Farming’s digital future

Farming is going digital. Software, equipment, and agricultural chemical firms are spending billions of dollars to develop digital tools such as in-soil environmental sensors and aerial imaging systems so farmers can capture data and use it to boost crop yields.

The combination of digital tools with robotic farm vehicles could greatly change the way fertilizers and pesticides are applied. Agrochemical firms fear losing control of how farmers apply crop chemicals and are responding by partnering with developers of software and hardware to digitize agriculture the way they want.

But digital agriculture is proving to be a tough business. While agriculture firms have been making some large acquisitions in the digital space—such as Monsanto’s nearly $1 billion acquisition of weather data analyzer Climate Corp.—many digital farming technologies have failed to generate the financial returns expected.

Despite the risks, the big German chemical maker BASF expects digital agriculture technology to increase profits for itself and the farmers that buy its products. The firm also expects new technology to reduce the cost of its own agchem research.

BASF is taking a relatively cautious approach. Its one significant acquisition to date is of the U.S. software firm ZedX, which employs about 10 people. Announced in May, it occurred only after a three-year collaboration between the firms.

Nonetheless, BASF says it sees immediate potential value for farmers in the acquisition. ZedX is an expert in algorithms that can determine the actions farmers should take in response to data on weather, crop type, pests, and more.

BASF is now testing a suite of crop protection apps based on ZedX’s technology for smartphones and tablets. One is for in-field leaf analysis. Farmers use their phones to take a photo of crop leaves, from which the app identifies any signs of disease. If it detects disease, the app recommends which pesticides to apply and when.

Unlike some of its competitors, ZedX has developed different algorithms for particular crops, BASF says. The algorithms take into account factors specific to individual crops, such as the growth stage of the plant.

“I am convinced this will enable us to be one of the best providers of advice for farmers,” says Rainer Preuss, head of global strategy and portfolio management for BASF Crop Protection. In addition to buying ZedX, BASF has established a series of partnerships with universities to develop other digital farming models as well as collaborations with industry partners, including farm vehicle producer John Deere.

BASF expects digital technologies will also benefit its efforts in agricultural chemical R&D. People have used computer-aided molecule design in pesticide discovery for years, and they could use new technologies such as the leaf-imaging system to also evaluate plants after the crops are treated with developmental pesticides, says Richard Trethewey, head of digitalization bioscience and knowledge for BASF.

Currently, research scientists spend a significant amount of time counting leaves and identifying leaf characteristics. Digital imaging could cut the time it takes to assess plants manually by 90%, Trethewey figures, freeing up scientists for higher-value tasks such as designing experiments.

Digital technologies are also going to influence the way fertilizers and pesticides are delivered in the field, analysts say. Improvements in image processing are allowing autonomous tractors to identify patches of weeds and spray them—rather than whole fields—with herbicide, says Khasha Ghaffarzadeh, research director at the market research firm IDTechEx. He expects to see a secondary effect for pesticide and fertilizer producers.

“This could change the pesticides business from one where agrochemical companies supply a few nonselective pesticides to one where the companies have to be ready to supply a broad lineup of niche, selective, specialty herbicides,” he says. “This could have very profound implications for the agrochemical industry.”

But this scenario raises questions, according to BASF. “For agrochemicals it very much depends on the pests, timing and product applied, as all this is much more complex. If only small parcels of plants were treated with pesticides—and maybe at the wrong time—then there is a risk of lack of performance.” Preuss says. This strategy could work for fertilizers, though, he says.

Clariant, a producer of the inert pesticide ingredients known as adjuvants, also expects crop spraying will continue to be done more or less the same way, regardless of whether it is with a standard or autonomous tractor.

On the other hand, applying chemicals with drones would create a whole new set of requirements, says Christian Vang, head of Clariant’s industrial and consumer specialties business. Current drones can lift only small payloads, which means the sprays would have to be highly concentrated compared with formulations applied via tractor, Vang explains.

“We are closely monitoring the development of digital solutions, since some of them can indeed impact our product development,” he says.

Although chemical companies such as BASF and Clariant see digitization as part of agriculture’s future, uncertainty about its profitability is still widespread.

“Monetizing digital technologies in agriculture is highly complicated and far from guaranteed,” says Laura Lee, a research associate at the analysis firm Lux Research. “Most digital agriculture technology companies have a capital value of less than $10 million and are less than 10 years old, and 70% of them are unprofitable.”

Profits in some cases have been elusive because of the level of complexity required to put a successful product together. A complete digital solution for a farmer requires successfully integrating chemistry, software, and machinery. In addition, a farming segment such as fruit production is very different from one such as cereal cultivation and will require a different approach, Lee says.

Leading agchem firms have adopted wildly differing strategies in their quest to profit from digital agriculture. Monsanto is struggling to generate value from its acquisition of Climate Corp., according to Lee. “Monsanto’s experience shows that big bets don’t always pay off,” she says. In contrast, Dow Chemical “doesn’t really have a strong digital platform at all.”

By focusing on smaller acquisitions and the development of targeted technologies, BASF is taking a middle-ground approach that it hopes will prove most profitable.