Smart farming
April 17, 2020

Earning back smart farming investment

How can you earn back your investment?

Common question, easy to answer - theoretically. Smart Farming generally optimizes farming practices. This optimization either reduces costs by saving on resources, increases income due to a higher yield per hectare or both.

Costs for farmers can be roughly divided in fixed cost and flexible costs. Fixed costs entail things like land lease and depreciation of machinery. Flexible costs are all costs involved with actions a farmer performs for the cultivation of his crops, from sowing to post harvest.

Precision farming allows farmer to optimize these flexible costs, as it provides better allocation of resources like water, crop protection, fertilizer, fuel and labor/time.

Increased revenue per hectare is achieved by the better growing conditions the actionable insights smart farming solutions provide. The better growing conditions cause less produce to default due diseases or size.

Let's take two Dutch farmers as examples. One with a high value cash crop and one with a lower value cash crop. A general rule of thumb says that flexible costs per hectare are roughly 15% of the revenue per hectare. The first farmer grows red cabbage, which has a revenue of €15.400 per hectare (per growing season). His flexible costs are €2.310 per hectare.

With the smart farming technique installed he irrigates his crop 9 times, which would have been 10 times without the insights from the smart farming technique. He also reduced the number of times he had to spray crop protection and use less of the substance in the remaining passes. All in all, he optimizes his flexible costs with 10%, while maintaining optimal growing conditions. These optimal growing conditions increase the crop yield and reduce crop defaults, increasing the total revenue per hectare with 3%. He saves €231 and increases revenue with €492, resulting in a plus of €693 per hectare.

The second farmer grows sugar beets with a revenue of €4.530 per hectare; flexible costs (15%) are €680. Let's assume that he's able to gain the same benefits as the lettuce grower; 10% reduction of flexible costs, 3% increase in revenue. This results in a plus of €204 per hectare.

To get the results above the farmers need a high data density and field specific insights. This is in which our solution excels. Let's assume that both farmers installed 1 sensor per hectare. The annual costs (with a depreciation of 3 years) of Farm21 would be €89 per hectare. This is, compared to the possible plus, a perfect deal for the farmer. Even if the savings or the increase in revenue are half of the scenario above, our solution can be earned back within one growing season.

Farm21 sensor, 1 per ha

Crop Revenue per ha/year Total plus per ha/year Sensor cost per ha/year Earnback calculations
Red Cabbage €15.400 €693 €89 One season
Sugar beets €4.530 €204 €89 One season

With other solutions the calculations look a bit different. Let's assume that the other solution is a sensor station capable of measuring similar values as the Farm21 sensor, but for a price of €700 per sensor/ year. (Unit price: €1500,-, €200,- for platform license, 3 years depreciation time). If you placed this sensor with the same density as the Farm21 sensor, you would lose money. Reducing the density would result in less and inaccurate information, limiting the achievable savings and the yield gain.

Other sensor, 1 per ha

Crop Revenue per ha/year Total plus per ha/year Sensor cost per ha/year Earnback calculations
Red Cabbage €15.400 €693 €700 After 3 years
Sugar beets €4.530 €204 €700 Never

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“Farm21 helps us give our farmers better advice, save on costs and improve yields. It makes our services more scalable and growers love the insights.”
Sander Dekker
Crop consultant precision farming