Late last year, we spoke with Prof Lowenberg-DeBoer of Harper Adams University. Prof DeBoer was speaking at the Future Farm Technology Expo in the UK on the key factors which must be considered before investing in new agricultural technology.

Listen to "Do the sums before investing in ag-tech" on Spreaker.

When considering investing in new farm technology (GPS, yield monitors, variable rate fertiliser spreaders etc), the first step farmers take is to assess the feasibility of the investment. Doing a partial budget is the best tool for the first round of technology economics evaluation. In simple terms, a partial budget assesses the potential change to profits by using the following sum: Profit change = Revenue change – cost change.

Cost changes are often the easy part he explains, and consists of looking at the existing variable costs of production as well as the new variable costs associated with the technology. Calculating revenue changes is often harder to predict and these variables are often case specific. This could include yield and quality improvements, opening of new markets, improved logistics or any number of other variables.

In the case of yield improvements, sometimes the increase could be significant, while other years it could be negligible

These variables in your revenue change calculations are likely to fluctuate he explains. For example, in the case of yield improvements, sometimes the increase could be significant, while other years it could be negligible. That’s why a sensitivity test must also be carried out before an investment is made.

This is also simple to do he remarks. It involves looking at the variables on the high end and the low end and seeing how they affect profit. For example, looking at yields in a good year versus a bad year and seeing if the investment will still pay over time.

Early adaptors

Prof DeBoer also spoke about the benefits of being an early adopter of new technology. “Historically, it’s really clear that in agriculture, for the right technologies, the benefits go mostly to the early adopter” he explained.

“By the time it becomes common practice, later adopters are forced to adapt just to keep up with their neighbours” he continued.

He explains that by the time the technology is widely known, it’s likely to be too late. Instead he encouraged farmers to visit and talk to university and agricultural researchers to learn of future technologies in the pipeline so they can become the early adaptors.