12th Annual Precision Agriculture Survey
With more than 80% of this year's Precision Agriculture survey coming from Midwest-based retailers, the nation's heartland takes center stage in site-specific adoption.
September 11, 2008
In the Midwest, the more established precision technologies have hit their stride. Though a few dealerships add new precision technologies and services each year (like field mapping for legal/billing/insurance purposes and satellite/aerial imagery for internal dealership use), an almost equal number of dealerships may drop those technologies, resulting in a more or less stable level of use.
This spring, CropLife® magazine and Purdue University’s Center for Food and Agricultural Business conducted a survey of crop input dealers for the 12th consecutive year to see which precision technologies were being used by dealers, what type of precision services they were expecting to offer in the future, and how precision customers were impacting their businesses. As in previous years, a survey was sent to 2,500 CropLife dealership readers to “take the pulse of the industry” with respect to precision technologies.
This year, results are focusing on the Midwest dealerships who responded (see sidebar for details about the survey).
How Midwest Dealers Are Using Precision
The most common precision technology this year was GPS guidance systems with manual control/lightbar, by 75% of respondents (Figure 1), followed by precision technologies being used to provide services to growers. Rising to third place this year were GPS guidance systems with auto control/auto steer for fertilizer/chemical applications (used by 30% of the responding dealerships). Over one-quarter of the respondents (27%) used both types of GPS guidance systems, while 22% of the dealerships didn’t use either type of guidance system.
Various types of sensors are beginning to be used by retail dealerships. Last year, we combined all the sensors into one question about sensors mounted on equipment/pick-up trucks.
This year, sensors were split out to two types: soil sensors for mapping mounted on a pick-up truck, applicator, or tractor (examples include pH soil sensor and chlorophyll/greenness sensor), and on-the-go sensors (such as Crop Circle, Greenseeker, Yara N-Sensor). Almost 2% of the dealerships used at least one type of sensor last year (1.7%), and this rose to 2.4% of the Midwestern dealerships this year. Soil sensors mounted on the equipment were used by 1.8% of the respondents and on-the-go sensors were used by 1.2% of the respondents.
Figure 2 shows the trends in the use of these technologies for the last five years. The biggest growth in technology in the last three years has been in GPS guidance systems with auto control/autosteer. In 2004, only 4% of the dealerships in the Midwest were using autocontrol/autosteer technology. Last year, 22% were using the technology and by this year 30% of the Midwestern dealerships were using it. The use of other precision technologies has more or less leveled off from 2005 to 2007.
Precision Ag Service Offerings
In the Midwest, precision agriculture service offerings have remained almost level over the past few years with minor fluctuations each year, likely due to different samples of survey respondents. However, despite the leveling off of adoption, dealers are still expecting to add precision services in the next two years, with continued growth expected through 2009. The biggest growth expected is in fieldmapping with GIS, with 56% of the Midwestern dealerships expecting to be offering the service by 2009, up from 45% in 2007. Satellite imagery is also expected to grow substantially in the next two years, from 18% of the dealerships offering the service by fall of 2007 to 27% by 2009.
Precision application services continued to grow in 2007, with controller-driven multiple-nutrient application growing at a quicker rate than single-nutrient application (Figure 3 and Figure 4). Both types of controller-driven application are expected to grow over the next two years, with 62% of the Midwestern dealerships expecting to be offering single-nutrient controller-driven application in 2009 and almost 40% of the respondents expecting they will be offering multi-nutrient controller-driven application.
Figure 5 shows the different types of variable-rate application services offered by the fall of 2007. Over half of the respondents indicated they are currently offering controller-driven single-nutrient application of fertilizer, outstripping manual variable-rate application, which was offered by only 44% of the Midwestern dealerships. Controller-driven multiple-nutrient application of fertilizer is quickly catching up, though, with almost one-third of the respondents indicating they were offering that service in 2007. Only for pesticides was manual variable-rate application still the most popular form of variable-rate application, with 23% of the dealerships offering manual variable-rate application.
Pricing Precision Services
Each year, dealerships are asked to tell us the typical price they charge per acre for their precision services. For those offering only packages or bundled pricing, it often isn’t possible to price out the components individually. Hence, far fewer dealerships typically respond to this question relative to some of the other questions in the survey.
Figure 6 and Figure 7 show the average prices charged per acre for each of the precision services in 2007 in the Midwest. The bars indicate what the middle 80% of the dealers were charging (as in previous years, we dropped the top 10% and bottom 10% to make the ranges a bit more consistent). Overall, the average prices charged were similar to those seen in 2007 with quite a bit of variability still in the market. Some of the services continue to be offered at no charge to the customer, though this is changing as precision technology becomes more wide-spread. The most common service offered free-of-charge was making agronomic recommendations based on GPS data, where 54% of the responding dealerships did not charge for the service.
We also asked dealerships how profitable they felt their precision service offerings were. For each precision component,Figure 8 shows the percentage of respondents who said the service was generating a profit (and covering both fixed and variable costs) from 2002 to 2007.
This year, 47% of the respondents felt that their total precision package was profitable, the highest percentage since we started asking the question in 2002. The most profitable precision service continued to be controller-driven multi-nutrient application, with 49% of the respondents saying that it generated a profit for them. This was also the only service with more respondents saying it generated a profit in 2007 than did in 2006. Controller-driven single nutrient application was second in profitability, with 40% indicating the service generated a profit for them.
Precision technology appears to be here to stay in over three-quarters of the retail dealerships in the Midwest. The biggest growth currently is in use of the technology within the dealership instead of in services offered to customers. GPS guidance systems with autocontrol/autosteer continue to show the most rapid growth, though sensors (both on-the-go and mounted sensors) may be starting their growth in adoption as well. With the boom in ethanol production, a key strategic question is the impact of more corn acres on precision agricultural services (and vice versa).
Where are the opportunities? Where are the challenges? This story is one to follow in the 2008 CropLife/Purdue precision agriculture survey.
Linda Whipker is a marketing consultant in Raleigh, NC. Jay Akridge is Director of the Center for Food and Agricultural Business at Purdue University and a Professor in the Purdue Department of Agricultural Economics, West Lafayette, IN.