MIS

Instructions

Page 72 (Ch2): How Much Does Data-Driven Planting Help Farmers? Please type the answer.

Your case analysis report should include a summary of the case (brief intro to the company/case, challenges/problems, and solutions) and your answers to the case questions. Your answers should be based on the chapter material and any additional information found on the Internet. Clearly indicate the case question number. Limit your report to 2 pages long.

Please read the case and answer the question.

How Much Does Data-Driven Planting Help Farmers?

As in many other businesses, information technology is reshaping farming. Many tractors and combines today are guided by Global Positioning System (GPS) satellite-based navigation systems. The GPS computer receives signals from earth-orbiting satellites to track each piece of equipments location and where it has gone. The system issues instructions for hoses to deliver precise amounts of fertilizer right into the grooves cut by the tiller. The system helps steer the equipment, so farmers can monitor progress on iPads and other tablet computers in their tractor cabs. Placing seed and fertilizer together with this level of precision means farmers need to use fewer loads of fertilizer, potentially saving an individual farmer tens of thousands of dollars. Now big agricultural companies such as Monsanto and DuPont want to do more. Because adjustments in planting depth or the distance between crop rows can make a big difference in crop yields, these companies want their computers to analyze the data generated during this computerized planting work to show farmers how to increase their crop output further. This practice is known as prescriptive planting. Proponents say prescriptive planting will spark an agricultural revolution rivalling the introduction of mechanized tractors in the first half of the 20th century and the rise of genetically modified seeds in the 1990s. Heres how prescriptive planting works. The farmer provides data about field boundaries, historic crop yields, and soil conditions to an agricultural data analysis company, which analyzes the data along with other data it has collected about seed performance and soil types in different areas. The company then sends a computer file with recommendations back to the farmer, who uploads the data into computerized planting equipment. The farmers planting equipment follows the recommendations as it plants fields. For example, the recommendations might tell an Iowa corn farmer to lower the number of seeds planted per acre or to plant more seeds per acre in specified portions of the field capable of growing more corn. The farmer might also receive advice about the exact type of seed to plant in different areas. The data analysis company monitors weather and other factors to advise farmers how to manage crops as they grow. Monsanto has developed a new software application called FieldScripts that takes into account

variables such as the amount of sunlight and shade and variations in soil nitrogen and phosphorous content down to an area as small as a ten-meter by ten-meter grid. Monsanto then analyzes the data in conjunction with the genetic properties of its seeds, combines all this information with climate predictions, and delivers precise planting instructions, or scripts, to iPads connected to planting equipment in the field. Tools such as FieldScripts would allow farmers to pinpoint areas that need more or less fertilizer, saving them the cost of spreading fertilizer everywhere, while boosting their yields in areas that have performed more poorly and reducing the amount of excess fertilizer that enters the water table. So prescriptive planting could also be good for the environment. Prescriptive planting could help improve the average corn harvest to more than 200 bushels an acre from the current 160 bushels, some experts say. Such a gain would generate an extra $182 an acre in revenue for farmers, based on recent prices. (Iowa corn farmers received about $759 an acre in 2013.) On a larger scale, according to Monsanto, the worlds largest seed company, data-driven planting advice to farmers could increase worldwide crop production by about $20 billion a year. So far, output from prescriptive planting systems has not achieved those spectacular levels. Farmers who use prescriptive planting report their yields rising by 5 to 10 bushels per acre. The costs of investing in the new technology and vendor service fees can amount to more than many small farmers can earn in extra yield from their farms. According to Sara Olson of Lux Research Inc., the problem with precision agriculture is the diminishing returns that come along with costly technologies on smaller farms. That means that only the big farms are likely to benefit. Monsanto estimates that FieldScripts will improve yields by five to 10 bushels per acre. With corn at around $4 per bushel, thats an increase of $20 to $40 per acre. A small farm, of about 500 acres, could get anywhere from $10,000 to $20,000 in extra revenue. Monsanto charges around $10 per acre for the service, so the farm will wind up paying around $5,000 in addition to paying tens of thousands of dollars to either retrofit its existing planting equipment or buy more modern tractors that include the electronics gear that syncs the scripts the Monsanto

online service provides with the planters onboard navigation systems. Monsanto also charges an extra $15 per acre for its local climate prediction service. A small farm will most likely lose money or break even for the first two years of using a service like FieldScripts, according to Ms. Olson. For large farms of about 5,000 acres, FieldScripts could increase revenues by $100,000 to $200,000. With Monsantos service costing around $50,000, that farms total profits will run between $50,000 to $150,000, more than sufficient to offset the cost of updating farm machinery. Whether a farm is big or small, the impact of FieldScripts would be minimal in good years because yields would be high regardless. Steve Pitstick, who owns a 2,600-acre corn and soybean farm near DeKalb, Illinois, said that the technology is likely to have a bigger impact in years when conditions arent so propitious. Because Midwest farming conditions were good in 2013, Pitstick found that yields from fields that he managed using FieldScripts were only between 1 percent and 2 percent higher than fields where he didnt use the service. A spokesperson for Monsanto stated that the outcome of prescriptive planting is less about the size of the farm and more about the farmers technology expertise. A wide range of farmers is currently using various types of precision agriculture technology. Both small-and large-scale farmers dealing with various crops and production methods are increasingly looking for new technologies and tools that can improve their yields while managing their overall risk. According to Michael Cox, co-director of investment research at securities firm Piper Jaffray Cos., revenue from FieldScripts and other technology-driven products and services could account for 20 percent of Monsantos projected growth in per-share earnings by 2018. Although some farmers have embraced prescriptive planting, others are critical. Many farmers are worried about the intrusion of big data into their once-insular businesses and are especially suspicious of what Monsanto and DuPont might do with the collected data. Others worry about seed prices rising too much, since the companies that developed prescriptive planting technology are the same ones that sell seeds. Farmers also fear that rivals could use the data to their own advantage. For instance, if nearby farmers saw crop-yield information, they might rush to rent farmland, pushing land and other costs higher. Other farmers worry that Wall Street traders could use the data to make bets on futures contracts. If such bets push futures-contract prices lower early in the growing season, it might squeeze

the profits farmers might lock in for their crops by selling futures. There are not yet any publicly known examples of when a farmers prescriptive-planting information has been misused. Monsanto and DuPont officials say the companies have no plans to sell data gathered from farmers. Deere & Co., which is working with DuPont and Dow Chemical Co. to formulate specialized seed-planting recommendations based on data from its tractors, combines, and other machinery, says it obtains consent from customers before sharing any of their data. Kip Tom has been testing Monsantos system on his 20,000-acre farm near Leesburg, Indiana, for about three years. He claims he would not plant a single acre without it, but he keeps close tabs on how data flow from and to his farm machinery. In 2013, Mr. Tom unplugged a cable inside one of his combines to prevent it from capturing details of his planting algorithm as he harvested corn. The combines manufacturer didnt develop that information, so Mr. Tom didnt believe it should have access to it. Some farmers have discussed aggregating planting data on their own so they could decide what information to sell and at what price. Other farmers are working with smaller technology companies that are trying to keep agricultural giants from dominating the prescriptive-planting business. Steve Cubbage, owner of Prime Meridian LLC in Nevada, Missouri, one of these small companies, says his companys independence from the seed, machinery, and chemical industry adds credibility. About one hundred farmers use Prime Meridians precision-seeding service, and Mr. Cubbage expects the number to increase dramatically. The company is developing a system to store farm-by-farm information on an online webbased service that could give access to seed dealers, financial advisers, and other outsiders that farmers approve. The American Farm Bureau Federation, a trade group for farmers, has warned members that seed companies touting higher crop yields from prescriptive planting have a stake in persuading farmers to plant more. The Federation also says the services might steer farmers to buy certain seeds, sprays, and equipment for their land. The Farm Bureau has held internal talks about whether the trade group should set up its own computer servers as a data storehouse, but it has not reached a decision. Brian Dunn, who grows wheat, corn, and sorghum on 2,500 acres near St. John, Kansas, believes that big companies can help in the short term but is skeptical about the long term. He uses Prime Meridians service.