Agribusiness Guide: Navigating Precision Spraying Impacts on the Crop Input Market
Agribusiness Guide: Navigating Precision Spraying Impacts on the Crop Input Market
Frameworks and thinking tools for considering the impact on your business.
I have talked about Jevon’s Paradox multiple times over the last five years. What I haven’t done is shared an encompassing overview of the concept and why it’s important to understand for agribusiness professionals.
The takeaway— just because there is an ability to reduce product usage in a specific application doesn’t mean total volume used by farmers declines. In fact, Jevons Paradox suggests we could see an increase in crop protection products because of how farmers are incentivized today (produce more), how weeds evolve (resistance is a major issue) and because of other converging trends that will decrease the cost of use (autonomous equipment).
Crop protection and ag retail companies still have business risks, though.
In this article, I dive into what precision application technology could mean for farmers, crop protection company volumes and their margins.
Index:
Understanding Jevons Paradox
Real World Examples
Energy and Iron
Transportation
Extrapolating to Farming
Yield and Quality as a Primary Revenue Method
Early Examples and Practice Evolution
Herbicide Resistance
Not an Isolated Technology
Second Order Implications
Commoditization of Crop Protection Products
The Jobs-to-be-Done Lens Behind Crop Input Decision Making
Disruption Through Complements
Access to Information
Farmer Apprehensions of Precision Spraying
Final Thoughts
Implications for Input Manufacturers
Jevons Paradox is named after the English economist William Stanley Jevons. It’s a counterintuitive economic theory that suggests improvements in efficiency for using a resource can lead to an overall increase in the consumption of that resource, rather than a decrease. This paradox has primarily been applied to sustainability efforts, specifically in the context of energy consumption and environmental conservation.
The implications reach beyond energy consumption, though. More specifically, the concept can be directly applied to crop input usage and precision agriculture.
Understanding Jevons Paradox
At the heart of Jevons Paradox is the concept of the rebound effect, where the gains in efficiency lead not to a reduction in resources use, but to an increase.
This occurs because as a resource becomes more efficient to use, its cost of use decreases, making it more accessible and attractive for consumption. This increased affordability can lead to higher consumption rates that may offset, or often exceed, the efficiency gains.
Real World Examples
Energy and Iron
One of the most cited examples of Jevon’s Paradox is in the energy sector. As technologies become more energy-efficient, the logic would suggest that less energy should be consumed. However, evidence shows that improvements in energy efficiency often lead to an increase in energy demand. For instance, as LED lighting technology has become more efficient and cheaper, its use has proliferated, leading to an overall increase in energy consumption for lighting.
In the 1800’s when Jevon’s wrote his original paper, he shared that if some technological advance made it possible for a blast furnace to produce iron with less coal, then profits would rise, new investment in iron production would come, and the price of iron would then fall, stimulating additional demand. Eventually, he concluded, “the greater number of furnaces will more than make up for the diminished consumption of each.” This turned out to be true.
Transportation
In the transportation sector, fuel-efficient vehicles exemplify the paradox. As cars become more fuel-efficient, the cost per mile of driving decreases, which often leads to people driving more. This increased vehicle usage can offset the benefits of the fuel efficiency gains. Despite significant improvements in fuel economy over the decades, total fuel consumption and vehicle miles traveled have continued to rise.
This has also been experienced with highway infrastructure and congestion— as investment in more highways or more lanes built out, the usage of vehicles increases, leading to more congestion.
Extrapolating to Farming
Yield and Quality as a Primary Revenue Method
In farming today, the primary way a farmer increases revenue on an acre is increasing the yield and/or the yield quality. That means unless there are changes to the underlying system (eg: paid for a reduction in pesticide usage, carbon intensity score, or changing to novel more practices like intercropping etc), there is going to be continued desire to increase yield and quality.
There are cultural practices and an improvement from improving traditional practices (eg: better placed seed) to increase yield, but once those efforts have been implemented, the next way to increase yield and quality typically comes from an increase inputs— a fungicide to manage disease, more fertilizer to fuel the crop, a biostimulant to enhance plant health, or an additional herbicide to clean up a field for next year.
When costs are reduced, there is often a re-allocation of funds, not an elimination of the spend and realization of savings. Just like the iron example above, there is likely a reinvestment into producing more— this can be extrapolated beyond herbicide and to fungicide.
Today, there is a generally a black and white “go/no-go” decision for a field. As we see the ability to precisely apply fungicide where it is needed most, such as through the InnerPlant, John Deere, Syngenta, Collaboration, or other precision approaches, we may see less acres per field applied to, but total number of fields treated (treatment intensity) increase through only spraying certain areas that are at risk.
There is also the ability to break apart the field into different targets or timings— meaning multiple passes for fungicide and herbicide for example where volume applied each application could decline, but the total number of passes increases.
This reinforces that Precision Spraying is not limited to influencing herbicide use, but many other areas of crop protection— from herbicides to fungicides, to biostimulants for example. The implication of precision spraying technology is not on just herbicides, but all crop protection products.
Early Examples and Practice Evolution
New tools bring new strategies. One new strategy might include an increase in pass number and change in timing. I am cognizant that each pass still has a cost (eg: fuel, depreciation, compaction etc) and time is still a limited resource— but one thing worth considering is that one of the biggest time drag of spraying is tank-filling, which can be drastically reduced with See and Spray (plus autonomy brings another consideration, which I talk about below under “Not An Isolated Technology”).
For the mid-west United States, we can take an early indication from this Wisconsin Weeds post from Weed Scientist Rodrigo Werle, where he goes on to state the following about adding an additional pass when a farmer has the “Premium” model:
If a PRE-emergence soil residual herbicide is to be applied early in the season (at planting time or shortly after), which is highly recommended for weed management in corn and soybean particularly for growers dealing with waterhemp, the targeted application modality of the See & SprayTM Premium system becomes of no use, unless a grower is willing to make two trips on the same field, one targeting established weeds with a burndown program (See & Spray modality on; green-on-brown application) and a second immediate trip delivering the residual herbicide program through a regular broadcast application (See & Spray modality off).
Dr. Werle’s commentary was specific to a “Premium” See and Spray model with only one tank. The “Ultimate” product however has two tanks, which gives the ability to manage weeds in a novel way, that could lead to an increase in product utilization (more below in Herbicide Resistance). Greeneye’s system includes two tanks, as well.
A two tank system allows for delivering a broadcast application + a spot spray application, which means when a broadcast fungicide is being applied, a farmer could consider adding a herbicide to the other tank, or when applying a herbicide, a farmer might reinvest the savings into a biostimulant in the broadcast tank.
Herbicide Resistance
One of the biggest risks to farmers profitability is herbicide resistance (along with fungicide and other pest resistance). Biology tends to be more clever than all of us. No matter what you throw at a weed, there will inevitably be some novel mutation that has the potential for that weed to overcome a tool. Today, there are hundreds of resistant weeds, and growing every year:
One of the things that seems inevitable is the need to reinvest precision application herbicide savings into more tank mixed products, more sprayer passes, more adjuvants, higher rates or some combination. Without a consideration for herbicide resistance, weed issues will continue to arise. This reality is likely to drive an increase in product usage. There are even companies building around this consideration that has potential to integrate into precision application systems, such as Geco.
Not An Isolated Technology
We can never look at a new technology in isolation. It needs to be looked at with consideration to other converging or emerging trends.
That brings up the question of how autonomous tractors influence precision applications.