Information is becoming a prized commodity as farmers seek to attract institutional capital hungry for better reporting.
The race to build one-stop shop data solutions for farmers is set to intensify after DuPont’s acquisition of agriculture software company Granular last week.
The $300 million deal, which saw the US conglomerate take control of both farm management tools and a platform aggregating data, came as growers seek to harness the multiform information generated by agtech at discrete levels of the production process.
Seeing the lucrative potential of platforms capable of integrating data feeds, the agribusiness majors that supply them are amassing considerable resources to embark on an acquisition spree – with limited regard for immediate profitability. A source told Agri Investor the price DuPont paid for Granular valued the company at nearly a hundred times its annual revenue.
“They’re not buying it for the cash flows today, they’re buying it for the future,” said Willard Velie, a co-founder of Aqueduct Investment Partners and principal at AccessAlpha. “These platforms are going to have a complete end-to-end value stream for farmers [but] none of these guys want to build out the entire platform themselves.”
He suggested the likes of Monsanto and John Deere – which did not respond to requests for comment – favored buying one of these platforms to bolt them on to businesses that already exist. Yet, DuPont’s early move seems to have taken some by surprise.
“That thing that Dupont just did has got a lot of their competition and these other big groups concerned about what they’re missing out on, or what they’re not seeing that Dupont’s seen,” Velie said.
The LP factor
Intimately linked to farmers’ evolving data needs is their demand for funding – and in particular, their efforts to raise institutional capital.
A source told Agri Investor that LPs invested in large agricultural enterprises have grown frustrated by the lack of reliable, detailed reporting coming back to them. “I’ve seen tense LP meetings where there was a high level of concern that the investors didn’t know what they didn’t know, because there just wasn’t enough information being offered to them in a thoughtful way.”
Farm operators were starting to realise this, the source said, noting that both the enabling technology and the thinking around it were moving “at a fast clip”.
Others suggest the quality of the data available publicly is also degrading – at least in the US – making it even more necessary to be able to gather information in-house.
“As farm expansion continues and the number of farmers declines, the quality of government databases declines,” Gary Pike, founder of the Pike Management Group, told Agri Investor. “As these guys get bigger they don’t use the government stuff so much, and they’re private entrepreneurs so they don’t share their data.”