sealPurdue News
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1998

Farm dealers at odds on new technologies,
study shows

WEST LAFAYETTE, Ind. -- A nationwide survey of agricultural services businesses found that independents are much more conservative than national or cooperative dealers when it comes to offering new technologies.

"Clearly different dealerships are approaching precision agriculture in very different ways," says Jay Akridge, professor of agricultural economics at Purdue University.

"Independent dealerships have taken a wait-and-see position in many cases -- deciding that their market isn't quite ready for precision, or that they will enter this market when the opportunities begin to clear up. Cooperatives and nationally owned dealerships have been much more aggressive in bringing precision technologies and services to the market."

Akridge surveyed more than 400 agricultural services businesses in more than 40 states in 1997 to get the dealers' perspective of where agriculture is headed.

"Dealerships play an important role as pipelines of technology to farmers," Akridge says. "Generally dealers are not developers of technology, but they do screen technologies and look for those that help their customers make money."

The survey found that new agricultural technologies are coming on faster than even many agribusinesses expect. In the 1996 survey, for example, 7 percent of the dealers expected to offer enhanced seed in 1997. The 1997 survey found, however, that 51 percent sold the seed that year.

The dealers expect that by 1999, genetically enhanced seed will be a common technology, with 56 percent of the independents, 82 percent of the national dealers, and 71 percent of the cooperative businesses expecting to sell this new product.

Akridge says that although seeds haven't been an important product for most farm supply businesses, that is changing because of the new bioengineered products. "Enhanced seeds are becoming an important product to dealers," he says. "The reason why is easy to see: Once you decide that you're going to plant a product such as Roundup Ready soybeans, you've made two decisions, one for your seed and one for your herbicide." So when a farmer shows up to order his seed from a dealer, the dealer has a chance to sell the herbicide, too.

Among precision farming technologies, yield monitors are the usual first step, and the survey found that 15 percent of the businesses offered yield monitor sales or service in 1997. By 1999, 22 percent of the businesses expect to be offering yield monitor sales and service.

"Some of the dealerships are being aggressive about making monitors available to the farmers at a reasonable cost to get farmers started in precision technologies," Akridge says. "So there are even different strategies among dealers who are offering these products."

Another growth area for dealerships is in agronomic interpretation of GPS farm data. (The geographic positioning system, more commonly known as "GPS," uses a grid of former military satellites to electronically locate any spot on earth to within a few feet. It is now used by civilians and is an integral part of precision farming.)

In 1997 29 percent of the businesses offered this service, but by 1999 40 percent expect to be in this form of agronomic consulting.

Akridge says that such consulting contracts are attractive areas of business for many dealers. "My sense is that when a farmer has two to three years of data with one of the dealers, unwinding that relationship will be more difficult than simply deciding to buy some other type of product," he says.

A third important technology in precision farming is field mapping using GPS. In 1997, 35 percent of the businesses offered this service; by 1999, 44 percent plan to offer GPS field mapping.

In the survey, the dealers also made these predictions about their businesses for the 1999 planting season:

  • Variable seed planting using GPS will be less common than other technologies: 12 percent of the independent businesses, 18 percent of the national dealers, and 6 percent of the cooperative businesses plan to offer this service by 1999.
  • Variable rate application of a single nutrient will be offered by 26 percent of the independent dealers, 53 percent of the national dealers, and 51 percent of the cooperative businesses by 1999.
  • The full package of GPS-driven multiple input variable applications will be offered by 6 percent of the independents, 35 percent of the national businesses, and 24 percent of the cooperative dealers by 1999.

The Purdue study notes that many businesses are looking beyond the pure technical benefits of precision agriculture technologies; they see the technologies as a way to differentiate their businesses in their area. Asked why they plan to offer precision agriculture technologies, the dealers gave these responses:

  • Improve competitive advantage, 28 percent.
  • Increase dealer profits, 12 percent.
  • Satisfy customer demand, 26 percent.
  • Offer environmental advantages, 7 percent.
  • Increase grower profits, 17 percent.
  • Increase crop yields, 3 percent.

Asked why they might not offer certain precision ag technologies, the dealers responded:

  • Expense to the dealership, 43 percent.
  • Too little grower acceptance, 12 percent.
  • Difficulty making profits from technology, 13 percent.
  • Benefits of technology unproved, 3 percent.
  • Difficulty training and retaining qualified employees, 13 percent.

Source: Jay Akridge, (765) 494-4247; E-mail
Akridge@agecon.purdue.edu;
http://www.agecon.purdue.edu/cab
Writer: Steve Tally, (765) 494-9809;
tally@ecn.purdue.edu;
www.agcom.purdue.edu/AgCom/homepages/tally/ Purdue News Service: (765) 494-2096; e-mail, purduenews@purdue.edu


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