Deere’s Future in Precision Agriculture Depends on Space

Iconic American manufacturer Deere most often elicits images of green tractors dotting fields full of crops.

But the farm equipment maker has sown the seeds for an increasingly high-tech, self-driving future that’s critically dependent on space.

“Deere is one of the best tech secrets in the world…but you’re not going to do it without access to space,” said Leanne Caret, Deere board member since 2021 and former Boeing chief executive. Defence, Space & Security, in a April interview with CNBC’s “Manifest Space” podcast.

Deere, like competitors CNH Industrial And AGCO, invests in precision agriculture. The strategy uses sensors, software and data analytics to deliver more precise farming techniques to improve crop yields, from more productive planting to more targeted fertilization and more efficient harvesting.

The company also produces and sells autonomous tractors and other machines with autonomous functions.

But connectivity is central to that vision, and the space fills a void left by fiber and traditional cellular signals.

“We’re pretty optimistic about the opportunity the commercialization of all things space brings to agriculture right now,” Deere CTO Jahmy Hindman said in the interview with Manifest Space. .

“If you think about agriculture…it’s done in rural areas, where terrestrial cellular connectivity isn’t always available, and when it is, it’s not always enough to do the type of things farmers must have done in the field,” Hindman said. . “We think satellite communications is a really intriguing and interesting technology to pursue to sort of solve this communications divide.”

For Deere, the intersection of space and agriculture began two decades ago, when it took a stake in, and then ultimately acquired, NAVCOM to activate its own real-time connection signal so that GPS helps direct machines and create yield maps for combines.

But GPS is no longer enough, especially in large markets like Brazil where more than two-thirds of agricultural land has no connection to communication infrastructure.

Last fall, the company issued a request for proposals to the satellite communications industry to partner with space-based connectivity services. He hasn’t publicly disclosed the estimated value of the envisioned “SatComms” deal, but the space industry is clearly seeing dollar signs: About 40 companies have submitted bids, according to Hindman, including the “who’s who of the satellite connectivity around the world”.

Hindman said Deere is running trials with select companies, including running certain equipment on vehicles to determine real-time, real-world performance.

“We had this opportunity to bring together two industries – satellite space communications and agriculture – and say, ‘What kind of value could we create?'”

Deere will select a partner for the project after bidders have gone through a growing season, with a solution expected to be rolled out to farmers by this time next year. Hindman noted that as the commercialization of Earth orbit reduces costs and increases capabilities, he is also taking a closer look at other space services, including Earth observation data.

What is still unclear: the final configuration of the business model and whether it could be a subscription to a service, a one-time payment or something else.

It won’t just affect new equipment either, Hindman said, as Deere customers also want the ability to update existing equipment.

Analysts note that the value proposition of precision farming and connected machinery has boosted demand and helped the company realize higher prices.

“This increases Deere’s structural pricing power and…it should have an upward effect on the valuation multiple,” said Chad Dillard, US Machinery principal analyst at Bernstein. “It really comes down to the fact that precision agriculture creates and improves on-farm productivity and drives this virtuous cycle of higher prices, higher margins and higher multiples.”

This dynamic will be front and center when Deere releases its quarterly results on Friday. And as Dillard noted, Deere also raised the prospect of seeing about 10% of sales come from software-like common recurring services by the end of the decade.

The increasing use of space abilities also explains why this is one of Cathie Wood’s main assets. Ark Space Exploration & Innovation ETF – a position that raised eyebrows with some investors when the fund was launched two years ago.

“If you have this ability to connect every acre on the farm, you have the ability to collect more prescriptive information…It allows the grower to make better decisions,” Hindman said. “It improves food security in the sense that it produces a better result at the end of the year than would otherwise be possible without this information, without this data.”