sealPurdue News

September 1997

Study: Precision farming boosts risk management, not profits

WEST LAFAYETTE, Ind. -- The first on-farm economic analysis of site-specific farming, also known as precision farming, finds that for now the technology does not increase profits.

However, the study found an unexpected benefit: Site-specific farming appears to reduce a farmer's risk of having a poor crop.

The research was conducted by Purdue University agricultural economist Jess Lowenberg-DeBoer and graduate student Anthony Aghib. The research was presented at the recent annual meeting of the American Agricultural Economics Association. The on-site trials were conducted in collaboration with DeKalb-Agra of Waterloo, Ind.

Precision farming uses technologies such as GPS (geopositioning satellite systems), variable rate material applicators and computer data bases to accurately place farm inputs such as fertilizer, herbicides or manure in the amounts needed on the specific places that they are needed. Traditionally, farmers have applied such inputs uniformly over an entire field.

Currently, farmers can use one of two methods of collecting site-specific information. The most common type is grid sampling, where soil samples and crop conditions are recorded in regular intervals throughout the field, such as every 100 feet. A second type, known as "smart sampling," records the soil samples and crop conditions at irregular intervals, wherever the farmer or technician judges that the samples will provide the most information. Taking samples based on soil types is an example of smart sampling. Software to guide smart sampling is now available, Lowenberg-DeBoer notes.

Although most farmers are aware of precision farming, the technology is still in its infancy. Even the most basic piece of equipment, a crop yield monitor, is found on only 8,000 to 10,000 of the 600,000 combines in use, according to Purdue agricultural engineer Dan Ess.

The economic study examined site-specific farming applications on six farming operations in Indiana, Ohio and Michigan from 1993 to 1995. The study examined phosphorous (known by the elemental abbreviation "P") and potassium ("K") use on corn, soybeans and wheat, and compared traditional whole-field management with two types of site-specific management, grid sampling (using three-acre grids) and soil type sampling. Other than the fertilizer applications, all other farming practices on the test fields were the same.

"This data has the advantage of coming from a situation that examines what people actually do, instead of coming from a university research farm where the practices may be different," Lowenberg-DeBoer says.

The study found that for whole-field or traditional management, the average return per acre was $147. For grid-type site-specific management, the average return was $137 per acre, and for soil-type site-specific management, the average return was $148 per acre.

"It looks like using site-specific farming for just P and K doesn't change returns much," Lowenberg-DeBoer says.

But there were significant differences in the variability of the types of management:

  • Whole-field management produced returns that varied from $35 to $312 per acre, or a spread of $277.

  • With grid-type management, the return varied from $65 to $275 per acre, or a spread of $210.

  • For soil-type management, the return varied from $57 to $238 per acre, or a spread of $181.

    "This is the one potential advantage of site-specific farming, as a risk management device," Lowenberg-DeBoer says. "This wasn't something we expected to find. But with site-specific farming, the number of acres that produce lower returns are reduced, so there is less risk."

    The data also clearly show that soil-type site-specific farming has an advantage over grid-sampling fields. "Soil-type management shows slightly higher economic returns, and it appears to have a benefit in risk management returns as well," Lowenberg-DeBoer says.

    He also points out that although using site-specific management to set fertilizer rates didn't increase profits, it didn't cost any more, either.

    "If the site-specific technology is also used for herbicide rates, lime application and nitrogen application, in addition to P and K application, the technology costs are spread over more inputs, so then it could become a profitable system," Lowenberg-DeBoer says.

    "It may be that some other part of farm management will benefit from site-specific farming more than fertilizer application. It may be that some other use such as crop diagnostics, monitoring crop problems, supervising employees, environmental record keeping, or record keeping for food safety concerns will become the primary reason for using the technology.

    "In the end, fertilizer application may become a sideshow to these other uses, but there is no doubt that some part of this is going to become standard practice."

    Source: Jess Lowenberg-DeBoer, (765) 494-4230; e-mail,
    Writer: Steve Tally, (765) 494-9809; e-mail,
    Purdue News Service: (765) 494-2096; e-mail,


    Average Returns and Risk Characteristics of Site Specific P and K Management: Eastern Cornbelt On-Farm-Trial Results

    J. Lowenberg-DeBoer and Anthony Aghib, Department of Agricultural Economics, Purdue University

    The objective of this study is to provide an economic assessment of site-specific management (SSM) of phosphorous (P) and potassium (K). The data were collected in farmer managed on-farm-trials coordinated by Purdue University and DeKalb-Agra, a Waterloo, Indiana, agricultural input supply and marketing cooperative, from 1993-1995. Whole-field management was compared to SSM using either three-acre grids or soil type. The data indicate that site-specific P & K application on corn, soybean and wheat did not increase net returns, but that it reduced the variability of returns. A positive perspective is that if Grid or Soil Type SSM can match Whole Field returns as a stand-alone practice, then it could be profitable as a part of an integrated system in which soil sampling and other costs can be spread over a wider range of inputs. The main effect of the site-specific P and K applications on physical quantities of fertilizer was to redistribute the nutrient applications within fields. Both Grid and Soil Type treatments have lower net return standard deviations than Whole Field treatment. Stochastic dominance analysis indicates that the Soil Type approach dominates the Whole Field treatment for risk-averse decision makers.

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