Podcast | Douglas Hirsh
Doug Hirsh is an investor in farmland and an angel investor in agriculture technology. He’s been involved in agriculture as a farmland investor since 2008. In 2014, he started angel investing in agriculture and related technologies.
This interview was conducted on August 1, 2018.
Thanks for giving us your time, Doug. I’ll start by asking you the same question I’ve asked everyone in our Thought Leaders in Agriculture Series:
“If you were to give a State of the Union address for Agriculture, what are the main points you’d make?”
I work with about 20 farmers on an annual basis, and every year has been a little different.
I’m positive on the long-term agriculture play, which is why I started investing over ten years ago for the potential inflation hedge and wealth preservation for our family. We’ve not had much inflation over the last ten years, but farmland has done considerably well.
We’re at the point where the farmers are starting to harvest, and they’re worried about the price of grain and how they’re going to survive. Farmers have a lot of anxiety, and I see it in the land market. There is much uncertainty about cash flow, so they’re not strong bidders on land. Looking at next year, I am nervous about how we’re going to negotiate rents.
Personally, I’m trying to find ways to make our land more productive. That’s where technology is going to be a big play—today and in the future. New agricultural technology is going to make farmland more productive and put more money into farmers’ hands.
As an agricultural investor, you know the types of technologies that are either available right now or will be available in the near future. What technologies do you see that will have the most positive impact for farmland investors?
First, I think what IntelinAir is doing – getting real-time data to farmers – is extremely important. It helps farmers find any issues in their field, make their job more efficient, get the chemicals needed to spray and fix the problems.
Getting real-time data to the farmer – and integrating that data into farm management software is extremely important.
Second: “Marketing better” will be significant.
When corn was at four dollars, I asked my farmers-“How much did you sell?”-and they said, “Well, it was pretty hot at that time of the year.” They were unsure about the type of crop they would get, so they were highly conservative in selling for the 2018 crop.
Companies that offer farmers tools to empower them to market their grain earlier and get higher prices will make a big difference in farmers’ profitability.
Finally, there is concern about arable land and the need to increase the production of food to feed the growing population.
The big talk is we’re going to run out of land; that we need to double food production. I believe we have an ample amount of land—we just need to make it more productive.
Being more productive solves the problem of deforestation, solves the problem of losing land throughout the world. Increase the productivity of existing farmland, and you increase yields—generating more food— and you can still get higher prices for farmers.
Do you see any technologies on the horizon that will help farmers with the marketing problem you just you just discussed?
A company called FarmLogs is taking it to the next level. They’re working with grain elevators, getting grain sheets electronically for the farmers and helping farmers who are starting to sell their grain.
They have identified a place in the market where there’s a huge need, and I think services like theirs will balloon in the coming years.
These technologies are available right now. What obstacles have to be overcome for these types of technologies to make a significant impact for farmers and farm investors today?
So many companies are trying to sell farmers service at three dollars an acre, five dollars an acre, and farmers’ margins are razor-thin right now. As a land investor, my rent has gone down over the years and my taxes have gone up. These tight margins don’t leave much room for additional expenses.
On the technology company side, many new companies have a simple revenue problem—they give their product away for free, bundling their service with something like seed purchases. It’s part of their marketing tactics, but it’s hard to get someone to pay for something they previously received for free.
Companies who work with suppliers with a large customer base, selling services to the suppliers for the benefit of their clients, will likely be more successful in the long run.
It sounds to me like what you’re saying is – from a technological standpoint – the solutions are there. They’re ready. They’re worthwhile. That it’s more of a marketing problem for those companies that have the technologies available. Am I hearing you right?
That is absolutely true. The technologies to help the farmer are already there, but there are many companies competing for the same space. Like any company, you have to change and figure out ways to make money. That’s the only way to grow.
I think a company that can provide a comprehensive program to farmers will find it a little easier to sell. Farmers often feel nickel-and-dimed by different types of companies, for example, there are quite a few companies are doing various kinds of automation for tractors and several more trying to sell data to farmers, so creating a more integrated solution could definitely help.
I’ve gotten that same impression from other interviews I’ve conducted. Everybody has a solution, and everybody’s charging a dollar an acre or three dollars an acre or six dollars an acre. Every solution looks really good, but farmers can’t buy them all. So how can a technology company differentiate themselves?
The companies that will do well will be the ones that can show them the return on investment. It’s okay to spend $2/acre if that investment will make you eight. It’s marketing. You have to prove that your product truly benefits the consumer. Anyone can say, “We can increase your revenue by X,” but people need proof.
Talk about IntelinAir. How did you get involved and what is it about their flagship product—AgMRI—that piqued your interest?
I got involved with IntelinAir two years ago via a venture firm with whose founders I have a good relationship and who know I am involved in agriculture. I talked to my farmers whom I trust, my advisors, and had several conversations with Al (Eisaian), one of the co-founders of IntelinAir. We discussed his solutions, his technology, and his team.
IntelinAir’s AgMRI solution made sense to me. I’ve had experience with satellite technology, and understand its shortcomings. It’s too slow getting data to the farmer—they need near-real-time data so they can make real-time decisions. However, it’s not just getting them the data. They also have to understand what to do with it. What should I spray? Is there an insect infestation? Disease? If so, where? How much of the field is affected?
IntelinAir’s software analyzes high-resolution imagery to find problems in the field and presents the information to the farmer in a way that makes sense to them.
How have your farmers responded to the idea of the IntelinAir-type of service where they’re not just taking images but actually analyzing the information and providing specific feedback?
They love it. One of my top farmers is working directly with IntelinAir. The level of detail and insights they provide is remarkable. It truly helps them identify and address problems as they occur. IntelinAir keeps improving their algorithms to pinpoint and identify issues in the field, giving farmers the information they need to be more proactive.
My farm managers love to scout, and IntelinAir makes their scouting more efficient. They provide real value so farmers can address the problem as it’s happening. That saves money when, for example, they can spray an area vs. a blanket application, making it easier to grow a profitable crop.
What improvements or enhancements have you seen IntelinAir bring to the farm and farmers over the last couple of years?
To be useful, data has to get into farmers’ hands on a near-real-time basis. IntelinAir is improving the lag time between the time images are taken and analyzed and delivered to the farmer, which helps farmers make better, more timely decisions.
IntelinAir listens to customer feedback to make improvements in issue recognition and overall usability. Using direct feedback, they are continuously improving the software to make it easy for a farmer to log in, quickly see the problem and decide exactly what he needs to do about it.
Another reason they’ve been so successful in creating a tool farmers can use is that they work with the people who work with the farmers every day. The folks who understand what the farmer needs to improve the performance of his fields. Through these partnerships, IntelinAir technology is also helping the people who help the farmers.
That’s the number one goal of IntelinAir – increasing performance for all their customers so farmers can grow a more abundant crop and make more money.
For other farm and farmland investors, is this something you think will make a significant difference?
Oh, I think so. Anytime technology improves the productivity of the land, it creates a huge impact and makes land more valuable. As a long-term investor, that’s why I like owning farmland. It’s also why I invest in these different technologies. They run hand-in-hand.
Like any investment, you look at your return on cash flows. How many bushels could I produce on that land? What price do I think I could get on average? Our leases have incentive clauses in them, so as an investor, I will make more money if the farmers use these kinds of tools and produce more bushels.
Is there anything else you’d like to add?
Everyone is focused on cutting costs, but I caution against cutting your costs by reducing your technology budget. It’s time to increase that budget because those extra dollars spent are going to make the difference.
I think when grain prices are as low as they are today, it is the best time to embrace technology and companies like IntelinAir that can help improve productivity. It might be those three to five extra bushels that make or break your return this year, to go from being in the red to the black.