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Precision ag technologies boost net returns

GPS mapping offers greatest operative profit boost of almost 3% on corn farms.

Does adoption of precision agriculture technologies increase net returns on U.S. farms? According to a new report from the Economic Research Service (ERS), it does.

The new report, "Farm Profits & Adoption of Precision Agriculture," investigated recent trends in adoption, production practices and farm characteristics associated with adoption and whether adoption is associated with greater profitability.

The report examines adoption rates for three types of precision agriculture technologies: (1) global positioning system (GPS)-based mapping systems (including yield monitors and soil/yield mapping), (2) guidance or auto-steer systems and (3) variable-rate technology (VRT) for applying inputs.

All three technologies have small positive impacts on both net returns, including overhead expenses, and operating profits for a U.S. corn farm of average size.

GPS mapping shows the largest estimated impact among precision agriculture technologies, with an increase in operating profit of almost 3% on corn farms. The impact of mapping on net returns is almost 2%. Guidance systems raise operating profit on corn farms by an estimated 2.5% and net returns by 1.5%. VRT raises both operating profit and net returns on corn farms by an estimated 1.1%.

The positive impact on net returns appears to diminish once capital requirements and costs associated with the technologies are modeled. Mapping has lower capital requirements, on average, and the greatest impact on net returns (1.8%). VRT, which is usually capital intensive, has a lesser impact on net returns (1.1%), with higher capital expenditures likely offsetting some of the gains from using the technology.

The highest adoption rates for all three technologies in 2010 were on farms with more than 3,800 acres. Computer mapping (both GPS soil and yield mapping) and guidance adoption were adopted on more than 40% of all farms above 1,300 acres. VRT adoption (the costliest of the three) is lower than for the other technologies on all farm sizes but is more prevalent on farms with more than 1,700 acres than on farms with fewer than 1,700 acres.

On average, farm operating profit of precision agriculture adopters was $66 per acre higher than for non-adopters, before controlling for other factors. “However, taking this $66-per-acre value as the precision agriculture gain for farms adopting such technologies would be a mistake because it is an average across different farm sizes, and adopters have much larger farms (480 acres larger, on average),” the report said. “Thus, the higher profit figure could reflect economies of scale associated with larger operations, and many factors can influence farm size that might also influence PA adoption (large farms are technology adopters in general).”

Several Corn Belt states had higher adoption rates than the national average. North Dakota’s rate is higher, while New York’s is much lower.

The strong association between farms with lofty yield goals, and the adoption of all three technologies may reflect the geographic distribution of corn farms accustomed to high yields, the report notes. All three technologies have adoption rates of more than 30% on farms with high yield goals in Illinois, Indiana and Iowa, the three states with the highest average yield goals (173-185 bu. per acre, as recorded in ARMS). Ohio and Minnesota have the next-highest state averages (goals of 164-173 bu. per acre); Ohio has a 25% adoption rate for mapping and VRT.

For more on the report, read our additional coverage, Farms increasingly turning to precision agriculture.

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