Precision Farming s Global Future Markwart von Pentz 1 Precision Farming s Global Future December 5, 2016
Agenda Farming continues to have a great future The evolution of agriculture and economic headroom John Deere Precision Ag
MEETING THE DEMAND FOR MORE FOOD, FEED, AND FUEL 3 Precision Farming s Global Future December 5, 2016
Agriculture and Global Challenges Improving Diets Enabled by Higher Income Population Growth in Urban Areas Rural to Urban Migration 21 st Century Challenge: Sustainably produce enough food, feed, fiber, and fuel from the same or fewer resources utilizing new technologies Limited Arable Land, Water and Environmental Constraints
Billions Urbanization: Rural -> Urban Population Shift 7 6 5 4 Urban Population Rural Population 3 2 1-1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050 Source: United Nations Department of Economic and Social Affairs, 2014 Revision
The global challenge: to ensure there is no productivity gap Global Agricultural Productivity (GAP) Index Required Rate Current Rate 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Global food production must increase at least 70% by 2050. Little additional land available, less water, climate change, societal constraints. Investment in agriculture must increase 50% by 2050 to meet required productivity increase. Source: USDA ERS, 2014; GHI, 2015 6 Precision Farming s Global Future December 5, 2016
MMT World food flows Net interregional trade 250 NoAmer SoAmer BlkSea Australia CentAmer SSAfrica Europe MENA Asia 200 150 100 Importers more people than land 50 0-50 -100 Exporters more land than people -150-200 -250 Source: UN FAO, USDA, GTIS Global Trade Atlas 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2019
The Evolution of Agriculture and Economic Headroom
Innovation and Technology in Agriculture Farming 1.0 Mechanization - Animal Power Farming 2.0 Mechanization Combustion Engine Farming 3.0 Guidance Systems and Precision Farming Farming 4.0 Connected Farming John Deere Precision Ag Goal: To identify the economic headroom in key production systems
Revenue* Cost Economic Headroom Economic Headroom The identified opportunity that can be unlocked through cost reductions and/or revenue improvements in the production system Revenue Increase Potential $/Acre Example: Precision Weed Management 2% yield increase -50% herbicide costs reduction Value in System Now Agronomic/economic model Cost Reduction Potential For a Job or Set of Tasks $23/Acre Economic Headroom 10 Precision Farming s Global Future December 5, 2016
Corn Soybean Grain Sugar Dairy Rice Key Production Systems Across the Globe
What s the Business Case for Precision Farming?
A Farm is a Factory in a Remote Area 40% 50% 90% 13 Precision Farming s Global Future December 5, 2016
Precision Agriculture Evolving Innovation Challenge 2016 and Beyond: A System Approach 3. Smart, Connected Product 5. System of Systems 1.Product 2. Smart Product + + + 4. Production System 1.Product 2. Smart Product 3. Smart, Connected Product + Farming 4.0 + + 14 Precision Farming s Global Future December 5, 2016
1 Costs/profit (USD/ac.) Yield (bu/ac.) WHEAT PRODUCTION Key cost elements, yield and profit (avg. 2013-15) 300 250 Machinery Diesel Seeds Nitrogen Phosphorus Potash 160 140 200 Herbicides Fungicides Insecticides Profit (incl. subsidies/rent) Crop yield 120 100 150 80 100 60 40 50 20 0 0 Alberta 4900 ac. Germany 3200 ac. Ukraine 16,500 ac. Russia 49,400 ac. Source: agri benchmark data (typical farms = highly detailed case study data)
Sc. 1 Scenario 2 Scenario 3 Economic Headroom Calculations for precision farming technologies (Expert judgment, non cumulative) controlled traffic farming variable rate application CP (fungicides, CGRs, by section) optimized combine residue management spot spraying weeds, two products small grain singulation manure sensing + variable rate application variable rate application CP (fungicides, CGRs, full width) variable rate application P/K variable rate application N section control: individual nozzle control, seed control AutoTrac RTK section control: nutrients and CP (6x5 sections) AutoTrac SF1-10 0 10 20 30 40 50 USD/ac. Revenue Seed Fertilizer Crop Protection Depreciation & Interest Repair Fuel Labor 16 Precision Farming s Global Future December 5, 2016 Source: Project of HSWT University with John Deere
XXXL Farming in Kazakhstan: Growing Small Grain Total Cost $3.98/bu $0.39/bu Harvest Management & Overhead Costs $0.70/bu $0.61/bu Weed Management Total cost Price Yield Profit/ac = $3.98/bu = $4.55/bu = 19.3 bu/ac = $11.0/ac Farm size = 2.2M ac Total profit = $24.2M Tillage $0.24/bu Seeding + Fertilizer $2.03/bu Source: agri benchmark data (typical farms = highly detailed case study data) 2011 data
1 Costs/profit (USD/ac.) Yield (bu/ac.) SOYBEAN PRODUCTION Key cost elements, yield and profit (avg. 2013-15) 300 60 Machinery Diesel Seeds 250 Nitrogen Phosphorus Potash 50 200 Herbicides Fungicides Insecticides 40 150 Profit (incl. subsidies/rent) Crop yield 30 100 108 20 50 0 Iowa 1700 ac. Brazil 3200 ac. Ukraine 6400 ac. 29 10 0 Source: agri benchmark data (typical farms = highly detailed case study data)
1 Costs/profit (USD/ac.) Yield (bu/ac.) Key cost elements, yield and profit in corn production (avg. 2013-15) 600 500 400 Machinery Seeds Phosphorus Herbicides Insecticides Crop yield Diesel Nitrogen Potash Fungicides Profit * 200 180 160 140 120 300 100 200 80 60 100 82 40 20 0 Iowa 1700 ac. -58 Brazil 3200 ac. France 270 ac. -202 Ukraine 16500 ac. 0 * Profit = net return after all costs (incl. own land and labor) and incl. subsidies 19 Precision Farming s Global Future December 5, 2016 Source: agri benchmark data (typical farms = highly detailed case study data)
USd/bu. FX impact: corn major exporters 1000 900 800 700 600 UAH Corn ARS Corn BRL Corn CBOT Corn $8.33 $6.75 500 400 300 $4.91 $3.49 200 2014 2015 2016 Source: Bloomberg, 28 November 2016; Deere analysis 20 Precision Farming s Global Future December 5, 2016
John Deere Precision Ag
Data enabled agriculture The future is NOW Operations Center Data, Data Management Telematics Site specific farming Guidance 22 Precision Farming s Global Future December 5, 2016
Traditional Agriculture Precision Agriculture Bigger. Faster. Stronger. Easier. Smarter. More Precise.
Connecting People, Equipment, Technology and Insights Dealers Partners Connect Machines Connect Operators Connect Fields Machine & Fleet Monitoring Operator & Job Management Set-up & Analyze
John Deere suite of mobile apps Get more out of your equipment and your business
John Deere Data Principles Value Transparency Control www.deere.com/trust
Economic Headroom Potential JD Precision AG Small Grain example from Europe Dealer Services POWERGARD AMS Support Non-/Connected Machine MyJobConnect MyFieldConnect CUSTOMER VALUE -10% INPUTS +20% PERFORMANCE -50% ADMIN -20% -10% INPUTS Better machine operation due to Automation Better machine uptime and performance through Connected Support Better Job Execution Higher yields With less inputs Equipment Technology Higher yields with less Inputs GROW LEAD ENABLE
Summary : 1. In order to feed 9.5B people field output has to double 2. You are competing with lower cost producers around the world 3. Production Systems and Economic Headroom concepts are foundational 4. Precision Farming allows to grow more output with less input
From planning to harvest, only John Deere seamlessly connects people, equipment, technology and insights to give you a greater advantage.