Precision Pays Off

Retailers have labored to develop innovative precision agriculture services with value and depth for customers. But how well are these investments paying off, especially in tough market conditions? The answers can be mixed, but the dealers we talked with are pretty optimistic as they book for the 2009 season.

Business was in full swing at presstime at Harvest Land Coop, Richmond, IN. “From last season we’re seeing tremendous growth — somewhere from 30% to 40%, as growers try to lay plans for the ’09 crop,” says Chris Kluemke, manager of site specific services.

High fertilizer prices drove up acres serviced by soil sampling and variable-rate (VR) nutrient management last year, says Sid Parks, manager, precision farming, with GROWMARK, Inc., Bloomington, IL. “People were looking to maximize their investment,” he believes. The company has also captured customers that it didn’t have five years ago because growers have progressed up the adoption chain, perhaps purchasing a new tractor or combine with precision technology they need help with. “This presents opportunities for us, too. Our member cooperatives can be a resource,” he says.

A key factor in growth at Co-Alliance LLP has been tying services to products. “I have watched as our company used sampling as a niche program then took it to a needed procedure prior to selling fertilizer,” says Justin Welch, ag technology manager based at the company’s Danville, IN, corporate location. “The service is now profitable on its own as well as growing margins 1% to 5% of goods sold.” Indeed, Co-Alliance is also providing hybrid-specific VR population maps – with the company’s technology and seed departments working closely in promotion and service. The map service, a moneymaker in its own right, is growing the seed business, says Welch.

At What Cost

Retailers face a host of challenges as they add and tweak precision, not the least of which is making services pay. “As the technology allows us to provide more services, retailers need to charge more to access these technologies,” says Parks. “Do I charge $5 an acre for normal chemical application and $6 for the variable rate?” he asks. “Does a grower care and recognize the value of the better job? Or does he think, ‘Go out and spray my field and don’t screw it up.'” GROWMARK recommends a “value service model” and so tends to be on the higher side for its region compared to those not offering services, explains Parks. Plus, this year, increased soil lab operating costs (fuel, analysis equipment) are bumping prices up a bit.

Another big challenge is just staying aware of the technology available. “What’s going to be the next buzz?” asks Kluemke. “There are so many things you can do. It’s all about sorting through all the information and finding that one little piece that’s going to help the grower.”

Technology suppliers don’t always come to the rescue. Kluemke says they tout products heavily, “but if it doesn’t put more bushels in the farmers bin or contribute to his bottom line, it’s not for us.”

Kluemke does appreciate how retailers can team up with suppliers for pilot programs on new equipment or software. Last season, Harvest Land tried John Deere’s AgLogic fleet/asset management system that utilizes GPS, cellular, and Web services. The coop’s central office handles all the company’s soil testing and dispatches sampling orders for the 25 locations — a huge logistical task for equipment and staff. “I took Deere’s advice to try this and now I won’t live without it.”

Understanding how to use complex precision technologies is another issue. Harvest Land has a full-time staff member devoted entirely to troubleshooting components that won’t talk to each other. And Co-Alliance’s Welch says the industry faces a void in ag technology employees that can provide sound agronomic recommendations to accommodate the VR seeding market. “There are not enough people to make maps to go into that equipment,” he notes.

Varied (red, yellow, green) manufacturers may make multiple upgrades on their equipment each season — and everyone who works with the data usually has to upgrade and change as well. “New systems don’t always talk to the old systems very well,” says Parks, and he has found some growers don’t want to risk upgrades messing up other parts of their systems. “You have to keep current the best you can and service farmers with different versions.”

Welch says getting all in-house precision equipment on the same page is worth the effort. The company has 60 variable-rate trucks, 95% of which are set up the same. “That helps with training and for troubleshooting,” he says.

Welch also sees challenges in selling some services to growers — in particular Co-Alliance’s new AgSure aerial imagery, which “is evolving into a more comprehensive scouting program and is very important as tied to the fungicide and seed segments of the business.” He says in difficult times, customers will spend money on products that offer immediate results and he sees AgSure being “flat” for the coming year.

Choosing whether to sell precision hardware/software can be a tough call. Co-Alliance carried GPS equipment for several years — until 2008. When the company exited the market, its agronomic services business grew 30%, “because we were able to focus on those services that will benefit growers,” says Welch.

In spite of optimism about the ’09 precision season, dealers still face market volatility. “Now that fertilizer prices have softened, fuel prices are down, and commodity prices are down, we’re in another cycle,” says Parks. “Getting producers to see the value in utilizing these technologies is a constant challenge, but it’s rewarding for those who can keep moving forward.”

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