MILAN, Tenn. -- While precision farming is an evolving and often enigmatic technology, basic economic principles can still be used to determine if it can be a profitable enterprise on your farm, according to Jim Larson, associate professor, University of Tennessee Agricultural Economics, Knoxville, speaking at the Milan No-Till Field Day.

“There are three steps to precision farming,” said Larson, who defines the technology as managing fields spatially rather than on a whole field basis. “Gather information through yield monitoring, grid soil sampling, remote sensing, etc. Take the rough data, analyze it and generate a prescription map to apply an input. The third step is implementation — deciding whether an action such as variable-rate application is necessary.”

Variable-rate technology (VRT) can use GIS/GPS map-based systems in which a database is established over time and used to help make decisions. Yield maps and other data-gathering technologies can also be used to identify problems in a field, for example, where there may be drainage problems.

In real-time VRT systems, a sensor on the application vehicle identifies a weed or some other characteristic of a plant and sends a signal to the spray nozzle to activate a nozzle or other function on an implement. The information gathering, analysis and implementation cycles are basically simultaneous.

If you want to figure out if precision agriculture can be profitable on your farm, there are some basic economic principles, plus a Internet-based product that can help. Here are some tips offered by Larson:

• Treat information gathering as a crop input. This allows you to use basic budgeting principles to evaluate what the additional information gathered is worth in dollars. Remember that information only has value if you use it.

• In a typical budget, you take the revenue that you generate, subtract the costs involved and compute a profit. In a budget for VRT, “we look at any change in revenue or costs from the additional investment you make in precision farming and the impact it makes on the bottom line,” Larson said.

• Potential sources of revenue changes include increased yields, higher prices from better quality or better marketing achieved as a result of investing in precision farming techniques. “For example, if you collect remote sensing information, you might get an early indication of what yields are, and you can act on that in hedging or other activities.

• “You can also have access to markets requiring documentation of input use, which I think is going to become more important in agriculture over time.”

• Sources of cost changes include higher data analysis costs with an investment in precision farming, such as yield monitors, higher custom, variable-rate application costs, grid soil sampling, remote sensing maps, etc. There are also more human resource costs, including the learning curve necessary for adopting precision farming technology. “You have to specifically account for that in figuring out whether or not you should invest in precision farming,” Larson said.

• Input costs can be higher or lower, depending on how VRT changes input usage in the field.

Often the most difficult aspect of determining value for precision farming is the difficulty of creating side-by-side comparisons, noted Larson.

“You may not see actual yield differences or input difference changes. Even in side-by-side trials, there may be enough difference in soils and other characteristics that do not make it a fair comparison.”

If you set up trials, you will likely need the help of a consultant to identify differences, and that is another cost. “On the positive side, the use of GPS and yield monitoring make on-farm trials a lot more feasible, because you have a way to collect very specific information.”

Larson advises growers to avoid making decisions on only one year of data.

There is additional economic information available through state Extension Services and experiment stations, such as budget templates and programs to help you understand the cost/benefits of precision farming, according to Larson.

Larson noted that the University of Tennessee has a program called Cotton Yield Monitor Investment Decision Aid. The program can be found at the Cotton Incorporated Web site, which provided some of the funding for the project. You can also type in CYMDA on Google, which will take you a site where the program can be downloaded.

The program will tell you what yield gains you have to have under various “what if” situations, to make precision farming profitable.

Larson added that there are situations where precision farming pays very well, “but in other situations, you may not get a very good return on your investment.

“Where we’ve seen rapid payoffs have to do with drainage and with variety choices. There are also other uses for precision farming, including as-applied maps for environmental compliance. Yield maps could be useful for crop insurance documentation and negotiations.”

e-mail: erobinson@primediabusiness.com