Deere relies on technology models like Apple to increase revenue

Deere & Co has been selling its tractors and other equipment to farmers for decades, but the world’s largest farm machinery manufacturer is taking its cue from the technology world’s playbook – combining sophisticated hardware with software and subscription models to increase revenue.

In a world where the number of grain farmers is dwindling and the population is growing, Derry and its rivals are building load-powered tools with the latest software that is reaping a new kind of bumper harvest: data. All of this translates into recurring revenue, which companies like Apple have enjoyed for a long time, and industry makers like Deere are watching with interest.

Julian Sanchez, director of emerging technology at Reuters, told Reuters: “The more technology we can develop that allows farmers to get productivity from their land without having to spend so much money on fertilizers and inputs, the better for everyone.” .

Investments in heavy-duty equipment automation for dear and competitors AGCO and CNH Industrial are still in the early stages. The next step would be to equip machines for planting seeds using satellite imagery and soil data, Sanchez said.

Although Deere did not say what that might mean for its bottom line, the late-fall U.S. automaker General Motors Co. said it aims to raise up to $ 25 billion in software-based services by 2030, adding that its cruise self-driving unit will hit. Maybe ছয় 50 billion in annual revenue in six years.

The growing food crisis has accelerated the race to automate agriculture among farm equipment companies. Deere’s strategy to expand its technology product line is now in the spotlight after the manufacturer’s stock fell 14% on May 20 after quarterly revenue declines. It was the biggest fall for Deer in 14 years.

The drop is due to the war in Ukraine and the massive drought in major grain-producing countries, which has led to a drop in supply and a rise in the price of grain and agricultural inputs. As a result, American farmers are pushing to increase their crop yields while limiting their use of fertilizers and pesticides.

This and the shrinking agricultural workforce pave the way for access to high technology for deer and other companies. For farmers, the price to pay is higher crop yields. For Illinois-based Dir, it’s revenue.

Artificial intelligence has become part of agriculture as the autonomous machine where Deere is betting. Its self-propelled 8R tillage tractor will be the latest addition to the company’s algorithm-based offerings when green machines go on sale in the fall.

The new tractor will cost 500,000 However, the autonomy function will be sold separately. Deere executives told analysts at a conference that the company would maintain its “point-of-sale” model for equipment primarily, but would include a software-in-service (SaaS) model for its solutions. Autonomous 8 This will probably include their self-propelled tractors.

“While it may take us a few years to build a recurring revenue base, autonomous solutions will recur in addition to our built-in machine forms,” ​​said Joshua Jepsen, Deir’s assistant chief financial officer.

“Based on this data,” said Michael Steve, a machinery partner at Bain & Company, “the recurring revenue model could be economically favorable for heavy machinery manufacturers.”

In the case of Deeres, higher margins can be obtained by selling or leasing driverless tractors and using the subscription model.

“After spending, every extra dollar goes straight to the bottom line,” said Edward Jones analyst Matt Arnold. “We hope it will be an attractive offer for farmers that offers them and is profitable for Deer.”

Agricultural data helps net bottom

Farmers have long been skeptical of how equipment and suppliers benefit from data collected from their farms, and how secure that data is. But as farmers face economic pressures, Deere and other manufacturers say it is easier to persuade farmers to make such investments.

A key reason: the ability to collect crop data from a large amount of agricultural data saves farmers money by estimating when to plant and how much seed to use.

“Everyone in the industry is a lot more data-driven than we’ve seen them in,” said Michael Bohelz, a professor at Purdue University. “(Companies) can estimate profits by the geographical location of the field. This takes you to a different level of thinking and analysis.

In 2020, Deere Harvest Profit, an agricultural profitable software that was integrated into the John Deere Operations Center. The platform stores and allows farmers to access their machine data from the cloud.

Jeremy Jack, a Mississippi row crop farmer and general manager, said:

Ron Heck’s case IH’s fleet is equipped with automatic steering and tractors for his 4,000-acre harvest where he alternates soybeans and corn.

A fourth-generation Iowa farmer says some of his new equipment has been loaded into technology. “Unfortunately for us, it costs more, but we hope the costs will be paid more efficiently in the long run.”

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