By Ashlee Vance October 02, 2013
As if we needed any more proof that the Big Data phenomenon is well and truly upon us, Monsanto (MON) has agreed to acquire the Climate Corp. for $930 million. The real stunner of a deal marks one of the largest buys of a new-era data analytics company.
Climate Corp. was founded in 2006 under the name Weatherbill by a pair of Google (GOOG) engineers who wanted to capitalize on the world’s increasingly unpredictable climate. The new company offered insurance against weather-related incidents such as a rainout at the U.S. Open tennis tournament or a concert cancelation. As time went on, the company settled on a business model that revolved around providing a new type of insurance for farmers.
Historically, farmers have relied on federal crop insurance to protect them against the costs of their inputs—fertilizer, seed—during hard times. This setup, though, leaves farmers at a break-even point and does not address the profit they may have made from the crop. The Climate Corp. stepped in to offer insurance that would cover the profit, and it did so in a very innovative way. The startup turned the U.S. into a grid and used weather data to measure temperature and rainfall and other factors. If a farmer bought a policy that covered drought and his land didn’t receive the specified amount of rain covered by the policy, he was paid out automatically by Climate Corp. based on the measurements—no need to filed claim.
Last year I traveled to Indiana to meet some of the farmers using this type of insurance. It was early days for Climate Corp., to be sure, and farmers were just starting to wrap their heads around the company’s proposal. Louis Wischmeier, a grower with 5,300 acres of farmland near Columbus, Ind., had embraced the new insurance to cover so-called specialty crops, such as avocados and blueberries, that the government program won’t touch. “This gives us a huge chance to feel comfortable targeting high-profit, specialty crops,” he told me.
Monsanto played down the insurance business it’s buying by not even mentioning it until the sixth paragraph of a statement announcing the deal. Instead, it portrayed Climate Corp. as a Big Data agriculture whiz. “The Climate Corporation is focused on unlocking new value for the farm through data science,” said Hugh Grant, Monsanto’s chairman and chief executive officer. “Everyone benefits when farmers are able to produce more with fewer resources.” The statement goes on to celebrate the startup for building “the agriculture industry’s most advanced technology platform combining hyper-local weather monitoring, agronomic data modeling, and high-resolution weather simulations to deliver a complete suite of full-season monitoring, analytics and risk-management products.”
The takeaway here seems to be that Monsanto sees Climate Corp. as a data and analytics service arm that will aid farmers in what’s being hailed as the era of Precision Agriculture. Startups have arrived delivering cheap sensors that constantly monitor the moisture and nutrients in soil, while others have started using satellite images to measure the yields of crops. All this information needs to be pulled and analyzed by someone who knows what she’s doing.