Real Numbers on Precision ROI

This Business of Farming

Ohio farmer researches and quantifies returns to tech spending: 145%!

Published on: July 16, 2013

For nearly 20 years farmers who spent cash on precision technology swore the moves saved money. Trouble was, it was hard to really quantify those savings or returns.

Brian Watkins, a grain and hog farmer in a family operation near Kenton, Ohio, dug through his numbers and shared what he learned at this week's Infoag meeting held in Springfield, IL.

Watkins' family farms 7,000 acres in a 50-50 corn and soybean rotation. Here's a breakdown of the farm's investment in precision tech:

-- five autosteer systems, two yield monitors with various yield modules - $132,000

-- planter system - $6,100

-- software - $1,200

-- clutches on planters - $15,000

Brian Watkins, who farms 7,000 acres with family near Kenton, Ohio, calculated a 145% return on investment for precision tech tools.
Brian Watkins, who farms 7,000 acres with family near Kenton, Ohio, calculated a 145% return on investment for precision tech tools.

-- VRT-ready applicators - $5000

Total investment -- $158,895

Annual costs:

-- consulting, including managing the database - $18,900 s

-- soil testing @ 21 per acre - $14,700

-- internal maintenance and management - $20,000

-- data plan for CORS -- $1,500

-- opportunity cost of capital @ 9% - $14,300

-- depreciation at 6 years - $26,482

Total annual costs: $95,883, or $13.70 per acre on 7,000 acres

Returns

Watkins admits some of the numbers he used were estimates, but surprisingly, quite a lot is rooted in printed literature from manufacturers.

Returns to autosteer/swath control focus on a number of variables, including overlaps and skips, the cost of inputs, machinery and labor. He concluded that conventional farming would lead to overlaps 75% of the time and skips 25% of the time. He used a price and yield goal of $12.40 and 58 bu. for soybeans, and $5 and 175 bu. for corn. Initial savings came to $5,579, which isn't much when you consider a total machinery investment of $2.2 million.

Digging deeper, Watkins looked at the literature to determine other improvements from autosteer and swath control. These improvements ranged from 4% to 7%, much of it related to shutting off booms and planters in odd shaped fields, a big factor where he farms. He looked at every field pass, from primary, fall tillage, spring till, fall strip P and fall strip K, spring strip, planting con, planting and spraying (three to five trips), along with harvest.

He weighed yield loss from using no technology, such as over-spraying or double planting. He factored in labor savings and fuel savings resulting in those tools enabling him to become more efficient and operate the machine a little less in each field. Fuel and labor savings came to about $3,000. Those small improvements from using the technology came to a whopping $62,173 savings, or 2% on a $1.5 million input budget.

"What this tells me is when you become more efficient with the equipment, your capital costs go down," he says.

Capital savings, yield improvements, fuel and labor savings, input savings, all come to $156,061 in savings from using that technology.

Digging even deeper, Watkins calculated how many more hours the family could work each day using the technology. "You can get a 10% increase in hours per day as a result of less driver fatigue, and that's a conservative number," he says. "We're getting increased capacity, and that's a capital savings of $19,000."

Variable rate soybeans reap a seed savings of $19,125. They see a yield increase of 2% on best soils, with a value-of-yield increase of $12,586, resulting in $31,000 savings from variable rate soybean plantings.

In corn the technology results in better seed placement and down pressure, with 10% better stands. Overall, Watkins calculated a .5% yield improvement in soybeans and 1% yield benefit in corn. "It all depends on the year, but there's no doubt we've improved ourselves by using these tool, and we estimate that benefit at $43,000."

Watkins' strip till investment of $268,000 shows direct operating cost of $2.46 per acre. They see soluble P savings of 5% and an overall corn yield boost of around $122,000 and P savings of $29,531. The result is a net benefit of $92,486, with $23,122 attributable to GPS.

A GPS-driven yield map is a crop removal map showing P and K by crop removal, explains Watkins. Assume normal distribution and a standard deviation of 20 bu. for corn and 6 bu. per acre soybeans, those maps result in savings of $38,000.

Overall, net returns to precision technology came to $216,611, with 145% ROI. But that number is a little misleading, Watkins warns.

"It's not like you can just shake the precision tech tree and money comes out," he says. "The system itself doesn't just fall into place. It takes 20 years of learning.

"Once you have evolved the system and make it work, you can make it pay."