America's Top States For Business

Frankenstates: Winning the agriculture tech war

What it takes to be the top state

Innovation and agriculture may be the proverbial peas in a pod. Each has grown together, creating a harvest of new methods for food gathering.

Take Bo Stone, a sixth-generation farmer who raises nearly 10,000 hogs a year, while growing corn, wheat, soybeans and strawberries.

"We use GPS and satellite technology to guide our tractors," said Stone, who with his wife and parents owns the 2,300 acres of P&S Farms near the town of Rowland, North Carolina.

"We download soil maps to our handheld devices to write prescriptions to give each part of our fields the right amount of fertilizer and pesticides," he said.

The 43-year-old Stone, who holds a master's degree in agriculture, keeps his tablet and mobile phone with him during the long working days, while using his off hours to do research on new tech advances.

Every device is used to maintain efficiency while growing his business. "The technology is another tool in the toolbox of farming. It's very important for my operations," Stone said.

Flying utility drone spraying pesticide over a cornfield
Maciej Frolow | Getty Images

It's a high-tech toolbox that is also leading to a battle between U.S. states for research funding earmarked for farming.

Farming states may not be making semiconductors or writing software code, but research in soil conservation, pesticides and genetics is geared toward innovation in the farm fields and is every bit as cutting edge in its own way as anything coming out of Silicon Valley.

Some of Silicon Valley's biggest trends are also capturing the attention—and dollars—of the biggest players in the agricultural sector. Monsanto paid close to $1 billion earlier this year to acquire Climate, a Silicon Valley–funded start-up working in data analytics and predictive analysis.

For the first time in its eight-year history, CNBC's Top States for Business has included agriculture research dollars (both federal and state) within its innovation ranking—and the competition is every bit as fierce as in other technology niches.

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Despite any misconceptions to the contrary, embracing new technology has been a staple of farm life.

Even when it came to the 'new' technology of the landline telephones in the 1920s, more farmers had them than the public at large, according to the U.S. Department of Agriculture.

"I love that people think agriculture is a late adopter to technology," said Steve Lucas, president of SAP Platform Solutions, a software firm that provides data platforms for agriculture machine maker John Deere. "But the truth is different, and we're seeing bigger innovations than ever before, and the agriculture industry is jumping in," he said.

The recent advances have been starting at the bottom of the supply chain, said Derek Yach, executive director of the Vitality Institute.

"We have better seeds, better forms of plant breeding, better soil nutrients and increased yields of crops," said Yach, who is a former senior vice president of global health and agriculture policy at PepsiCo.

"And it's really just getting under way now," he said.

R&D money 'not enough'

Every year, the states are granted around $7 billion by the government—specifically the U.S. Department of Agriculture and the National Science Foundation—to develop new technologies for agriculture. There is also some private funding.

However, the competition for those dollars is very tough, said Mark Rieger, dean of the University of Delaware's college of agriculture and natural resources.

"We could use more money than what's available now," said Rieger. "But it would be better if we could have more private funds so we're not so dependable on the government."

States leading the way when it comes to research and development programs in agriculture include California, Michigan, New York, Florida, North Carolina, Illinois, Nebraska, Indiana, Virginia and New Jersey.

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To get government funds, many states must often team up with each other and with local universities on agriculture projects.

Some of the tech advances in agriculture being used or on the drawing board include:

  • Telematics, or satellite-generated maps of crop fields, known as precision farming.
  • Soil and crop sensors.
  • High-flex tractor tires to ease weight across fields.
  • GPS navigation for farm machinery.
  • Precision navigation for better water distribution.
  • Robotic picking machines and tractors.
  • Drones for crop mapping and monitoring.
  • Research for soil nutrient replacement.
  • Chemical and mechanical treatments to process manure and discharged water from livestock.

Private sector jumps in

Private and publicly run companies have entered into the agriculture tech sector as well. Stevia First is a development-stage agri-bio business focused on industrial-scale production of stevia, an all-natural zero-calorie sweetener.

Stevia is a plant from the sunflower family that is a native of Peru. The by-product can be used as a sugar substitute. It's often found in beverages, like Vitaminwater.

Stevia First is planting, cultivating and harvesting organic stevia in California using mechanized equipment in a commercial crop-production setting.

"We're still in the R&D stage and have raised about $6 million to date," said Robert Brooke, CEO of Stevia First, which incorporated in 2007 and is publicly traded.

Brooke explained that Stevia First plans to commercialize a low-cost Reb A stevia product that uses fermentation-based production methods, which have the potential to greatly diminish the need for stevia leaf production.

"There are people who say the plant is too processed," Brooke explained. "But our focus is on sugar reduction. We're trying to develop a more reliable stevia plant that is more efficient and reliable."

I love that people think agriculture is a late adopter to technology. But the truth is different, and we're seeing bigger innovations than ever before, and the agriculture industry is jumping in.
Steve Lucas
president of SAP Platform Solutions

While most tout the progress that technical innovation has brought and will bring to agriculture, there are still words of caution about its impact.

"The trend for things in agriculture is to get bigger and more consolidated, and that's creating two markets," said Frank Aragona, CEO of Agricultural Innovations, an information source for agricultural strategies.

Aragona, who has a masters degree in forestry, said the worry is that large farm operations can more easily afford the new high-tech advances, while smaller farms can't, creating a technology gap of sorts.

"A farmer may have a tractor that's 20 years old and now outdated," he said. "But many farmers are saying it's too capital intensive to go out and buy the newer, more advanced models."

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Another drawback to taking the plunge into the world of high tech is simple access to the Internet. Many farmers complain they don't have interconnectivity in rural areas.

Also what's needed by farmers is more open sourcing—universal free access to software and other computer technology, Aragona said, adding that there isn't a lot of money being poured into that area.

GMOs and controversy

The most important technology advancement in agriculture is genetically modified organisms, or GMOs, said Kerry Cornelius, director of ranch management at Texas Christian University.

"They have increased the yield of food, and they help feed more people on less land," Cornelius said.

GMOs are foods produced from organisms that have had specific changes introduced into their DNA using the methods of genetic engineering. Around since the early 1990s—and now prevalent in farming around the world—GMOs have been engineered for resistance to pathogens and herbicides and better nutrient profiles.

But GMOs are controversial. There are no labeling requirements for GMO-based food, and that raises concerns they are a possible health risk to humans. The science is not clear; the FDA has mandated no specific labeling requirements but supports voluntary labeling by food manufacturers. There are also ongoing issues between GMO crop companies and farmers over patent infringement of seed technologies—the Supreme Court upheld a ruling in favor of Monsanto's seed patents in January.

Nevertheless, GMOs are here to stay, Cornelius said.

Despite the ongoing advances in agriculture, more will be needed in the years to come, according to industry analysts.

That's because by the year 2050, the world population is expected to rise to nearly 10 billion—up from 7.2 billion now.

That doesn't leave much time, said Bo Stone, who's been using some of his own money to work on a subsurface drip irrigation project with North Carolina State University for the last two years.

"This is to have even greater water efficiency," he said. "We'll keep working on this even if the university drops out of the program. It's too important to stop."

Federal investment in state agriculture (in $MIL)

  1. California: $165,833,601
  2. Pennsylvania: $139,855,685
  3. Texas: $102,847,221
  4. North Carolina: $88,144,692
  5. Iowa: $85,540,434
  6. Florida: $76,043,550
  7. Georgia: $75,360,095
  8. Illinois: $71,429,004
  9. Wisconsin: $70,185,070
  10. Washington: $67,424,615
    Source: USDA's National Institute of Food and Agriculture, Fiscal 2012 (the most recent year for which data is available)

Total investment in state agriculture, all sources (in $MIL)

  1. California: $434,496,291
  2. Texas: $296,450,456
  3. Pennsylvania: $217,501,036
  4. North Carolina: $198,680,715
  5. Washington: $175,832,144
  6. Iowa: $156,642,571
  7. Nebraska: $140,882,530
  8. Georgia: $138,070,168
  9. Michigan: $123,792,526
  10. Minnesota: $123,555,067
    Source: USDA's National Institute of Food and Agriculture, Fiscal 2012 (as reported by states to NIFA, including non-USDA federal funding, industry funding, state funding and self-generated funding)

—By CNBC's Mark Koba