November - December 2000
General Thoughts
A general theme of a recent conference of precision ag service suppliers emphasized that site-specific agriculture must first be profitable for the producer. If the farmer can't make any money from precision ag, then how can the service industries expect to do business? An old rule for pricing ag chemicals was that farmers would pay $1 for every $3 that a product returned. With reduced commodity prices, basic economics dictates that either farmers will use less or the cost of inputs must fall if service providers expect farmers to use the same quantities they did when crop prices were higher. In a nutshell, site-specific service providers should be willing to negotiate on price. A farmer should bargain hard on the cost of soil sampling, variable rate application charges, even fertilizer. These are tough times, and everyone in the industry will have to squeeze their profit margins.
Fertilizer Levels
Basic economics dictates that the value of the last dollar spent on fertilizer should return a dollar's worth of crop. We can generally assume that fertilizer levels follow the law of diminishing marginal product, i.e., that the last pound of fertilizer produces less additional crop than the previous pound. So, if the price of the crop decreases, the profit-maximizing amount of fertilizer must decrease as well.
Site-specific practices will allow the producer to better target the appropriate amount of reduced fertilizer. A farmer who cuts fertilizer levels 10% across the field will more than likely have areas where not enough fertilizer was applied and areas where too much is still applied, relative to the profit-maximizing amount. Using the information gathered from site-specific practices, a producer can identify where the response to fertilizer is greatest, keeping fertilizer levels up and cutting back where the potential gains are lower.
Recognize that the previous discussion does not necessarily imply that fertilizer levels should be reduced more on lower- or higher-yielding areas of the field. The critical point is to reduce fertilizer levels on areas where the response to additional fertilizer is lower. This could be either high or low yield sites.
Unfortunately, current fertilizer recommendations are not generally based on economics or profit-maximization. Usually, the recommendation is based on some target yield and crop removal. Rarely does the expected price of the crop, or even the cost of the fertilizer, affect the recommendation. Yet, we all recognize that when the crop price drops or the fertilizer cost increases, we should use less fertilizer. The only way to approximate the profit-maximizing answer is to lower the target yield.
How much? Maybe not as much as you think. Continual improvement in varieties, herbicides, and other management practices have tended to increase yields over time. If you anticipate significant improvements in yields based on these other factors, then maybe you should not decrease the target yield but hold it steady.
Lastly, most recommendations offer some sort of "build" scenario, providing the opportunity to increase soil fertility over time. For cash strapped farmers, now is probably not the best time to be trying to increase fertility. Instead, this is the time to think about "mining" some of the nutrients. Instead of making deposits to the land's soil fertility bank, make withdrawals.
Profitability
My first thought when requested to write this was to use yield maps, enterprise budgets, and cost information to identify areas that are not profitable and leave them idle. However, this is not as obvious as it may sound. Farming these areas may cost the least amount. By not planting, a producer would save seed costs. But planting cover crops may be more expensive. Will fuel and time be saved by skipping these areas? Probably only if they are large areas. Will weed control be adequate if the producer skips herbicide application? Will the fertilizer saved cover any additional costs of application if a GPS unit is required on the applicator?
Let me offer a further caution here. If this decision is based on a limited number of years, will you really have identified those areas that are not profitable? These areas must be consistently unprofitable to guarantee an increase in returns. If these areas were not profitable only in wet years, then you would need to be able to predict the weather to be sure to leave them idle.
Assume that areas with limited profitability or even losses can be identified with a site-specific system. Now identify how many of these acres may be eligible for the Conservation Reserve Program's continuous sign-up option. Land near waterways and streams, wildlife corridors, and other specific criteria can be enrolled at any time. This may be the best way to deal with at least some acreage with limited profit potential.
Alternative Sources of Fertility
Livestock waste disposal is a significant problem for large-scale operations. There may be opportunities to acquire plant nutrients at a lower cost from livestock operations. Although many of these operations would like to charge for the nutrient value in the manure, they are also desperately looking for land to apply manure. Buyers should negotiate with a tough attitude.
A farmer should be concerned about the actual nutrient value of applied waste and insist on some kind of analysis. The source lagoon should be well-agitated to ensure adequate distribution as the waste is removed. If waste must be moved a long distance from the source, there may be some settling in transport and nutrient values will not be consistent as the waste is applied. Also, the manure should be uniformly or appropriately applied. Very few applicators can provide variable-rate applications of livestock waste, although more have the ability to at least use GPS systems to apply to specific locations within a field.
Also, be sure to give full credit for any livestock waste applied that was produced by animals raised on the farm. Clean out or exhaust the farm's own sources of plant nutrients.
Soil Sampling
I cannot justify spending a significant amount on soil-sampling large portions of the farm under the current economic situation. There has been little economic thought given to the design of soil-sampling procedures or to identifying sites where it is most needed. The best analogy is to imagine a leaky underground waterline. Gridsampling the whole field for site-specific farming is like starting at the well and digging up the whole line, even after you find the leak. Use yield maps to identify "leaky" or "wet" spots that need to be sampled. Where yield maps indicate few problems and relatively similar yields, reduce the number of samples.
New Investment in Site-specific Equipment
I will return to my opening comments. Dealers will more than likely have inventories of equipment that they are not able to sell. There may be some real bargains if dealers cut prices in order to reduce their stocks. However, now is not a good time to spend a dollar to save a dime. Be sure that the bottom line can support any investment in new equipment.
Purchasing farm equipment which has a GPS system is a bit like planting fruit trees -- the investment will require a number of years to pay off.