The verdict is in — more corn in 2007 was good for everybody in the ag retail business. In particular, precision agriculture recorded some truly impressive numbers. As a result, there was nothing unlucky about the 13th annual Precision Ag Survey.
The impact of more corn acreage and higher fertilizer prices can be seen in this year’s adoption of precision technology in dealerships. Service offerings of both single-nutrient and multi-nutrient controller-driven application is up. Not surprisingly, more dealers report they are earning a profit on these two services relative to all other precision offerings.
This spring, CropLife magazine and Purdue University’s Center for Food and Agricultural Business conducted a survey of retail crop input dealers for the 13th 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 programs continue to evolve. As in previous years, a questionnaire was sent to 2,500 CropLife dealership readers to “take the pulse of the industry” with respect to precision technologies.
How Are Dealers Using Precision Technology?
This year showed continued growth in the use of precision technologies within the dealership. The most commonly used precision technology were GPS guidance systems with manual control/lightbar at 73% of respondents (see Fig.1), followed by precision technologies being used to provide services to growers (61%). Similar to last year, the third most-common use of precision technology within the dealership was the use of GPS guidance systems with automatic control/automatic steering for fertilizer/chemical application, used by 37% of the responding dealerships. Almost one-third (31%) used both types of GPS guidance systems (manual and autosteer) while 22% of the dealerships didn’t use either type of guidance system.
For the second year in a row, we asked dealers if they were using sensors: soil sensors for mapping mounted on a pick-up truck, applicator, or tractor (examples: pH soil sensor, chlorophyll/greenness sensor) and on-the-go sensors (such as Crop Circle, Greenseeker, Yara N-Sensor). Four percent of the dealerships used at least one type of sensor this year compared to 1.7% of the respondents last year. Soil sensors mounted on the equipment were used by 3.3% of the respondents and on-the-go sensors were used by 2.6%.
The biggest growth in technology has been in GPS guidance systems with auto boom control/autosteer. In 2004, only 5% of the dealerships were using autocontrol/autosteer technology. Last year, 27% were using the technology. By 2008, 37% of the dealerships were using autocontrol/autosteer (a seven-fold increase in four years). Other growth areas this year were field mapping with GIS for legal/billing and insurance purposes and satellite/aerial imagery for internal use — both growing from just under 20% last year to over one-quarter of the dealerships this year. The use of other precision technologies has more or less leveled off from 2005 to 2008.
Precision Ag Service Offerings
The precision services that dealerships offer their customers have remained relatively stable over the past few years with minor fluctuations each year, likely due in part to different annual samples of survey respondents. This year, all precision service offerings — except for field mapping with GIS — were at the highest level, showing slight increases over previous peaks. (Note that the 2007 results showed a reduction in most service offerings, though we expect that this may have been due to the sample of dealerships reporting instead of a real decline in the U.S.) Dealers are expecting to add more precision services in the next two years, with continued growth expected through 2010 for all precision services. The biggest growth expected is in satellite imagery, with 36% of the dealerships expecting to be offering the service by 2010, up from 26% in 2008.
Precision application services continued to grow in 2008, with both controller-driven multiple-nutrient application and single-nutrient application growing quickly this year, reflecting last year’s prediction by respondents that higher fertilizer prices and corn acreage would result in more demand for precision application. For the first time, over half of the dealerships (56%) said they offered controller-driven single-nutrient application, with almost two-thirds (64%) expecting to offer it by 2010. One-third of the respondents said their dealership offered controller-driven multi-nutrient application.
Unexpectedly, variable-rate seeding with GPS more than doubled this year from 6% of dealerships offering the service in 2007 to 15% in 2008. One-quarter of the respondents expected to be offering the service by 2010.
Profitability Of Precision Ag Service Offerings
Fig. 2 shows the different types of variable-rate application services dealerships expect to offer by the fall of 2008. Over half of the respondents (52%) indicated they were currently offering controller-driven single-nutrient application of fertilizer, up from 40% in 2007. Almost as many were offering controller-driven application of lime (45%, up from 33% in 2007). Controller-driven multiple-nutrient application of fertilizer is also increasing, with almost one-third indicating they were offering that service in 2008, up from 24% in 2007.
We also asked dealerships how profitable they felt their precision service offerings were. For each precision component, the percentage of respondents who said the service was generating a profit (covering both fixed and variable costs) from 2003-08. This year, 43% of the respondents felt that their total precision package was profitable, similar to last year’s 44%. 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. But 47% said that controller-driven single-nutrient variable-rate application was generating a profit this year as well, up from 36% last year.
Expected Investment In Precision Technologies In 2008
Given the current market conditions, one question we had for dealers was how much more they would be investing in precision technology this year. Almost one-quarter of the respondents (23%) said their dealerships would be investing more than $25,000 in precision/site-specific technology in 2008 (Fig. 3). More than half (53%) said their dealership would be investing under $25,000. Only one-quarter of the respondents (24%) said they wouldn’t be investing anything in 2008.
With another big corn crop expected and continued pressure on fertilizer prices, use of precision technology will likely increase again in 2009. Growers — and dealerships — continue to look for strategies to successfully manage through this unprecedented time.