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Financial considerations

Article outlining the financial costs and risks as well as the benefits of precision and data-driven farming approaches.
Two men stand in a field looking at a tablet
© EIT Food

In Step 1.7 we looked at the three pillars of sustainability. This Week we have focused on the first pillar – financial and economic sustainability. Do any of the priorities you’ve identified in your Action plan come under this heading?

Priorities in this area might include:

  • improving the profits and financial performance of the farm

  • protecting financial viability

  • supporting the development/expansion of the farm business

  • re-investing for the future.

So, what are the financial considerations you should to take into account when considering whether to adopt precision farming techniques? There are both benefits and risks which we’ll explore here.

Financial benefits

Various studies have shown financial benefits of using precision farming to reduce costs. For example:

  • Reduced fuel and fertiliser consumption when using tractor guidance systems. Using guidance systems led to more efficient application of fertiliser and reduced tractor use, reducing fertiliser and fuel costs [1].

  • Variable rate application (VRA) of nitrogen fertilisers. Fertiliser is applied when and where needed, rather than uniformly, this reduces the amount of fertiliser applied (and therefore costs) while maintaining productivity [2].

  • Using a range of precision mapping, sensing and VRA techniques to reduce nitrogen fertiliser application while maintaining yields and grain quality in wheat farming. Reductions in nitrogen fertiliser use ranged from 10 to 80% [3].

  • Reductions in fuel, herbicide and fertiliser use, and costs, and increased yields in maize, oilseed rape, wheat and sugar beet as a result of VRA of herbicides, fertilisers and tractor guidance systems. Herbicide use was reduced by between 40 – 60% [4].

Precision farming could also have a combination of short and long term financial benefits. In the short term savings in fuel, fertiliser and pesticide use. In the longer term reduced wear and tear on machinery and equipment. Data gathering of, for example, trends in yield and fertiliser use over longer timelines can enable even more precise applications [5].

How about increasing revenue? With targeted application and lower use of inputs, precision farming can lead to improved yields – both in terms of quality and quantity [3]. Higher quality product can sell for a premium [6], as can food produced organically [7] in a more environmentally sustainable way [8].

If crops produced using precision farming to allow lower use of pesticides and fertilisers were marketed as such to consumers, could they command higher prices? Consumers have shown a willingness to pay a premium for food produced using less pesticide and food traceability [8,9], both of which can be provided by precision farming.

So, with all the potential benefits of precision farming, why might uptake be low?

Financial costs and risks

Surveys of farmers across Europe identified the most common reason for not using or increasing the use of precision technologies as the high initial costs of buying into the technology [10,11]. Low cost effectiveness was also perceived to be a problem, ie precision farming reduces costs, but not enough to cover the costs of buying the technology. Precision farming may be viewed as long term investment [12] and it can be difficult to predict financial returns, as they can depend on:

  • Farm size, crops grown and technologies implemented [13].

  • Skill-level (in terms of IT) and training of farmers and farm workers [6].

  • Profit margins that fluctuate with market prices and the costs of inputs such as fuel, fertilisers and herbicides [14,15].

As you’ll hear from our farmers in the next Step, there are also the costs (financial and time) of training and learning how to use systems, for example learning how to operate equipment and interpret the data gathered. And there is the cost of associated systems, such as broadband, mobile signals, and Wi-Fi needed to link and operate sensors and other equipment [10]. The interoperability of systems and retrofitting also needs to be taken into account. Can existing equipment be modified and will software and hardware from different providers work together [14]?

Financial incentives

As well as financial benefits there may also be financial incentives:

  • Meeting environmental targets and regulations – precision farming can enable better compliance with environmental rules and regulations which can carry a financial incentive. Data collected through adopting precision farming techniques and technologies can also support this [14,15].

  • Avoiding penalties or taxes on, for example, pesticide and herbicide use, as precision farming can reduce use [6,10].

  • Involvement in environmental schemes – funding for environmental projects which precision farming can support [6].

  • Subsidies and direct support from governments – such as funding or low interest loans to buy equipment for example, or national schemes to produce data-based resources such as soil maps [15].

Low tech alternatives

Precision agriculture doesn’t always need to be expensive and hi-tech, there are less costly alternatives. Data Driven Farming Could Transform Agriculture is a TEDx Talk with some ideas for low cost solutions.

Much satellite data is freely available (eg Sentinel), as well as soil maps and soil geographic databases.

There is also a range of open source technology, discussed in this TEDx Talk, Open Source Automated Precision Farming.

Additional options include:

  • Using less expensive hand-held or field-based sensors [14,16]

  • Adapting technology you already use – for example the precision farming apps available for smartphones [17,18].

  • Retro-fitting – adapting equipment you may already have [19]

Finally, with new developments becoming more commonplace, the technology is becoming cheaper and more widely available [20].

© EIT Food
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Innovation in Arable Farming: Technologies for Sustainable Farming Systems

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