The roots of precision agriculture in its first forms date back to the 1990s. Since then, the concept has constantly gained in importance, especially in leading agricultural countries such as the United States, Canada, and Australia, and also in Europe. Explained simply, precision agriculture is the incorporation of data-driven decision-making in every step of the farming process and the reliance on increasingly sophisticated farm machinery. The overarching goal is to produce more with less, i.e. to use all inputs as efficiently as possible while maximising the output. In most cases, precision agriculture is more evolutionary than revolutionary. Its rise has been accompanied by technological advances such as the global positioning system (GPS), high-quality satellite and drone imagery, and automation and robotics. The approach is heavily reliant on data, e.g. related to the weather, the fields, or the machinery, which is collected by an armada of sensors and processed by ever-more powerful computers.

The following are among the commonly used applications of precision agriculture:

According to a regular survey by Purdue University, the availability and adoption of precision agriculture in the United States has been steadily on the rise in the past few years. Grid or zone soil sampling, a rather ‘old’ precision agriculture application, is a case in point, with availability increasing from around 40% in the early 2000s to more than 80% in 2020. Similar growth rates were observed for yield monitoring and variable rate technology. Also newer applications such as aerial imagery, guidance / autosteer, and profit-cost mapping have been quickly adopted by more than half of the survey’s respondents.

Unsurprisingly, the biggest obstacle to adoption is the cost associated with precision agriculture, especially in times of low agricultural prices. In 2019, almost 80% of the respondents said that they were interested in precision agriculture but that they were financially constrained. Furthermore, almost 50% replied that the costs would outweigh the benefits. These numbers are down significantly since prices started to rise, reaching 37% and 24% respectively as of 2021.

To assess the long-term impact of precision agriculture, the US Association of Equipment Manufacturers, CropLife America, the American Soybean Association, and the National Corn Growers Association conducted a study, analysing 18 years of data:

The study showed that precision agriculture is in fact living up to its promise. Corn and soybean crop production grew by 6% on average, while the fertiliser and herbicide efficiency increased by 14% and 15%. At the same time, fuel and water use fell by 16% and 21%, respectively. A comparable study conducted in Canada, focusing on canola and wheat, generally confirmed the positive impact of precision agriculture, even though to a lesser degree than in the United States.

While financial hurdles remain – not only in the United States but even more so elsewhere in the world – we believe that precision agriculture will define the future of farming. In the long run, it should help tackling both economic and ecological challenges. Looking ahead, we expect further technological advances, for example related to artificial intelligence. Image recognition and robotics could be used in weed control and harvesting, while algorithms more broadly can help optimising fertiliser and pesticide use as well as planting times, spacing, and depth.

How to harvest the benefits?

Precision agriculture holds the promise to produce this food more responsibly, i.e to produce more with less. We believe agricultural machinery companies are the main long-term beneficiaries of precision agriculture, as more sophisticated products provide a new selling opportunity. Agricultural traders should also profit from structurally globally growing volumes, even though they seem to have missed the opportunity to turn last year’s turmoil into bumper profits. Seed, fertiliser, and pesticide producers should face some more short-term headwinds as agricultural prices continue to come down. In the longer term, these companies should still benefit from rising volumes and their strong market position. Last but not least, agricultural producers are unlikely to offer strong structural growth potential, as on average this segment should grow in line with the overall economy, reflecting population and prosperity growth.