New Agronomy Tool Makes Determining ROI on Variable-Rate Technology Simple
By John Orlowski, Research Agronomist
Want to know if variable-rate technology would work on your farm, but aren’t sure if the investment is worth it?
Buying equipment and setting up variable-rate prescriptions for seeding and fertilizer can be costly and time-consuming. Fortunately, you can determine your return on investment.
For example, you can keep track of your planting zones and expenditures to determine ROI at the end of the season. You can also use technology to nail down your ROI before you spend a dime. Let’s dive into both ways.
How Much is Variable-Rate Technology?
Because of changes in primary soil material, soil texture, depth to water, and organic matter, all ag fields have inherent variability. As a result, soil nutrients will fluctuate across the field, and optimal planting populations will vary as well.
However, once you determine the variability in your fields from regular soil testing, you can know how your agricultural inputs, particularly seed and fertilizer, should also vary within a field. Thankfully, modern planters and fertilizer applicators can help you do that.
Variable-rate application technology can reduce seed costs and eliminate unnecessary fertilizer applications, but the technology comes at a price too.
In addition to the expense of the equipment, which often ranges between X and X, also consider how much time it will take you to build the variable-rate prescriptions your farm needs. Or, in other words, what is one hour of your time worth?
Determining Your ROI Can Be Challenging
Due to the investment of capital and time in adopting variable-rate technology, you want to see a positive return on investment in one of two ways – increased yields and/or cost savings from optimizing your inputs.
While this is a relatively straightforward calculation on a total farm basis, there are some challenges.
First, the calculation of ROI for a growing system is backward-looking. While you know what you spent on seed and fertilizer early in the season, you won’t know your yields until the fields are harvested.
Yes, this insight helps plan for the future. However, if you could determine your ROI before even writing the first check at the beginning of a season, then you can identify where your farm is making and losing money to increase profitability.
Second, with ROI calculations, the most valuable insights relate to the amount of profit gleaned from each area of the field, rather than from the field as a whole. By gathering information on various zones or grids in the field, you can customize the amounts of inputs across the fields, but that can be complicated.
A significant challenge in determining the ROI associated with variable-rate technology is keeping track of the inputs and corresponding yields as they vary across a farming operation.
For example, if you have 1,000 acres and use variable-rate applications for 5-acre zones, you’ll have 200 zones to evaluate. If you applied lime, potassium, phosphorus, and seed for each zone, you would be tallying 800 different pieces of information.
You can build a spreadsheet to keep track of these zones, expenditures, and returns, but it takes time and careful attention to keep the data straight.
But There is a Better Way
Our Agronomy Tool is built to help with these challenges. Within the tool, you can add and adjust costs for different inputs, as well as crop sale prices and fixed costs.
Once these values are added, the tool calculates the per-acre ROI based on the variable-rate prescriptions generated by the app. You can model different scenarios to achieve the highest ROI for your operation and experience the full value of variable-rate technology.
Also, our Agronomy Tool provides quick summaries of the yield and profitability achieved for each zone or grid you want to analyze. The tool frees up significant time tracking and reporting on yields, costs, and profits per acre, saving you both time and effort.