RISK MANAGEMENT POTENTIAL OF PRECISION FARMING TECHNOLOGIES

Initial ideas on risk management uses of precision agricultural technology focused on site-specific treatment of problem areas to reduce the probability of low yields and returns. Recent discussions deal with sensor and remote-sensing information to improve marketing and "as applied maps" as trace-back mechanisms to manage liability. A theoretical model is presented that suggests that there are plausible circumstances under which precision farming can reduce temporal yield variability. Empirical evidence from an on-farm trial of site-specific P&K management in the Eastern Cornbelt supports the hypothesis that precision farming can have risk-reducing benefits.food safety, GIS, GPS, crop insurance, marketing, precision farming, site specific management, risk, Research and Development/Tech Change/Emerging Technologies, Risk and Uncertainty,

PRECISION AGRICULTURE: ECONOMICS OF NITROGEN MANAGEMENT IN CORN USING SITE-SPECIFIC CROP RESPONSE ESTIMATES FROM A SPATIAL REGRESSION MODEL

Adapting variable rate technology (VRT) to Argentine conditions requires methods that use inexpensive information and that focus on the inputs and variability common to Argentine maize and soybean growing areas. The goal of this study is to determine if spatial regression analysis of yield monitor data can be used to estimate the site-specific crop Nitrogen (N) response needed to fine tune variable rate fertilizer strategies. N has been chosen as the focus of this study because it is the most commonly used fertilizer by corn farmers in Argentina. The methodology uses yield monitor data from on-farm trials to estimate site-specific crop response functions. The design involves a strip trial with a uniform N rate along the strip and a randomized complete block design, with regression estimation of N response curves by landscape position. Spatial autocorrelation and spatial heterogeneity are taken into account using a spatial error model and a groupwise heteroskedasticity model. A partial budget is used to calculate uniform rate and VRT returns. First year data indicate that N response differs significantly by landscape position, and that VRA for N may be modestly profitable on some locations depending on the VRT fee level, compared to a uniform rate of urea of 80kg ha-1. A more complete analysis will pool data over many farms and several years to determine if reliable differences exist in N response by landscape position or other type of management zone. The study is planned for four years. The purpose of this preliminary analysis is to show how spatial regression analysis of yield data could be used to fine tune input use.Crop Production/Industries,

THE DISTRIBUTIONAL IMPACT OF 1981 AND 1982 FEDERAL INCOME TAX LEGISLATION: WHICH FARMERS BENEFIT?

Simulation was used to analyze the distribution of benefits from the 1981 and 1982 federal income tax legislation for farm types that exhibit various tax characteristics. The results indicate that distributional effects are largely attributable to the reduced progressivity of the tax rate schedule. The largest farms benefited relative to the smaller farms of all farm types. Intensive livestock farms and producers of perennial crops experience additional benefits relative to other farm types primarily because of the large reduction in useful life for tax purposes of specialized livestock facilities, orchards, and vineyards.Agricultural Finance, Public Economics,

EX ANTE NON-MARKET VALUATION FOR NOVEL PRODUCT: LITERATURE REVIEW

This paper provides a critical review of the literature on non-market valuation methods to estimate the welfare impact of novel products; it is the first study to assess both observed data- and perception-based methods as non-market valuation methods. Observed databased methods include budgets, regression, mathematical programming, and simulation. Perceptions-based methods include the contingent valuation method, choice-based conjoint analysis and experimental methods. Findings imply that the preferred observed data-based method to estimate the ex ante economic impact of a new technology on the welfare of the farm household is a combination of simulation and mathematical programming. The preferred perceptionbased method for estimating the ex ante impact of a novel product on the welfare of an economic agent is represented by experimental methods. Findings also imply that observed-data based methods and more specifically mathematical programming are more popular for estimating the ex ante farm-level economic impact of a new technology. On the other hand, perception-based methods are more popular for estimating the economic impact of a novel product for consumers.Staff working papers, Dept. of Agricultural Economics, Internet publications, Purdue University

Drainage water management impact on farm profitability

The representative farm planning model that is used for the 2005 Purdue University Top Farmer Crop Workshop base case was extended to include managed drainage activities in order to evaluate the impact of drainage management time on farm operations. The analysis considered two alternative enterprises: rotation corn soybeans with and without controlled drainage activities. The baseline solution assumed that controlled drainage has 10% higher average yields than free flowing drainage, one drainage control structure is needed each 20 acres, and all drainage management work was done on good field days. The results suggest that the baseline optimal solution was rotation corn-soybeans with controlled drainage where 1,500 acres were cultivated with corn following soybeans and 1,500 acres with soybeans following corn. Compared to the enterprise without controlled drainage, the annual returns to resources were 10% and 7.9% higher with and without EQIP subsidy respectively. Time opportunity cost for the managed drainage activities in each time period in the baseline solution was zero except for Dec. 6 Apr. 21 period when its value was $10/hour and 108.69 hours of labor were hired. This was because of the controlled drainage activities (both installation and boards removal occur in this time period) that completely utilize full-time field labor and require additional hours of part-time labor to be hired. When hiring part-time labor was not available, the optimal enterprise was rotation corn-soybeans with managed drainage on 2/3 of the farm and corn-soybeans without controlled drainage on 1/3 of the farmland for a total annual contribution margin of$675,505. Increasing labor available by one more hour would increase the profits by $281.30 (Dec 6 Apr. 21),$28.06 (Apr 22 Apr 25), $338.18 (Apr. 26 May 2),$229.48 (May 3 May 9), $9 (May 10 May 16),$28.07 (Nov. 1 Nov 14 and Nov 15-Dec 5). In the baseline scenario the yield advantage threshold for profitability of managed drainage was 2.3% and 4.5% with and without EQIP subsidy respectively.Farm Management,

Using Spatial Analysis to Study the Values of Variable Rate Technology and Information

We present a review of the last few years' literature on the economic feasibility of variable rate technology in agriculture. Much of the research on this topic has involved the estimation of site-specific yield response functions. Data used for such estimations most often inherently lend themselves to spatial analysis. We discuss the different types of spatial analyses that may be appropriate in estimating various types yield response functions. Then, we present a taxonomy for the discussion of the economics of precision agriculture technology and information. We argue that precision agriculture technology and information must be studied together since they are by nature economic complements. We contend that longer-term, multi-location agronomic experiments are needed for the estimation of ex ante optimal variable input rates and the expected profitability of variable rate technology and information gathering. We use our taxonomy to review the literature and its results with consistency and rigor.precision agriculture, spatial econometrics, variable rate technology, Research and Development/Tech Change/Emerging Technologies, C31, O33, Q16,

Spatial Analysis of Precision Agriculture Data: Role for Extension

The role of Extension in assisting farmers conducting on-farm trials with yield monitors was assessed by direct casual observation and a formal interview during a three-year case study. Results indicate that Extension has a role in assisting farmers when selecting treatments to test, designing experiments, and interpreting statistical results.Farm Management, Teaching/Communication/Extension/Profession,

The impact of farmland price changes on farm size, financial structure enterprise choice

This research develops a theoretical framework within which the impact of farmland capital gains and losses on agricultural production, finance, and enterprise choice decisions can be analyzed. A preliminary test of this theoretical model is conducted using a deterministic dynamic programming model of a central Iowa farm firm in the period 1970-1984. Though the theoretical model was developed to examine the impact of farmland price changes, it may be extended to analyze decisions involving any durable assets which may earn capital gains or losses;The model suggests that real estate capital gains provide incentives to increase farm acreage, incur greater debt to purchase the appreciating land, and decrease holdings of more liquid nonland assets. Capital losses tend to have the opposite effect because decisionmakers seek to economize on land use to avoid the capital drain. Limited availability of land, the inability of many farm decisionmakers to attract outside nonfarm equity, and adjustment costs may dampen or even eliminate these effects in some cases, but the empirical work suggests that in recent years conditions are such that capital gains effects could be observed. The theoretical model suggests that if borrowing against unrealized capital gain is permitted, land price risk may force decisionmakers to build added financial flexibility into their operations by reducing farm acreage, cutting debt use, and increasing holdings of liquid, nonland assets;The empirical model suggests that the asset and financial restructuring on U.S. farms in the 1970s toward greater land investment, more debt, and smaller holdings of nonland assets was a response to the large farmland capital gains of the period. This research draws a direct link between land price increases of the 1970s and farm financial stress of the 1980s. With greater land investments, more debt and fewer liquid assets, many farmers were financially vulnerable in the situation of low farm income and dropping asset values that they encountered in the mid 1980s. The study suggests that in the environment of falling land prices experienced in the 1980s, farmers in general will seek to hold less land and reduce debt loads. In this context, the farm financial crisis of this period can be seen as a set of problems encountered in moving from a period of large farmland capital gains to a period of stagnant or declining land prices

SPATIAL REGRESSION MODELS FOR YIELD MONITOR DATA: A CASE STUDY FROM ARGENTINA

Precision agricultural technology promises to move crop production closer to a manufacturing paradigm, but analysis of yield monitor, sensor and other spatial data has proven difficult because correlation among neighboring observations often violates the assumptions of classical statistical analysis. When spatial structure is ignored variance estimates tend to be inflated and significance levels of test statistics are reduced. The gap between data analysis and site-specific recommendations has been identified as one of the key constraints on widespread adoption of precision agriculture technology. This paper compares four approaches that explicitly incorporate spatial correlation into regression models: (1) a spatial econometric approach; (2) a polynomial trend regression approach; (3) a classical nearest neighbor analysis; and (4) and a geostatistic approach. In the Argentine data studied, the spatial econometric, geostatistical approach and spatial trend analysis offered stronger statistical evidence of spatial heterogeniety of nitrogen response than the ordinary least squares or nearest neighbor analysis. All the spatial models led to the same economic conclusion, which is that variable rate nitrogen is potentially profitable. The spatial econometric analysis can be implemented on relatively small data sets that do not have enough observations for estimation of the semivariogram required by geostatistics. The spatial trend analysis can be implemented with ordinary least squares functions that are already available in some GIS software. In this study, the main benefit of using spatial regression analysis is increased confidence in the corn yield response estimates by management zone, and conclusions about the profitability of precision agriculture technologies.Crop Production/Industries,

Setting the record straight on precision agriculture adoption

There is a perception that adoption of precision agriculture (PA) has been slow. This study reviews the public data on farm level use of PA in crop production worldwide. It examines adoption estimates for PA from completed surveys that utilized random sampling procedures, as well as estimates of adoption using other survey methods, with an objective to document the national or regional level adoption patterns of PA using existing data. The analysis indicates that Global Navigation Satellite Systems (GNSS) guidance and associated automated technologies like sprayer boom control and planter row or section shutoffs have been adopted as fast as any major agricultural technology in history. The main reason for the perception that PA adoption is slow is because PA is often associated with variable rate technology (VRT)—just one of many PA technologies, one of the first adopted by many farmers, but that now rarely exceeds 20% of farms. This level of adoption suggests that farmers like the idea of VRT, but are not convinced of its value. VRT adoption estimates for niche groups of farmers may exceed 50%. The biggest gap in PA adoption is for medium and small farms in the developing world that do not use motorized mechanization