recent acquisitions: the Climate Corporation, which Monsanto purchased last October for $930 million, and Precision Planting, which Monsanto bought in 2012 for $210 million. The Climate Corporation offers by-the-field analytics and weather simulations, and Precision Planting's machines can vary seed density, depth, and variety. Together, they make up Monsanto's new FieldScripts product, which puts the right type and amount of seeds in the exact place in the field based on weather predictions, soil, and other historical data.
FieldScripts is still new, but Monsanto says it can improve yield by 10 bushels per acre. Last year, the U.S. corn harvest was a near record-setting 158 bushels per acre. With more data science products, Monsanto believes there are still between 30 and 50 bushels of corn yield, which could add $20 billion to business. Agricultural productivity accounts for 20% of Monsanto's sales, with the remainder from its seed business.
Farming's space race
With such potential value, FieldScripts has its competitors. DuPont's (NYSE:DD) Pioneer offers Field360, which helps farmers utilize data into planting decisions, and Encirca, which details real-time crop conditions around the country to help predict market prices and identify yield trends. Even though it's an extremely diversified company, agriculture brings in 64% of Dupont's operating earnings, making it an important focus for the company's future.
BASF and John Deere have a partnership to help growers interpret data and "make more precise and efficient decisions about their crops and operations." The companies aim to have a service released by the end of 2014.
While not as relaxed as a game of FarmVille, producing crops is moving toward more tapping on touchscreens. The technology can give farmers a clear value if it costs less than the extra bounty it can provide. The company that provides the best of these services will win over the next generation of farming, especially if it bundles the traditionally profitable seeds with superior software.
Dan Newman has no position in any stocks mentioned, and neither does The Motley Fool. 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.