Precision ag has had a permanent home in our Ag Equipment Division since 2012, when we launched Precision Farming Dealer and added the annual live-gathering Precision Farming Dealer Summit in 2016.
The progress made in precision had us confident in adding resources to actively study and report on precision technologies, but the early years were consumed by navigating the data, mapping and signal technology issues, and sorting through manufacturers’ and dealers’ trial-and-error approaches. Not to mention the multiple stops and starts on where to “house” the operation within dealerships – and how to recoup dealers investment in talent, training, parts and vehicles.
If we were reporting on precision farming’s early and adolescent years back then, the last several years could certainly be called Precision Farming 2.0. And its entrance was big and bold coming out of the pandemic. And in recent months, it feels like an all-on blitzkrieg.
Seeing precision ag regularly in the headlines at Wall Street Journal and Barron’s is alerting us to how far – and fast – things can change – and how profoundly wowed outsiders are with the technological changes we are rolling with every day.
On Oct. 9, Barron’s published “Buy AGCO Stock. It Can Take on Deere.” I don’t pay attention to buy/sell recommendations, but I take note of analyses about what management is attempting. Al Root wrote how the AGCO-Trimble joint venture was making waves. The new $2.4 billion deal came 4 years after the Duluth, Ga. major-line acquired Precision Planting.
AGCO CEO Eric Hansotia calls his Trimble acquisition the largest ag-tech deal in history, which was valued at $300 million more than the CNH-Raven deal in 2021.
According to Root, Trimble’s ag division was generating EBITDA margins of 32% vs. AGCO’s traditional 12% on equipment. Looks like a profitable marriage. J.P. Morgan’s Tami Zakaria adds that she expects the arrangement to add 2 points (from 10% vs. John Deere’s 18%) of operating margin for AGCO by mid-decade.
Root nods to John Deere for its pioneering presence precision ag, and noted the OEM’s goal of finding 10% recurring revenue by 2030, a 10-fold increase from where it is today.
Yet the Trimble joint venture means AGCO will be able to develop its own precision-farming technology at a faster rate as it tries to compete with Deere, writes Root.
Retrofits Take Hold
In the Nov. 6 article, “Farmers Teach Old Tractors New Tricks,” the Wall Street Journal’s Bob Tita covered similar topics. He noted how AGCO expects Precision Planting sales this year to more than double from 2020 levels to $850 million this year, and is now forecasting $1 billion in sales by 2025.
Much of his piece covered how OEMs are quickly entering the retrofit market to ease into the big-dollar opportunities. Pointing to kits like Precision Planting’s software and components that can be added to most planters, Tita stresses how retrofit solutions give the OEMs access to the 93% of global farmers who aren’t fully replacing their older equipment in any given year (the other 7% do). With the average piece of farm equipment offering a useful life of 17 years as Hansotia says, the retrofit/upgrade market is significant, and can swiftly put best-in-class technology onto older iron.
AGCO and CNH, Tita writes, are expanding their retrofit products in recent months to counter Deere's 66% North American market share lead in new high-horsepower tractors. And as he points out, Deere this year started selling retrofits for its own equipment, with costs roughly one-half of the factory-installed See & Spray technology on a brand new sprayer. Another article from Prairie Farmer reported how a farmer can, with a Raven technology purchase of just $5000 each on the tractor and combine, control both the combine and the tractor pulling the grain cart. A $10k investment like this will be a no-brainer for many growers.The ag machinery segment is spending $150 billion annually in retrofit markets, according to AGCO estimates, writes Tita.
Tita noted that CNH has been fortifying its precision-farming capabilities with a series of acquisitions, starting with the 2021 purchase of South Dakota-based Raven Industries for $2.1 billion.
The November 10 On the Record from Ag Equipment Intelligence included the lead story on CNH’s goal of transitioning to in-house tech solutions. With around 75% of its factory fit solutions and 40% of its aftermarket solutions already produced in-house, CEO Scott Wine says CNH is aiming for almost all those solutions to be brought in house by 2025. Started in 2019, the strategy was accelerated by the Raven deal in 2021, says Wine.
“Our tech stack hit an inflection point in 2023 with the integration of Raven and the contribution of some of our recent acquisitions,” he says. “This activity allowed us to bypass years of organic development in key areas such as autonomy, vision and guidance, which we further expedite by rapidly scaling our own tech talent. This steep increase in this ownership curve is no accident. And it is the manifestation of our strategy to take control of our tech offerings.”
Thirty-six hours after the On The Record broadcast, AGCO issued more news on Hansotia’s big plans, which included the acquisition of FarmFacts, which appears to be a European mapping and software solution.
But the rest of the announcement (disseminated from Agritechnica in Hanover, Germany) had more meat to it. “In addition to having a full-line of autonomous solutions for every stage of the crop cycle by 2030, our transformation commitment continues via acquisitions and early-stage tech investments.”
AGCO is also heralding its AGCO Venture initiative, which formalizes AGCO’s approach to sourcing and funding new and early-stage technologies to deliver on the company’s strategic priorities. AGCO says it’ll drive innovation by investing in start-up companies, venture funds, incubators, accelerators, higher education and research institutions.
According to the preliminary survey results of Ag Equipment Intelligence's 2024 Dealer Business Outlook & Trends, GPS/Precision Products topped all categories for improving unit sales next year. More to come on the survey in the January 2024 Farm Equipment.
Don’t Miss Indianapolis
If you want a window into where precision is moving next, make sure you’re in the room for the 9th annual Precision Farming Dealer Summit this January in Indianapolis, just prior to the National No-Tillage Conference. Trimble, Case IH and John Deere dealer Hutson are all new Title Sponsors this year, and attendees asked us to bring back the major-line discussion with precision leaders. Three of the 4 majors accepted our invite to answer dealers’ questions, including Kendal Quandahl, Precision Field Team Manager at Case IH, Jeffrey Smith, Product Marketing Manager at AGCO, and Paul Welbig, the new Product Marketing Director of Precision Technology at New Holland. Enter the coupon code RETRO to use a special discount at the registration page here.