Section 5: Cost Benefit Analysis

Precision Farming

Remote sensing is just one component of a much larger integrated technology known as precision farming. Precision farming is still an emerging technology with very limited economic success. Precision farming will first have to become an economical management system before the integration and use of remote sensing becomes widely used in agriculture. Early adopters of new farming technology will benefit the most when precision farming does become profitable (Cochrane, 1979).


The increase in net profits from precision farming come from a combination of revenue increases from higher yields and/or decreased input use and their associated costs.

Lowenberg-DeBoar and Swinton (1997) reviewed 17 published precision farming economic studies in an attempt to answer the question whether precision farming is more profitable than whole-field farming. Precision farming is not profitable in five studies, profitable in six studies, and mixed or inconclusive in six studies. Several problems with these studies exist. The studies are not very comparable because of various different assumptions and cost accounting methods. Twelve studies use actual crop yields while the remaining five studies use simulated yields. Under accounting for true costs, assumed nitrogen response, and high product value are three factors that are cited by Lowenberg-DeBoar in the group of studies that are profitable.

Under accounting for true costs
omitted costs such as the cost of collecting and analyzing soil samples, map making, and input application.

Assumed nitrogen response assumes that the crop will yield will reach its targeted yield if nitrogen is not a limiting factor. Four profitable studies did not generate any data to prove this assumption.

High product value was a factor in two out of the six profitable studies. All of the inconclusive and unprofitable studies are low-value grain crops.

None of these studies attempted or considered the environmental costs and benefits of precise placement and reduced use of agricultural chemicals.

Some people assume that increased technology automatically increases pollution. Pollution is not the result of technology and the high level of inputs. It is the result of the inefficient use of those inputs that result in byproducts and waste material that is created in the production process (Khanna et al, 1996).

Pollution from farm chemicals to the environment does not yet have a significant cost directly charged to the farmer. All taxpayers, rural and urban, are still paying the cost of removing farm chemical runoff in public water supplies.

Risk and Uncertainty

Lowenberg-DeBoar and Aghib (1997) determined that the precision application of phosphorous ("P") and potassium ("K") using either grid or soil type management did not significantly increase net profit compared to whole field management. The data was collected from six farms located in Northeastern Indiana, Northwestern Ohio and Southern Michigan. The average net return per acre was $146.93 for whole field management, $136.99 for grid soil sampling management, and $147.80 for management areas based on soil type.

The study also found that although precision application of P and K did not significantly increase net profits, it did reduce the risk of poor profit results by decreasing the variability of net profits for each type of crop management used.

The variability of net profit per acre was significant for the three management types. For example:

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Figure 5.1  Data from Lowenberg-DeBoar and Aghib (1997)

Precision farming using soil type management showed only a very slight increase in profit verses whole field or grid type management. This study shows that the greatest benefit for the farmer using precision farming, will be the risk reduction of incurring low profits.


Remote Sensing Ecomonics

Remote sensing will not be a commonly used technology until precision farming is profitable. Farmers just aren't going to be willing to pay for remote sensing images if its not going to add value to their crop growing operation. Remote sensing can be a very expensive component of precision farming. The cost of a remote sensing images has very little meaning unless it becomes part of a precision farming decision support system.

The following are some examples of the cost of remote sensing images from data providers specializing in agricultural images and decision systems.

Satellite Image Cost

Many satellite companies will not normally deliver remote sensing images directly to the retail customer. Images are sold through authorized retailers. These retailers will take the satellite images and perform post processing steps to make the classified image more useful to the customer. For example, a Canadian company, Prairie Geomatics, will create NDVI vegetation maps derived from India IRS-1D, French SPOT, or U.S. Landsat satellite photos for approximately 47 per acre.

Aerial Image Cost

Commercial aerial images tend to be higher in cost than satellite images. Multispectral classified images with a resolution of 2 meters are available from DTN, a Nebraska company, for approximately 75 per acre. DTN advertises a 48-hour turnaround from image acquisition to customer delivery.

Farmers are finding inexpensive ways to acquire aerial images with the use of aircraft platforms such as the powered parachute shown in figure 5.2.  Figures 5.3 and 5.4 were taken from the powered parachute with a hand held camera in the visible red and near-infrared bands.

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Figure 5.2  Powered Parachute

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Figure 5.3 Figure 5.4


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