Spotlight on Economics: Economic Lessons From Precision Agriculture in N.D.

Precision agriculture has become a new frontier for technology adoption.

Erik Hanson, assistant professor, NDSU Agribusiness and Applied Economics Department (NDSU photo)

By Erik Hanson, Assistant Professor

NDSU Agribusiness and Applied Economics Department

Agricultural technology has been evolving for centuries.

Increased production and reduced production risk are some of the many benefits derived from technological advancements. In the 21st century, precision agriculture has become a new frontier for technology adoption.

Precision agriculture involves collecting data and making farm management decisions with great locational specificity. By accounting for variability within a field, precision agriculture technologies may allow farm managers to maximize yields, reduce input costs or mitigate risk.

Precision agriculture technologies include commonly adopted tools such as global positioning systems for providing precise location information, automatic section control for reducing overapplication of crop inputs, and variable-rate technologies for adjusting seeding and fertilizer application rates throughout a field. Emerging technologies such as satellite imagery and unmanned aircraft systems for monitoring crop progress are also part of this category.

A 2018 survey of North Dakota farm owners offers greater clarity on precision agriculture adoption and usage patterns. Survey responses were received from 453 individuals, 176 of who were active decision makers on operations that grow crops. These 176 crop operations are considered in the remainder of this article.

Data were collected on the adoption of automatic section control, autosteer and global positioning systems, satellite imagery, variable-rate nitrogen application, variable-rate seeding and unmanned aircraft systems. The most commonly adopted technologies were autosteer and global positioning systems (adopted by 60% of respondents), automatic section control (53%), variable-rate nitrogen application (34%) and variable-rate seeding (27%). Satellite imagery (15%) and unmanned aircraft systems (7%) were adopted by relatively few respondents.

The specific operations that adopt precision agriculture technologies often can be explained by the concept of economies of size. Economies of size exist when average costs are decreasing as output is increasing. Among other reasons, economies of size may exist because larger operations can fully use their resources, such as technology, and can invest in expensive technologies that may be infeasible for smaller operations.

Unsurprisingly, the survey shows that larger operations are more likely to adopt precision agriculture technologies. Compared with smaller operations, operations with at least 2,000 crop acres were 46% more likely to have adopted automatic section control, 40% more likely to have adopted autosteer and global positioning systems, 20% more likely to have adopted satellite imagery, 41% more likely to have adopted variable-rate nitrogen application and 28% more likely to have adopted variable-rate seeding. This reflects trends in precision agriculture adoption that have been noted in previous years and across different regions.

The survey also found connections between cropping patterns and precision agriculture technology adoption. Of the 176 crop operations analyzed, 62% grew corn, 76% grew soybeans, 74% grew wheat and 61% grew at least one other crop. (These percentages don’t add up to 100% because most operations grew more than one crop.)

Farm management decisions often are guided by the concepts of marginal input cost (the cost of using one more unit of an input) and marginal value product (the increase in revenue created by using that additional input). Marginal input cost and marginal value product are used to maximize profits.

Precision agriculture technologies allow farm managers to make profit-maximizing decisions with greater accuracy. The potential benefit of making these decisions correctly, and therefore the potential benefit of adopting precision agriculture technologies, may be heightened for crops that have relatively high input costs or revenues.

Unsurprisingly, corn producers, who face higher production costs for inputs such as seed and fertilizer than producers of most other North Dakota crops, were more likely to have adopted precision agriculture technologies than other producers.

Precision agriculture technologies are prominent in production systems in North Dakota and across the U.S. As these technologies become even more widespread in the years to come, fundamental economic concepts will continue to provide useful perspectives on precision agriculture technology adoption and usage.

NDSU Agriculture Communication - Aug. 19, 2020