On January 5, 2023, a John Deere completely electric excavator is on show at the business’s booth at the Consumer Electronics Show (CES) in Las Vegas, Nevada.
Images by Patrick T. Fallon | AFP | Getty
Most frequently, the name Deere conjures up visions of green tractors dotting fields covered in crops.
However, the manufacturer of farm equipment has been sowing the seeds for a future that is increasingly high-tech and autonomous and that heavily depends on space.
In an interview with CNBC’s “Manifest Space” podcast in April, Leanne Caret, a Deere board member since 2021 and the former CEO of Boeing Defense, Space & Security, said: “Deere is one of the best technology secrets in the world out there, but you’re not going to do that without the access to space.”
Like its rivals CNH Industrial and AGCO, Deere has been spending money on precision farming. The proposal makes use of sensors, software, and data analytics to deliver more precise agricultural methods, from more fruitful planting to more precise fertilization to more effective harvesting, in order to increase crop yields.
Additionally, the firm manufactures and markets self-driving tractors and other autonomous machinery.
The keystone of this idea is connectedness, and space fills the gap left by fiber and conventional cellular transmissions.
According to Jahmy Hindman, chief technology officer of Deere, in an interview with “Manifest Space,” “We’re pretty bullish on the opportunity that the commercialization of all things space is bringing to agriculture at the moment.”
When it comes to terrestrial cell coverage, Hindman stated, “agriculture is done in rural areas, where it is not always available, and when it is, it is not always sufficient to do the types of things that farmers need to have done in the field.” We believe that satellite communications is a particularly fascinating technology to explore in order to close the communications gap.
In order to provide its own real-time connection signal for GPS to assist guide machinery and develop yield maps for combines, Deere invested in and finally bought NAVCOM twenty years ago, marking the beginning of the junction between space and agriculture.
However, GPS is no longer sufficient, especially in large markets like Brazil where more than two thirds of agricultural land is disconnected from communications infrastructure.
In order to cooperate on space-based connectivity services, the business issued a call for proposals to the satellite communications sector last autumn. The exact cost of the proposed “SatComms” arrangement has not been made public, but the space industry obviously sees money in the proposal: according to Hindman, some 40 businesses have filed bids, representing “the who’s who of satellite connectivity across the globe.”
According to Hindman, Deere is now doing various trials with specific businesses, including the installation of equipment on trucks to assess real-time, in-use performance.
We had the chance to combine the satellite space communications industry with agriculture and ask, “What kind of value could we create?”
After the bidders have completed a growing season, Deere will choose a partner for the project, with a solution anticipated to be made available to farmers by this time next year. Hindman stated that he is paying closer attention to other space-based services as well, including Earth observation data, as the commercialization of Earth orbit drives down prices and enhances capabilities.
The ultimate form of the business model, including whether it will be a service subscription, a one-time payment, or something else, is still up in the air.
It won’t just effect new equipment, though, according to Hindman, who noted that Deere customers have a strong need for the capability of updating older equipment as well.
Analysts point out that the value proposition of linked machinery and precision agriculture has been boosting demand and enabling the firm to achieve greater pricing.
According to Chad Dillard, senior analyst of U.S. Machinery at Bernstein, “it increases Deere’s structural pricing power and should have an uplift effect on the valuation multiple.” It essentially boils down to the reality that precision agriculture boosts agricultural production, which in turn fuels the upward spiral of pricing, margins, and multiples.
When Deere releases its quarterly earnings report on Friday, that dynamic will be highlighted. Deere has also discussed the possibility that by the end of the decade, typical recurring software-type services may account for around 10% of sales, as Dillard pointed out.
The fact that space-based capabilities are used more frequently also explains why they are one of the top holdings in Cathie Wood’s Ark Space Exploration and Innovation ETF, a position that first puzzled some investors when the fund was introduced two years ago.
“If you have this ability to connect every acre on the farm, you have the ability to collect more prescriptive information… That allows the grower to make better decisions,” said Hindman. That boosts food security because it results in a better year-end result than would otherwise be feasible without that knowledge or that data.
Morgan Brennan of CNBC hosts “Manifest Space,” which focuses on the billionaires and minds driving the ever increasing prospects beyond of our environment.Brennan speaks with the biggest names in the satellite, space, and defense sectors as well as new companies.In “Manifest Space,” take a seat back, unwind, and get ready to take off.