Transcript Economics of Precision Agriculture: Is there a Payoff?

Site-Specific Management
& Demand for Knowledge
Based Agricultural Services
Jess Lowenberg-DeBoer
Site-Specific Management Center
Purdue University
www.purdue.edu/ssmc
Questions:
• Who is using site-specific management?
• Which precision agriculture technologies are
showing themselves to be profitable?
• Implications of site-specific management for
demand for knowledge based agricultural
services?
Some Definitions:
• Site-specific management – is the old idea
of doing the right thing, at the right place, at
the right time.
• Precision agriculture – uses electronic
information technology to make sitespecific management commercially viable
in mechanized agriculture.
Three More Definitions:
• Embodied Knowledge Technology – Science
incorporated into physical inputs (e.g. seed, fertilizer,
chemicals) in such a way that minimal decision making
by the user is required. Bt corn and glyphosate resistant
soybeans are good examples.
• Knowledge Based Agriculture – requires data
gathering and analysis to adapt decisions to local
conditions. Precision agriculture and integrated pest
management (IPM) are examples. Also called “Smart
Farming”.
• Knowledge Based Services – when a user out-sources
data management, analysis and recommendation
development for knowledge based agriculture.
Yield monitors: Precision
Farming’s “killer application”
• According to the USDA about 34% of U.S. corn
acreage was harvested with a combine equiped
with yield monitor in 2001. It was about 25% of
soybean acreage.
• Only about a third of these combines were
equiped with GPS.
Source: Daberkow et al, 2002
02
20
00
20
98
19
96
19
94
19
Corn
Soy
Wheat
19
50
40
30
20
10
0
92
% of Planted Acres
U.S. Acreage Harvested with a
Yield Monitor Equipped
Combine
Yield Monitor Use Highest on
Larger Farms in the Corn Belt
• USDA researchers showed that 60% of U.S. farms
using precision agriculture are in the Corn Belt.
• In a 1999 survey, Ohio researchers found that only
6% of all farmers use yield monitors, but over
50% of farms with gross sales over $1 million.
• In general, larger farms are more likely to use
yield monitors, but the likelihood of adoption
peaks at about 1600 acres.
Yield Monitor Use in
Europe
• United Kingdom
• Denmark
• Germany
• Sweden
• France
• Holland
• Belgium
Source: Stafford, 2000
400
400
150
150
50
6
5
Yield Monitor Use in Latin
America
•
•
•
•
Argentina
Brazil
Uruguay
Chile
560
100
12
4
Las Rosas, Cordoba, Argentina
 < 33 qq/ha
 33-56 qq/ha
 56-66 qq/ha
 66-76 qq/ha
 > 76 qq/ha
Source: M. Bragachini, INTA Manfredi, Argentina, 2002, Jose Molin, USP, Brazil, 2002
Yield Monitors in the Rest of
the World
• Australia, 800 monitors used for the 2000 harvest,
500 of those in Western Australia
• In South Africa, 15 monitors used in 2000, mainly
in the corn growing area.
• No yield monitors used commercially in other
parts of Africa, Eastern Europe, or Asia
• Monitors being developed for other crops,
including cotton, sugar cane, potatoes, sugar beets,
tomatoes and grapes. About 8% of U.S. potato
acreage is yield monitored.
Precision Farming Services in
the U.S.
• In 2002 variable rate application service offerings
seem to be growing again.
• 50% of all fertilizer retailers nationwide offered soil
sampling with GPS in 2002, mostly 2.5 acre grids.
This compares with 45% in 1999.
• 43% of all dealers offered computer controlled
variable rate application services in 2002, compared
to 38% in 1999.
• Over 50% of all dealerships in the Midwest offer
these services, and 60% to 70% of cooperatives and
regional/national chain outlets offer the services.
Increasing Percentage of U.S. Ag
Retailers Providing Variable Rate
Growing Use of Precision Ag Tools
by Dealers to Provide Traditional Services
45%
40%
% of Dealers
From fall 1999 to spring
2002 use of GPS guidance
by custom applicators
grew from about 5% to
almost 44%. Growth was
especially strong in the
Midwest where over half
of custom applicators use
GPS guidance
35%
30%
25%
20%
15%
10%
5%
0%
GP
S
National 02
National 01
National 00
G
gui IS fo GPS
dan r le fo Telem
gal r lo
ce
/bil gis etry:
ling tics fiel
d-o
/...
ffic
e
Source: Akridge and Whipker, 2000, Whipker & Akridge, 2001 & 2002
Farm Level Adoption of VRT
in the U.S.
Widespread use of VRT on some higher value crops, but
in bulk commodities farmers try it on a small proportion
of crop area.
• Overall about 10% of sugar beet and potato acreage
received VRT fertilizer in 2000.
• About 40% of sugar beet acreage in Minnesota and
North Dakota received VRT nitrogen in 1999
• About 11% of U.S. corn acres received VRT fertilizer
in 2000. About 6% of soybean acres and 4% of cotton
acres received VRT fertilizer.
• 1% to 3% of corn, soybean and cotton acres received
VRT seed or pesticide in 2000.
Percent of Acreage
Ever Intensively Soil Tested
% of Acreage
25%
22%
20%
17%
15%
11%
13%
10%
5%
0%
Corn
Soy
Source: Daberkow et al, 2002
Wheat
Cotton
VRT Worldwide
 Worldwide experimentation with VRA, but
relatively little commercial use outside of U.S.
and Canada
 In Argentina and Australia, VRA constrained
by high cost of soil testing
 In Western Europe VRA seems driven by
environmental concern and regulation.
Because of limits on overall N use,
commericial use of the greeness sensor is
growing.
Remote Sensing
• About 5% of corn acres and 4% of soybean
acres were managed using some kind of
remotely sensed image in 2000.
• This could be either satellite or aerial
photograph.
• Ag retailers are struggling with how to
market this service. In the 2002 Purdue
survey of ag retailers, remote sensing was
the least profitable of precision ag services
offered.
More Rapid Adoption of Biotech
 Transgenics have been marketed as a classic embodied knowledge
technology. New science marketed in a very traditional package.
Economic Studies of
Precision Agriculture
• Focus on variable rate fertilizer
• “Stand alone” systems with one or two
inputs
• Usually had variable rate application
equipment with whole field
recommendations
• Most studies on bulk commodities
because this is the “mass market”
sought by manufacturers
and retailers
Many Articles and Websites Report
Profitability of Precision Agriculture
• Lambert and Lowenberg-DeBoer reviewed 108
articles reporting economic results related to
precision ag. Some 63% reported profits.
(http://mollisol.agry.purdue.edu/SSMC/)
• Many of these studies omit important costs
including: soil testing, data analysis, training.
• Other studies overstate yield benefits and/or cost
savings.
Variable Rate Profitability in Nine U.S.
Studies with Standardized Budget Methods
Crop
Inputs
Grid Site-years
__ acres_ Profitable
Higher Value Crops:
Sugar Beets
N
2.75
100%
Extensive Dryland Crops:
Wheat, Barley
N,P,K
soil type
20%
Wheat
N
3.0
0
Wheat, Barley
P,K
soil type
0
Corn and Soybeans:
Corn
P,K
3.0
42%
Corn
P,K
soil type
50%
Corn, Soybean
P,K
2.5
83%
Irrigated Corn
N
0.75
50%
Corn
P,K
2.5
50%
Corn, interpolated
P,K
2.1
100%
Corn, grid average P,K
2.1
0
_______________________________________________________
Source: Swinton & Lowenberg-DeBoer, JPA, 1998.
Variable Rate Lime Seems
Consistently Profitable the
Eastern
Cornbelt
Annual Net Returns to pH
174
$172
$ /a c r e /y e a r
172
170
Management in Indiana
$167
168
166
$164
164
162
$162
160
158
156
154
152
150
Do nothing
Source: Bongiovanni and Lowenberg-DeBoer, 1998
Whole Field
VRT agonomic
VRT economic
Profitability of Yield
Monitors
Profitability depends on:
• Use in diagnosing problems such as pests,
drainage, tillage, fertility and
• Improving input decisions (e.g. hybrid,
varieties, herbicides)
Yield Monitor Profit
Example?
• A 2000 acre grain farm
• Purchases a yield monitor
and GPS for about $7000
• Uses yield data to choose
better corn hybrids and
soybean varieties.
• Improves average yields by
1 bushel/acre
• Almost pays for yield
monitor first year
Whole Farm Information
Systems Benefits
•
•
•
•
•
•
•
Diagnosing crop production problems
Improving field logistics
Supervising employees in the field
Managing production risk
Marketing differentiated products
Providing “traceback” for food safety
Documenting environmental compliance
Farm Journal Soil Density Trials
Example of Technology Testing
Source: Farm Journal, July/August, 2001, p. 16.
The Pace of Technology
has Quickened
– On-Farm Testing With
Yield Monitors Provides
Timely Information With
Less Interference with
Farm Operations
Source: Farm Journal, July/August, 2001, p. 18.
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Background Image Courtesy of Emerge
As-applied maps can be a useful
Davisin
Purdue
Agricultural Center
tool
documenting
safety &
environmental stewardship.
Field Operations Record
Spraying
This is a map of herbicide
Application
on the Davis Purdue
Date and Product Applied
Ag Center
Yellow -- 6/27/00 -- Poast Plus
Yellow
– Poast
– 6/27/00
Bright Green
-- 6/28Plus
-- Roundup
Ultra
Green
Roundup
– 6/28/00
Blue –
-- 6/28
-- Poast Ultra
Plus + Synchrony
Blue
Plus Gold
– 6/28/00
Orange–--Poast
6/28 -- Basis
Orange – Basis Gold – 6/28/00
7000 gal/a
EXAMPLE OF AS-APPLIED MAPPING
L a t it u d e
6000 gal/a
5000 gal/a
4 0 .4 1 7 4
4000 gal/a
3000 gal/a
4 0 .4 1 7 2
2000 gal/a
“No-Apply” Zone
-86.9330
-86.9328
-86.9326
-86.9324
-86.9322
-86.9320
-86.9318
Longitude
1000 gal/a
0 gal/a
L a t it u de
Manure Application Map
4 0 .4 1 7 4
4 0 .4 1 7 2
-86.9330
-86.9328
-86.9326
-86.9324
-86.9322
-86.9320
-86.9318
Longitude
As-applied maps can be developed for manure as well as any other crop input.
These maps can document that nutrient management plans are being followed.
Manure can be applied at a variable rate, but because it is not a standardized
product it is hard to know what is being applied.
Precision Farming Profitability:
Chapters:
1 - Information Technology Profits
2 - Choosing Better Hybrids and Varieties
3 - Making Drainage Decisions
4 - Managing Soil Fertility
5 - Increasing Cost Effectiveness of Weed
Control
Plus Technical Reference Section
Edited by J. Lowenberg-DeBoer and
K. Erickson
Published by Purdue University
Agricultural Research Programs
with support from Case New Holland,
Dec., 2000.
Excellence in Communication Award,
Agronomy Society of America, 2001
Budget templates can
help guide analysis of
common precision ag
practices. Template for
yield monitoring for
hybrid and variety
choice
Source: Precision Farming
Profitability, LowenbergDeBoer and Erickson, 2000
Why Does Precision Agriculture Hold
Opportunities for Crop Advisors?
• Economies of Scale – in some cases the skills,
hardware and software that one producer would
use for his operation, could be used equally
effectively on a much larger acreage.
• Producer lifestyle choice – most US farmers
chose that occupation because of the active,
outdoor lifestyle it offers. They did not become
farmers to sit in front of a computer.
Convenience Farming?
• “Convenience Agriculture” is the opposite
of Smart Farming or Knowledge Based
Agriculture.
(See Sept. , 2002 USDA Outlook:
www.ers.usda.gov/publications/agoutlook/sep200
2/ao294i.pdf)
• Convenience agriculture economizes on
management time.
Management Time in Agriculture
• Management time is expensive - The average
compensation for U.S. managers in 2001 was
$60,000/year and experienced managers can earn
much more.
• Ag. management time may be more expensive
than average – because many producers chose
agriculture for the active, outdoor lifestyle. They
did not become farmers to spend hours in front of
a computer.
Percent of Corn Area
Compare Precision Ag
to Adoption of Hybrid Corn
100%
90%
80%
70%
60%
Most assume farmers
will grow their own
hybrid seed.
Universities produce
1st hybrid at
bulletins for on-farm
Connecticut Exp.
hybrid production
Station yields
120 bu./a
1st commercial hybrid
production exploits
economies of scale
50%
40%
30%
20%
10%
0%
1900
1910
1920
1930
When hybrid seed is
easy to use and onfarm trials show
profits, hybrid corn
adoption grows
quickly.
1940
1950
Maturing hybrid technology includes:
a) development of adapted inbred lines, and
b) retraining a generation of plant breeders
1960
Percentage of Crop Area
Projected Precision Agriculture Adoption
with & without Knowledge Based Services
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
Top Soil
Testing
formed
Lindsey &
Bauser
recommend
2.5 a grids
Potential
adoption with
knowledge
based services
1st Ag Leader
yield monitor
Robinson &
Lloyd
measure soil
variability
1900
1920
Ron Olson uses
2.5 a grids on his
father's farm
1940
1960
GPS available for
civilian use
1980
Projected
adoption with
mainly on-farm
data analysis
2000
2020
2040
Maturing Precision Ag requires:
a) Technical improvements – soil sensors, higher resolution satellites, etc.
b) Analysis tools – better algorithms and software
c) Retraining a generation of agricultural scientists
Take Home Message
The economics of precision agriculture are site
specific.
Use of precision agriculture technology is
growing throughout the world.
Precision agriculture adoption has been slower
than expected, in part because of the
management time required.
Management time in agriculture may be more
expensive than in other parts of the economy.
Knowledge based services are the key to
reducing the cost of precision agriculture
management time.
Developing Precision Agriculture &
Knowledge Based Services Requires:
 Lower cost data gathering – sensors, high
resolution remote sensing, etc.
 Better analysis tools – improved algorithms in
user friendly software.
 Knowledge based service packages – make
precision ag as easy for the producer as herbicide
resistant soybeans
 Entrepreneurship – Marketing knowledge services
to producers who have better things to do with
their time.
Questions?
Jess Lowenberg-DeBoer
Site-Specific Management Center
Purdue University
Website: www.purdue.edu/ssmc