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Space Profits

According to the agriculture market research provided by Ernst & Young, one third of Russian respondents put efficiency improvements on the second place of  their hierarchy of business priorities. Additionally, more than 90% of market players  agreed with the fact that greater benefits come from assets gains enhancement rather than their modernization or acquisition of new ones. If the problem of efficiency exists, what it actually is and how it might  be solved?

Russian Federation is one of world largest producers and suppliers of crops. According to the FAO (2010), it has 1st, 3rd, 5th, and 6th place in production of wheat, sugar beet, sunflower and corn, respectively. However, it is necessary to consider the efficiency of resources exploited  in agribusiness. For example, regarding to grain yield Russia is far behind not only from the majority of the world but even from other members of the CIS. One possible inference might be derived: if the productivity of grain growing is low, so it needs more area for cultivation, comparing with other countries. Indeed, Russia has one of the highest rates of farmland  per capita, while agribusiness contribution to the country’s GDP is relatively low.

Notably, it  might be explained by the shortcoming of fixed and variable costs per unit of area under crop, in comparison with other countries.

Fertilization is especially actual problem. For instance The State Program of Agricultural Development and  Regulation of Agricultural Product Markets, Raw Materials and Food for  2008-2012 assigned more than 20 bln rubles for subventions on acquisitions of mineral fertilizers. Additionally, according to the Federal State Statistics Service, during last 5 years, use of fertilizers rose by 58%. Also, in state draft Program for 2013-2020 years amount of the mineral fertilizers was scheduled to increase “from 38 kg as 100% of the nutrients per 1 ha of crops in 2010 to 80-100 kg in the future”.

Cultivated areas is not less important topic. According to the Ernst & Young research almost 60% reduction of land designated for the forage crops resulted in import of 500 ths tonnes of grain per year in Russia. Starting from 2009, in line with the Federal State Statistics Service figures, area of wheat crops began to decrease by 2.1 million ha in 2010 and by 1 million ha in 2011.

Necessity of intensive way of progress has become obvious long time since for the majority of the developed world.  Up to date state-of-art scientific and technological achievements are applied during work in the field. Modern agricultural machinery is equipped with computers, new crop varieties are grown in laboratories, agriculture companies, using satellite images, observe crops condition.

Today, agriculture industry of the developed countries  has  switched to the another level of competition – the efficiency competition. If you can not control the market price, you need to manage production cost. The market of agricultural products has become so global, that the most efficient way to manage profitability is to manage cost of manufactured goods. All the efforts should be directed to ensure the use of resources with the highest efficiency bringing back the maximum result. In developed countries these trends have led to the concept of precise agriculture. Precise agriculture involves constant monitoring of crops and soil for operative carrying out  of the measures to optimize problem areas conditions. For example, if a certain field has some areas with a low harvest , it is not necessary to introduce an increased amount of fertilizers to the whole field – it would be quite enough to treat the problem area. This will cut costs on the fertilizer, fuel and depreciation, moreover, it will save working time of the equipment and its crew for other work.

Fields observation is performed in different ways: making a detour round the fields, collection and analysis of soil samples, sensor stations use, aerial photography. In global practice it becomes more and more popular to apply satellite crop monitoring for the farmland which area starts from 100 ha. Computer processing of satellite images in certain spectral ranges,  which these systems produce, provides a precise map of the level of vegetation in each field and enables to make decisions about the “point” application of fertilizers, pesticides or other activities. In addition historical photos show how the fields germinated in the past, which in comparison with the current information, allows to forecast the yield for current and forthcoming years.

It should be noted at once, that monitoring methods which differ from satellite ones, are more expensive while having less regularity and frequency of measurements. All current and historical data of satellite observations and their automatic interpretation are available from any computer with Internet access. Satellite monitoring of the crops also minimizes such negative element as human factor and, at the same time, allows the head of any department and owners to receive accurate factual information and to present it to the potential investors.

Satellite crop monitoring is successfully used in many countries of America, Europe and CIS regions. The most famous and effective service providers are Cropio (USA/Germany), eLeaf (Holland), PrecisionAgriculture (Australia), Vega (Russia). Those systems usage allows not only to monitor the fields conditions, but also to receive reports and notifications about the most important events via e-mail or sms in real time, to make forecasts about crop yields and company’s economy in general, to receive information and news about agricultural markets, currencies exchange rates and prices dynamics, to compare current and historical values of vegetation indices etc.

Now, lets consider the investment efficiency of satellite vegetation monitoring. Based on our research, this service costs from USD 1.5 per  1 hectare per year, depending on the total area that is serviced by the system. At the same time this service allows to save USD 3-5 and to earn USD 13 from the business efficiency increase (this is an example for such crop as winter wheat). In other words every invested dollar provides an opportunity to earn up to 18 times more on reducing costs and increasing the efficiency of crops processing.

If a large agricultural holding has 100,000 ha of land, the use of the crop satellite monitoring can bring it million dollar profits, to compare, this is 10-15 units of new agriculture machinery.

Agronomist who use satellite field monitoring increases his efficiency and management methods, thus eventually making a “leap” into the age of high technology. This agronomist can debate with the colleagues from around the world on equal terms backed not only by the of the Soviet agriculture school knowledge, but also by the achievements of modern technology and computer systems.

Source: IEASSA (http://ieassa.org/en/space-profits-3/)


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