Using #AgTech to Weather the Booms and Busts of Agriculture

Posted by on February 23rd, 2018 | 0 Comments »

Thanks to decades of dedication, determination and innovation by American farmers, the U.S. produces more food using less land and labor, and fewer inputs per acre, than it did 60 years ago.

This increase in productivity (producing more crops or livestock, using the same amount or fewer inputs) has driven down real agricultural prices by an average of 1 percent per year (red line in Figure 1). As a result, U.S. consumers enjoy the lowest food prices in the industrialized world.

But this has not been a smooth road.  The business of agriculture is characterized by cycles of booms and busts.  Prices for agricultural commodities can change drastically in a very short period of time (orange line in Figure 1). These cycles are driven by a variety of factors, including extreme weather, global economic conditions, political uncertainty and conflict.

These booms and busts have profound implications for the pocketbooks of farmers, the rural economies where the live and the consumers and industries that rely on their products.

Figure 1 shows how prices for agricultural goods have risen and fallen over the last century due to economic, political and environmental shocks (orange line). Thanks to improvements in productivity, overall prices trend has decreased by one percent per year (red line). Click on chart to see full size image.  Source: 2016 Global Agricultural Productivity Report® (GAP Report®), page 7.

Managing the Booms and Busts With AgTech

To manage these risky business cycles and help build resilience to economic and environmental shocks, U.S. farmers use a variety of financial and production strategies.

One of the most important tools is crop insurance, a critical part of a farmer’s safety net. (Learn more about crop insurance in our recent blog, The Risky Business of Agriculture.)

Farmers also use agricultural technologies, combined with good farm management practices, to reduce risks by protecting the productivity and resilience of their production system.

Machinery equipped with precision agriculture technology use data from field sensors, satellites and drones to precisely apply inputs (fertilizers, pesticides and irrigation water) and to maximize labor and machine hours.  This helps farmers control costs, making it easier for them to protect their incomes when crop prices are low.

“It’s amazing what’s happening in precision agriculture and what’s coming down the pipe,” USDA Secretary Sonny Perdue, Ag Outlook Forum, February 22, 2018.

With precision agriculture tools, farmers can “farm smart”. Using GPS systems and field monitors, farmers identify the best combination of inputs for each field. Photo: USDA/NRCS

Good soil management practices, such as reduced or no-tillage systems and 4R Nutrient Stewardship (choosing the right nutrient source to apply at the right rate in the right place at the right time), build resilience in the soil and can mitigate risks from changing weather patterns.

Advanced seed varieties, from traditional hybrids, to genetically modified seeds, to new gene-editing techniques like CRISPR-Cas, protect crops from pests and drought, ensuring that a farmer has a crop to sell at the end of a challenging growing season.

Livestock monitors check animals for breeding cycles and disease, notifying farmers of when animals are ready to breed or give birth and identifying diseases before they spread to the entire herd.

Diversification Reduces Risk

To further hedge against down cycles in the agricultural economy and protect the financial health of the farms, farmers are diversifying their operations.

Rather than focusing on a single crop, farmers are growing multiple crops varieties and/or adding a livestock operation to reduce the financial risk of a large drop in prices for a particular crop.

Vertical integration gives a farmer control over a product through several stages of production and processing, and can either use their products on their own farm again (as livestock feed, for example) or sell the final product for a higher value.

The American farmer is resilient and innovative.  With the right mix of public sector safety net programs, agricultural technologies, best management practices and diversification, farmers can not only survive, but thrive, the inherent risks of farming.

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