Agricultural Drones Are Disrupting Crop Spraying, Crop Analytics, & The Tractor Biz
Recently I had the opportunity to chat with Arthur Erickson, founder and CEO of Hylio (pronounced like Helios, god of the sun, not Hi Leo!) about his 14-foot diameter crop spraying drone manufacturing business. I was interested because it was intersectional to two of my key decarbonization focuses: precision agriculture and electrification of aviation.
But it turned out to be intersectional to more of my interests, including disruptive innovation and China. As I was preparing for the chat, I spent some time looking for competitors and found not one, but two 800-pound gorillas. And later I asked myself what China was up to in the space and found another 800-pound gorilla, although in a different way.
Of course, every startup — and Hylio is a startup, only eight years old and counting — has an aha moment. Erickson and team were originally building a generic, heavy-lift drone platform. Their idea was that it was going to be a beast that other firms could stick their own components into. They tried out various business models, including drone delivery. And then when he was down in Costa Rica, Erickson saw local farms spreading agricultural products on farm fields by hand. Being from Texas, which has more farms than any other US state and a $160 billion agricultural sector, he was used to massive tractors on huge fields, but these farmers didn’t have tractors and the fields were too small for the modern agricultural behemoths that agribusinesses use.
And so, a business model emerged. They refined their product by doing crop spraying as a service for the first three years. No one had crop spraying drones, so no one bought them. But farmers were paying $700,000 for new tractors and $11 per acre for a single application by an airplane or helicopter. Modern tractors are complex beasts and have all the mod cons: internet, stereos, air conditioning, and cup holders. They take a long time to deliver these days, with lead times of well over a year. And fixing them has been a political hot button for a long time, with manufacturers voiding warranties if farmers wrench them, not to mention that they are much harder to fix in any event.
From first principles, they thought that they would be more effective because they could fly closer to the crop than fixed wing or helicopter sprayers. Turns out to be unnecessary, as the blast from the props blows the product directly into the crop. As soon as they started doing it, they saw that reality. They run them about 15 feet above the crops as a result, so there’s zero concern about them accidentally hitting a tall stalk, although they have collision avoidance built in. There were a bunch of other learnings over time, but there was nothing like running their emerging line of drones over crops and spraying them for farmers to refine their product line and make it fit for purpose.
Per Erickson, two of their top of the line AG-272 model, the one that is 14 feet across and can carry a couple of hundred pounds of wet or dry fertilizer, pesticide, herbicide, or fungicide, with trailer and bits costs about $200,000 and can cover as many acres per hour as the $700,000 tractor. Oh, and it runs on cheap electricity and only has to move about 150 pounds of extraneous weight above that of the product, unlike tractors which weigh multiple tons and run on diesel. I’ll be writing a different assessment of the multiple streams of environmental benefits that accrue from using drones for crop dusting, but there’s a bit of a clue there.
Hylio uses a lot of standard drone control packages and components in its drones, although the application is custom and the drones’ layout and many components are unique to the company. But it wouldn’t have been possible to start the firm in 2008, to pick a year. Drone technology maturity and availability leapt forward in the past 15 years, and businesses that couldn’t exist even in the 2000s are big business globally.
Crop spraying drones can’t replace tractors for the big load of fertilizer that goes on fields after harvest, but they can replace them for all of the spraying of herbicides, pesticides, fungicides, and fertilizer after that. They can replace fixed wing and helicopter spraying services as well. One big drone can cover 50 acres in an hour, and at manned crop dusting standard rates, that’s $550 avoided every hour, which adds up. With average corn farms hitting 725 acres in 2017 and requiring multiple passes with four products, usually multiple times, that could conceivably mean $130,000 in dusting services per year. The $70,000 for a drone starts to look like it has a good pay off. Corn farms are bigger, but the US average of all farms was still 445 acres as of 2021, so dusting services for a year could still be more than one drone.
There are other hard dollar benefits for using drones, other than replacing pushing tons of tractor around with diesel with lifting 150 pounds with electricity. Soil compaction from running tractors and other farm equipment has big impacts. Erickson had a number he provided, but it was lower than this study of the 2018 North Dakota and Minnesota farming yields, which found from 9% to 55% crop yield losses. Crop duster sites I’ve looked at quote 3%, which is clearly low ball, but still sufficient for their business case. Running drones is cheaper than paying crop dusting services, cheaper than tractors and increases yields just to compaction avoidance.
And tractors and wet fields don’t work well together. Want to tear up a field? Run a tractor over muddy ground. Need to apply product anyway? Drones ignore the ground conditions, so product gets to where it needs to when it needs to.
Then there’s the precision part of this equation. Fixed wing and helicopter dusting spreads a lot of product and typically has significant spill around the edges of the fields to ensure coverage, and they can’t fly too close to power lines and other field site obstacles. Meanwhile, the drones push product directly into the crop with almost no overspill, and can work around obstacles without concern. Erickson says a study is coming up which he believes will show in the range of 30% to 50% less product use overall to get the same yield results. With herbicides, as an example, costing up to $230 per gallon in 2017 and anhydrous ammonia — made from hydrogen made from natural gas — spiking to $1,318 per ton with last year’s energy crisis, you can see why farmers can easily make the case for spending hundreds of thousands on drones.
And then there’s precision part two: spot application. Erickson estimated 15% of farms have drones, mostly aerial imaging and sensor drones to assess crop health, but studies show he’s well under on that data point as well. A survey of 1,000 US farmers in 2017 found 63% were already using imaging drones then. A smaller 2018 study found 75% of farmers were already using or planning to acquire drones. Of course, there’s ownership and then there’s acquiring drone-based spraying services such as the ones Hylio provided. Many farmers just hire a service that uses drones instead of investing their capital and learning the tech themselves.
What the majority of agricultural drones do is fly over fields looking for spots that aren’t doing as well and use SaaS platforms that aggregate imaging and sensor data to figure out what is required to boost yields on those spots. Maybe it’s more herbicide or fungicide. Maybe it’s short a little fertilizer. And then spraying drones can go directly to those spots and apply the exact amount required. Once again, less product, greater yields.
I spoke with Grant Canary, founder and CEO of DroneSeed, back in late 2021. That firm flies heavy lift drones with 60 pounds of seedlings in moss pucks over burnt out areas and drops the seedlings in preplanned spots. Precision tree planting without sweaty 20-year-olds scrambling up and down hills. One of the topics was FAA approval for running big drones out of line of sight of the operators. DroneSeed was running five at a time with preplanned routes with two operators then. One of their calls had 46 people from the FAA on it.
Erickson knows of DroneSeed of course, and credits them with easing the ability to do drone spraying. Fields are big, and the other side of fields are out of sight, especially late in the season when crops are tall. Out of line of sight operation happens. The FAA understands this, and accepts short duration out of line of sight as a reasonable exception for agricultural spraying, especially as there aren’t many people around. There are conditions about automatic return to base and the like, but they aren’t onerous.
And so, to the competitors. I mentioned three 800-pound gorillas in the market.
The first is DJI, which is the biggest drone manufacturer in the world. Oh, and it’s a Chinese firm. But it is an imaging drone company first, and a spraying drone company well down the list. DJI has a spraying product, and introduced its first version in 2015. In reviewing the literature on it, the user experience sprang out at me. Because it is company that started with standard drones, it has standard drone controllers. They can slave up to four drones to be operated by a single operator, and do some geofencing, but it’s much more hands-on by the operators.
By comparison, Hylio does route planning on its custom Windows application, and it can be done anywhere at any time. Press a button in the application and the drone takes off, sprays, returns, and lands without operators doing anything else. And one app can run multiple drones running completely different routes and products simultaneously, if that’s the need. It was pretty clear to me that Hylio was well differentiated against that gorilla, and of course in the current climate having an American-made and manufactured product gives the firm an edge.
The next gorilla is John Deere, the second biggest tractor company in the world after Mahindra & Mahindra out of India. It too has a spraying drone product. But remember that tractor vs drone comparison? Drone sales cannibalize tractor sales for the company and its distributors. And tractors are lifeblood for John Deere, while drones are a tiny fraction of its $52.6 billion revenue in 2022. I’m pretty sure the drone division suffers the usual challenges of being the tiny division in a massive firm, and one that displaces other divisions’ offerings. I wouldn’t want to be in John Deere’s drone division.
And then there’s just the current biggest offering, which is Shenzhen United Aircraft Technology Co., Ltd’s TDN-01, which has a more standard helicopter layout with two big counter-rotating props. It can carry more gallons than even the Hylio AG-272, about 21 gallons in a load compared to 18. More gallons, more coverage per flight. There’s going to be a maximum somewhere, but given battery density improvements and the increasing size of agricultural drones, we’re not at it yet.
A scan of the usual market research report press releases from firms that spam out analyses like them suggest that the market was under $1 billion in 2021, but is expected to hit $5-$6 billion by 2028 to 2030. And there’s at least one analyst who thinks that the agricultural market will be the biggest market for drones in the world. Given my recent assessment which concluded that biofuels will provide the energy for the segments of transportation that are hard to electrify, longer haul aviation and transoceanic shipping, with stalk cellulosic pathways dominating most likely, electric drones maximizing crop yields globally becomes an even better win for decarbonization.
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