A Whole- Farm Investment Analysis of Some Precision Agriculture Technologies

Brad Knight and Bill Malcolm

No 10406, 2007 Conference (51st), February 13-16, 2007, Queenstown, New Zealand from Australian Agricultural and Resource Economics Society

Abstract: This study uses a farm in the Victorian Mallee over the period 1998 - 2005 to analyse whole-farm profitability and risks of investing in Precision Agriculture and Site-Specific Crop Management systems. To answer the research questions, a model to predict yield under PA management is developed to simulate paddock and activity gross margins. Analysis is conducted that enables judgements to be formed about merit of investing in some PA technologies. The case study farm comprised 1400 hectares, with 900 hectares of cereals cropped each year. In this case, investment in Zone Management technologies did not meet the required return on capital. Using the relationship of paddock variability to profitability derived from the simulation data, in a year with median growing season rainfall, a variation of at least 2.5t/ha in yield across the paddock was required to meet the required rate of return on the Zone Management investment. A comparison using certain and uncertain seasonal knowledge assumptions indicated that seasonal variation has a much bigger impact on gross margins than spatial variation on this case study farm. Two equipment guidance systems were evaluated. Both systems earned more than 8 per cent on capital invested. Real-Time Kinetic (RTK) guidance with a precision of 2cm and a capital cost of $50,000 was outperformed in economic terms by a $20,000, 10cm accuracy Sub-Metre guidance system. The analysis of RTK guidance profitability showed that it would be important that producers who invest in this technology also adopt supporting management practices that enhance crop gross margins or provide other benefits. Investment in GPS guidance technology can be a worthwhile investment, provided the benefits per hectare are adequate and the capital cost is spread over sufficient hectares. This conclusion is endorsed by many Australian farmers who have moved towards GPS guidance.

Keywords: Farm; Management (search for similar items in EconPapers)
Pages: 53
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aare07:10406

DOI: 10.22004/ag.econ.10406

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