Precision Ag Survey and Manufacturer Views
Adoption of precision agriculture technology has been moving ahead at a steady pace but not equally as fast for production of all crops or in all regions of the country. An AgProfessional survey of agricultural retailers indicates there is potential for much faster adoption of precision technology, but precision ag technology manufacturers apparently are happy with the pace of adoption and see nothing but expansion that will keep manufacturers busy and profitable in the foreseeable future.
“The thing we are looking forward to is more and more people using some sort of precision ag equipment,” said Mike Gomes, director of agricultural marketing and business development for Topcon Precision Agriculture. “The question to farmers in the past was do you use GPS, and then it became are you using autosteer, and now the question is, are you using variable rate and what operations are you doing variably.”
AgProfessional did an e-mail research study with a primary audience of ag retailers to take a snapshot of where adoption of precision ag technology stands today with ag retailers and their farmer customers. The research also asked for projections on adoption in the next five years.
There have been constant guesses and claims of various degrees of adoption by both ag retailers and farmers, and the AgProfessional survey doesn’t provide a definitive answer. Survey results seem to indicate there is much more potential growth, but manufacturers report already rapid adoption.
There are a couple reasons farmers and ag retailer/custom applicators will continue to rapidly advance their capabilities in precision, said Erik Ehn, director of product marketing, Trimble Agricultural Division. “More and more farmers are seeing the payoff of the technology. They are seeing the return on the investment,” he said. “The other reason is because manufacturers of equipment are now factory installing precision technology as base technology and providing support.”
Precision manufacturers don’t see the industry maturing in the foreseeable future. There are plenty more potential users that can adopt the technology, and the precision manufacturers have made it a goal to help farmers double their per acre production by 2050 or earlier.
Projecting five years from now, has Mike Olson, North American sales manager for Ag Leader, saying that farmers in general across the United States are adopting pieces of precision ag equipment at different paces—rather than loading their equipment with all the bells and whistles at once.
Most farmers start out with some technology on their equipment and then add as they become more comfortable with the whole potential for precision. But the ag retailers are ordering new custom application equipment fully loaded to replace old applicators, he said.
Five-year targets for adoption by farmers nationwide cannot be considered to be the same for every type of precision technology. “If you are going to say 50 to 60 percent (of farmers) are going to have adopted autosteering then that percentage would be a good target. If you are talking about the guys who are into variable rate planting, then you are probably looking at 30 to 40 percent,” Olson said. “There are many avenues to adding technology. Seventy-five percent might have some type of technology on their farm (in five years), whether it be a yield monitor or whatever.”
A look at the survey forecasts by ag retailers about precision application by their farmer customers in five years substantiates the idea that farmers will be applying much more of their fertilizer and pesticides using precision technology. A total of 83 percent of retailers see their farmer customers doing more precision applications in five years. But there is no consensus, whatsoever, about the percentage of acres in an individual retailer’s service area that will be precision applied by the farmers—rather than hiring custom application by the retailer or another applicator (See chart A).
What seems the most disturbing in terms of ag retailer adoption of precision ag from the AgProfessional survey is the percentage of companies that don’t have their entire fleet precision technology equipped with GPS controller systems. About 41 percent of the ag retailers with application service, who completed the survey, reported not having any of their application rigs equipped with such systems, and an additional 31 percent of retailers had 50 percent or less of their application equipment GPS controller system equipped. Only 12 percent of the ag retailers responding said 75 percent or more of their fleet was GPS controller equipped.
When it comes to providing service with product, many ag retailers have felt somewhat caught in historical pricing. It hasn’t been uncommon for application of fertilizer to be built into the price of the fertilizer in one way or another. But providing application service with a high-tech system for variable rate fertilizer application using variable-rate mapping isn’t something that an ag retailer can justify as being “free” or built into the margin of the fertilizer.
“In the age of the internet, where product availability becomes less of an obstacle; the importance of a local service provider becomes more vital to a grower. As adoption of precision ag strengthens, the importance and need for quality local service and support becomes a key component to make any farm organization successful in a local geography. Farmers are used to purchasing products and services bundled together, that isn’t always possible with precision ag technologies,” said Gomes.
Some of this concern about how to charge for services could account for fewer retailers than anticipated offering the top of the line application service using variable rate mapping software, etc. Without GPS controller systems, variable rate fertilizer application isn’t happening.
Some ag retailers and farmers are concerned their system will rapidly go out of date. Ehn said that should not be an issue because the payback is proven to be one to three years for many farmers and can be the same for ag retailers who are compensated appropriately for their services. Choices for keeping pace are numerous as new equipment or updates are coming on the market almost monthly, which easily allows upgrading old equipment or updating with new equipment.
INSTALLING TOP OF THE LINE
The survey results indicate that when ag retailers do equip their applicators with precision systems, they are going for top-of-the-line systems. The retailer responses were almost half and half on whether at least some of their application equipment is set up with wireless data transfer directly from applicators to an office for recordkeeping and/or billing—48 percent yes and 52 percent no.
“Our customers are asking us more and more in that arena to help them better manage their data. They may go out and apply fertilizer to a customer’s field, and they want a better way to manage the data from that operation,” said Ryan Molitor, marketing supervisor for Raven Industries.
Connectivity for fleet management is a big reason that ag retailers should see value in precision ag technology, said Trimble’s Ehn. Providing wireless “remote assistance for managing their entire fleet of equipment” and even having long-distance resolution of equipment’s problems is efficiency improvement that pays for itself, he said.
Olson with Ag Leader said, “I see a tremendous opportunity for services to increase by the ag retailers. We are getting into some things that most farmers are not wanting to spend the time doing by themselves, and there is an opportunity for retailers to pick up the torch and provide services to help farmers maximize their opportunity to achieve greater yield and profit. I see an opportunity for that (ag retailer) side of the business to grow quite a bit.”
NOT ALL SEE THE OPPORTUNITY
Whether the ag retailers who replied to the AgProfessional survey see all of the opportunity is questionable considering that 23 percent said they won’t be custom applying fertilizer and another 18 percent won’t be using variable rate mapping software to apply fertilizer at the end of five years (2018) (See Chart B).
Currently, only a third of ag retailers who responded offer precision analysis services for their growers, and nearly another third rely on recommendations provided by farmers who got the recommendations from their own sources, such as seed company programs or an independent precision service provider. About 20 percent of the retailers reported they work with a third-party vendor/service provider themselves and serve as the middle man for providing precision recommendations to the farmers. The remaining 15 percent are lost on what to do or don’t see a need to be involved in any type of precision agriculture technology.
So, looking at the overall attitude of ag retailers responding to the survey, 77 percent aren’t worried about lost potential future income by letting someone else do precision data analysis (seed company, third-party service provider, etc.).
BIGGER COMPANIES SEE VALUE
In looking at those who responded, 35 percent of the survey respondents have total crop input sales of more than $7 million, and 20 percent classify themselves as a national retailer facility. It is logical to think that these larger operations are the ones reporting at least some concern about earning income from data analysis for their customers.
“Looking at the top five or six ag retailers in the U.S., each one of them has some aspect or some offering of a precision agriculture program that is branded,” said Topcon’s Gomes. These companies are seeing the value to assist the farmer from top to bottom in precision agriculture because they don’t want to be “contractors for single hit services”—being the hired applicator, Gomes noted.
FARMERS ARE WILLING
Top to bottom services also can mean helping the farmer with operations that the farmer does on his own such as variable rate planting. More ag retailers claim to be stepping up to the plate to help their customers with variable rate planting recommendations. In this situation, the retailer doesn’t have to invest in all the hardware and implement technology; the farmer has to equip the planter and tractor. Forty-nine percent of retailers reported they are helping customers with “providing variable rate planting recommendations,” and 51 percent said they aren’t.
In the question asking ag retailers “what percentage of your trade-area farmers will use variable rate planting in 2013,” it was 23 percent saying no one and 20 percent saying less than 10 percent of their farmers. The next highest guess of 13 percent was for between 21 to 30 percent of their trade area farmers planting with variable rate in 2013.
In projecting what percentage of farmers will be variable rate planting in five years, the responding retailers had guesses widely spread from zero to more than 70 percent (See chart C).
This planter technology increase seems to indicate that more farmers are willing to step up and figure out how to use precision ag technology and invest faster than some retailers because they have been educated on the return. That education is most likely coming from the seed companies that have shown in many cases how higher seeding rates are appropriate for a lot of fields.
The crop protection/pesticide manufacturers and fertilizer companies might not have aggressively promoted precision application. The claim can be made that precision, as promoted by the precision technology manufacturers, usually means less product application and lower input costs for farmers.
The precision ag manufacturers are trying their best to make it easy for farmers, or anyone’s hired labor to operate the technology. It is a similar goal for all the manufacturers, according to their spokesmen.
“Some growers say they understand the principles of precision ag, but also say, ‘It is so complicated to enact that I’m not going to ever be able to utilize it to its fullest potential to get return on investment.’ So, when we are in the design phase of our products, we really try to stress simplicity. We know that our customers need to be able to use the technology to its fullest,” said Raven’s Molitor.
CHANGE IS OCCURRING
No matter what phase of adoption agriculture is at, in a region of the country or use on various crops, change will proceed. It just takes some people longer to accept change. They learned their farming from the previous generation and experience, not from a book, so adopting precision ag is a disruptive action, noted Gomes.
Olson said, “Change takes time. A lot of guys aren’t ready to make a huge financial investment all at once; they’ll do it in pieces. And also, there is a learning curve. They adopt a couple pieces of equipment each year and get familiar with it and figure out using it, but also they have to figure out how it is going to affect their total operation and management plans.”
Hemisphere GPS is the most recent example of a company showing financial faith in the growth of precision ag technology, by selling its non-agricultural operations but keeping the ag business, to “capitalize on the rapidly expanding market opportunities in agriculture,” as Rick Heiniger, president of the company, explained.
The same financial success seems to be occurring for most precision ag technology manufacturers. Plus, the ag retailers that are stepping up to the plate to adopt and invest and sell a wide array of services to farmers appear to be doing well, too. And the industry in general should be having success five years from now. The precision ag manufacturers say there isn’t any way to turn away from the inevitable.