December 2002

 

Will Farmers Choose Precision Farming or Convenience Agriculture?

 

Jess Lowenberg-DeBoer

 

Management time is a scarce and expensive resource in all industries. A 2001 U.S. Department of Labor survey shows that the average compensation for managers is around $60,000 annually. Experienced managers earn much more.  Average farm worker wages are around $20,000 annually. A recent article in the USDA monthly publication Agricultural Outlook suggested that adoption of precision agriculture technology was relatively slow because of the management time require to implement this technology. Katherine Smith, author of the USDA article, labeled farming practices that economize on management time as “convenience agriculture”.

 

The Smith article considers all types of “smart farming”, not just precision agriculture in her analysis. By “smart farming” she means agricultural management that collects data, analyzes that data, and implements farming practices based on that analysis, instead of relying on rules of thumb, fixed application schedules or general recommendations. She includes integrated pest management (IPM) as another example of smart farming.

 

The Glyphosate Paradox - The management time hypothesis could help explain some disparities in adoption of technology in agriculture. In particular it could help explain the difference between adoption of biotechnology products, which typically require little management effort, and information technology, which often requires substantial analysis and decision-making.  The difference in adoption between glyphosate (i.e. Roundup Ultra, Touchdown, Rattler, or Rodeo) resistant soybeans and precision farming technologies such as yield monitoring or intensive soil sampling is a good example. Glyphosate resistant soybeans are planted on over 70% of U.S. soybean area in spite of the fact that there have been marketing problems and they often do not show production benefits when compared to conventional soybeans. In some cases glyphosate resistant soybeans suffer from lower yields (i.e. yield drag) and may have higher weed control costs than conventional soybeans if glyphosate must be applied more than once. Many farmers say that they use glyphosate resistant soybeans because they are “so easy to grow”. In other words, glyphosate resistant soybeans do not require as much management time as conventional soybeans. While the per unit area returns may be lower, they allow a producer to manage more area. In contrast, precision agriculture adoption has been relatively low, in spite of good evidence of profitability for some aspects. 

 

One issue is that none of the economic studies of precision agriculture have explicitly accounted for the management time needed to implement these technologies. In fact very few of them have accounted for any additional time requirement (see review of these studies by Lambert and Lowenberg-DeBoer under publication). The most common practice has been to treat farm labor as a fixed resource that would not change with the technology and omit it from partial budget calculations. One of the key problems in trying to introduce charges for management time is that there is no good data on the amount of management time that various precision farming tools require. Some practices that are primarily outsourced (e.g. grid soil sampling, variable rate fertilizer) probably require very little management time. Practices that primarily affect logistics or operations efficiency, but do not require data analysis or decision-making (e.g. DGPS guidance, "lightbars"), also do not require much management time.

 

How much extra time does precision farming take? - Practices that must be implemented by the producer and those which require analysis and decisions probably require much more management time. In the U.S. Midwest, where it is common for farmers to own combine harvesters, someone on the farm must usually invest time if yield monitoring is to show any benefit. They must learn how to operate and calibrate the equipment. They must learn how to make yield maps and how to use yield map data to diagnose problems or interpret on-farm trial information. It is not uncommon to hear first time yield monitor users explain that, “I spent all winter going through those yield maps.”

The charge for management time is difficult to determine in traditional U.S. farming operations in which producers provide both labor and management. It is common, even for producers with relatively large operations (> 5,000 acres of row crops), to spend some time operating equipment. The value of time in bottleneck planting and harvesting periods can be estimated by the opportunity cost (e.g. shadow prices in linear programming models or the cost of hiring additional labor), but what is the value of the flexible time in the winter months used to study yield maps. Is it the $10/hr that might be earned in part time seasonal work? Or is it the $30/hour or more for management time?

 

The relatively low returns of most stand-alone precision farming practices (e.g. variable rate P & K, variable rate seeding of maize and soybeans) means that they could not support much management time. But what about the more profitable integrated precision agriculture practices? On the 526 ha Sauder corn and soybean farm, the GPS treatment would earn about US$18,000/year more than the conventional whole field management. This would pay for almost three full months of the average American managers time. Three months is probably more than enough to analyze the soil test data, to implement and interpret the on-farm trials that Sauder used to develop his farm specific soil fertility management plan, and to make the necessary decisions. This suggests that while including the cost of management time may mean that returns to precision farming technologies are somewhat lower than previously thought, it does not seem to entirely exclude adoption of the technology.

 

A related issue is the availability of management time. Most U.S. producers did not become farmers in order to spend time in front of the computer analyzing spatial data. They became producers in part because they like the active, out door life that farming offered. This may mean that they are relatively unwilling to put time into management or equivalently that they must be compensated at a higher than average rate to make it worth their while. Risk may also be an issue. Alternative uses of time for U.S. producers (e.g. seasonal off-farm work, livestock raising) have more certain compensation than the relatively new, immature precision agriculture technology. Management time is another reason to expect higher adoption of precision agriculture on larger farming operations. There are economies of scale in data analysis and decision-making. Larger operations can spread the management time cost over more area.

 

The apparent reluctance of US producers to commit management time to precision agriculture and other types of smart farming may create an opportunity for crop consultants. If these consultants are willing to learn precision agriculture skills and to spend time in front of the computer, they may be able to provide cost effective crop management advice. This has benefits for all concerned. Crop consulting could create relatively high paying jobs in rural areas and those services could allow producers to benefit from smart farming without becoming “nerds”.

 

Conclusions - Both availability and cost of management time appear to be issues for adoption of precision farming technology. Some precision farming technologies appear to use very little on-farm management time under U.S. conditions, either because they are usually out-sourced, or because they mainly affect logistics and do not require data analysis. Some stand-alone precision farming technologies yield low returns even without charging for management time and they would look even worse if management time were deducted. For the most profitable of precision farming practices returns seem to be high enough to pay average management costs. The willingness of traditional U.S. producers to retrofit and undergo extensive training (e.g. computer analysis and decision-making) may be a greater constraint than the opportunity cost of the time because many producers have chosen agriculture for the active outdoor lifestyle and are reluctant to spend time in front of a computer. The apparent unwillingness of U.S. producers to commit management time to precision agriculture may signal an opportunity for out-sourcing the data analysis and recommendation development.

 

References:

 

Lambert, D. and J. Lowenberg-DeBoer. 2000. Precision Farming Profitability Review, Site-Specific Management Center, Purdue 

   University, West Lafayette, IN, USA, www.purdue.edu/ssmc.

Smith, Katherine. 2002. “Does Off-Farm Work Hinder ‘Smart’ Farming? USDA Agricultural Outlook, Sept., p. 28-30,

   (www.ers.usda.gov/publications/agoutlook/sep2002/ao294i.pdf).