Precision Agriculture And The Economy

The theme of this issue is “Precision Around The World.” It seems a bit coincidental that we are discussing international precision agriculture efforts at the same time there is global economic upheaval. With so much news about a turbulent economy, one can not help but wonder how recent events would impact precision agriculture innovation worldwide.

Before plunging into some thoughts about global precision agriculture, I did want to share an interesting bit of analysis, which maybe is not too surprising given the recent economic picture. A good friend of mine, who is also a client from a Texas cooperative, recently shared some analysis he had performed on possible production scenarios for the 2009 growing season. He was particularly interested in a grower’s probability of being profitable for different crops (corn, cotton, soybeans, sorghum, wheat, and rice) given recent trends in spending and earnings. As part of his analysis, he entered realistic costs for seed, fuel, materials, etc. in addition to labor, rent, and depreciable items. He then entered the expected revenue for each crop based on average yield projections.

What he found was that growers in his region of Texas could barely make a profit with corn, make some profit with sorghum, and make the most profit with rice about half the time (one out of two years). In other words, a grower had a 50-50 chance of making a profit in any given year for three out of the six analyzed crops. If he increased the probability of being profitable (or lowering risk) to three-quarters of the time (three out of four years), then only rice was profitable. While the remaining crops (cotton and soybeans) could be profitable at unacceptable low probabilities (high risk), wheat was never profitable.

The lesson learned from my friend’s analysis is that with increasing costs, tightening credit accessibility, and variable revenues due to economic instability, we may have reached a point in certain geographies of this country where crop production is just barely viable.

Negative Factors

And how does this affect precision agriculture? I believe the economic turbulence affects precision agriculture in both negative and positive ways.

On the negative side, when production becomes marginally profitable, growers, especially those reliant on bank loans, shift into a cost-cutting mentality. The first cut is always information services, even at a time when such services would be invaluable.

The gut logic is that information will not fuel any equipment or protect any crops from pests. Information is simply seen as unnecessary expenditure in tough economic times. In many instances, this cost-cutting mentality is dictated by lenders. Besides outright rejection, there will also be some entrenchment. Even growers who were “early adopters” of precision agriculture innovations tend to dig in their heels and not try new ideas. They become more conservative because taking chances on something new costs money even if there is a likelihood of positive payoff. Proven, cost-effective technologies become the rule of the day, while innovations tend to be put off until better times.

Positive Perspective

Now there are positive ways that a turbulent economy helps precision agriculture.

I see two long-term driving forces that are favorable to precision agriculture, even in trying economic times. First, people have to eat. The increasing demand for food by a growing world population will support a global agriculture industry. While our traditional production practices will be challenged by a changing economic world, new ones will arise and be empowered by technologies like precision agriculture. Starting first at a few locations with small numbers of growers, these new production systems will contribute to establishing new, stable local economies. During this trial and error period, a tremendous amount of experimentation will take place, with the most successful production systems taking root in different geographies. In short order, profitable approaches will be copied and stable and local economies would scale up and impact regional and national systems.

The second driving force is regulation. Many traditional production practices have been at odds with urbanization and the environment. In order to bring about a balance, state and federal agencies will apply financial resources to guide growers towards more socially acceptable practices. In uncertain times like today, regulation will be viewed by many as the easiest solution for providing stability. As production practices become more regulated, precision agriculture can provide the required monitoring and management tools. It can also help automate the submission of information demanded by regulation.

Underlying this discussion about precision agriculture in a turbulent economy is the need for innovation. This need is why the “Precision Around The World” theme is particularly important today. Because of the sheer number of new ideas being tried in different crop production systems and geographies, innovation becomes our best safeguard in economically troubled times. In some sense, innovation over a large area in just a brief period of time is equivalent to innovation occurring over a very long time in just one location. We all benefit in the short term when many individuals in different places are engaged in a creative activity like precision agriculture. Let us learn from each other, so that this difficult economic period we are experiencing today will be short-lived and be the start of a better future.

Editor’s note: This article first appeared in the Winter 2008 issue of PrecisionAg Special Reports.

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