As part of our on-going Manager Series, Preston Tolstad considers how high commodity prices in the US are pitted against the spectre of energy prices and environmental impacts, and how ordinary farmers can hedge against both these adversities.
To paraphrase a proverb often accredited to the Chinese, it seems that we farmers “live in interesting times.” In our modern world, where change seems to be the only constant, the most recent development comes in the form of high commodity prices.
Brought on by a combination of factors including wild weather patterns and a global economic slowdown caused by the pandemic, higher food prices are the bane of both importers and the general shopping public alike. However, coupled with the very lucrative payments put in place by the previous administration to facilitate market readjustment, these high commodity prices have been a veritable boon for many US farmers.
All well and good, you might think, but there is still a catch (isn't there always?).
To explain, the current rise in commodity prices is due to the effects of supply and demand. Faltering agricultural production drives prices higher, while bumper yields and surplus drive prices lower. However, this simple casual relationship is made infinitely complex by the multitude of factors in play.
One of the biggest influencers is energy. Following the pandemic lockdowns of 2020, the economic rebound has been more rapid than expected. This, in turn, has magnified the effect of supply constraints and created the soaring oil and gas prices we are experiencing today.
It is a particularly nasty situation for farmers for several reasons. The first being that many agrochemicals, particularly Nitrogen fertilizers like Urea, are derived from fossil fuels. Inevitably, higher energy prices are always accompanied by a surge in fertilizer cost. Another is that hauling, logistics, and machinery running costs are also adversely affected, simply because everyone is now paying more at the pump for fuel. The final reason concerns the across-the-board inflationary impacts high energy costs have, especially if sustained.
These effects have already pushed up production costs for the farmer, thereby significantly nullifying the benefits of high commodity prices and seriously jeopardizing net profitability. This is most keenly felt on smaller farms as they do not normally have wide operating margins and the flexibility they afford. The combined effect of rising agrochemical, fuel, equipment, parts and labor costs extracts a heavy toll on such operations and gives unfair credence to that age-old adage, “big is beautiful.”
Even if size matters as much as it seems to, the big players cannot escape their total dependence on agrochemicals to promote crop growth and protect against weeds and disease. In addition to soaring energy costs, this also leaves farmers vulnerable to the impacts they have both on their immediate environment and the biosphere as a whole. With many experts fearing that the environmental tipping point is a lot closer than expected, it seems that something has to give.
Yet, the world still needs feeding and clothing. Moreover, farmers certainly have a right to their livelihoods and should be lauded for their efforts, especially seeing that they face so much adversity from so many fronts. Despite all the well-intentioned hoo-ha from environmentalists, the simple fact of the matter is that there are no viable alternatives to agrochemicals when it comes to producing the vast amounts of food and clothing required. Irrespective of farm size, the obvious solution is to maximize efficiency, minimize waste and squeeze every grain and dollar out of all farming efforts. Unfortunately, even with the advent of Precision Agriculture some time ago, it has proven to be far easier said than done.
This is where Augmented Farming comes in. It redefines Precision Agriculture by making the goal of efficiency a practical, hassle-free reality.
Based on an unobtrusive electronic device retrofitted to the cab roof a standard tractor or spreader/sprayer, it is unique in using machine vision and AI to determine actual crop need and health (or in the case of selective spraying, to detect unwanted weeds). It then controls VRA enabled equipment to fully-automatically apply agrochemicals in real-time during a single pass. This judicious use of inputs significantly curbs waste and promotes plant growth. In other words, farmers can now enjoy the apparently impossible combination of saving on input costs and promoting sustainability, while also reaping the financial benefits of better yields.
Interestingly, although the Chinese proverb “May you live in interesting times” seems to be a blessing, it is actually an ancient curse. Its original meaning was that it is far better to live in “uninteresting times” characterized by peace and serenity, rather than during the turbulence of trouble and misfortune.
Augmented Farming can certainly help with that. Its ability to manage agrochemicals intelligently can significantly reduce vulnerability to both price hikes and environmental backlash. It can also ensure the best possible production results. Regardless of the size of operation, use of this new technology means that farmers can now rest assured that they are getting “the biggest bang for their buck,” not to mention efforts.
For my money, that buys anyone a whole lot of peace and serenity. And when those commodity prices drop and energy prices moderate as supply issues are resolved, it will still put you well ahead of the eight ball because you’ll be running a much leaner operation. So, the even smarter money is on looking beyond the apparent benefits of high commodity prices and helping to bring on those “uninteresting times!”
We want to keep you informed! Read all about the Augmenta System, the company and the impact we are having on revolutionizing farming.