Monsanto: Now The Big Data Buzz Hit The Agriculture Industry.

| About: Monsanto Company (MON)

The "big data" is the latest buzz world in the market. Almost all the technology companies like, Intel (NASDAQ:INTC), Cisco (NASDAQ:CSCO), IBM (NYSE:IBM), Microsoft (NASDAQ:MSFT), etc. are trying to establish themselves in the big data market by offering hardware and software products that can meet the requirements of big data. There are lots of reasons behind this enthusiasm, but the prime reason is the amount of unique knowledge, that can be derived from these assets. Due to this unique knowledge the big data assets are getting huge valuations. The latest example is the Monsanto's acquisition of Climate Corporation:

On October 2, 2013, Monsanto (NYSE:MON) announced that it will spend a whopping $930 million, in cash, to acquire Climate Corporation.

Founded in 2006, by former employees of Google (NASDAQ:GOOG) and other technology companies, Climate is a provider of the agriculture industry's most advanced technology platform that delivers a complete suite of analytics and risk-management products. It monitors, collects and analyzes, the weather and agronomic related data and provides the actionable insight to its users through its SaaS based solution. It also protects the farmers against the adverse weather condition through its Total Weather Insurance ("TWI") offering that pays farmers automatically for bad weather that may impact their profits.

As per the Climate website, the prime aim of the company is to:

"Protect the $3 trillion global agriculture industry from the financial impact of adverse weather-the cause of over 90% of crop loss-with automated, full-season weather insurance."

Data assets:

Climate holds significant weather and agronomic related data assets that include: the shape of every single of the 20 million crop lands in the United States, what is grown on each every year, what the crop yields were, the water-holding capacity of the soil and 150 billion soil observations. Moreover, the company's technology platform, on a daily basis ingests weather measurements from 2.5 million locations to generate 10 trillion weather simulation data points.

The quality of its data and analytic capabilities reflects from the fact that Climate is an authorized provider of the U.S. Federal crop insurance program.

For Monsanto, this acquisition, will be its first big investment in the two technologies that are considered as a must have technologies in any industry; namely, big data analysis and cloud based delivery platform. This acquisition will serve the company in multiple ways, like:

  1. Better customer services.
  2. Better future planning.
  3. New revenue streams.

1. Better customer services:

The data bank and the analytic capabilities of Climate will allow the company to offer better insight to its existing customers so that they can better understand: what they need and how much they need.

2. Better future planning:

In the agricultural industry, the requirements of farmers change due to the multiple factors, like: weather conditions, location, end product price, input cost, availability of water and energy, the requirement of labor, soil condition, previous crop, etc. This acquisition will allow the company to plan its future growth strategy in a better way, as the data will allow the company to understand the broad-base as well as the area-specific requirements of the industry. This data can also provide a significant insight of the future requirements of the industry so that its R&D department can develop products that can meet the future industry requirements.

3. New revenue streams:

The acquisition will not only help the company in its present businesses but will also allow it to address the new revenue generation opportunities to the tune of $20 billion, in the field of data science. According to the company:

"The Climate Corporation's capabilities in data science, agriculture's next major growth frontier, an area that represents a potential opportunity of $20 billion beyond Monsanto's core focus today"


Monsanto is one of the largest players in the agriculture industry, which operates on a big scale and serves the diverse geographies. If all goes well, then this acquisition will play an important role in the future performance of the company. In the immediate future, the data that the company gets through this acquisition will not only help it to improve its customer experience but also help it to improve its operational efficiency; through, better inventory management, better production planning, and much more effective and focused R&D efforts.

Moreover, it fits the core vision of the company "to increase crop productivity, conserve more of our planet's natural resources and improve the lives of people around the world"

Long-term outcome:

The cloud base solutions are expected to show exceptional growth, in the years to come, due to its benefits like: instant availability, scalability, rising Internet penetration, the availability of high data-transfer speed, changing corporate culture, cost-effectiveness, rising awareness among users, etc.

So, in the long-run, the acquisition is expected to be more fruitful because in long-run, the cloud based SaaS solution is expected to emerge as a good source of revenue. Moreover, in the future, the company can enhance the acquired platform to offer more services.

Considering all the above points, this is an excellent acquisition for the company.

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.