‘Big data’ strikes again. A story this week highlights just how important big data is to an industry that has a major impact on the health and well-being of the planet: agriculture. This is a $3trn global industry whose job it is to feed the world.
Monsanto is a stock that I used to invest in during my days as a US equity fund manager. Back then, its most exciting product was Roundup, which the company touted as an environmentally-friendly weed killer.
In the intervening years, Monsanto has attracted controversy through its genetically modified seeds business. In both these cases, its aim is to help farmers improve crop yields and get the maximum out of their resources. So it was a bit of a shock to see them splash out $930m on a software company called Climate Corp.
Genetically modified seeds were the last great scientific breakthrough in agriculture, but data science represents the industry’s next great growth opportunity. Monsanto estimates this acquisition opens up a $20bn opportunity for them beyond their existing core focus on seeds.
Making sense of 60 years of data
San Francisco based Climate Corp was founded in 2006 by a team of software engineers and data scientists from Google and other leading Silicon Valley companies. Their initial idea was to use hyper-local weather data to provide insurance for businesses vulnerable to disruption from bad weather.
Climate Corp has subsequently focused on agriculture and its Total Weather Insurance business pays farmers automatically for bad weather which might impact their profits.
However, the real value doesn’t lie in providing an insurance product, it lies in the data itself.
Weather data is clearly a key factor in agriculture. In an era of potential climate change, understanding it will be even more important. The US government’s national storm warning infrastructure uses Doppler radar scanning one million sites to monitor weather patterns.
Climate Corp has combined this highly detailed weather data with 60 years of information on crop yields. Local weather is also matched with data on local soil types – every two square miles across the US. In the new big data era, we can start to make sense of such enormous, diverse data sets.
An online service to help boost crop yields
Monsanto themselves were founded in 1901, so they should have plenty of their own data to contribute. Indeed, they spend over $1bn a year on data generation, so spending less than that to acquire Climate Corp to help them use that data more productively in their own business, and to sell it to farmers, makes a lot of sense.
The challenge for Climate Corp and Monsanto, therefore, is to turn all this information into recommendations that farmers can use. Ultimately, this will result in a boost to crop yields and a reduction in the risks involved in producing them.
Climate Corp has the industry’s most advanced technology platform, already providing an online service for crop planning, monitoring and insurance. This service is relevant for farmers regardless of their farm size or preferred methods of farming.
Like most of us, farmers are faced with a proliferation of information sources, so the prospect of a focused, authoritative offering backed by Monsanto should be a winner.
Some commentators have been a bit sniffy about big data, describing it as a fad. So it’s good to have a serious ‘old economy’ company making a big commitment to it. At some point in the near future this information might be just as important to farmers as seeds and tractors are today.
Like Monsanto, I certainly don’t think big data is a fad. Most companies will increasingly need to have a big data strategy to stay ahead of the competition.