It’s become easier to justify precision ag on a dollar-and-cents basis — but don’t forget to sell the intangible benefits, too.
by Dan Zinkand, Associate Editor
It makes sense to scrutinize the financial returns of precision ag technology costs, says Matt Darr, ag and biosystems engineering assistant professor Iowa State Univ. But Darr says farmers are continually reminding him about the intangible benefits of using these tools that, in many cases, are just as important as the dollars and cents justification.
This includes older farmers who say the technology not only enables them to manage complexity of farming and save money on labor, but also reduces the fatigue from long hours of operating a tractor. Darr talks with farmers about precision agricultural technology at Extension meetings and industry events.
After one of his presentations, a farmer came up to Darr and said that he had had shoulder surgery in the summer. Without auto-steer the farmer said he would not have been able to drive his combine that fall because it would have been too physically demanding. Having auto-steer reduced the physical demands, allowing him to harvest his crops, the farmer told Darr.
“Skeptics will never account for benefits they can’t apply numbers to,” Darr says. “You have to be in the cab to experience many of these indirect benefits that farmers appreciate.
It’s important for dealers to understand that farmers value these “non-direct” and seemingly intangible advantages, Darr says. While economists might consider these intangible, they’re very real to farmers.
Nonetheless, demonstrating the economics of investing in precision ag remains a necessity. The return on investment (ROI) for precision technology understandably happens quickly when farmers cover a lot of acres. But the biggest per-acre payback doesn’t necessarily come in the huge, square fields in the Midwest and Northern Plains because they don’t present the “overlap” challenge of smaller, odd-shaped plots.
Darr says the bigger paybacks occur where there is more chance of overlap in applying broadcast fertilizer, spraying and seeding in irregularly shaped fields or those with grass waterways, creeks, streams and wetlands.
A Big Payback
Darr speaks from personal experience. He grew up on a farm in Ohio, which the family still operates. When he was an undergraduate at Ohio State Univ., Darr bought a $125,000 sprayer and did custom spraying to help pay his way through college. During the first summer, he didn’t have a lightbar on the sprayer. When it got dark, he had to quit spraying and his investment stopped generating income. But the following summer, Darr invested $2,500 for a lightbar. That investment changed things dramatically.
The cost of the lightbar was nominal. Today, it would be about 1-1.5% of the cost of the sprayer, according to Darr. While it was a tiny investment compared to the cost of the sprayer, it produced huge results. First, he was more comfortable and less fatigued. Second, there were fewer overlaps, which reduced trips across fields. Third, he could operate later at night. All of these added up to increased income and profits, he says.
Darr adds another lesson from his experience. Financially, it makes sense to buy precision ag equipment with the new equipment because it can be included in the cost of the loan.
If the farmer decides to buy the technology afterward, that cost comes out of cash flow. Even so, in Darr’s case of the $125,000 sprayer and the $2,500 lightbar, the add-on quickly paid for itself.
Some farmers continue to get by without auto-steering or a lightbar when fertilizing, spraying and planting in fields with old corn rows, using only the cornstalks as guides, Darr says. Obviously, it’s more difficult to minimize overlap or avoid skips in fields of soybean stubble if farmers are not using some form of guidance or at least foam markers, he says.
Darr estimates that without a lightbar, there can be 4-8% overlap when applying dry fertilizer or anhydrous. Adding a lightbar could reduce overlap to 4%, he says. On 80 acres, that saves 3 acres of overlap. With fertilizer, fuel, labor and machinery costs, the savings could be as much as $100 an acre. All told, a lightbar could save $300 on an 80-acre field, Darr notes.
“Just using those numbers it’s easy to see that it can break even pretty quickly. You can’t lose using a lightbar.”
Universal Auto-Steering. Using universal auto-steering provides even more potential for additional savings.
Universal auto-steer uses an active method of steering, which involves attaching an electric motor to the steering wheel. No hydraulic valves or hoses need to be installed.
Darr estimates the cost of auto-steer at $6,000 to $7,000 for a WAAS-based system. For a farmer cropping 400-500 acres a year, the savings from auto-steer would pay for itselfin 5 years. Universal auto-steering doesn’t have the fine, sub-inch accuracy of integrated auto-steering, which uses RTK, Darr notes, but it’s a step up from a lightbar. Additionally, some of the newer universal auto-steering systems are providing performance very close to that of integrated systems.
A farmer cropping 400 acres a year using universal auto-steering for tillage and applying dry or anhydrous fertilizer can save $300 on an 80-acre field, Darr says. That adds up to $1,500-$1,600 a year, which shortens the payback to 4 years
Integrated Auto-Steering. Farmers who want a higher degree of precision for planting, spraying and strip-till applications need to look at advanced GPS for sub-inch accuracy.
Using integrated auto-steering with RTK GPS service on a tractor for tillage, fertilizer application and planting will pay for itself in 5 years for a farmer cropping 900 acres a year.
“There’s a qualitative shift in performance by moving from WAAS-based to subscription or RTK GPS, but the cost of an integrated auto-steering system can run $16,000 to $20,000.”
Darr estimates that the overlap with integrated auto-steering can be reduced to 1-2%.
Seed-Row Shutoff Clutches. These are one of the most popular precision ag tools on the market right now and generally cost around $400 per row plus the cost of a suitable display and controller.
“If I was a farmer, I would be using these as they provide significant benefits during planting,” Darr says.
He estimates that it will take 5 years for a farmer cropping 1,500 acres to pay back the cost of seed-row shutoff clutches. Like guidance systems, ROI with these systems is quicker when used in odd-shaped fields and other irregular contours, he adds.
Determining the payback for these clutches is a little more difficult, because it’s a question of how much of the cost of the auto-steering system and GPS should be allocated to the planter. As precision ag systems are used for multiple purposes, the ROI reduces accordingly, he says.
These clutches can eliminate double planting at headlands and point rows, which can reduce yields up to 10 bushels per acre in these zones, according to Darr’s field trials
He says that as the cost of seed increases, the payback on row clutches becomes even shorter. “In 2 years, seed costs have risen dramatically,” says Darr, noting that it isn’t hard to imagine $400 per bag of seeds soon.
What Farmers Value
Darr says it’s easy to quantify the payback on precision ag tools, using the ROI in lightbars, universal auto-steer, integrated auto-steer, and seed-row shutoff clutches as examples
But inevitably, after speaking at farmer meetings and providing a quantifiable approach to justifying investments in precision ag equipment, Darr says, “A farmer will come up and say, “‘You forgot to mention the most important thing about auto-steer: It’s just that much easier to farm with it.”’