A Strategic Approach to the Implementation of Precision Farming Principles in Cash Crop Farming
W.T. Nell, N. Maine & V. Zeilinga
Farm managers who are contemplating on getting involved in precision agriculture have to undergo a paradigm shift or a mind shift. In this article, an effort is made to set guidelines on how this process must be strategically approached in a holistic way.
The big variation in yields of cash crops (dry land or irrigation) within a field prompt farm managers to determine at the beginning of every production season which areas can be cultivated at a profit, given a specific scenario price.
Precision agriculture is perhaps one of the most important agricultural technologies that can assist farm managers in the process of staying successful. Moreover, precision agriculture can help farm managers increase their management capacity, which is of utmost importance in the highly competitive modern agriculture.
Join us on the “JOURNEY TO FARMING SUCCESS” with precision agriculture.
Precision agriculture and its accompanying equipment are some of the modern agricultural technologies that became more readily available in the South African agriculture at a time where profit margins came more and
more under pressure. The profit levels of crop farming in South Africa and in the rest of the world where a free market prevails, come increasingly under pressure every year due to the price: cost squeeze. Precision agriculture, which is a relatively new concept in South Africa is one of the most important modern technologies in agriculture that can assist farmers in their endeavour to ensure sustainable success of their farming businesses.
In a study conducted by Zeilinga (2004) it was established that there are different ways that the farm managers
can follow in introducing precision agriculture technologies in their farms, as well as in the identification of management zones. These depend to a great extend on the methodology followed by the organisation or service provider advising the farming business. The various methods identified have different time spans of introduction and the cost structure involved has a great variation. The modern farm manager must therefore be precisely informed about the pros and cons before venturing into precision agriculture in the farming business. Technologies that do no function properly in other countries are brought into South Africa and farm managers spend funds on technologies that do comply fully to the needs of the farm, or the farm manager pays more for the same type of technology which is cheaper overseas. Farm managers must therefore not only be thoroughly versed with
the precision agriculture technologies when considering their adoption, but must also approach this decision in a holistic and strategic way. A strategic approach will be used in this paper in assisting farm managers who consider becoming involved with precision agriculture technologies.
Precision agriculture is a technology that supplies farm managers with highly sophisticated and precise information to assist them in their normal, everyday planning and strategic decisions. Farm managers considering to venture into the world of precision agriculture have to shift their management levels to a higher level of sophistic action to be able to use the information available. The plan of getting involved into precision agriculture should be approached in a holistic and futuristic way, thereby necessitating the strategic approach. The strategic management model developed by Nell and Napier (2004) will be used in this paper.
ADOPTING PRECISION AGRICULTURE TECHNOLOGIES : A STRATEGIC APPROACH
Mission, vision and culture
The farm has to clearly define its mission in order to determine how precision agriculture can aid in the realisation of this mission.
For instance, a farm with the following mission “We are cash crop farmers in the Northern Free State producing summer and winter cash crops with a holistic approach to utilise the natural resources in a sustainable way” has to find out where precision agriculture fits in. Can precision agriculture lead to an increase in yields of these cash crops and ensure sustainable use of resources with less environmental damage?
With regard to the long-term plans of the farm, it has to be established how the implementation of precision agriculture technologies can lead to the realisation of the farm’s vision. A farm with a vision such as ‘To improve the profitability of cash crop production to 15% return on investment (ROI)’, needs to determine the present and future effects of the technology on the profitability. Of the three factors that contribute to profitability: the price of the output, the output, price of inputs and the inputs applied, which can be affected positively by precision agriculture? Precision agriculture indeed has an effect of the output per management area and efficiency of input use.
The culture of the farm has to be questioned. Is the culture of the farm to preserve the natural resources for decedents? Precision agriculture establishes the
culture of environmental protection and sustainable use of resources. With precision agriculture, chemical inputs, the main environmental degraders are applied according to the requirements of the soil to ensure minimal surpluses that can damage the environment.
In a highly turbulent external environment good information is of utmost importance for the farm manager to make good decisions (Van Rooyen, 1998:40-43). It is therefore important that a comprehensive investigation be made on all the aspects in the external environment that can have an effect on the progress of the farm on the journey to farming success. Management
will have to identify opportunities and threats in the external environment. Technology, particularly precision agriculture, can create both opportunities and threats for the farming business. Farmers that are abreast of the new technology have a competitive advantage and gain the benefits of first mover advantage. On the other hand, precision agriculture can pose threats. The increasing tempo of change in new technologies can result in obsolescence of equipment at its very early stage of life. This uncertainty about the technological evolution and the economic environment, can create uncertainty about the costs and benefits of the new technology amongst farmers.
Of the five macro environment divisions namely; Economy, Politics and Law, Ecology and Climate, Social and Cultures, and Technology, only technology and climate will be attended to in this paper. Precision agriculture falls under technology and the expected climatic outcome for the coming season will have an effect on the functional application of precision agriculture.
In the investigation of the technological sector of the macro environment, it will become evident that precision agriculture is one of the most important new technologies that can assist the farming business in its search for sustainable success. The research done by Zeilinga (2004) shows that there was a significant increase in average yield of fields where farmers started with precision agriculture (Figure 1).
Figure 1: Average Yields
The results imply that precision agriculture has the potential to increase yields and enhance net returns. Precision agriculture has some risk reduction implications attached to it as it has the ability to reduce variability in growing conditions within the soil and yield of crops, and consequently net returns.
Figure 2: Kilogram N, P and K applied per ton maize produced
When evaluating the introduction of precision agriculture technologies it is also important that management takes notice of the trend in the climatic conditions for the year to come as well as the longer term. Different potential soils react differently to specific weather condition and will have to be treated differently. With the type of season it is referred to an El Nino or La Nina year. If a La Nina year is expected, soils that have a characteristic of drowning must be treated differently from other soils. If precision agriculture is not in place farmers will not
know where possible problems may occur and
thereby act accordingly.
According to Van der Berg, Enviro Vision, it is expected that the coming season will be an El Nino year and the expected weather conditions are explained in Figure 3. This will have possible effects on different areas (types of soil) on the farm, which the farm manager must take notice of.
The farm manager has to have good knowledge of all the resources (workforce, management [technical, physical, economical, financial, and strategic] natural resources [land, water, natural veld], production, mechanisation, information, etc.) on the farm thoroughly. Management must therefore identify strengths, weaknesses, successes and failures on the farm.
Farmers have to determine strong as well as weak points within their farming businesses in order to maintain or enhance their competitive advantage. Adoption of precision agriculture technologies can constitute a strength of the business. Farmers that do not make use of new technologies cannot compete successfully with their counterparts who have the advantage of new technologies with their associated benefits. Agriculture is moving from commodity products to differentiated products, and precision agriculture can help farmers differentiate their products in various ways. An example is protein analysis available on a yield monitor that can assist farmers market high quality wheat at a premium. The information provided by precision agriculture can also facilitate documentation on how food was produced, thus differentiating the product from other non-documented products.
The comment passed by a small grain farmer in Heidelberg, South West Cape that he thought he new the potential of his farm, but when he became involved in precision agriculture, and started with yield monitoring, his eyes really opened, indicate how much value added information can be provided by the technology. It provides farmers with detailed information about their resources, in this case land potential. The farm manager must have good knowledge of the break even price and yield of all the enterprises within the farming business. With this information, it can be determined which particular fields or parts of the fields cannot be profitably tendered at a certain price and/or expected yield.
The analysis of the results of the Setlagoli enterprise budget indicate that if the coming season is going to be realised as discussed earlier, there will be areas that the farming business are not profitable to plant. The average long-term yield for the area is 2,5 ton per hectare and the break even yield (total production cost) at a price of R1 000 is 2,44 ton per hectare. If the farmer does not know the yield potentials on different areas, maize will be produced at a loss in some areas that yield 2,44 ton per hectare and lower, which will cause a loss and will “swallow” some of the profit on the higher potential areas. The same will happen under irrigation if the farmer has areas yielding less than 8,37 ton per hectare.
Sustainable success of the farming business will therefore depend on the precise knowledge of the different resources of the farm where soil is perhaps one of the most important resources for the strategies of implementing precision agriculture on a farm.
Strategic analysis and identification of competitive advantage
At this stage of the journey to farming success it is important that management identify the most important opportunities and strengths that will help with the strengthening and creation of a competitive advantage and also look for ways to avoid threats and weaknesses that will have a negative effect on the strengthening of the competitive advantage of the farming business. Opportunities created by the technology such as possibility of increasing yields, efficient use of inputs and differentiation can be exploited. The farm can decide follow the low-costs strategy or differentiation strategy from the advantages created by the technology.
The information on the enterprise budgets will guide management in identifying ways to improve and strengthen the profit margins of the cash crop production. This information will assist management in deciding which areas to plant with each kind of crop and also whether specific lower potential areas must be planted at all.
To increase the ROI to 15% and return on equity (Re) to 18% in the next 3 years. What role will precision agriculture play towards achievement of this goal? Increased yields, efficient use of inputs and the likely consequent profit can aid management to pay off debt quickly, reducing the interest that have to be paid, thus increasing the return on own equity.
Main strategies (HOW)
With the main strategies management must answer the question HOW they are going to go about to achieve the long-term goal. In the case of the example used in this paper they will have to seek ways to improve ROI and Re. If management decided that the principles of precision agriculture will be a major contributor to the long-term goal, they must also decide HOW they are going to implement or phase this technology into the business.
The following ways are some of the ways currently used by farm managers in South Africa:
- First start with a yield monitor for three years, correcting obvious controllable soil characteristics, do a full grid sampling over the whole field and start to apply VRA technologies.
- First start with a yield monitor for three years, correcting obvious controllable soil characteristics, do a intensive grid sampling in problem or specific high yield areas and start to apply VRA technologies.
- Start with full comprehensive grid sampling, correct obvious controllable soil deficiencies and start to apply VRA technologies as soon as the deficiencies are corrected.
- Start the first year to correct pH deficiencies by means of marking areas with the aid of a GPS, put flags in the fields and as the tractor driver gets to the flags, the tractor is stopped, the VRA equipment settings changed manually and carry on. The second year the farm manager may adapt the current planter to vary inputs and the following year or thereafter implement the whole VRA equipment when the financial position of the farm permits it.
With the knowledge available to the farmers, a choice can be made whether to select only certain components of the technology such as variable rate fertilizer application or venture into a fully-fledged package of precision agriculture that encompasses VRA technologies (fertilizer, seed, pesticides, herbicides), yield monitoring and mapping and remote sensing.
Short term objectives and actions
At this stage of the journey management must decide WHAT will be done, WHEN and at which STANDARD to ensure the achievement of the longer term goal. This is where the actions of implementation of precision agriculture have to be determined. A typical short-term objective can be as follows:
- WHAT – Grid sampling.
- WHEN – July when the summer crops have been harvested.
- STANDARD – One sample per four hectare.
There are five functional tactics management must attend to namely, production, marketing, financial, product development and research and human resources. The most important tactic which management must attend to is to determine whether the implementation of precision agriculture with variable rate technology (VRT) will have the desired financial results. Profitability of precision agriculture technology is the single most questioned aspect of the technology, and it is important to determine the financial implications thereof. The following three question are perhaps the most important ones:
- Will the area under cultivation justify the investment in precision agriculture? Is there enough variability with the soil?
- Will it improve ROI and Re?
- How will it be financed? Own funds or borrowed funds? Are the interest rates favourable?
- How will management deal with the results of labor saving of precision agriculture? Will there be a need to lay off some workers or will they be redistributed to other sectors of the farm?
- Is further investigation or research necessary on the advantages (non-financial benefits) of precision agriculture to the farming business?
It has to be established in time whether the workforce need further training on precision agriculture practices. Lowenberg Deboer and Erichson (2000) found that training costs of implementing precision agriculture is a cots item that many farm managers neglect when planning to adopt this technology.
Management has to determine whether there is enough capital available to purchase precision agriculture equipment and how will it be financed? The financial policies of the farm such as the proportion of borrowed funds have to be considered in line with the required foreign capital to ensure that this policy is not violated.
At this stage everything should be set to decide WHO is responsible for WHAT. If management decides to start with yield monitoring, the production manager or the farmer should start looking for the type of equipment needed for the harvesting process (combine harvester equipped with a yield monitor) and get specifications and prices of the equipment. The same should occur for VRT of input application by organising and getting hold of the necessary equipment. If management decides to implement grid sampling the service provider will have to be approached to arrange the implementation of grid sampling.
Control is essential to make sure activities are running smoothly and according to plan. Yield monitoring can serve as a control mechanism to determine the productivity of each area of land relative to the expected yield. The results obtained from monitoring the yield should be evaluated after harvesting. Management should also make use of simultaneous control, which means that the person in charge of the combining should carry-out control on a regular basis to determine whether the calibration of the yield monitor presents the correct results.
Enterprise budgets for each management zone should be compared with the actual results realised per enterprise for each management zone. This will assist management to decide which areas can be cultivated under which crop at a profit.
Adoption and implementation of precision agriculture technologies requires an integrated and holistic evaluation to determine the effect of the technology on the business performance, and to ascertain in time whether it will be profitable or not. Precision agriculture has advantages associated with it, which require some careful consideration in order to be exploited. It is evident from the discussion in this paper that if management does not follow a holistic and futuristic (strategic) approach in planning the adoption of precision agriculture technologies, it will end up asking the same question a Canadian farmer, who purchased the full range of VRT equipment and yield monitor asked one of the authors in 2000, “Ok I have all the information for the past five years and what am I going to do with it now?”. Remember precision agriculture gives highly sophisticated information and the management level of the farm manager must be on such a level that the information can be used to realise the vision and long-term goals of the farming business.
Used efficiently and correctly, precision agricultural techniques can optimise input applications, cut input costs, increase production, reduce production risks and promote greater profitability in the long-term. Coupled with this are environmental benefits.
Lowenberg-DeBoer, J. & Erickson. 2000. Precision Farming Profitability. Agricultural Research Programs. Purdue University, Indiana.
Nell, WT & Napier. 2004. Strategic approach to farming success.
Van Rooyen, C. 1998. Beter inligting verminder risiko’s. Landbouweekblad, 20 Maart, pp. 40-43.
Zeilinga, V. 2004. Evaluering van verskillende metodes om bestuursones in die sentrale akkerboustreek te identifiseer. M.Agric skripsie, Universiteit van die Vrystaat, Bloemfontein.