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Farming for profitability

Precision ag systems can take your ability to analyze profits way past yesterday’s cost-revenue calculations.

It’s been the mantra of agricultural economists, bankers and even agronomists for the past 20 years. “Know your cost of production.” At every podium at every conference, you can almost guarantee the question is going to get asked. How can a farmer farm successfully without knowing their cost of production?

We’re always told every successful corporate executive outside of agriculture knows the cost of their widgets or grommets, usually down to the last fraction of a penny.

Then the question comes again: Can agriculture afford to be different?

But agriculture HAS changed, especially in the past 10 to 15 years, maybe not because the idea of farming for profitability is so new (it isn’t) but because farmers now have the ability to measure specific properties on the farm, from fertility levels to soil organic matter percentages to cation exchange capacity.

Of course, farming has also changed because the numbers are getting so much more volatile, which puts additional pressure on farm decision-making, not just from year to year but sometimes from one week to the next.

The equipment and systems used to support these decisions are far more complex than they were even five years ago, just as the complexity of our seed technologies has leapt ahead, with double- and triple-stacked traits as well as drought toler-ance and above- and below-ground pest protection. It’s a new universe compared to when Bt genetics first hit the market in the early 1990s.

All of these things have changed the landscape in which farmers conduct business. Yet the focus in the fields still tends to be centred on productivity. How is your company rep or your ag dealer helping you drive yield? In spite of the layers and the complexity, yield remains the single most-important factor in measuring success, and some are arguing that’s only because there’s a comfort level that comes with yield, along the same lines of “if it’s bigger, it must be better.”

Now it’s all being challenged by individuals including Mike Wilson, a certified crop adviser with Thompson’s Limited. For the past two years, Wilson has been building tools that can monitor, measure and collate farm details into a workable program to increase profitability.

“A lot of this is still in the experimental stages,” says Wilson, who’s based at the company’s Blenheim, Ont. office. “With some of our key customers, we’re starting to see some really positive results, and it’s starting to confirm that we are on the right track and it is something that we’re going to be able to take to the mainstream as we move forward to develop into a more encompassing program for all of our customers.”

Contrary to the perception that “precision ag” is something new, it really has been around for 20 years, if GPS-based yield monitors represent its beginning. The yield monitor quickly evolved towards variable-rate technology (VRT) but then developed at a much slower pace, if for no other reason than the theory of VRT was created without farmers necessarily having the ability to make full use of the data.

Now that hardware exists and is being upgraded constantly, there are more growers willing to adapt to it, in spite of the steep angle of its learning curve.

It’s in recognition of these changes, along with multi-hybrid planter units and automated down-pressure systems, that Wilson has renamed his department “Advanced Agronomy.”

“It’s not precision ag anymore, it’s agronomy,” Wilson says, noting how it’s been influenced by a number of different catalysts, from land prices to commodity price volatility, and from input costs to market demand.

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“That’s how we’re going to farm in the future and that’s how we’re going to be more profitable,” Wilson continues. “The progressive farmer, the farmer who’s in it to make money and treat it as a business, this gets their attention every time. They want to be more profitable and usually with profitability comes more bushels anyway — we wind up being more productive as well.”

It’s interesting that in the past, the two have been positioned as exclusive aspects of farming, much like oil and protein in soybeans, where you can’t have high levels of both, only one or the other.

Wilson believes the idea that profitability leads to improved productivity may be a starting point for the discussion. There are some fields in Ontario, he says, that are incapable of producing more than say, 125 to 150 bushels, and that no matter how much fertilizer is applied, or how high the plant densities are pushed, they can’t produce more. Wilson has witnessed one field where the combination of low yield potential and high fertilizer and chemical inuts was costing the farmer $400 per acre every year.

The challenge is convincing growers that in spite of combining more corn and thinking they’re making more money, they may actually be losing money by doing so. What helps is Wilson’s system, where there are multiple layers of data and calculations that can show land or rent prices, fuel costs, inputs and fertilizers, so the losses become easier to outline on the page or the computer monitor.

Maybe the farmer can just cut back on seeding rates or drop fertilizer allotments, thereby improving per-bushel cost enough to net more per acre.

It’s similar to a pitch senior agronomist Dale Cowan made several years ago: stop growing corn on the headlands where the yields are at their lowest. Those numbers are just dragging down the field’s average, he once said.

Instead, throw down the cheapest cereal or grass seed you can find, let it grow for two or three years, and let the roots break down the compacted layers and add some organic matter to the headlands.

Wilson agrees. “If we’re farming based on your farm’s average, we’re going to continue to produce average yields,” he says. “If we start creating management zones and farming the farm based on zones, then we increase profitability, because that spot of the field that only yields 125 bushels, we’ve been wasting money on for years. Let’s save our money, or better yet, let’s spend it where it’s needed. That area of the field that yields 250-plus because it’s the best spot on the farm and we’ve been fertilizing for 180 bushels, can it yield more?”

Wilson insists it can, and that with the latest upgrades in measuring nutrients and performance, farming by zones also becomes more economical.

“Now we’re getting more bushels off the farm for the same amount of money, or we’re getting the same bushels for less money,” Wilson says. “It can shake out many different ways.”

It also starts with the essential step of a yield map. Without some form of precision agriculture, decisions based on management zones are not possible. And there are some misnomers tied to this trend. Wilson has actually proved some of the systems that fall under the umbrella of “precision ag” may not help drive profits.

current farming-technology

The ultimate goal for Wilson is to have the recommendations from the advanced agronomy calculations match the variation in the field. If grid sampling can’t match what the customer knows is happening in the field, then the information is incomplete. What has to be kept in mind is that the customer’s stake in this is the biggest factor to be considered.

What’s changed in the last few years isn’t just the layering of information that’s become available. It’s that we also have the means of analyzing and incorporating that information.

We can look at yield zones on a map, bare-ground imagery that shows colour variation and variability, or even an elevation layer from RTK or a UAV flight, and if those components can be combined, and the customer agrees that this is the shape and condition of the field, that’s the most important facet.

“Then we can start measuring more of what’s happening with greater specificity, and have a stronger correlation to the results, because we’re actually applying in those yield zones more accurately,” says Wilson. “It gives farmers a better in-depth look at each zone, and allows them to make better decisions on things they may have questioned before.”

On a much smaller scale

Chris Boersma, who farms around Ridgetown, Ont., has been working with Wilson for the past year or two but has been engaged in improving his profitability since the late 1980s, when he was involved with a group called “the Most Economical Yield.” For Boersma, it’s not a new concept; what’s changed is the capacity to measure against the expectations of farmers who consider using this relatively new system.

“It’s more intensive now; there are a lot more details to it and there’s more paperwork involved, and a lot more to consider,” says Boersma. “You understand that the crop is influenced by 100 different factors and you’re trying to manage 80 of them, so there’s more intensity, without a doubt. But you have to be of the mind and have the resources to do it, and if a farmer doesn’t have that, they’re not likely to see the benefit of it.”

Plus there’s the level of the return on investment; it isn’t a dollar at a time. Instead, with this management zone or Advanced Agronomy concept, the farmer is aiming to shave a few pennies here, or maybe a nickel or a dime there.

But together, they might add up to dollars per acre.

It’s a longer-term process and it requires greater management input, but once you get started with it, the benefits only continue to grow, especially as the equipment and software continue to drive deeper for more detail.

But Boersma agrees that convincing a grower that there’s value in a process that might cost a dollar or two — or more — per acre to get started is a difficult pitch. The value of that information, generated on a 12- or 30-square-foot basis, continues to build. Added to that is the potential for measurements to become better defined, similar to being able to measure parts per million. Now there’s the capability to measure in parts per billion and parts per trillion, and that’s opened the door for better standards and more specific applications.

As the scale continues to shrink, the value only gets bigger.

“Now because of technology, I can get the percentage return on any one product based on a number of different scenarios, without a lot of extra labour or work throughout the season,” explains Boersma. “That’s because every implement’s record-ing what’s applied, and the combine’s picking it up, and it’s all reporting that if we spent $1 per acre on product A, we got $1.10 back or $1.80.”

It’s not necessarily an indication of increased yield, it’s a reflection of the product applied, and a return on that investment, so the correlation is much more direct.

Prerequisites

In some ways, Advanced Agronomy is similar to other trends where there are innovators and then early adapters. There are two primary differences, says Boersma. The first is the capital investment and the size of the farm play a role in that investment.

Smaller farmers are less likely to be able to justify that kind of financial commitment.

The second difference from other trends is the learning curve, which tends to be more vertical.

“With the technology, the equipment is data logging everything,” says Boersma, noting that he can see a spot in the field where a spray application was missed or went awry. “It’s probably a combination of things, but everything comes together.”

(Source – http://www.country-guide.ca/2015/10/20/farming-for-profitability/47455/)

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