Vol. 18, No. 5, 1997

Jess Lowenberg-DeBoer
Extension Ag Economist, Purdue University

     Precision agriculture is an infant technology.  This infant has some 
of the signs of eventual greatness, but its full capacities will not be 
evident for some years.  Like all infants, it will require an investment of 
time and resources to help it to maturity.  This investment will have some 
short term payoff, but the main benefits will be in the future.
     The purpose of this presentation is to help you manage your adoption 
of precision farming technology for that future payoff.  The specific 
objectives will be to:review what we have learned about the economics 
of precision farming, identify future benefits, and outline an adoption 
strategy designed for long term competitive advantage.

What We Have Learned

Economics change as technology changes. Almost every week new equipment and 
software are put on the market that improves our ability to collect and use 
site specific data. Our understanding of the economics of these new tools 
is far from perfect, but gradually we are beginning to understand the trends 
and the general characteristics.
     Costs - Studies of site specific management have often focused on 
changes in crop input costs, such as fertilizer or herbicide,while 
sometimes ignoring investment costs(Table 1).  In particular, the cost of 
developing"human capital" is often omitted.  We are not born with the 
capacity to use site specific management profitably.  It must be developed. 
Costs might include: workshop and short course fees, time 
away from other work and "wrong decisions" made while learning.
     The annual cost of using site specific tools depends heavily on the 
useful life of that equipment, software, databases, and skill.  If site 
specific management tools are obsolete in 3 or 4years, like other 
computer based technologies,the annual cost of use can be surprisingly high.

     Benefits - The benefits of site specific management have proven 
difficult to measure.  Crop yield changes in side-by-side comparisons 
of site specific and whole field technologies might be due to inherent 
soil differences or microclimate. Simulation of what the field might have 
produced under another management system is time consuming and often 
inaccurate.  The environmental benefits of site specific 
management have been discussed, but they have not been measured.

     Short Term Profitability -

Currently available site specific management technologies are profitable 
in some cases,but studies suggest that they often fail to cover all 
additional costs in the production of bulk commodities like corn, 
soybeans,and wheat (Table 1).  The profitability of precision management 
is greater in higher value crops, such as vegetables, potatoes,and seed.  
Low profitability in bulk commodities may be due as much to management 
problems as to technology.
     The importance of having a site specific management system emerges 
clearly from available studies.  It is unlikely that one or two inputs 
will consistently pay the costs of site specific data collection and use.

Future Benefits

     Long run profitability of previous farming technology depends on the 
development of management systems that link inputs applied with yields 
harvested on specific sites.  These management system swill be some 
combination of computerized decision support systems and the accumulated 
wisdom of experienced managers.  Decision support systems require databases.
Wisdom comes with long experience.  These management systems will be site 
specific.  Generic decision support systems will be developed,but their 
performance on your farm will been enhanced by data from your farm.     
Agricultural databases take time to accumulate.  For example, because of 
weather variability, accurate information on site specific yield potential 
and problems may require several seasons of data.  Retesting soils at the same 
sites creates data on fertility trends.
     History shows that most of the benefits of any new agricultural 
technology go to the early adaptor.  Those who lag have often been forced 
out of farming.  Precision farming is expected to follow the same 
pattern.  Those who begin to accumulate data and experience now will be 
ready to use improved precision technology as it matures.

     Data Management - Who benefits from precision farming will be 
determined by how management of precision data is organized.  To realize 
the full benefit from precision farming,farmers will probably need 
to pool data.  You can not try every alternative on your farm, but 
by pooling data with other farmers who have different management approaches, 
it will be possible to identify the best combination of seed,fertility, 
tillage, and pest control.

     Four alternative organizational forms have been proposed for data 
pooling:1) agricultural input manufacturers and suppliers, 2) independent 
data management companies, 3) non-profit data management groups, and 4) land 
grant universities.
     Each alternative has its advantages and disadvantages.  Data management 
by ag input manufacturers raises questions of credibility and 
representativeness.  Some suspect that manufacturers would manipulate 
the data to enhance sales.  Data collected exclusively from the clients of 
a manufacturer might not be representative of farmers as a whole; and as a 
consequence, the fine tuned crop plans developed might not be useful outside 
the client group.
     Strategic Management - For precision farming, eventual developments can 
be grouped in  three scenarios:
     a) Information Agriculture - This is the rosy scenario in which farmers 
share data and results, and as a consequence costs are cut,yields improved, 
and the environment is maintained.  Farmers, industry, and universities are 
partners in developing these better crop "recipes."
      b) Industrial Crop Production -Precision data and analysis are 
controlled by large companies.  They develop proprietary crop recipes.  
Some farmers become minimum wage tractor drivers and others become 
"integrators."  Only part of precision farming potential is developed.
     c) Technological Deadend -Practical and profitable uses are not 
developed for precision farming, perhaps because data is not shared.

Adoption Strategy
     In this environment of rapid technological change, farm and 
agribusiness adoption strategy should be based on finding the least cost 
way to build site specific management capacity and databases.  Agriculture 
is becoming a knowledge based industry where what you and your employees 
know is a key factor in profitability.  Ownership of precision farming tools 
has a place in this strategy,but it is not the only option.
     For some farmers, the least cost learning strategy will be using custom 
services to build databases and gain experience with the spatial variability 
of their fields.  With custom services, data ownership will be 
an issue.  Farmers who plan to use custom services to help build their 
precision farming database should have a written contract that specifies 
their rights to the data, and they should take care that the data is 
available in a format that can be transferred to other software.
     For many grain farmers, a yield monitor will be the point of entry to 
ownership of precision farming tools.  Yields are an essential layer in a 
spatial database for your land. Interpreting and using yield maps 
is the key step in developing precision management skills. Mapping packages 
sometimes store data in propriety formats that can not be used by the next 
generation of software.  To facilitate use of previously 
collected yields by new software, raw yield data should be retained.
     Soils data is another essential layer in your precision farming 
database.  Soil sensors may eventually make grid sampling obsolete, but in 
the meantime grid sampling is the best way to collect soil data.  If 
purchased services are used to collect soils data, care should be taken to 
establish ownership of the data and to conserve the raw data.

     Some aspects of precision farming will become standard practice for 
North American agriculture, but we do not yet know which aspects will 
prove most practical and profitable. The most durable investment 
that farmers and agribusiness can make in this area is the development 
of management skill and databases. Hardware and software are sure to change, 
but site specific data bases and the capacity to use precision management 
tools profitably will provide a long run competitive advantage.

Table 1.  Profitability Conclusions from 11 Precision Farming Studies
                                       Treatment of        Precision
                            Inputs    Sampling & VRT        Farming
Study          Crop         Managed      Cost ($)        Profitability
Observed Yields

Carr et       Wheat, barley  N,P,K     Not included       Mixed
al. 1991.

Fiez et       Wheat          N         Not included       yes, potentially
al. 1994.

Hammond.      Potato           P,K    Variable & fixed    Inconclusive
1993.                                                     (costs only)

Lowenberg-    Corn             P,K    Variable & fixed    No, but might
DeBoer et al.                         custom rates        for low-soil
1994.                                                     test fields

Wibawa        Wheat          N,P    Variable & fixed       No (but over-
et al. 1994.                        w/ 1 yr. amort.        ests. annual
                                                           fixed costs)

Wollenhaupt   Corn             P,K    Variable & fixed     Mixed; deps. on
& Buchholz.                           w/ 4-yr amort.       yield gain

Wollenhaupt   Corn             P,K     Varirable & fixed   Mixed; deps. on
& Wokowski.                            w/ 4-yr abort       sampling density
1994.                                                      & abort. period

Simulated Yields

Beuerlein     Corn, soy        P,K     Variable & sample;  No, but more
& Schmidt.                                                 efficient
1993.                                                      fertilizer use

Hayes,        Corn            N        Not included        Higher revenue
et. al.                                                    has potential
1994.                                                      to cover costs

Hertz &       Corn             P,K     Variable & fixed    No, but close 
Hibbard.                               custom rates        to uniform in
1993.                                                      profitability

Maharnan.     Corn             P,K     Variable & fixed    No if 1-yr sample
1993.                                  custom rates        abort.; yes if 4-
                                                           year sample abort.
SOURCE:  J. Lowenberg-DeBoer and S.M. Swinton, "Economics of site Specific 
Management in Agronomic Crops," Staff Paper 95-14, Department of Agricultural 
Economics, Purdue University, West Lafayette, IN.  1995.