August 1, 2020
Precision ag record began in a early 1990s with widespread use of produce monitors in combines that would beget maps of fields formed on a pellet upsurge into a hopper as a appurtenance changed adult and down a fields. Early adopters of pointing ag record were mostly described as being on a “bleeding edge” of adoption since a costs so mostly exceeded any quantifiable boost in profitability.
That’s no longer a case. In fact, Forbes repository ran a 2019 underline with a headline: “By Raising Productivity, Ag Tech Boosts a Value of Farmland.”
In that article, Bill Lapp, boss of Omaha-based Advanced Economic Solutions remarkable “Widespread adoption of technologies that have increasing outlay per acre, as good as shortening prolongation costs, have been a primary matter for rising land values in a U.S. and globally.“
The record has modernized so distant that tangible margin information from farmers participating in a FINBIN program headquartered during a University of Minnesota can now be sorted into those aggressively regulating pointing ag tech and those who don’t and afterwards compared for differences in yields, income, non-static costs, bound costs, and returns. FINBIN covers all vital plantation stand and stock enterprises; we chose soybeans for instance purposes.
First, we tangible “aggressive users” of pointing ag tech as those FINBIN participants utilizing 4 specific pointing ag technologies: information from produce monitors a before deteriorate to beam non-static rate planters, non-static rate manure applicators, non-static rate chemical application, and auto-steer superintendence technology. Then, we compared FINBIN participants regulating those 4 technologies in their soybean prolongation to a apart arrange of FINBIN participants who didn’t use any of them in their 2019 soybean production.
Figure A next uses 2019 information from FINBIN benchmark reports for soybeans among all 12 participating states (MN, IL, WI, MI, MO, NE, ND, SD, OH, SC, PA, UT). we did not use a benchmark news for all 2,087 participating producers submitting their information for a 2019 soybean crop. They were sorted into dual groups. Figure A information is subsequent usually from 581 of those participants we sorted out as assertive users of pointing ag and compares it to a same metrics among a remaining 1,506 participants who used nothing of those 4 listed technologies.
While a FINBIN benchmarks information into apart percentiles in 10-point increments, we chose only 3 for both groups we sorted out: Those in a 30th percentile or lower, those during a median (where half were softened and half were worse) and those during a 70th percentile or higher. Among a pivotal commentary were:
- Precision ag users generally averaged 2.5 to 3 bu./acre some-more than non-users on land of identical peculiarity formed on lease value.
- Precision ag users generally averaged reduce non-static costs per hactare than non-users.
- Precision ag users generally had larger earnings over non-static costs trimming from $19 per hactare among those in a 30th percentile, to $10 per hactare among those during a median, to $6 per hactare among those in a 70th percentile.
More Evidence Precision Ag Will Boost Land Values
Early this year, a Agricultural Data Coalition polled farmers to learn 1) a stream border of pointing ag use among farmers; and 2) where farmers suspicion destiny advances competence bring. Among findings, 58% already consider an endless database on how their land has been monitored and spoon-fed only what’s indispensable for limit profitability will boost their land value compared to identical land but such information to uncover intensity buyers.
How Increased Profitability Translates to Higher Rent Value or Land Value
A common magnitude of land value is tied to what’s called a capitalization rate or “cap” rate subsequent by dividing normal lease value (less skill taxes) by a seeking price.
Going behind to Figure A above, we compared increasing earnings over non-static costs by those aggressively regulating those 4 elements of pointing ag to those who didn’t use any of them. Next, we estimated a 43 bu/acre belligerent in a 30th percentile, with a net lease value of $164 in a FINBIN data, to be value $4,750 per acre. we estimated a median produce of 50 bu/acre with net lease value of $188 per hactare to be value $5,400 and a 54 bu/acre belligerent autocratic net lease of $225/acre to be value $6,500/acre.
Finally, we combined a boost in earnings over non-static costs among those aggressively regulating pointing ag record to a FINBIN net lease value and re-calculate a capitalization rates accordingly. Finally, we re-evaluate a value of a land to a assertive pointing ag user regulating a softened capitalization rates.
The Figure A lines in immature tell a story: That $4,750 land in a 30th percentile is indeed value $556 some-more to a pointing ag wiz. That same land is also value behest an additional $12.91 an hactare only to lease it. At a “median” level, pointing ag adds $281 to a value of a $5,400 land for a pointing ag wiz, and raises a bid to lease it by $5.61 per acre. Among a high performers in a 70th percentile among both groups (precision ag users and those who don’t use it), a pointing ag advantage lifted a value of a $6,500 land by $159 per hactare and raises a value as let belligerent by $2.95 per acre.
Two Summary Conclusions
The justification that pointing ag creates land some-more prolific and essential clearly translates into aloft lease value and marketplace value for farmland to assertive users of pointing ag.
The fact that reduction than 30% of a soybean producers participating in a 2019 FINBIN module met my clarification as “aggressive users” of pointing ag tech is important. Why? It means they also have a poignant rival advantage.
Editor’s note: The Jul emanate of the ASFMRA – Iowa Chapter newsletter includes a essay above titled, Precision Ag Tech Boosts Land Values for Users submitted by Dan Manternach, President, Perfect Fit Presentations LLC.
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