The Coming Sag in Agtech
Last month's stock market turmoil is adding to an already difficult market situation in agriculture. We should not fool ourselves that this might not have ripple effects in the adoption of agtech. The USDA’s recently released economic research report shows a forecast for net farm income to be the lowest since 2006 and farmer debt ratios rising. Crop receipts are expected to drop 6% YOY and livestock receipts by 9% due to lower milk and hog prices.
These deteriorating business conditions are already having an effect on farm equipment and technology purchases. CNH Industrial reported Q2 revenues from its agricultural equipment sector were 32% lower this year over last. John Deere’s agriculture sector sales are expected to drop 25% YOY.
Steven Fisher, machinery analyst at UBS Investment Research, and his team just released their semi-annual US Agriculture Dealer Survey and the results were the most pessimistic in the survey’s 36 year history. Their survey reports that farm equipment sales will likely stay flat only if corn is selling at $4.70 a bushel or more in 2016. (Future prices for December for corn are around $3.70.)Of the 178 respondents to the UBS dealer survey, dealers indicated the impact--on a scale of zero to ten--coming from the sale of big data (4.05 average), drones (1.58) and robots (1.05). The silver lining is that when asked about the impact of these same technologies five years from now, dealers score an impact from big data at 5.98, drones at 4.02, and robots at 2.44.
One hundred ninety-six respondents weighed in on the UBS survey question of “What percentage of your customers are motivated to purchase the very latest in Precision Agriculture Technology?” The average answer was a respectable 24%. However, the key takeaway for me was that over 80% of dealers answered that 10% or less of their customers are interested in Precision Agriculture today. The average answer from Deere dealers was 33%. Dealers in the Delta States region averaged 40% while the average was a surprisingly low 19% in the Pacific region.
What Civil Eats wrote about Silicon Valley and food tech at the end of August holds true for agtech as well: “The world may be changed by companies [in Silicon Valley], but it probably won’t be as fast, cheap or simple as the companies, or their investors, hope it will be."Rob TriceFounder of The Mixing Bowl