Will the Convergence Between Artificial Intelligence and Precision Agriculture Lower Farming Costs?

By ARK Invest

Crop production in the US is facing significant cost pressures, writes Daniel Maguire at ARK Invest. After input costs rose 80-250% during the supply chain shocks associated with the coronavirus crisis and the Ukraine War, crop production costs hit record levels in 2022. Coupled with labor shortages, net farm income in the US is likely to drop 18% this year, according to U.S. Department of Agriculture (USDA) forecasts. Moreover, because US crop yields have plateaued during the past five to six years, as shown below, farmers are seeking innovative ways to lower costs and improve profitability.

According to our research, Artificial Intelligence (AI) and Precision Agriculture (Ag) have the potential to reduce annual agricultural operating costs by more than 22% globally. AGCO Corporation, CNH Industrial, Deere & Company, and Komatsu, among other companies, are creating innovative solutions to boost farm productivity. Last year, Deere announced plans to launch a fully autonomous corn and soybean production system by 2030—beginning with the Autonomous 8R Tractor. According to our research, the company’s precision ag tools—particularly the ExactShot Planter and See and Spray Ultimate Sprayer—will play important roles in boosting farm productivity.

The combination of See and Spray Ultimate Sprayer, ExactShot Planter, and autonomous technology should lower several agricultural costs. First, the amount of seed, fertilizer, and chemicals involved in farming could drop by ~27%, a reduction driven largely by a 60% decline in starter fertilizer—which accounts for ~3% of operating costs—and a 67-80% decline in herbicide costs—which accounts for ~12% of operating costs. Second, as autonomous technology takes over in-field work from humans, we estimate that labor costs, which account for ~8% of operating costs, could drop ~85%. Finally, our research suggests that predictive maintenance and more efficient field passes could reduce fuel, lubricant, electricity, and repairs by ~20%.