For the past several decades, agricultural technology (agtech) has made tremendous strides in fostering increased crop yields and more efficient use of inputs such as water and fertilizer. More recently, U.S. farms’ productivity trends have experienced fluctuations due to a plethora of factors, resulting in significant market responses and price reactions.1 Going forward, crop yield gains are projected to slow down.2 The recent recovery in agricultural commodity prices and farm income opens the potential for investment in a new tier of agtech, including precision agriculture (PA). This new generation of agricultural systems will help to address climate change adaptation alongside traditional goals of improved yields and reduced costs.
As climate change risks are recognized, increasing uncertainties cloud the outlook for the continuation of historical trends in the growth of crop yields. Success in securing sustainable food will be highly dependent on the deployment of PA technologies to improve the efficiency and resiliency of agricultural systems.
Precision agriculture allows for new efficiencies
Agtech is the use of technology in agriculture, horticulture, and aquaculture. PA is a major component of agtech focused on developing and enhancing the tools and processes to most efficiently use resources in crop production and reduce input use (water, fertilizer, seeds, herbicides, and insecticides). PA technologies and equipment such as soil and yield mapping using a GPS, laser land levelers, GPS tractor guidance systems, and variable-rate input application allow farm operators to calibrate their operations and achieve new levels of efficiency.
The availability and cost of water has been central to the successful growth of U.S. crop production, particularly in water constrained, arid regions and more widely in periods of insufficient precipitation. Irrigated acres in the United States grew from less than 3 million acres in 1890 to 58 million acres in 2017, at which time irrigated acres represented 24% of total U.S. cropland.3 Corn and soybean acreage accounted for the largest irrigated acreage in 2017, representing 21% and 16%, respectively, of the total. This major expansion in irrigated area has been enabled in recent decades by advances in water application technologies. Between 1969 and 2017, the average irrigation application rate dropped from 2.0-acre feet per acre to just under 1.5-acre feet per acre in the United States.4
The shift from gravity-powered irrigation methods such as flooding of fields to pressurized irrigation (such as drip and sprinkler) systems have been key to achieving the major reductions in per acre water use on irrigated lands over the last 30 years. Pressurized irrigation systems accounted for only 37% of all irrigated cropland in 1984, increasing to 72% in 2018.
Growth in pressurized irrigation acres in the United States
U.S. farmland (million acres) under gravity and pressurized systems
Irrigation technology and application methods continue to evolve and improve. Advances in PA technologies such as variable rate irrigation, GPS technology, and monitoring and automation systems are driving current improvements in irrigation efficiency.5 Drip irrigation has evolved over the years and pumps and valves can be manually or automatically adjusted to respond to the water needs of individual plants. Spatial variation in soils, nutrient availability, topography, and crop growth in the fields result in variable irrigation needs, and variable rate irrigation systems allow the grower to address these variations, conserving water resources and improving yields.
Remotely collecting and processing digital information from monitoring devices adds an additional layer of control and efficiency to the irrigation process. GPS software platforms in conjunction with soil moisture probes allow collection of field-specific information on topography, soil moisture, and other field conditions. Real-time data on weather conditions also helps growers make better water management decisions. These systems allow remote control of irrigation systems through tablets or phones, providing efficient water control from anywhere.
Precision agriculture and the third wave
PA is considered an important component of the third wave that is currently happening in modern agriculture. The first wave (i.e., mechanized agriculture) began in the 1700s and the second, the "green revolution," around 1964.6 The phenomenal yield growth that has occurred over the past two decades is due to a multitude of factors, particularly the application of improved genetics and the development of drought-tolerant varieties, but PA advances in agricultural production have also played an important role.
Increasing yields for corn and soybeans show a strong positive correlation with the expanded deployment of PA. The average yield for U.S. corn increased 28% from 1997 to 2010, while PA use in U.S. corn production more than tripled over the same period. Similarly, U.S. soybean average yields experienced a 10% increase, as the PA adoption percentage for soybean acres nearly quintupled.
Growing yields trend with increased precision agriculture (PA) application in soybean production (1996–2012)
USDA soybean yield (bushels/acre/year) and precision agriculture adoption rates (% of planted acres)
Growing yields trend with increased precision agriculture (PA) application in corn production (1997–2010)
USDA corn yield (bushels/acre/year) and precision agriculture adoption rates (% of planted acres)
In addition to PA irrigation applications, other PA applications that are being widely adopted include GPS guidance systems for farm equipment and GPS soil mapping and variable-rate input applications. Prior USDA rates of adoption on U.S. farms in 2013 were GPS guidance systems (45% to 55%), GPS soil mapping (25%), and variable-rate input application technology (VRT) (20%) of planted acres of corn, rice, soybeans, and peanuts.7 GPS-enabled guidance systems can save production cost by reducing over-and-under application of sprays and improving seeding. Soil mapping provides farmers with more actionable data, and VRT allows farmers to customize the application of fertilizer, chemicals, and pesticides using GPS data from yield and soil maps or guidance systems. The USDA hasn’t released the updated data for PA technology adoption rate since the 2013 publication of its Agricultural Resource Management Survey.
However, the 2020 Precision Agriculture Dealership Survey, an independent study, provides some measure of the continued deployment of PA on U.S. farms from 2017 to 2020. Although not completely consistent with the USDA survey, the survey estimated that adoption of three technologies continued to grow among U.S. farmers, with guidance systems reaching 66%, soil mapping at 52%, and VRT in fertilizer applications at 57%.8 Newer technologies that have still greater untapped potential for deployment, and are still being actively developed, are drone imagery, use of artificial intelligence, and robotics for harvesting and weeding.
Increasing use of precision technologies based on market area, as estimated by technology retailers
Precision technology farmer adoption
|Sprayer section controllers||-||56%||62%|
|Field mapping with geographic information systems (GIS)||45%||58%||57%|
|VRT fertilizer application||38%||39%||57%|
|Grid or zone soil sampling||45%||52%||52%|
|Planter row or section shutoffs||-||45%||46%|
|VRT lime application||40%||41%||44%|
|Variable down pressure on planter||14%||29%||31%|
|Satellite or aerial imagery||19%||26%||31%|
|Cloud storage of farm data||14%||21%||29%|
|Any data analysis service||13%||26%||25%|
|Electronic records/mapping for quality||-||20%||21%|
|Variable hybrid placement within fields||7%||11%||17%|
|Soil EC (soil electrical conductivity) mapping||9%||10%||14%|
|UAV or drone imagery||6%||9%||12%|
|Y drops on fertilizer applicator||6%||10%||11%|
|VRT pesticide application||3%||8%||7%|
|Selective harvest for quality||-||4%||7%|
|Chlorophyll/greenness sensors for nitrogen management||3%||5%||5%|
|Robotics/automation for harvesting||-||0%||1%|
|Robotics/automation for weeding||-||0%||0%|
The environmental benefits of precision agriculture
The ongoing robust adoption of PA technology in the U.S. farm sector has resulted in the improved efficiency and cost reductions that these technologies deliver to the farm community. Furthermore, the expanded use of PA also generates nonfinancial, environmental benefits through reduced use of water, fossil fuels, fertilizer, and herbicides. Optimal fertilizer use reduces nutrient runoffs and decreased application of herbicides slows the development of weed varieties resistant to existing control methods. Greenhouse gas emissions are also lowered; fuel savings are enabled by GPS guidance systems that reduce machine field passes; and water scarcity issues are addressed using need-based application of water.
The report, “The Environmental Benefits of Precision Agriculture in the U.S.,” published by the Association of Equipment Manufacturers in 2021, states that, based on the further application of PA technologies, U.S. level annual crop production could increase by another 6%, while concurrently, fossil fuel use in the agricultural sector could drop by 16%, and water usage could decline by 21%.9 The study estimates a potential increase in fertilizer placement efficiency of 14% and 15% for herbicides. The associated environmental and climate change mitigation benefits of PA provide another rationale for an acceleration in future adoption rates, and the possibility of government funding, particularly in development research and training programs and the collection and distribution of information for prospective users.
Wider adoption of more advanced agtech is critical for future agricultural production
Looking forward, continued commitment to investment in advancing agtech and wider adoption of PA technologies should be a crucial element in meeting the challenges of the next few decades for the global agriculture community. PA technologies have the potential to add increased resilience to the financial health of farm operators, contribute to the solution of regional food insecurity issues, while improving the environmental profile and supporting adaptation to climate change for the agricultural sector.
Q2 2021: farmland market indicators
Global corn production is forecast to reach a new record in the 2021 marketing year according to August WASDE
Annual corn production estimates, major producers (million metric tons)
Global corn production is expected to reach a new record 1,186 million metric tonnes (MMT), 6% higher in the 2021 marketing year, driven by gains in the United States and Brazil. In 2021, U.S. corn production is forecast to increase by 4% to 375 MMT, primarily driven by yield returning to trend line marketing year (MY-September 2021 to August 2022). Brazil 2020 (MY March 2021 to February 2022) production is estimated to decrease by 15% from MY 2019 to 87 MMT because of dry weather causing a delay in planting of the second crop. Brazil’s 2021 marketing year (March 2022 to February 2023) production is forecast to increase by 35% to 118 MMT because of greater planting area and recovery from drought conditions. Argentina’s corn production is forecast to decline by 8% to 48 MMT in the 2020 MY (March 2021 to February 2022) before rebounding 9% to 51 MMT after yields return to normal in the 2021 MY. China’s production is forecast to increase slightly from last year to 268 MMT (MY May 2021 to April 2022).
Global soybean production to reach new record in 2021 marketing year according to August WASDE
Annual soybean production estimates, major producers (million metric tons)
Global 2021 MY soybean production is expected to increase by 6% from the previous MY to 384 MMT. U.S. soybean production is forecast to increase by 5% to 118 MMT due to an increase in area and average yields (MY September 2021 to August 2022). Brazilian production is forecast to increase 7% to 137 MMT in 2020 (MY February 2021 to January 2022) before increasing 5% in 2021 (MY February 2022 to January 2023) to 144 MT due to a greater planted area. Brazil’s weakened currency has made soybean production highly profitable. Argentina’s soybean production is forecast to decline by 6% in 2020 (MY April 2021 to March 2022) to 46 MMT before rebounding by 13% in 2021 (MY April 2022 to March 2023) to 52 MMT.
USD depreciates slightly against competing currencies
Quarterly exchange rates between USD and agricultural currencies (indexed to 1 at 2006: Q1)
The U.S. dollar depreciated slightly in the second quarter as measured by the U.S. Federal Reserve Board’s broad Trade Weighted U.S. Dollar Index as a result of smaller differences in interest rates between the United States and its trading partners. The U.S. dollar fell 1.5% against the Canadian dollar, and 3.3% against the Russian ruble, with both currencies gaining strength from the revival in energy markets. The Brazilian real strengthened early in the second quarter, reflecting the uptick in global commodity markets as well as growth in Brazil’s GDP, beating expectations. The Australian dollar tracked the recent downshift in currencies against the U.S. dollar during the second quarter yet regained some of its value after the Reserve Bank took tentative steps to taper policy in early July. The U.S. dollar also appreciated slightly against the Argentinian peso. The U.S. dollar is expected to remain volatile in 2021, as global economic activity revives, effective vaccines are deployed, and interest rates remain accommodative across most competing currencies.
U.S. corn exports continued to increase in Q2 2021
Four-quarter moving average corn exports, major producers (million metric tons)
Global corn exports rose in Q2 2021, driven by stronger demand from China and tight supplies in Brazil due to dry weather conditions. U.S. corn exports drove the increase at 17 MMT, up by 66% from last year and 12% higher than last quarter. Brazil’s four-quarter moving average exports were down 6% from last year at 9 MMT and 5% lower than last quarter, as record exports in the previous year and drought conditions in the 2020 MY depleted Brazil’s corn stocks. A major tailwind for Brazil’s grain exports in the future is the paving of the BR-163, a highway that runs through Mato Grosso and Para, and ends at the river terminals of Miritituba, the site of several major grain trading companies. Argentina’s four-quarter moving average exports, also at 8 MMT, were down 10% from last year and slightly down from last quarter.
U.S. soybean exports decrease in Q2 2021
Four-quarter moving average soybean exports, major producers (million metric tons)
In Q2 2021, U.S. soybean exports decreased slightly from last quarter. On a four-quarter moving average basis, at 17 MMT, U.S. soybean exports were down 3% from last quarter and 41% higher than last year. The four-quarter moving average of Brazil soybean exports was at 210 MMT, up slightly over last quarter and 8% lower year over year. Lower profitability of Chinese hog producers has decreased soybean exports to China. Argentina’s soybean exports at a four-quarter moving average of 0.9 MMT were down by 39% from last quarter and down 65% from last year. Farmers have been reluctant to sell soybeans in Argentina to avoid the devaluation of their profits in Argentina’s high inflation economy.
Prices for row crops rise on demand from China
Row crop prices (USD per bushel)
In Q2 2020, U.S. corn, wheat, and soybean prices all rose on strong export demand from China and tight global supplies. Corn prices rose most and at US$5.74 per bushel (bu), were up 78% since last year. Soybean prices were up 73% since last year, at US$14.40 per bu. Wheat prices rose by 32% from last year to US$6.25 per bu.
MY 2020/2021 tree nut prices mixed as markets seek balance
Annual U.S. average grower tree nut prices (USD per lb.)
MY 2020/2021 almond prices declined because of abundant crops. U.S. almond production is estimated at 3.0 billion pounds in 2020, followed by a projected 3.2 billion pound year in 2021. Prices have moved lower despite strong shipment numbers in MY 2020/2021 (August 2020 to July 2021). Exports through June 2021 were 31% higher than the previous marketing year’s exports through March. Walnut prices declined 38% to US$0.61/lb. in the 2020 marketing year. The USDA estimates the 2020 walnut crop (MY September 2020 to August 2021) to increase 20% over the previous year. Walnut exports have also been strong, with exports through June 2021 up 18% from the previous marketing year. The pistachio crop reached a milestone billion-pound crop (in shell basis) (MY 2020 September 2020 to August 2021). A relatively less mature tree nut, pistachio prices are estimated to increase despite continued production increases. Pistachio production is more concentrated and as a result, more likely to set prices in the market than almond or walnut producers. Pistachio exports through June 2021 were up 14% from the prior marketing year.
Q2 2021 NCREIF row crop returns and cash receipts rise
NCREIF row crops total return (% per year)
Q2 2021 NCREIF row crop returns were 2.2%, the highest Q2 quarterly return since 2008. Strong export demand from China and high prices helped boost farmers’ returns. USDA farm income and wealth statistics projects 2021 row crop cash receipts to rise by 20%, the largest increase in cash receipts since 2007.
1 USDA, National Agricultural Statistical Service, August 31, 2021. 2 “World Agriculture towards 2030/2050,” ESA Working Paper No. 12-03, FAO, June 2012. 3 Crop Acreage Data, USDA Farm Service Agency, September 10, 2021. 4 Irrigation and Water Use, ERS-USDA, September 6, 2021. 5 “4 Important Ways Precision Agriculture is Impacting Irrigation,” PrecisionAg, October 12, 2017. 6 “Digital agriculture: helping to feed a growing world,” Performance by Ernst and Young, February 2017. 7 “Precision Agriculture Technologies and Factors Affecting Their Adoption,” ERS USDA Amber Waves, December 5, 2016. 8 2020 Precision Agriculture Dealership Survey, CropLife Magazine and Purdue University, August 2020. 9 “Study shows Precision Agriculture improves environmental stewardship while increasing yields,” CropLife, February 1, 2021.
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