Making Smart Farm Purchases Work For Your Operation in 2020

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December 17, 2019

For farmers, December signals the start of spreadsheet season:  Right now, operators across the country are working on both their pre-tax-season numbers and next year’s budget and cash flow. 

And, as the smart farming movement continues to pick up steam, tech is at the forefront of the minds of small-farm operators as they work out expenses and investments for next year.

The Curation Approach

Smart farming technology encompasses a vast array of solutions ranging from hardware to apps. To invest in all of them at once would be cost-prohibitive, obviously; so, how do you choose which to invest in?

Tech, like other equipment, is best acquired slowly and replaced on a rolling basis.  That way, expenses can be managed. Every year, if you choose one or two smart farm technologies to add to your operation, you can build a substantial amount of technology into you

What Can Smart Farming Technologies Do For Your Operation?

Smart farming is growing in popularity, even in very small operations, because it delivers substantial benefits - even in areas beyond cost savings (though that’s front-and-center):  

  1. Cash flow:
    Some smart farming tech has the sole purpose of creating breathing room in your budget.  Even after you factor in the expense of the technology, the profit and/or savings per acre make them cash flow, some within the first year.
  2. Strategy:
    With data comes context, and context makes strategic planning possible. In a highly competitive market, this is more important than ever before.
  3. Time:
    A few technologies are designed to help you to farm faster, which frees up your time.  That extra time is agricultural gold.
  4. Ease:
    Farming is hard on the body - physically demanding or repetitive tasks take their toll over the years. Technology to ease that strain are also part of the lineup of smart farming tools.

Planning Step 1:  Prioritize

Consider the list of benefits of smart farming. Which one(s) are the most important to you?

For example, consider Aiden, a farmer in his 30s who is operating under 600 acres of crops.  He has been farming with his family for his whole life, so he knows his ground well. Aiden has expressed less interest in data collection and more interest in faster farming. 

Aiden sees data collection as redundant because of the small size of his operation; he is confident that his anecdotal familiarity with the soil types, yield history, weather patterns, etc. of his farm all contribute to a strong “big picture” understanding of the nuances of his farm; he is not convinced that collecting more data by way of AgTech sensors and equipment is worth the investment over so few acres.

On the other hand, Aiden is also pursuing a second business, so farming faster is appealing. He wants to free up as much time as possible to attend to his professional obligations.

Like Aiden, farmers who hope to transform their operations into smart farms will need to evaluate which make the most sense. Everyone wants better cash flow — but what is your next priority after that?  Which comes in third place?

Planning Step 2: Assign Value
For the smart tech that you want but that doesn’t necessarily deliver budgeting benefit, decide what those things are worth to you.  In Aiden’s example, saving even a few hours a month can be worth over $5,000 since he can allocate that time to his other business.

Likewise, if an older farmer wants to stay in the game for five more years, but sitting for long hours is hard, something that eases his time in the tractor may also be worth thousands to him, since it means he can create farm income for more years than he otherwise would have been able to.

Planning Step 3: Budget

Russell Leigh, a CPA who specializes in agricultural tax planning in rural Illinois, stresses that every farmer should know their numbers:

“Buy for the operation you have, not what you had or what you hope to have in the future.  Ask yourself, what is the proposed benefit per acre? Then, calculate the cost over all your acres.  A purchase that makes sense for one-thousand acres may not work for five-hundred acres.”

This calculation can be done easily on a spreadsheet, so there is no need to guess or make a “gut” purchase.  The calculation is simple:

(Proposed savings or benefit per acre) x (number of acres) - (all costs of the tech)

On a spreadsheet, you can test multiple numbers for savings per acre. If the numbers trend positive, there is a good chance that the investment will cash flow in the first year.  (You can also check with your tax professional to see how the tax write-off on your investment will help your overall financial position.)

Beyond cash flow, consider your ability to absorb the upfront cost.  A $20,000 purchase might cash flow in a year, but if you can’t write a check for (or finance) the initial expense, it might be best to plan for that investment down the road.  

In a similar vein, many farmers adhere to the old adage: Never gamble more than you can afford to lose.  If a piece of smart farming tech is new and therefore not yet solidly proven to work as described, proceed with caution.

Even if you can front the upfront expense, it is important to investigate the costs of wear-points.  For example, if the tech has sensors, consider the cost of each sensor, as well as its life expectancy.  Some sensor-driven technology is like an inkjet printer: Relatively low cost upfront, heavily expensive to operate year-to-year.  

Investigating Your Smart Farm OptionsSmart farming technologies are a smorgasbord of options.  Here are a few popular ones to consider:

-Drones.  Pricing varies wildly, but even middle-of-the-market agricultural drones can take the grind out of summer crop scouting. You don’t need the highest-end model to see value here.  Some consultants charge by the acre for agricultural crop scouting with a drone; checking on that pricing will give you a sense of what is reasonable to pay for a drone.

-Weather stations.  If your farmland is spread out, weather stations obviously give you a set of “eyes” so you don’t need to check on your own. Weather stations make it easy to collect weather-related data so you can see more subtle trends faster, sometimes within just a few years.  For haying, weather stations are especially handy.

-Calving alert sensors.  These handy IoT (internet of things) devices clamp onto a cow’s tail.  When the cow goes into labor, the device sends an alert to the farmer’s phone.  

-Soil sensor systems. These systems alert farmers when soil is too wet, dry, or cold.  For farmers who rely on irrigation, these sensors help conserve water; for fruit and vegetable farmers, soil sensors can reduce losses due to frost. 

-Autosteering. Autosteering that retrofits into almost any older-model tractor turns your current equipment into smart equipment.  This makes smart farming a reality for smaller operations. Benefits include savings on input overlap, higher yields, faster farming, and ease of tension for the tractor operator.

Next Steps
Researching and planning take a substantial amount of time, and it comes at one of the busiest times of the agricultural cycle, but farmers who take the time to thoughtfully plan out their AgTech purchases before the new year can start to develop their own smart farms. 

New technologies are transforming the agricultural landscape, and many of those technologies are perfect for smaller operations.  When the benefits outweigh the costs, that’s a signal to consider adopting that technology in your own operation. You can’t know the right tech for your farm until you’ve done the research and penciled out whether the purchase makes sense to you. 

Because of its versatility and easy price point, autosteering works for thousands of smaller operations across the country, so it’s a great place to start.  Adding other tech over time, too, may well make farming easier and more profitable for you than ever before.

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