Precision agriculture as a profit driver

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Precision agriculture has seen many advances in technology. It provides exciting avenues for many growers, with autosteer, yield mapping and controlled-traffic farming becoming common.

It is important to objectively analyse the technology and its impact before going ahead and investing in precision agriculture, as some emerging technologies have a high capital cost with significant upfront investment.

Key points

The net economic benefits derived on-farm from precision agriculture (PA) technologies are highly situational for many reasons

It is important that growers and advisers apply a structured and objective approach to assessing PA opportunities, including completing a robust economic analysis

Before refinement through precision use of inputs, consider whether the fundamentals of crop rotation, crop agronomy and operational timeliness are well-executed. Capture these benefits first. This includes having a disciplined approach to the key variable cost inputs of fertiliser and chemicals (which can be influenced by PA)

Returns from precision agriculture

Financial return

Different precision agriculture technologies are highly situational in their net economic benefit per hectare when assessed in real-life farm scenarios.

Returns ranged from a low of –$90 per hectare to a high of $75/ha. About 25 per cent of applications generated a net economic benefit of between $30/ha and $75/ha.

The remaining 75 per cent generated a net economic benefit of less than $30/ha, with most of these in the range of –$10/ha to $10/ha.

Other benefits

In addition to a supportive economic analysis, intangible benefits are worth noting. Working with precision agriculture can increase interest in and commitment to agriculture. Technology that motivates a grower to look closely at unique soil types and production zones across a property and assess how they can optimise the productivity of each land class is valuable.

When conducting a robust economic analysis consider:

  • Initial purchase costs
  • Repairs and maintenance/ongoing support fees
  • Additional labour
  • Finance costs
  • Depreciation costs
  • A rigorous analysis of the benefits over a variety of seasonal conditions and prices. Examples are:
    • yield increases
    • grain quality increases
    • cost savings
    • more targeted application of inputs according to yield potential
    • overcoming a constraint
    • enhancing operator performance or implementation.

The 10-point checklist

Given variability in possible returns, apply this 10-point checklist to guide investment decisions when assessing precision agriculture opportunities.

  1. Have I fully exhausted the internal opportunities within my business to increase gross margins and net profit through crop rotation, crop agronomy and operational timeliness?
  2. Has the product/technology that I am considering been robustly tested in a commercial environment?
  3. Does the technology influence long-term average crop yield?
  4. Is the precision agriculture technology the most cost-effective mechanism to achieve the outcome I am striving for?
  5. Does robust economic analysis demonstrate a positive net benefit?
  6. Do I understand how the benefit will be influenced by climatic seasonality?
  7. Do I understand how my available level of scale influences the commercial feasibility of applying this technology?
  8. Have I used long-term, decile-5 commodity pricing rather than spot pricing when calculating the net economic benefit?
  9. Do I have the skill set and capacity internally, or easily accessible externally, to manage the data capture and interpretation required to successfully implement this technology?
  10. Have I completed the economic assessment of this opportunity without bias?

If ‘yes’ is the answer to all 10 of these questions then the precision agriculture technology has been well-considered and is likely to result in a suitable economic benefit over time.

GRDC Research Code RDP00013

More information:

Simon Vogt, Rural Directions Pty Ltd
0407 959 836
svogt@ruraldirections.com