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1. Introduction
It was over two decades ago when the technological
foundations for precision farming became available in
practice. Yet, it has not become as wide-spread as it was
expected. Other technological innovations, such as nozzles
suitable for spraying micro-drops of pesticides etc, rapidly
became widely-used, regardless of the extra costs or
sometimes even the investments they required.
Precision farming is a new farming strategy in crop
production which enables farmers to implement variable rate
applications, primarily in using chemicals. It provides
farmers with a possibility to grow crops more economically,
while the environmental load is also reduced. According to
Moore et al (1993), site-specific crop management is an
information- and technology-based farming system which is
aimed at identifying, analysing and handling the soil, spatial
and temporal variability for the purpose of reaching optimum
yield and agricultural sustainability and to protect the
environment. (Moore et al. 1993)
Precision farming makes it possible to treat the different
parts of the field separately with targeted active ingredients,
which results in a more rational and reduced application of
chemicals. It is based on the facts that the data of soil
examination enable farmers to plan variable rate fertiliser
application, while the data about pest presence, the level of
infection and its estimated development dynamics enable
them to make decisions regarding crop protection and the
dose of the active ingredient in the different lots. The
computer-operated agricultural machinery can release
fertilisers or pesticides in different amounts, while it can
measure the yield of each lot during harvest, which assists
the following planning period. It must be added, however,
that the technology can be used to its full potential only if
each participant of the system can and is willing to use it in
an appropriate way.
According to Wolf and Buttel (1996), in the ensuing
decades, precision farming will be a reforming tool for
agricultural production, the key to increasing its efficiency as
well as an abiotic factor that can reduce the extent of
environmental pollution. They highlight the duality of the
significance of this technology. It is not only the reforming
tool of people’s approach to agricultural production with its
chemical reducing ability, but also one of the basic factors of
efficient agriculture, retaining the present industry-like
farming structure, investments and certain managerial
structures and operational mechanisms. Furthermore,
precision farming is a real means of reducing environmental
damage, and it is a means of reducing risks on the level of
farmers. During crop production, yield uncertainty can be
Applied Studies in Agribusiness and Commerce – A P ST R AC T
Agroinform Publishing House, Budapest SC IENT I FIC PAPE R S
ECONOMIC ASPECTS OF AN AGRICULTURAL
INNOVATION – PRECISION CROP PRODUCTION
Katalin Takács-György
Károly Róbert College, Gyöngyös, Hungary
Abstract: Innovation in agriculture ensures the wide-spread use of the latest, up-to-date technology. Such new technology is precision farming
in crop production, which serves as a validation of the criteria of environmental and economic sustainability.
The economic applicability of precision crop production depends on several factors.Among them the following aspects must be emphasized:
the size of the farm, the characteristics of the production structure, the current input-output prices and their tendencies, the investment needed
for transitioning to precision technology and its capital source, the level of professional knowledge and the managerial attitudes of the farm.
I have examined the economic relations between potential savings in chemicals on EU level. It has been found that after switching to
precision farming, the active ingredient use for fertilizers can be reduced by 340 thousand tons at the same expected yield level in an
optimistic scenario in the EU-27, while the savings in pesticide use can be 30 thousand tons (calculating with the current dose-level). If
approximately 30% of the crop producing and mixed farms over 16 ESU adopt this new technology, this will diminish environmental loads
by up to 10-35%.
The majority of farms characterized by greater output and size can be based on their own equipment but it might as well be presumed that
smaller farms can turn to precision farming not based on their own investment. They can buy the technical service from providers, they can
establish producer cooperation, for example in the frame of machinery rings.
At a certain farm size and farming intensity precision crop production is a real, environmentally friendly farming strategy, with the help of
which the farm can reach earnings that cover at least the economic conditions of simple reproduction.
Keywords: farming, technology push, low speed of diffusion
52
reduced and the security of farmers’ incomes can be
increased if the technological elements are used and
combined properly, but not the incomes at every case
(Auernhammer 2001; Gandonou et al. 2004; Takács-György
2006; Hejmann – Lazányi, 2007; Chavas, 2008).
Neményi et al (2001) emphasise that site-specific farming
research goes far beyond the development of agricultural
activities. They reveal the general tendency aimed at
combining artificial (technological) and natural (biological,
ecological, etc.) information systems.
In what follows, I intend to look at the issue from the
point of view of innovation. For that reason, it is important to
clarify the notion of innovation. Innovation refers to the
process of applying knowledge (Oslo Manual 2006) The
process is not for itself, it is important to use its result in
practice – applied research. An innovation can be regarded
implemented when it has been launched (product innovation)
or when it has been applied during a production process
(process innovation). The process of the innovation basis
model is linear. Applied science (applied research) produces
new ideas and products by using basic scientific results
(basic research) called as science push line, which is
followed by the launch of the innovation, when market forces
take the leading role (market pull). (Arnold – Bell 2001) In
this respect, precision crop production as an agricultural
innovation belongs to the ’science push’ category. Other
authors call this type a demand-creating model (technology
push). (Pakucs – Papanek 2010).
Precision farming technology became part of crop
production in the United States of America in the 1990’s. In
1992, 3% of American farmers used yield mapping
combined with GPS (Lowenberg-DeBoer 1999), while in
1998, only 5% of them used some kind of a precision
technology device (McBride – Daberkow 2003). However,
precision soil sampling techniques and variable rate fertiliser
applicators spread rapidly. In 1996, 29%, in 1997 33%, while
in 1999 43% of American farmers used GPS-based soil
sampling methods. While in 1996, only 13% of the farmers
combined precision fertiliser release with variable rate
applicators, this ratio was estimated to be 37% in 1999
(Akridge – Whipker 1997). In EU-member states, the
spreading process started later and its extent also remained
below the level of proliferation in the United States.
Presumably, one of the reasons is the difference in farm size.
According to a survey carried out in 2002, slightly more than
1% of Danish farms (400) apply this technology, on an
average of 200 hectares, and only 10 farms reported to apply
more than one precision element. (Pedersen et al. 2010)
Adaptation refers to the diffusion and proliferation of the
innovation. Despite its 20 years, precision technology can
still be categorised as being in the early stage of launch.
Although it has already left the stage of innovations, its
development is still being carried out, i.e. there are still R&D
activities connected to that technology. Lack of capital as one
of the main elements hindering innovation and its diffusion
cannot be disregarded (Pakucs – Papanek 2010). Otherwise
innovation is a tool for being adaptive to the new challenges.
(Marselek et al. 2008; Buday-Sántha, 2009) Another
important factor in spreading innovations is the role of mass
communication channels since potential appliers can
primarily be informed about the presence and details of an
innovation through these channels. After the initial phase,
however, the role of interpersonal communication channels
increases (e.g. discussions between experts) as individuals
base their decisions mainly on the information coming
through these channels (Csizmadia 2009). We must also bear
in mind the IT skills, however basic they are, required from
the appliers of this technology. It must be underlined the
important role of extension services and communications,
the communication of economic and other usefulness of
novelty in the diffusion of precision technology. (Griffin et
al., 2004; Kalmár 2010; Kutter et al., 2011) The causes of the
slow spreading process also include lack of education and
expertise (Attanandana et al., 2007; Pecze 2008; Takács
2008; Magda et al. 2008; Kalmár 2010; Nábrádi 2010).
Moreover, the new technology requires high-level
managerial skills, accuracy as well as relatively high extra
investment costs and the lack of proof for the cost-efficiency
of the technology (Lencsés – Takácsné 2010). Accuracy is
needed during proper application of precision technology,
but often this becomes one obstructive factor of using it in
farms. (Arnholt et al., 2001; Sinka, 2009)
The amount of chemicals saved by precision technology
can be regarded as chemicals not required and not taken by
crops and also not released into the environment, thus
playing an important role in reducing environmental load.
The positive impacts of the technology are unarguable both
on the level of farms and on the level of the national economy
as several earlier studies found cost-effectiveness in farms,
however, their detailed discussion cannot be included in this
paper. (Goldwin et al. 2003; Swinton 2005; Dillon –
Gandonou 2007; Chavas 2008; Takács-György 2008;
Lencsés 2009; Lencsés – Takács-György 2009) The reduction
of environmental burden can be considered as other positive
impact. (Chilinsky et al., 1998; Pretty et al., 2000; Szûcs et
al., 2004; Jongeneel et al., 2008; Takács et al., 2008; Magda
et al., 2009)
The objectives of this paper are as follows:
– examination of the macroeconomic relations of
precision crop production as an agricultural
innovation and the modelling of active ingredient
savings in case of applying this technology;
– revealing the causes of its slow proliferation.
2. Material and methods
During my research, I had the following presumption: in
EU-25 countries, the transition of a certain number of farms
to precision crop production would result in saving a
significant amount of active ingredients, particularly in the
field of crop protection, which would reduce the
environmental load as well. Using scenarios, I modelled the
changes in the amount of the fertiliser and pesticide applied
Katalin Takács-György
53
presuming crop producing and mixed farms adopt the new
technology to different extents. The statistical data concerning
farm structure were collected by EUROSTAT and the Central
Statistical Office of Hungary, while those concerning chemical
use were collected by the OECD (Table 1).
The European Size Unit, which categorises farms
according to their profitability (SGM output) and
distinguishes 6 categories, served as a basis for identifying
the farm size where the extra investment of adopting
precision farming technologies pays off. Based on their size
and farming standards, crop producing farms (cereals and
other field crops, as well as fodder production) over 100 ESU
were presumed to be able to adopt precision farming with the
help of their own financial resources. I also presumed that
farms of 16-40 and 40-100 ESU would be able to adopt
precision crop production with the help of machinery rings
(Takács 2000). In the EU, there are 240 thousand farms of
16-40 ESU, accounting for 4.2 million hectares of land. The
number of farms of 40-100 ESU is 139 thousand, accounting
for 5.9 million hectares, whereas the number of farms over
100 ESU is 77 thousand, and they account for 11.3 million
hectares of land. The basis of the calculations at national
level was also the above categorisation.
The ratio of farms deciding on adopting the new
technology is 15, 25 and 40%, in case of pessimistic,
indifferent and optimistic scenarios, respectively.
Savings for fertilisers are 5, 10 and 20%, while for
pesticides they are 25, 35 and 50%.
3. Results and discussion
3.1. The diffusion of precision crop production – how
it looks like and the reasons for its slow speed
Based on Rogers’ (1960) typology of the diffusion of
innovations, precision crop production as an agricultural
innovation can be described as follows, including some of
the reasons for its slow diffusion in practice:
1. In the launch phase, it had an advantage over the
technological elements widely used in farming, which
could have made rapid diffusion possible.
2. Precision technology is less compatible, as farmers
greatly vary in knowledge, skills and attitude to
innovations, as well as in farm size and financial
background. Due to lack of counselling support, the
process of proliferation of the new technology is
slower. In this respect, the Hungarian practice has
several positive features, such as the successors of the
production systems set up several decades ago, and
the counselling networks.
3. The application of precision crop production must be
considered from two points of view. Although the
adoption of the element of the technology is not
complex, it requires far more attention, a wider
information base and also more accurate work.
4. The key figures of letting farmers learn more and test
the new technology are the participants of agriculture
and providers. (There are several specialist, scientific
shows and presentations organised annually in order
to achieve wider diffusion.)
5. Some of the benefits of precision technology can be
observed directly (material saving, improved cost-
effectiveness, yield growth), similarly to extra costs
and investments. However, its indirect impacts, such
as the reduction of the environmental load and
increased food safety, are less obvious. As long as the
positive impacts of the new technology are not
obvious and measurable for farmers, and the
perceived risk of its introduction is high, the
technology will diffuse slowly, even when the
financial background is sufficient. (This phenomenon
can be observed both in the United States of America
and in Europe.)
The most important factor that can speed up the diffusion
and wider application of the innovation is its profitability
(Samuelson – Nordhaus 1985). Others emphasise the effects
of demand (van Rosenberg 1976), the significant role of
R&D (Freeman, 1974; Szûcs et al., 2010), or the role of the
state (Nelson 1982; Késmárky-Gally 2008; Pakucs – Papanek
2010). According to some economic theories, demand-
creating innovations can be expected to diffuse if using the
limited resources with the new technology results in
economic efficiency. The diffusion of precision crop
production and its wide-spread application in practice is an
economic decision from farmers side when they have to
invest their capital. Thus, it is not sufficient to examine the
changes in the variable costs incurred by production but it is
also important to consider the changes in product prices as
well as the rate of interest of credits so that farmers can make
a reasonable decision (Swinton – Lowenberg-deBoer 2001).
The dynamic spreading of the technology can be expected in
countries where there is a scarcity of human labour, the
amount of arable land is not limited, the selling prices are
high, while the rate of credit interest is low.
Husti (2008) states that innovation is not generated by
farmers in Hungarian agriculture, which results from the
polarised and highly fragmented farm structure, the shortage
Economic aspects of an agricultural innovation – precision crop production
Table 1. Fertiliser and Pesticide-Herbicide Application, 2007
Source: OECD in Figures 2008
Country Total arable land Fertiliser Pesticides
thousand ha kg/ha arable land
OECD 350,960 22 0.70
EU-15 324,300 60 2.3
Hungary 9,300 58 1.7
Netherlands 4,200 134 4.1
Germany 35,700 105 1.7
54 Katalin Takács-György
of capital and the lack of entrepreneurial
affinity. The majority of agricultural
businesses are characterised by a survival or
sometimes consolidation strategy, which does
not contribute to investment in the future of
production. From technical size to implement
all the necessary machines and other facilities
the farmers can buy the technical service from
providers, they can establish producer
cooperation, for example in the frame of
machinery rings. (Takács 2000; Baranyai –
Takács 2007; Baranyai – Takács 2008)
In my opinion, it is of great importance to
provide information for farmers, particularly
information on the economic benefits of the
technology.
3.2 The environmental and economic
benefits of precision crop
production
Modelling the savings of active
ingredients of fertilisers and those of costs in
case of switching to precision technology
showed the following results: on the level of
EU-25 states, the widespread application of
precision farming in crop production may
save 959-10082 t of fertiliser active
ingredient, amounting to €327.1-1308.3m,
while the costs of pesticides saved may range
between €1674.1-3348.1m (using 2006 price
levels) (Tables 2 and 3).
Primarily, precision nutrient supply may
be the method of using the yield potential of
the field, thus it is not a constant amount, and
can even mean higher fertiliser application in
certain cases. Naturally, there is considerable
fertiliser saving when planning the
consolidated field-level yield. Precision
farming has an even greater significance in
reducing the amount of pesticide used.
One of the main advantages of precision
crop production is that site-specific
treatment of lands with pesticides or
herbicides may save a considerable amount
of chemicals when only a small proportion
of the land is infected. The estimated
amount of pesticides saved in this way on
the level of EU-25 countries is 5.7-11.4
thousand tons in case 15% of farms apply
precision farming, 9.5-13.1 thousand tons in
case 25% of them introduce it, while in the
most favourable case it is 15.2-30.4
thousand tons (Table 4).
Considering the role of agricultural
production in ensuring food safety, this
Table 2. Estimated savings in fertiliser application of farms introducing precision farming (EU-25)
Source: Author’s calculations
Category Farms applying precision technology
15% 25% 40%
16-100 ESU
Land using precision technology (ha) 103,559 172,598 276,157
Savings in fertiliser
active ingredient (t)
5% 535 892 1,426
10% 1,070 1,783 2,853
20% 2,140 3,566 5,706
>= 100
Land using precision technology (ha) 132,353 220,588 352,941
Savings in fertiliser
active ingredient (t)
5% 424 1,136 1,094
10% 821 2,272 2,188
20% 1,641 4,543 4,376
Total
Total size of land using precision
technology (ha) 235,912 393,186 629,098
Total savings in fertiliser
active ingredient (t)
5% 959 2,027 2,521
10% 1,890 4,055 5,041
20% 3,781 8,109 10,082
Table 3. Savings in fertiliser costs
(million euros)
Source: FADN data base, edited by author
Country 16-100 ESU farm group >100 ESU farm group
5% 10% 20% 5% 10% 20%
Denmark 2.398 4.796 9.592 3.654 7.309 14.617
United Kingdom 9.982 19.964 39.928 25.585 51.169 102.338
France 48.870 97.739 195.478 50.547 101.094 202.189
Netherlands 1.349 2.698 5.397 2.052 4.105 8.210
Poland 12.927 25.855 51.709 9.185 18.369 36.738
Hungary 3.641 7.282 14.563 4.913 9.826 19.652
Germany 19.362 38.724 77.448 40.025 80.049 160.099
EU-25 156.259 312.519 625.037 170.815 341.629 683.258
Table 4. Estimated savings in pesticide application of farms introducing precision farming (EU-25)
Source: Author’s calculations
Category Farms applying precision technology
15% 25% 40%
16-100
ESU
Land using precision technology (ha) 5,086,330 8,477,217 13,563,547
Savings in pesticide
(t)
25% 2,925 3,574 7,799
30% 4,095 3,950 10,919
50% 5,849 4,900 15,598
>= 100
Land using precision technology (ha) 4,818,598 8,030,997 12,849,595
Savings in pesticide
(t)
25% 2,771 4,618 7,389
30% 4,095 6,465 10,344
50% 8,190 9,235 14,777
Total
Total land using precision technology
(ha) 9,904,928 16,508,214 26,413,142
Total savings in
pesticide (t)
25% 5,695 8,192 15,188
30% 8,190 10,415 21,263
50% 11,391 14,135 30,375
55
amount cannot be ignored. It has great importance since the
same effects of crop protection can be achieved with a
significantly lower level of environmental load if precision
crop production is applied (Table 5).
As macro-level modelling calculations support, precision
crop production plays an determining role in reducing the
environmental load, along with the other agricultural
technological innovations. However, precision farming has a
greater importance in the reduction of the amount of
pesticides used. On the level of farms, site-specific crop
production leads to the reduction of material costs, as the
necessary pesticide amount is 8-10% lower (calculated in
active ingredient) than in case of traditional treatment
Savings in pesticide use affect not only costs but also
competitiveness, and have great importance in environmental
protection as well.
In the above situation, individual and societal benefits
coincide, thus serving sustainability. In agriculture, the
diffusion of every technological procedure that has a
positive impact on conserving or re-producing natural
resources and can be implemented in a profitable way on
the level of farms (economic efficiency) supports
sustainability. Furthermore, the proliferation of precision
crop production promotes societal sustainability, together
with the reduction of environmental pollution and the
production of foods, industrial raw materials and energy
plantations.
Apart from economic arguments, precision technology
can be supported by other factors as well. First and
foremost, we must refer to its role in the reduction of the
environmental load. However, it is not an important
motivating factor for farmers, unlike for those who consider
the transition to organic farming. Nevertheless, precision
farming must be given outstanding attention in sustainable
agriculture in developed countries. It must, however, be
examined how it can be a real alternative in an economic
respect. As it requires extra investment, expertise and
accuracy, and its risks depend on a lot of unknown factors,
farmers will not apply precision farming exclusively for
’philosophical’ reasons.
4. Acknowledgements
The study has been written with the
support of the project GAK ALAP1-
00138/2004 and the assistance of Károly
Róbert College.
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