Editor’s Note: Joseph Byrum is senior R&D and strategic marketing executive in Life Sciences – Global Product Development, Innovation, and Delivery at Syngenta. This first in a three-part series explores the development of data as an agricultural commodity.
Farmers are adapters. Many are early adopters of cutting-edge advances that will help them be more efficient, competitive and profitable. These innovators are already learning to harness data that they generate on-farm and much more from other sources like governments. In fact, data are fast becoming agriculture’s new currency.
The shift has already taken place in other major industries in which data have become integral to successful operations. Without data – and the ability to manage it effectively — modern transportation, shipping, and communications networks would all grind to a halt.
Despite the central role data have assumed in our lives, the concept remains a bit fuzzy, and can be difficult to define. Synonyms for “data” include “facts, figures, and statistics.” They refer to pieces of information that can be analyzed, quantified and summarized. But data can be much more powerful than mere statistical information.
As information systems grow in utility, data have come to represent different things for different industries, overlapping many scientific disciplines. Along the way, the scope of information that industries want to capture and measure expands, and the data become yet more useful.
Under today's unique circumstances, AgFunder is re-opening Fund III for a limited time to enable investors to join our mission and invest alongside us as LPs in a second close. Learn more here.
In agriculture, data have played the role of an oracle providing insight on seasonal activities. In varying degrees, data have been informing insurance policies, finance facilities, and commodity exchanges.
More recently, precision agriculture and agtech have inspired start-ups offering farmers equipment, software, and other innovative tools that capture, monitor and process field- and crop-specific data. The mind-blowing pace of technology development in this space has left farmers bewildered by the options. In 2015, agtech investment hit a record $4.6 billion. Although 2016 investment amounts were a bit more modest, last month AgFunder reported that $84 million was raised for agtech investments in just two weeks.
Such a level of investment interest comes from those within the industry who see the value of data as a commodity in and of itself.
What does that mean? Earlier this year Bill Schmarzo, the chief technology officer for Dell EMC Services, elaborated on the economic concept of data as a new currency. Essentially, he was exploring the question of the value of data. He compared data to currency; a $10 bill, which doesn’t disappear after you hand it to the barista at Starbucks. Instead, managers at Starbucks take the cash and use it to buy coffee from distributors, who in turn pay growers, who in turn spend it on inputs — and so on. This is the “multiplier effect.”
Like cash, data aren’t one-use, disposable items. Data can also have a multiplier effect of their own that is more accurately described as a “network effect.”
Schmarzo’s insight illuminates a way in which farmers and the agricultural production chain can improve their businesses with a proper appreciation of data as currency.
The concept of currency in agriculture
The concept of agricultural commodities as currency goes back as least as far as the book of Genesis, where we find the story of Joseph, a wise man who rose from the position of a lowly slave to become the administrator of all of Egypt under the pharaoh.
As vizier in a time of great abundance, Joseph saved the fertile lands of the river Nile from ruin by predicting a terrible drought. Acting on information he received in a series of dreams, Joseph ordered the production of as much grain as humanly possible, storing the harvest until every granary overflowed. It eventually became impossible to keep track of it all.
When the drought fell upon the land, the people in Egypt and other nearby nations came to pharaoh desperate for food, and Joseph sold to them. As the drought persisted, people eventually ran out of money. So Joseph traded them grain in exchange for their livestock. With no relief in sight from the famine, people came back looking for food once again. So Joseph traded them grain in exchange for land, giving pharaoh control over all the region.
This story effectively illustrates the use an agricultural commodity as currency. Joseph received knowledge of the drought through a series of dreams. He used this information (or “data”) first to influence the currency of grain, and secondly as a multiplier effect to give pharaoh full control of the property and land.
Today, following the global establishment of monies as finite world currencies, the value of agricultural commodities is influenced by the speculation of global supply and demand chains. With the dramatic increase in global population and industrial growth, the movement of agricultural stockpiles has become a big business. Consequently, the data that inform commodity speculation are highly prized.
Farmers more often than not bear the brunt of the ebb and flow of this speculation in the form of unstable commodity prices. For that reason, they can see the value that increased knowledge or data can bring to their bottom line.
Farmers intuitively understand the data that they generate can bring greater profits through heightened predictability and stability in the market. Much like the rest of the production chain, however, they still haven’t figured out how to make this a practical reality.
Refining data is the key
Schmarzo’s blog series explains that an output must first be commoditized before it can function as a currency. To illustrate this point, he references marketing guru Michael Palmer who notes that oil in and of itself is not a viable commodity. As a refined product, however, oil takes on the value of a currency. Palmer goes on to compare data with oil. Data, like oil, only have a finite currency value once refined. Refinement is what makes data useful and converts data into a commodity, giving them real value.
For farmers, the value of data lies in their ability to assist in making the best possible decisions about using funds for the ongoing production of their crops. Data have the potential to impact the price and conditions under which Starbucks passes that $10 bill down the value chain in the purchase of coffee beans from the farmer. Data also have the potential to distinguish a farmer in his ability to connect and communicate with the market and in his ability to distinguish himself from other farmers.
It’s no wonder, then, that some farmers have questioned the true nature and purpose of the consumption of agricultural data. Farmers will want to know how the multiplier effect of the consumption of data from the farm will allow more efficient resource management and services, bringing back more profit to the farm.
The industry’s challenge is to develop the technology that enables the information transfer to and from the farmer, who remains the primary agent for the collection and collation of data, as well as the chief beneficiary. The inherent complexities in the agricultural production chain present a concerning bottleneck in technology transfer for agriculture overall.
Similarly, many companies try to sell farmers on technology solutions, each of which take their own approaches to data collection and analysis. The farmer who is still undecided on the value of data for his own situation looks at the conflicting claims and understandably struggles to see the practical value of data for his field, even if he recognizes data’s value to the industry as a whole.
We must address these challenges, because, like every other industry, agriculture has to move forward into the era of data. That means farmers will have to adapt in the context of circumstances that impact on the production and sale of their crops. The true value of data for farmers lies in their ability to help them adapt without having to forfeit control of the farm—as the farmers in Joseph’s Egypt had to do.
If data can be considered the new oil, then they must embody economic principles that can enable the farmer to harness their economic benefit.
In the second part of this three-part series, we will take the farmer’s point of view and examine how we can transform what today is a byproduct of agricultural output into a commodity that has value for all stakeholders within the production chain.