Farm Industry News

Guidance system for profit

A recent John Deere product event in Iowa featured automated equipment guidance systems as a solution to several farm problems, including limited time, input overlap and crop loss at harvest. The keynote speaker at the event was Purdue University ag economics professor Michael Boehlje.

“Right now, GPS guidance systems are the ‘killer application’ in agriculture technology,” Boehlje said. “Farmers are adopting GPS guidance very quickly because they realize that there is an immediate payback. Plus we now have enough research compiled to show that the systems will pay for themselves in increased productivity.”

Boehlje pointed specifically to Purdue research released in February 2004. The study, conducted by Purdue ag economics professor Jess Lowenberg-DeBoer and graduate student Matt Watson, looked at the profitability of adding varying levels of GPS-enabled guidance technology to a 1,800-acre farm.

Farm expansion

Estimates derived from data collected on corn/soybean ground in west-central Indiana indicate that a big portion of the economic value of these systems comes from the ability of farmers to farm more acres with the same equipment. “Lightbar guidance would allow an 1,800-acre operation to expand to about 2,600 acres with the same 12-row planter while maintaining timeliness of operations,” Lowenberg-DeBoer said. “GPS auto guidance would allow that grower to expand to about 3,100 acres with the same set of equipment. For farmers who can use larger equipment, the benefits of GPS auto guidance would be greater because the auto guidance cost is the same regardless of equipment size.”

Added productivity

While a non-expanding 1,800-acre farm would obtain a return of $1.95/acre by adding a lightbar, the chart shows that returns from a lightbar increase up to $6.93/acre by using the added productivity to expand the farm operation to 2,600 acres. Due to higher attainable ground speeds, the differential corrected (DGPS) or real-time kinematic (RTK/RGPS) auto guidance systems allow 3,100 acres to be farmed with the same equipment. But because of its higher cost, an RTK system would provide less immediate economic return on a farm in this size range. The researchers note that some farmers may benefit from the RTK's 1-in. accuracy in other ways, such as reduced compaction from driving the same tire tracks year after year, or “spatially sensitive” input-saving practices such as ridge-till and banded applications of fertilizer.

Auto guidance is available with two accuracy levels: DGPS is accurate to about 4 in., and an RTK system is accurate to about 1 in. The Purdue researchers considered the following investment costs when deriving profitability numbers: price of a lightbar, $4,050; DGPS auto guidance, $15,000; RTK auto guidance, $50,000. They also figured in a DGPS annual subscription cost of $800. Profit estimates assumed a corn price of $2.23/bu. and soybeans at $5.49/bu.

Profitability of using GPS guidance to expand from 1,800 acresa
Larger farm size (acres) Revenue increase/acre Revenue increase/farm
Lightbar 2,600 $6.93 $5,800
DGPSb 3,100 $7.36 $9,700
RTK/RGPSb 3,100 $3.41 $4,500c
Source: Purdue University
aAssumes no other equipment upgrades
bDGPS = differential corrected GPS; RTK/RGPS = real-time kinematic GPS
cLower revenue increase reflects the higher cost of an RTK/RGPS system.
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