Like a lot of basic manufacturers, farm equipment maker Deere & Co. of Moline, Ill., is being buffeted by rapid advances in technology. Farmers on the cutting edge already use satellite mapping and global positioning systems to boost yields in low-performing parts of their fields. And there are further advances in the works that will pose new challenges for Deere. Farming, once thought of as a finger-to-the-wind type of business, is being transformed by new technology that allows farmers to micromanage their crops like never before. One part of a field can be specifically groomed to make corn for cooking oil while another can be managed for feedstock.
Among the technologies about to hit the market are new GPS systems that are accurate to within a few inches, computer-guided steering systems, and on-board sensors that can measure the oil content of grain or tell the difference between weeds and crops. The advances mean that driverless combines and tractors are a possibility within a decade. Then there are new Internet-based services aimed at everything from providing weather and pricing forecasts to selling tractors direct to the farmer, a development that could undermine traditional equipment dealers.
John Deere executives believe the ability to deploy new technologies will bestow a new competitive advantage in agriculture. Despite a deep slump in the farm economy that has clobbered earnings--Deere's net income shrank by 77%, to $239 million in 1999, while total revenue contracted by 15%, to $11.7 billion--the company has been on a technology buying spree for three years, snatching up more than a dozen small companies with expertise in software, sensors, GPS, and other specialties. Earlier this year, Deere teamed-up with two farming cooperatives--Farmland Industries Inc., in Kansas City, Mo., and Growmark Inc. in Bloomington, Ill.--to launch an Internet-based service called VantagePoint (www.vantagepoint.com), which allows farmers to better manage their fields by comparing notes and field maps anonymously. The site, which also offers weather forecasts, agriculture news, and financial data, will eventually be a full-service portal for farmers.
On Mar. 27, Business Week Online contributing editor Thane Peterson talked with Fred Korndorf, president of Deere's Worldwide Agricultural Equipment Div., about the future of farming. Here are edited excerpts of their talk:
Q: Farming is getting ever more sophisticated. What sorts of capabilities do cutting-edge farmers have today?
A: At the very least, they're doing [computerized] yield mapping of their fields. The value of that is that if you see [lower] yields [in different parts of] a field, you can address the probable causes by changing seed varieties and pesticide, herbicide, and nutrient application. But in the future, farmers will no longer be simply growing corn or soybeans. They'll be growing [grain designed for] French fry oil, feed that allows hog manure to be less polluting--specific products like that.
Q: What capabilities do you see being added to farm equipment to make that possible?
A: I believe the next critical component that will go into all machines we make is machine intelligence.... [This] is a whole constellation of competencies. First, it is sensor technology that can, for example, sense the vibration of the engine so that one can anticipate when the bearings might go out, monitor the application of seed and fertilizer, and map precisely where those applications take place, monitor the harvest, monitor the oil content and humidity content of the crop. All that will be done at the machine level. Then we need to get this information somewhere, typically on the farmer's desktop [computer]. For that, we need satellite communications and precise positioning technology. Then, we've got to take a limitless stream of data and make sense out of it. That's the software part of it. True machine intelligence is the integration of all that.
Q: Is this just a matter of adding on to a conventional tractor? Or is it more fundamental than that?
A: More fundamental. For example, one of the capabilities we're interested in is autonomous steering. We have the technology to enable an operator to drive down a featureless field in a straighter line using GPS than he could just paying a lot of attention. The core technology to do that exists, but it has not been [used] in the tractor. It [soon] will be. It's already in our protoypes.
Q: Why is that important?
A: It's a matter of not wanting to overspray. If you put, say, nutrients on the ground you don't want to [overlap], and you don't want to miss any areas. Even a very alert, conscientious operator finds that tough.
Q: How important are environmental concerns in this arena?
A: As important as the commercial imperative. There's a real environmental problem [caused by] overspraying of herbicides and pesticides. Over time, all [such] applications will be required to be more precisely done and monitored.
Q: This also ties in with your new VantagePoint Internet service. What can a farmer do with the data collected there?
A: After 20 years, you get pretty good at farming because you've got this database you've built up from personal experience. Through VantagePoint, you can compare your experience with 20 like-situated farmers and get 20 sets of results [right away].
Q: If you look ahead 10 years, what are we going to see in agriculture? Driverless tractors?
A: Driverless involves a lot of safety and control issues....But at minimum, we'll have the next best thing where the driver essentially watches over the operations in the field and is prepared to intervene as necessary--say, if a dog runs across the field....One vehicle may have a human operator, and various others [such as grain carts] will operate remotely.
Q: Will these changes hurt small family farms by mainly benefiting the biggest, richest farms?
A: [Successful farmers] will need a reasonably large farm. But the technology is a great equalizer. It will enable a smaller farm to compete with the huge farm because of nearly cost-free availability of data that was inaccessible before.
Q: But how can a small farmer afford a $250,000 combine?
A: A $250,000 combine is our flagship model. You can buy small ones, contract out your harvesting, or share the cost of a combine with other farmers. But we can expect the cost of the I.Q. in farm machines to follow the same downward trend one has seen in the raw computing power of PCs....
Q: How do agricultural equipment dealers fit into all this?
A: A farmer often works in very narrow windows of time to plant and harvest. The machinery is put into tough, hostile environments. A servicing dealer organization is essential to maintaining uptime.
Q: But couldn't your dealers, like car dealers, lose out to Net companies that sell equipment directly?
A: When I buy a car, I'm not betting my livelihood on it. When [farmers] buy a combine, it's their livelihood. They will either harvest their crop, or it will rot in the field if the combine doesn't work properly.... A combine [also] typically costs 10 times as much as a car [and is] incredibly complicated. It has to be set up. That takes a lot of knowledge.
Q: Is it essential to have genetically engineered crops for precision planting to really be effective?
A: No. There are already many varieties not genetically modified, [that are] equally compelling. They will continue to evolve.