Why is the world’s biggest seed company betting nearly $1 billion on a Big Data startup?

So much corn, so little insight.
So much corn, so little insight.
Image: PRNewsFoto/Greenpeace
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Biotech giant Monsanto said on Wednesday it will pay $930 million to buy The Climate Corporation, a Silicon Valley startup specializing in weather analytics and risk management.

Big data, normally associated with consumer-facing sectors, seemingly couldn’t be further away from Monsanto’s often controversial core business of genetically modified seeds. So what gives?

Climate Corp, backed by two former Google executives and PayPal co-founder Peter Thiel’s Founder’s Fund, among others, provides insurance products and software services that aim to reduce weather risks and boost crop yields for farmers. It does so using technology that “combines hyper-local weather monitoring, agronomic data modeling, and high-resolution weather simulations,” according to its website.

“We took 60 years of crop yield data, and 14 terabytes of information on soil types, every two square miles for the United States, from the Department of Agriculture,” Climate Corp chief executive David Friedberg told the New York Times in 2011. “We match that with the weather information for one million points the government scans with Doppler radar—this huge national infrastructure for storm warning—and make predictions for the effect on corn, soybeans and winter wheat.”

That’s an especially useful skill for Monsanto to employ. After all, the seed giant has been around since 1901, and could conceivably have more than a century’s worth of records on weather patterns and crop yields. On a conference call with analysts on Wednesday, the company said it’s spending north of $1 billion on data generation each year. Marrying Climate Corp’s data mining prowess with Monsanto’s records could help improve the crop yield associated with Monsanto products and hone better farming techniques.

“If we tried to replicate this it would have cost us more,” Monsanto chairman and chief executive Hugh Grant said on the call.  “This is the entry ticket into a $20 billion market opportunity.”