If you want to get a sense of John Deere’s grip on the agriculture industry, head to Iowa, one of the world’s largest producers of corn. More than 2 billion bushels of the common grain (much of which is used for ethanol production) will be harvested from the state’s 12.6 million acres this year alone. Despite massive consolidation across the industry, most of those acres are still owned by family-run farms, and most of those families have more than corn-growing in common: For decades they have relied on Deere machines to cultivate their crops.
“We ‘bleed green,’ ” says T.J. Coughenour, a fourth-generation farmer in the small town of Maxwell (pop. 916). Beside him, lined up in front of an immense cornfield, are three gleaming Deere machines, including the original “cab” purchased by his grandfather more than 40 years ago.
In this Midwestern state, Deere’s iconic green tractors, combines, balers, and sprayers are almost as much a part of the natural landscape as cornstalks and cows. (Fun fact: There are more cows than people in Iowa.) Though the 178-year-old company’s headquarters are in neighboring Illinois, its enormous presence in Iowa is a testament to its dominance in agribusiness. Deere controls an estimated 60% of the U.S. Farming-equipment market. But despite that supremacy (and the multigenerational loyalty of farming families like the Coughenours), the tractor maker faces strong headwinds. Soft commodity prices have weakened demand for farming equipment and caused Deere’s revenue to tumble to $36.1 billion last year, a 5% decrease from the year before.
To help combat the decline, Deere has turned to a new source of revenue: software services that deliver information and counsel to farmers in the field.
“What we’re trying to do is put another leg on the ‘ag stool,’ if you will,” says Samuel Allen, the company’s CEO. “A farmer might not have to buy a new piece of equipment every year, but he’s still doing the data every year. That part of the business can be more constant.”
Deere has a long history of technological innovation. The company first released tractors with autonomous features in 2002, well before Google (GOOG) began its driverless-car project. “We’ve had embedded technologies in our cabs for a long time,” says Matt Olson, product line manager for Deere’s Intelligent Solutions Group. “But like most people today, our customers are carrying around iPads with them.”
So Deere is investing heavily in software. In a nondescript office just outside Des Moines, Olson’s teams are hard at work developing apps that help farmers manage their fields from their mobile devices. One of them, called SeedStar Mobile, lets farmers monitor factors such as the spacing between planted seeds and “singulation” (the term that describes the deployment of a seed from the meter, the machine that regulates seed flow) row by row. Today there are more than 200,000 Deere machines that can wirelessly transmit agronomic data to remote servers to be organized, analyzed, and tapped for other applications (such as coordinating multiple machines in the same field).
Deere has also looked outward to jump-start its technological initiatives. In early October the company introduced SageInsights, a joint venture with Colorado software company DN2K, which is developing a cloud-computing platform to allow retailers and consultants to manage their agronomic data in one place. One month later Deere revealed that it would open a data link between its machinery and Monsanto’s Climate Corp. Division to allow the latter to deliver farmers advice based on weather and crop data. (As part of the deal, Deere acquired Monsanto’s Precision Planting unit, which makes seeding equipment.)
Corporate partnerships and software integrations can certainly help John Deere boost its technological prowess in the short term, but the company faces the longer-term challenges of attracting employees with skill sets that match its new businesses. Deere has long hired workers from the farming community it serves. Can it also attract tech-industry talent?
“We can’t rely on being the employer of choice only for people involved with farming,” says Allen, who says it makes sense for John Deere to set up shop someday in Silicon Valley.
In the meantime the CEO is not worried about future demand for Deere products: “The world needs to eat.”
A version of this article appears in the December 1, 2015 issue of Coins2Day with the headline “John Deere, Modern Farmer.”
