Impact of low Corn and Soybean prices on UAS innovations in Agriculture?
You’ve heard it a million times: the ag-tech / drone community loves to discuss forecasts that indicate world population is going to double in the next 50 years, and in that period farmers must double their output in order to meet demand.
Before we start to wave the increasing demand flag too aggressively, maybe we should take a glance at the current state of agricultural economics. The charts are bloody. In fact, last year U.S. corn stockpiles were the highest they’ve been since 1988! And this week agriculture.com reported that commodity traders reduced bets on higher soybean prices to a six-month low.
The American farmer is facing an uphill battle right now — it is a difficult job to juggle high inputs in the face of very low commodity prices. All of this is starting to make me curious: how will low farm sector profitability impact drone innovations on the farm?
Recently I was speaking with a mentor that works with Gayland Ward Seed who has sold agricultural inputs all over the world for the past 40-50 years, and he explained:
“I’ve never seen the broader agricultural economy as depressed as it is right now. At any given moment in the past you might have seen beef having a hard time but dairy might be doing well, or cotton prices might be rocking along while soybeans are down down. Right now it seems like we’re observing a perfect storm of unfortunate agricultural dynamics that are driving net farm incomes to the lowest level we’ve seen in the better part of a decade.”
To corroborate the perspective above with good hard data, below is a macroeconomic statement from the USDA:
“Farm sector profitability is forecast to decline for the third straight year. Net cash farm income for 2016 is forecast at $94.1 billion, down 13.3 percent from the 2015 estimate. Net farm income is forecast to be $71.5 billion in 2016, down 11.5 percent. If realized, 2016 net farm income would be the lowest since 2009.
Cash receipts are forecast to fall $25.7 billion (6.8 percent) in 2016, led by an $18.7-billion (9.8 percent) drop in animal/animal product receipts and a $7.1-billion (3.7 percent) decline in crop receipts. Nearly all major animal specialties—including dairy, meat animals, and poultry/eggs— are forecast to have lower receipts, as are feed crops and vegetables/melons, down $3.2 billion (5.5 percent) and $1.5 billion (7.5 percent), respectively.”
Sooooo that sucks, but now the good news: perhaps UAS innovation / adoption will be insulated from low commodity prices for two reasons 1) the types of crops grown in California and 2) university research. Obviously many technological innovations are happening in California, and California agriculture is largely based on specialty crops (fruits, veggies, nuts, etc). Although specialty crops only represent about 40% of national agricultural output, they are generally very high gross dollar per acre crops relative to corn, sorghum and soybeans. Dealing with such high gross values per acre will enable specialty crop producers to innovate and adopt more consistently throughout downturns.
Market conditions may cause the corn grower in the Texas panhandle to pump the brakes on spending, but the lettuce producer in Salinas Valley can continue buying computer vision enabled field robots from companies like Blue River Technology. Another piece of silver lining is the fact that universities generally carry minimal exposure to low corn prices. We have schools all over the country (namely Purdue, Texas A&M and Auburn) researching and developing all sorts of applications for drones on the farm.
It is important that innovators in San Fran closely collaborate with progressive ag producers working in fields to guide development of new solutions. Otherwise this can start to look like a solution looking for a problem. If we do this right, true farm adoption will continue to increase and innovation will forge ahead regardless of commodity prices.