Proceedings of the Workshop on Remote Sensing for Agriculture in the 21st Century October 23-25th, 1996    David Zilberman Department of Agricultural and Resource Economics University of California, Berkeley	| Ag 21 Agenda |
Comments on Precision Agriculture

Drip irrigation and other modern irrigation technologies are also precision technologies. Here applications may vary over space to accommodate different land qualities, and with drip, as well as other systems such as permanently set sprinklers, decision-makers can adjust the time of application and respond to changes in weather and other environmental conditions. Drip irrigation systems may be expanded to dispense chemicals in addition to water ("chemigation"). They may be part of computerized systems and irrigation may be automated with water applied in response to signals sent by the tensometers or other monitoring devices.

Another interesting technological arrangement that has the feature of precision agriculture is the irrigation system that depends on CIMIS (California Irrigation Management Information System). In this case, irrigation consultants or farmers have their own computerized irrigation management programs that use the weather information from CIMIS as input and determine water management strategies in response to changes in weather conditions.

Experience with existing precision technologies can provide valuable lessons for assessing the potential for and adoption patterns of some of the more recent precision technologies discussed in this conference. There is a large and growing literature on the economics of irrigation (see, for example, Boggess et al., and Caswell) and other resource-conserving technologies. Here I will present some general results obtained by this literature.

Precision technologies can be viewed as technologies that improve the efficiency of an applied input (the actual amount of inputs utilized by a crop) but require higher investment capital or labor than the traditional technology. The effectiveness of such technologies varies across location. For example, the gains associated with irrigation technologies is higher in locations with steep slopes and sandy soils. Economic theory also suggests that adoption of precision technology is likely to increase yields and, in many cases, save the input. In some cases when yield effects are very significant, you may actually see increases in input use with the new technology. This is because producers want to take advantage of increased yields. But in most cases, adoption of precision technology tends to increase yields and reduce input use relative to the initial technology. There is empirical evidence that demonstrates this for irrigation and fertilizer, and which suggests that it may even hold for coal use in power plants (Khanna and Zilberman).

The factors that affect adoption of precision technologies are prices of outputs and inputs, and environmental characteristics. In the case of drip irrigation, these include water-holding capacity of the soil and the slope of the land. Generally modern technologies
are more likely to be adopted for. the production of high value crops (crops that generate a high volume of revenue per acre) and where a relatively small increase in revenue has a significant impact in dollar terms. Similarly, regions with high water prices or with water scarcity problems are more likely to adopt modern technology.

Adoption of technologies varies across periods. As you can see from the figure that I enclose, the 1988-1991 drought contributed significantly to the introduction of drip irrigation in California agriculture. During this period, drip started to be used for production of some major vegetable crops. The same was true with the drought of 1976-1977. Actually, the biggest jump in acreage using drip irrigation occurred in the 1976-1977 drought.

One can infer from these observations and suggest, following the model of Dixit and Pindyck, that extreme events (dramatic increase in water scarcity, significant decrease in output price) serve as triggers to large-scale adoption of new technology. The extremely high prices of grains during 1973-1974 triggered wide increase in the use of center pivot irrigation in the midwest and led to significant increase in irrigated acreage and modernization of US agriculture. Increases in energy prices in the late 1970s and early 1980s led to increased use of herbicides and substitution of tractors with chemicals for the control of weeds. All of us remember that the energy crisis of 1973 led to the introduction of cars with greater fuel efficiency throughout n the United States and throughout the world.

A second point that is clear from the literature on adoption and one that applies very well for drip irrigation, CIMIS, and other technologies, is that new technologies tend to be adopted at locations where they have relative advantage. Furthermore, modern technologies may not be completely adopted. In the case of drip irrigation, it was adopted first in the San Diego mountains where the hills were steep and the irrigation efficiency of traditional technology was very low and in the sandy soil regions of the Central Valley in California. In many areas of California where the soil is heavy and the land is flat, drip is still unprofitable relative to traditional technologies, even with very high value crops such as fruit trees. In these cases, complete adoption of drip not very likely. From the cases of drip in the past and of CIMIS now, it is quite clear that the technology may not be profitable in many locations, or even most locations, but there are some areas that are especially appealing and are the most likely to adopt the technology on a large scale.

The literature on adoption in agriculture (Putler and Zilberman, McWilliams and Zilberman) demonstrates that education affects adoption of computers. Individuals with higher education are more likely to adopt. Actually, in the case of computers, we also found that the larger firms were more likely to adopt because computers require mostly fixed investment and the variable costs were relatively small. In the case of irrigation technology, where the costs were more or less proportional to size, we did not see that size was a very important element affecting adoption. (I will return to the topic later.)

But the interesting lesson from computers is that this technology that has many components was adopted gradually. At first individual users adopted the simpler packages (word processing, accounting), and only later were the more advanced systems such as computerized irrigation or computerized feed and rationing for livestock adopted. That is likely to hold true with agriculture which has several components and I expect that some components will be more popular than others. Some people will adopt precision agriculture partially, adopting certain elements but not others. First the more obvious components will be adopted, and later on, the more advanced ones.

Another important lesson in the case of irrigation is the importance of appropriate marketing strategies and education. I interviewed a large number of individuals active in the development and marketing of drip in California in the early 1970s. It is clear that this technology had several setbacks in the beginning because of inappropriate marketing. The first demonstrations were done in the early 1970s using equipment that came from Israel. Several manufacturers underestimated the technology and oversold it without providing sufficient product support. That led to several failures, especially around Bakersfield in the southern San Joaquin area, and that caused the technology to have a negative image. The technology has taken off in California years later, when a new company, Agrifim, that had been successful in marketing drip in South Africa, brought it back to California and marketed it in a more organized manner. Agrifim did not sell components, only complete systems that they designed and they provided backup and close supervision of use.

Some marketing experts argue that when a new highly sophisticated technology is introduced, the manufacturer should be responsible for promoting the technology and providing product support in the early days. Manufacturers need to convince the dealers that it is in the dealers' best interest to learn about the new technology, invest in it, and sell it. After a while, once the dealers believe in the technology, they can develop personnel to
sell it and design it. Currently, most of the design of drip irrigation systems is done by experts employed by dealers, and the manufacturers mostly sell components.

The success of new precision agricultural technologies may depend on product reliability and the support provided by manufacturers. In cases where neither the manufacturer nor the dealers are able to provide support, the diffusion process may be slowed. On the other hand, good product support contributes to the diffusion of the product.

Two important concepts that have to be taken into account when dealing with modem technologies are the concepts of learning-by-doing and learning-by-using (McWilliams and Zilberman). Learning-by-doing reflects the reduction in cost of production as the manufacturer of a technology learns to produce it better. Learning-by-using reflects increase in efficiency of use as the users learn to take advantage of new technologies. Both phenomena played an important role in the diffusion of drip irrigation. The cost and especially the quality of drip products improved over time. In particular they were much better able handle problems of clogging. The users of the technology have expanded over time by the addition of fertigation and later by incorporating automated controls. In the case of computers, we see both learning-by-doing as costs go down all the time, and we also see learning-by-using as individuals progressively use more advanced software packages with their computers. Putler and Zilberman found that individuals in California started with word processing applications and over time began to use more sophisticated programs including irrigation and production management programs.

ANSWERS TO SPECIFIC QUESTIONS
1. Is site-specific management as practiced today farm-size and production-system neutral?

To a large extent farm size does not affect very much the adoption of drip irrigation, CIMIS, or IPM for several reasons. The marketing system has adjusted provide custom and rental services to smaller users, thus facilitating adoption. While big farms that adopt IPM may have in-house entomologists and scouting systems, smaller farms can rely on consultants who usually charge per acre and thus scale affect does not play a major role in the adoption of IPM.

In the case of laser leveling, a technology that increases water use efficiency by leveling the soil, there has been widespread adoption through the use of custom services. There are examples where new technology that is capital intensive is promoted early through rental agreements. In the case of sprinkler irrigation, a major company that introduced the product was Rain For Rent, and the name speaks for itself. By renting the equipment, the manufacturer enabled early adopters to avoid the risks associated with purchasing and fostered learning about the technology.

Other factors may be much more important than size in explaining adoption. In the case of drip irrigation, adoption varied significantly by crop. For some high value crops, like strawberries, there is 100 percent adoption. Location is another important factor. In locations with sandy soils in the foothills, the technology is more likely to be adopted.

Another important element is availability of good backup systems. In some regions where there are more effective dealers you see more widespread adoption. In many cases dealers are attracted to an area where the technology has good potential. That is why there is a large number of irrigation dealers in Fresno, and there is greater competition there in terms of services provided to producers, etc. On the other hand, you may find a very good dealer of drip irrigation or of center pivot irrigation in a remote region, resulting in a sudden increase in the rate of adoption of this technology in the region.

Regarding the impact of size on computerized irrigation, it is clear that automated
irrigation is very appealing to some of the- smaller part-time farms that are owned by individuals who have relatively high- levels of education. Automation allows these individuals to manage their farms with less effort and they can concentrate on other activities. Some of the most advanced automatic computerized irrigation systems are found on the small farms in San Diego near Los Angeles where the owners are highly trained engineers who like computers. So, owners' technical skills and computer literacy are important in explaining adoption of automated irrigation.

The introduction of a new technology, such as drip irrigation, results not only in a switch from the traditional technology, but also in expansion of irrigated land. For example, the introduction of drip led to planting of avocados in the San Diego hills and in some of the foothills near California's Central Valley. In the case of center pivot, its introduction led to expansion of farming of the sandy soils in Nebraska.

The impact of a new technology on farm size, when it is measured by acres, depends to some extent on its nature. Technologies, such as tractors, that do not tend to improve yields but rather reduce costs and involve high fixed costs, are likely to increase farm size and reduce the number of farms. Technologies that increase yields, especially in products with high demand elasticity, may actually have a smaller effect, or no effect, on farm size. Actually, in the case of drip irrigation, very small farms producing high value crops (strawberries) have become much more profitable as yields per acre increase.

2. Are new site-specific technologies more or less likely to be farm-size and production-system neutral?

As long as the new production technologies are available through consulting and custom services, their impact on farm size is not likely to be drastic and, in many cases, they will be farm-size neutral. If some components of the new technologies are embodied in machinery that is not provided by custom services or rental services, or if rental is not equivalent to ownership in terms of costs per acre, then the technology may not be scale neutral and will favor larger farms. It is difficult to generalize, but it seems that the last scenario will not apply for most components and for most sites of new technology.

Site specific technologies should not discriminate that much according to acreage but rather according to other variables. Farm operators who are computer literate and who have appropriate education are more likely to adopt these technologies and benefit from them. A region with variable land quality will benefit more from site specific technologies and will become more competitive. Regions with better extension services or a better network of independent consultants will be better situated to take advantage of these new technologies.

I do not see some of the giant farms as among the first to adopt these technologies.  In a way, it took IBM several years until it changed operations and entered the personal computer area. It is clear that these technologies are in the early stages of their development, and their adoption requires drastic changes in modes of operation. They require retraining of workers and changing procedures, and large operations may not want to overhaul their systems. It is likely that some large farms will experiment with the technologies and may introduce them gradually over time. On the other hand, middle sized farms owned by people with a high degree of sophistication are more likely to take the plunge. Individuals with good computer skills and middle or small sized farms may take advantage of these technologies first.

The new technologies may be very useful for addressing the environmental side effects of agriculture and reducing agricultural pollution. Availability of new technologies may allow enacting stricter environmental regulations and that extra burden may induce individuals to adopt new technologies. In the case of the pesticides, we know that availability of substitutes may serve, at least indirectly, as a strong incentive to eliminate the use of environmentally unfriendly chemicals.

Another interesting link is between information technology and biotechnologies. With biotechnologies the range of agricultural products is likely to increase and the value added of farming activities may increase. In many cases, that will increase the profitability per acre, and actually may reduce the minimum farm size (in terms of acreage) that is economically viable. Precision agriculture in many cases may be compatible and complementary to biotechnology. With precision agriculture, producers may vary the range of products (varieties) they grow on fields or small farms and they may better take advantage of the availability of topographical or even climatic conditions.

3. How could the answers to questions 1 and 2 change with likely changes in federal farm policy, particularly the declining general commodity support?

Answers to questions 1 and 2 will change with likely changes in federal farm policy. We expect declining federal support for agricultural commodities in the coming years.

Farm prices are key elements in determining adoption of modern technologies. In periods of high prices and high farm earnings, farmers tend to adopt new technologies and expand their production base. First, when farmers make profits, they are likely to invest to avoid paying taxes. They are also more credit worthy and less dependent on credit institutions for investment. The first World War, the early forties, the years immediately after the second World War, and the early seventies were bonanza periods in terms of agricultural profitability and investment. During these periods, the outlays of support programs were low. Support programs are much more significant when agricultural output prices are low.

Just and Zilberman argue that availability of price support and other commodity programs in the past encouraged adoption of modern technologies especially because such programs increase average prices and reduce risks. But much of the adoption occurred during periods with low support levels and very high prices. As we look at the future, we have to realize that other events may occur in addition to reductions in government support.

First, we can expect two or three years with high commodity prices. During such a period, farmers are likely to invest and adopt new technologies. Actually, there is evidence that new commodity programs (Freedom to Farmers act) should increase farmers' income relative to traditional support policies because, at least over the next few years, payments are independent of earnings.

If in the future there will be periods when prices go down drastically, I personally expect that farmers will fight for the reversal of current policies and seek a return to the traditional support programs. So, all in all, I expect that in the near future at least, commodity programs will operate to increase earnings and this will enhance adoption of new technologies.

Second, the new commodity programs are part of global arrangements that have opened markets for agricultural commodities. These arrangements are likely to reduce subsidies for European producers, lead to overall increases in the average prices of foodstuffs, and improve the situation of American growers and their ability to adopt new technologies.

A third important element is environmental policies. Concern about environmental quality is likely to increase the amount of regulation and that may provide an important inducement for adoption of precision technologies. There is an interesting example in California where the drainage problem in the Kesterson area induced adoption of sprinkler and drip irrigation in the short run. In some cases, drainage considerations led to the introduction of tiered pricing (whereby water use above a certain level entails much higher prices) aimed to induce diffusion of water-conserving technologies. Some of the tax earnings were returned to farmers in the form of technology subsidies (see Wichelns).

I believe that the US economy will also benefit from exporting the know-how and hardware associated with the new technologies world wide. Center pivot irrigation has become an important American export product and other countries in eastern Europe, in South America, in Europe, are likely to adopt precision agriculture when it is proven profitable. Of course the exporting of such technology abroad is tricky. It requires establishing local contacts and local experts, but as long as America has the edge in the technology, they can provide a profitable area for export. The free trade agreement and opening of foreign markets may enhance this possibility.

4. How will an increase in information-intensive management likely impact rural economies?

Since these technologies are location specific, or since they require sophisticated man power to operate and manage and sometimes tailor made software, they will increase the sophistication of the farm sector and provide a new white collar jobs in rural areas that need these types of occupations. In California we see that consultants for pest control, irrigation, feed rationing, with computer backgrounds are doing quite well. With the introduction of precision technologies, demand for such consultants will increase. The computer whiz who operates his service bureau and provides consulting services and management services to farmers will become an important aspect of the farm operation, much more important than an accountant, and he will be well paid. I think that this type of job will make agriculture "cool" and attract a lot of smart kids, who otherwise would not be attracted to agriculture, to work with the GIS systems to develop farm management programs and to consider agricultural occupations.

I believe that mature precision technologies will serve to integrate agriculture into
the information age. Furthermore, as agriculture becomes more information intensive, the interest of some of the telecommunication giants in agriculture will increase. There will be more value to link agriculture and rural communities to the information superhighway and to provide them with other information services. In this regard, automated and computerized agriculture will serve as a way to increase the quality of life in the rural communities. As I mentioned earlier, some major media companies have significant operations in agriculture. For example, Disney and ABC own a large number of agricultural media, and the more integrated and automatic agriculture is, the more it will become part of the modern telecommunications society.

5. What kind of information/communication infrastructures will be needed in rural areas?

A successful adoption of precision technologies and information technologies in agriculture requires first and utmost improvement in human capital and especially in computer literacy and skill in agriculture. I expect that precision technologies and information technologies will be user friendly and easy to learn. Widespread implementation will require that almost everyone involved the agricultural industry will have some degree of computer skill and some ability to interact with computers. The challenge for both the public sector extension university school as well as the private sector is to develop educational programs that will enable the widespread use of information technologies.

Establishment of a minimal degree of computer literacy across the board is one educational challenge. Another, and even more demanding challenge, is to establish a cadre of people who are highly trained in design, adaptation, and manipulation of computerized and automated systems. In addition, one needs professionals to install and maintain computer hardware.

The length of the period in which we can upgrade the manpower in rural areas probably will be a dominant factor in the determination of the pace of automation in agriculture and diffusion of precision technologies. There is growing evidence that non-targeted worker training programs are not necessarily the best way to improve employment and manpower (see "Training and Jobs," The Economist). It seems that probably the best way to prepare agricultural labor for the information age is to emphasize computer and quantitative education throughout the educational system, from grammar school to college, and to expand the diffusion of computers in the rural areas.

Whereas it is much cheaper to train computer literate individuals in the use of specific software, in most cases employers are likely to carry a significant part of this specific training once they have at their disposal employees who can be trained within a relatively short time and at low cost. To upgrade computer education at all levels is crucial to accelerate the introduction of precision technologies in agriculture. Programs that enhance the adoption of computers by private individuals can-- also play a very important role. There have been mentions of bank programs and government initiatives to provide incentives for individuals to adopt computerized systems. And as the information age continues, the likelihood that people will have outlets to the information superhighway and will manage their lives with computers is increasing.

While educational infrastructure is crucial for the introduction of precision agriculture, it is also very important to have financial infrastructure to support new technologies. Given the variability and the heterogeneity of agriculture, in many cases there will be a significant need for adaptation of software and design of tailor made computerized and automated systems for specific crops. Many of these activities are not likely to be carried out by the large corporations that have relative advantage in the design of generic larger systems. Instead, this may be taken up by smaller entrepreneurs who are familiar with problems and who have the specialized skill to address them.

One crucial factor for the success of Silicon Valley is the ability of individuals with original and creative and technical ideas to get the financing for implementation of their ideas through venture capital and other sources. The capacity to finance a creative information venture in agriculture will affect the speed of the diffusion of precision systems and their geographic distribution. Commercial banks, as well as other sources of funding, have to be educated regarding the potential of precision farming and information technologies in agriculture. In some cases (and I really believe that is the minority of cases), it may be worthwhile to develop programs of subsidized credit to enable research and development activities that can develop new automated farming systems.

While automated agriculture and precision farming has made a lot of progress, it is still in its infancy. The main obstacles to the spread of these technologies are significant knowledge and technological gaps. From my experience working in pesticides, water, and other agricultural problems, I believe that our crop growth models and production systems are very primitive, ignore a lot of factors, and are subject to significant uncertainty, variability, and error. We need much more research to improve our capacity for a quantitative remodeling of biological systems.

Even weaker are our management models of agricultural systems. For whatever reasons, I believe that farm management and development of sophisticated management systems have not been deemed a high priority by agricultural economists. It is my perception that many believe that the development of management systems is the responsibility of the private sector while public institutions should emphasize the more aggregate macro economic management problems. I believe that the leading agricultural economics departments in the country (Berkeley, Davis, Maryland, Minnesota, even Iowa State) lack emphasis and expertise in production systems. Most people who teach agribusiness and agricultural economics are very weak in integrating biology with economics. Agricultural economics has tended more to become a branch of general economics, emphasizing economic principles but neglecting issues of management, and that includes development of systems, software, and other tools that are useful for precision agriculture.

Some of the management tools that are developed by entomologists, soil scientists, etc. may be lacking in the quality of economic argumentation and logic. That makes them not as effective decision tools as one would desire. There is a wide range of basic research problems associated with principles and algorithms of automated agricultural management systems and they should be a emphasized in the research agenda of land grant systems. While many pay lip service to interdisciplinary research and suggest that the topic I mentioned above (development of economically sound management systems for agriculture) should be part of an interdisciplinary effort that we all would like to promote, I think that one may view agricultural management as an important and distinct discipline of either agricultural economics or agronomy. It relies on other disciplines (basic economics and management, biology, agronomy) but has its own independent scientific infrastructure (journals, professional specializations, courses). I believe that the heyday of this subdiscipline should be in the near future. While I expect private enterprise to write, support, and develop outstanding agricultural- management programs that will make precision agriculture more profitable, the public sector should provide the research foundations and algorithms that will allow this software to grow.

Automated agriculture will require a sophisticated communication network. This is embodied in expensive physical equipment (wires, maybe metal, or fiber optics). Generally, communication equipment is likely to be more intensive in cities than in the rural areas. Thus, deficiencies in the communication systems may hamper the automation of agriculture and some elements of precision technology. In some cases, the government should provide incentives to private companies to expand communication networks to the rural sector above and beyond what the private motive dictates. But determining when and to what extent to subsidize communication networks and how to develop incentives to obtain the right amount is a tricky business, and sometimes private intervention may lead to waste. Thus, determining efficient infrastructural policies in the area of communication in the rural areas is subject to further study. It is clear however that the more benefit communication networks will provide to agricultural production, the more likely private concerns are to expand the communication networks to rural areas.

Final Perspective on Precision Technologies

Precision technologies are in their infancy. All stages of agricultural production-breeding, seeding, feeding, disease protection, and harvesting--can be done more efficiently. The three elements of each precision technology are monitoring, diagnosis, and response. Efficiency technologies addressing specific problems improve with the frequency of monitoring, the accuracy of the diagnosis, and the refinement of the response. Advances in satellite and communication technologies provided a base for monitoring elements of recent precision technologies. Improved GIS and computer technologies provided a base for the diagnostics. And modified seeding or land preparation complemented the other components to provide a better response. Thus, the generation of precision technology is especially challenging since each component requires improvement in another type of technology. Furthermore, advances in precision technologies require interdisciplinary research and alliances between different units, both in research and in production.

Most of the recent celebrated precision technologies address problems of seeding, feeding (providing fertilizers and other nutrients), and, to some extent, pest control. Some of the biggest challenges to agricultural technology lie in the area of improved precision of harvesting. More versatile, refined, and accurate harvesting equipment may enable growing several crops on the same field and taking advantage complementarity among crops. More refined harvesting technologies can provide the key to addressing problems that go beyond agriculture, such as for example, the problem of bi-catch in fishery management and the severe ecological damage caused by current nondiscriminating forest management practices, especially in multi-species tropical forests.

References

Boggess, William, Ronald Lacewell, and David Zilberman. "Economics of Water Use in Agriculture." Chapter 8 in Gerald A. Carlson, David Zilberman, and John A. Miranowski (eds.), Agricultural and Environmental Resource Economics. New York: Oxford University Press, 1993.

Dixit, A.K. and R.S. Pindyck, Investment Under Uncertainty, Princeton, NJ: Princeton University Press, 1993.

Just, Richard E. and David Zilberman, "The Effects of Agricultural Development Policies on Income Distribution and Technological Change in Agriculture," Journal of Development Economics, Vol. 28 (1988), pp. 193-216.

Khanna, Madhu and D. Zilberman. "Choice of Input Quality and the Abatement of Greenhouse Gases: The Thermal Power Sector in India." Unpublished manuscript. Department of Agricultural and Resource Economics, University of California, Berkeley, 1996.

McWilliams, Bruce and David Zilberman, "Time of Technology Adoption and Learning by Doing," Economics of Innovation and New Technology, Vol. 4 (1996), pp. 139154.

Putler, Daniel S. and David Zilberman, "Computer Use in Agriculture: Evidence from Tulare County, California," American Journal of Agricultural Economics, Vol. 70, No. 4 (November, 1988), pp. 790-802.

"Training and Jobs." The Economist. April 6, 1996, pp. 19-21.

Wichelns, Dennis. "Increasing Block-rate Prices for Irrigation Water Motivate Drain Water Reduction." Chapter 14 in A. Dinar and D. Zilberman (eds.), The Economics and Management of Water and Drainage in Agriculture. Boston: Kluwer Academic Publishers, 1991