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Deere Suit Sheds Light on Race for $240 Billion Farm Tech Market

June 20, 2018
Deere is suing rival AGCO Corp. over technologies integral to a projected $240 billion market for so-called precision agriculture, which harnesses big data to automate operations and boost productivity.

An obscure-sounding legal battle between two of the biggest farm-machinery makers is highlighting a race to automate farm work.

Deere & Co., the world’s biggest tractor maker, is suing rival AGCO Corp. over gadgets like seed meters and hoppers that attach to planting machines. Such devices are integral to a projected $240 billion market for so-called precision agriculture, which harnesses big data to automate operations and boost productivity.

Companies are “moving fast” with precision technology, transforming the industry, said Karen Ubelhart, an analyst with Bloomberg Intelligence. “This is a big deal, and they’re all spending a lot of money on it.”

Battle Over Patents

In its patent-infringement complaints, filed June 1 in federal court in Wilmington, Delaware, Deere said the combination of AGCO unit Precision Planting’s vSet seed meters and SpeedTube seed-delivery system infringes 12 patents related to Deere’s ExactEmerge, which allows farmers more accurate seed placement and spacing while planting at higher speeds. Deere is seeking court orders blocking further infringement and to collect cash compensation.

AGCO, the No. 3 tractor-maker, bought the company that makes these components, Precision Planting LLC, from Monsanto Co. last year -- a few months after Deere’s $190 million bid for the business was blocked by the Department of Justice.

AGCO said in a statement that Deere’s claims “are believed to be without merit and will be vigorously disputed.”

“Deere is now suing AGCO over the Precision Planting technology that AGCO acquired that, in the first place, John Deere wanted to acquire," said Dennis Buckmaster, a professor of agricultural and biological engineering at Purdue University in West Lafayette, Indiana. “There must be sufficient difference in the technology, or else Deere wouldn’t have wanted to acquire it in the first place."

The lawsuit against AGCO “is not related to previous activity regarding the proposed acquisition of Precision Planting by Deere,” said Ken Golden, a Deere spokesman. “The lawsuit is our effort to enforce Deere’s patent rights to protect the value of innovation created by our company and its employees and to restrict unauthorized use of the exclusive product features that are created through use of these patents.”

‘Unique and Inventive’

Deere and Precision Planting spent years independently developing their technologies and then released them within weeks of each other in 2014, according to the DOJ lawsuit challenging the merger deal. Deere had 44% and Precision Planting 42% of high-speed planting systems at the time. A combination would result in higher prices for farmers, the DOJ said.

In a June 1 statement about the AGCO suit, Deere said that patents in question “relate to several of the unique and inventive aspects” of the company’s planting equipment.

The sting for Deere is that Precision’s components can be attached to older planters of any brand, and the number of retrofits the company sold last year was about equal to new planters the entire industry sold.

“Let’s suppose there was a cool little add-on that you could give your Toyota and make it feel and ride like a Lexus,” Buckmaster said. "Lexus wouldn’t want that to be on the market."

‘Game Changer’

High-speed planting is a “game changer,” said Scott Shearer, a professor at Ohio State University. Precision Planting’s technology in particular has been integral in increasing expectations for farmers, who now demand near-perfect accuracy in some aspects of seeding, he said.

Some of the biggest farm-machinery companies “began adopting and changing seeding technology because of this startup that was garnering a lot of interest from farmers,” Shearer said.

New technologies under the category of precision farming -- which also include things like autonomous tractors, plant sensors, drones and data-management software -- will probably generate $240 billion in revenue by 2050 and help lift crop yields by 70%, according to a 2016 report from Goldman Sachs Group Inc.

AGCO has rolled out what it says is the first built-from-scratch “smart” combine, which is embedded with sensors and can cut, separate and clean the crop during harvest, all automatically.

Shrinking Work

“We’re getting more autonomous all the time, and the job of the farmer keeps shrinking in the cab,” said Eric Hansotia, senior vice president at AGCO, adding that its machine has far more lines of computer coding than a space shuttle.

Fully autonomous tractors are about five years away, said John Nowatzki, an agricultural machines specialist at North Dakota State University. CNH Industrial NV, the second-biggest tractor-maker, already has a concept for such a vehicle. It’s a sleek, aggressive-looking machine that notably has no seat for humans.

Matt Swanson, 31, who farms 1,000 acres in LaHarpe, Illinois, said he invested $100,000 to retrofit his planter with Precision Planting components. Because he can better manage where he’s putting down chemicals and seeds, he thinks he’ll make back the investment in two to three years.

“You’re literally eliminating mistakes,” whereas with his old system, “it was a hope-and-pray thing,” Swanson said.

By Lydia Mulvany, Susan Decker and Christopher Yasiejko

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Licensed content from Bloomberg, copyright 2016.

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