New technology is changing the business of farming

By now, many farmers are already acquainted with subscription-based services, and between auto guidance and telematics services, they may have a few of their own. 

In 2022, the Association of Equipment Manufacturers (AEM) made 13 predictions in “The Future of Food Production” report covering the next 10 years. They include changing farm ownership models, increased global production demand, reducing environmental impact, geographic shifts in production, developing artificial intelligence, and narrowing the connectivity gap. At the convergence of all these trends, AEM predicts new business models will emerge in the agriculture machinery industry. 

Curt Blades, senior vice president of AEM, points specifically to changes in farm ownership as one of the biggest trends driving the emergence of new business models, citing data from the 2014 USDA Tenure, Ownership, and Transition of Agricultural Land survey. At that time, 39% of U.S. farmland was rented, increasing to 54% for land used for crop production. This trend has continued since 2014. Looking specifically at Iowa, the amount of Iowa farmland leased out increased from 53% in 2017 to 58% in 2022, according to data from Iowa State University’s Iowa Farmland Ownership and Tenure Survey. 

“The business structure has evolved a little bit with less direct ownership of farmland,” says Blades. “As a result, whether you’re in ag equipment or inputs, you have to match that business model with what the farmer’s using.”

Subscriptions in the marketplace

Equipment manufacturers look to “equipment as a service,” a model used predominantly outside of North America until this point as a possible payment model alongside subscription services. This would allow farmers to lease equipment for a specified period, with payment based on the output of that equipment, along with any other services that go along with it, such as data analytics and preventive maintenance, according to AEM’s report. Blades likens this to custom harvesting practices.

“‘Equipment as a service’ is kind of tailor-made for high-concentration small farms,” says Blades. “That doesn’t really exist here in the U.S., but you could certainly see where it would apply nicely to a small farm because they just wouldn’t need to have that capital expense.”

Hardware, until very recently, has always been a one-time buy, says Jim Chambers, senior vice president and general manager of Trimble Agriculture. Farmers would buy the receivers and then pay different unlock fees depending on the accuracy required for their equipment. Costs would be relatively expensive, but the hardware was the owner’s for the lifetime of that technology. To get higher accuracy and additional features, owners of Trimble equipment needed an annual subscription. 

Instead of paying for the hardware entirely upfront, Trimble is starting to offer subscription agreements, providing a cheaper entry point comparable to a cell phone plan, according to Chambers.

“You could turn it off at any point you don’t need it or if we’re not meeting your needs,” says Chambers. “It forces us to be better suppliers because we have to earn your business over and over again.”

John Deere has offered subscription services for precision ag tools such as RTK guidance signals, following a time-based model. Deere plans to expand its service offerings with time-based and usage-based pricing models, according to Joel Dawson, director of production and precision ag marketing at John Deere.

“These ‘solutions as a service’ not only minimize upfront costs for farmers but also continually enhance their effectiveness, allowing them to pay only for what their farm needs,” says Dawson.  

Case IH has yet to launch any machines under the “equipment as a service” model. The company will continue to evaluate business models as technology hardware costs increase and market conditions change, with the goal of making its machinery cost-effective, notes Chris Dempsey, global director of precision technology at Case IH.

Determining pricing models

Telematics aren’t new to agriculture, so there is a fair amount of market expectations from competitors and related industries driving price positioning, says Dempsey.

“The other factor is anytime we bring new products to market or consider pricing adjustments, those are largely based on customer feedback, and a group of customers we work fairly closely with to have those conversations,” says Dempsey. 

John Deere approaches pricing by analyzing the competitive landscape, and considering the pricing of alternative options available in the market, says Dawson.

“Our chosen pricing strategy is geared toward facilitating a rapid return on investment for farmers to improve their profitability,” says Dawson.

Largely precision ag and telematics subscription services are offered on a machine-by-machine basis, but in some instances dealers might combine services to encompass fleets or multiple-unit packages for unique requirements from the farmer.

Maintaining uptime

During critical points while planting or harvesting, any amount of downtime can affect a farmer’s bottom line. While most of these subscription-based services require a data connection for full function, it isn’t always necessary for access.

“The data is always logged in the display or in the architecture onboard the tractor, combine, or any connected piece,” says Dempsey. “When it regains connectivity, it will send the relevant data that has been logged during periods of outage.”

Access to timely customer service is just as important. Deere and its network of dealers have used an internal administration tool for a number of years that the company is enhancing with new features.

“Establishing a robust infrastructure is critical in effectively overseeing the intricate facets of subscriptions,” says Dawson. “It’s an essential element in guaranteeing a favorable experience for all stakeholders involved.”

Chambers says, in the past two years, Trimble has invested “massive amounts of money” for the company’s digital transformation across its entire portfolio to prepare for the future.

“We’re leveraging transportation, geospatial, and construction to build one common infrastructure to operate within that allows us to monitor our customers,” he says. “We can know how they’re using our products, and we’re able to provide the latest and greatest insight, and make sure we’ve got all the content needed however you want to access it. Do you want to text somebody? Talk to somebody? Do you want to just go on the Trimble site and read a document yourself? All of those options are available.”

Precision for small farms

Precision technology is pouring into the machinery marketplace at a faster rate than farmers can purchase new equipment. Historically, advanced technology was initially adopted by farmers with large operations, often leaving smaller ones unable to justify the investment due to scale limitations.

“This highlights a key advantage of our ‘solutions as a service’ approach,” says Dawson. “Our solution incurs a lower upfront cost, making it feasible for small-sized farms to embrace technology. This approach ensures accessibility for all farmers, allowing them to integrate evolving technology at their own pace and pay only for the features their farm requires.”

Deere has entered the retrofit market for similar reasons. 

“While we value selling new equipment, we also emphasize the sale of technology that enhances the intelligence and precision of existing machinery,” says Dawson. “This commitment ensures advancements in technology benefit all farmers, regardless of their equipment’s age.”

Case IH has made retrofitting the company’s own machinery and mixed fleets one of its primary objectives, according to Dempsey. CNH Industrial’s recent acquisition of Raven Industries has further accelerated the company’s presence in the aftermarket.  

AEM is also working to ensure farmers can afford access to the financial and environmental benefits this technology can provide to their farms. 

The organization supports two pieces of bipartisan legislation — the Precision Agriculture Loan Program Act and the PRECISE Act — allowing for funds to be used to upgrade equipment to include precision agriculture, which Blades hopes will be included in the upcoming farm bill.

Manufacturer interoperability 

"Most farmers have a mixed-fleet environment of machines and implements, even if they’re predominantly one color,” says Chambers. “As we’re moving forward, we’re moving a lot more technology off the tractor and onto the implement.”

Trimble, which recently entered a joint venture with AGCO, is still focused on servicing mixed fleets, with 40% of its agriculture business sold directly to OEMs and installed at the factory, and the other 60% sold in the aftermarket from a variety of dealers. 

“Trimble’s goal is to be this open environment,” says Chambers. “You could be an independent OEM and you can still brand our tech whatever brand you’ve got, but behind the scenes, it’s Trimble’s system, Trimble’s data structure, making it easier to bring all the farmer’s data together.”

AEM has worked closely with the Agricultural Industry Electronics Foundation (AEF) over the years to improve cross-manufacturer compatibility and implement international standards for electronic and electric components like ISOBUS equipment. As telematics services and precision ag technology have entered the market, data compatibility is becoming increasingly important. 

AEM regularly meets with AgGateway with the mission of developing the “resources and relationships that drive digital connectivity in global agriculture and related industries,” according to the group’s website. 

“We have a little ways to go on both of those two fronts, but we’re certainly all committed to making sure that it works,” says Blades. “There’s a three-way memorandum of understanding between AgGateway, AEM, and AEF to work together on data and hardware interoperability.”