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Bayer reveals results from first ‘outcome-based pricing’ pilot

Last year, Bayer announced it was developing a new business model that meant it would share some of the risk associated with growing crops with its customers.

This would be done through a product recommendation to a grower, guaranteeing a certain yield for example, and Bayer would be paid based on the yield outcome.

 

If the yield was less, Bayer would take the hit, and if it was more, they would ‘share the upside’.

 

Over the last year, pilots have been rolled out across the US, where Bayer has the broadest digital penetration. Its digital platform, Climate FieldView was used to collect all relevant data from the farm, which was calibrated with historic data and other farm data to create a recommendation and a prediction on how much harvest a farmer would achieve.


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Risk

 

Liam Condon, president of Bayer’s Crop Science division told the 2020 Future of Farming Dialogue online conference that a large number of farms had signed up but had taken different approaches.

 

“Farmers could decide whether they wanted to cap their risk or whether they wanted to share profits. For example, if our prediction was off and the farmer wanted to achieve more than we predicted, we could have a value sharing option. Most farmers were interested in capping the risk.”

Options

 

Based on this year’s results, Bayer is refining the model to a more specific package, Mr Condon said.

 

“We had a huge variety of options. Now we’ll be focussing on very specific outcomes, but with the same approach and the basic premise, we have skin in the game.

 

“It’s not just the farmer that takes the risk, but we are also willing to take the risk and we want to be paid for the outcome generated, and not just for the inputs we sell. This is something we will continue to evolve and I’m sure the entire industry will move towards.

Model

 

He added: “If we have an outcome-based business model, the inputs simply become cost factors. Using as little as possible is the right thing but maximising the output from a sustainability and business point of view – that’s what makes more sense. To do that you need a strong digital platform and that’s why the Climate FieldView platform is so integral to this approach.”

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