Agribusiness Guide: Navigating Precision Spraying Impacts on the Crop Input Market

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:

1. Understanding Jevons Paradox

2. Real World Examples

   1. Energy and Iron

   2. Transportation

3. Extrapolating to Farming

   1. Yield and Quality as a Primary Revenue Method

   2. Early Examples and Practice Evolution

   3. Herbicide Resistance

   4. Not an Isolated Technology

4. Second Order Implications

   1. Commoditization of Crop Protection Products

   2. The Jobs-to-be-Done Lens Behind Crop Input Decision Making

   3. Disruption Through Complements

   4. Access to Information

   5. Farmer Apprehensions of Precision Spraying

5. Final Thoughts

   1. 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:

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.

Today, there is a cost of labor with every pass. By 2030, John Deere, and competitive organizations like CNH Industrial, have stated they want to deliver an autonomous production system to the market. Once there is a reduction in labor cost (I purposely do not state elimination, there is still a need for obtaining product, mixing products for spray tank, yard work etc) there is a more streamlined ability to deploy a sprayer to a field for a lower cost. Even consider the Solinftec and the Solix Platform.

Equipment companies have traditionally tried to solve this through scale, as pointed out by Austin Lyons in his guest post on autonomy and automation in Software is Feeding the World:

Bigger equipment still has constraints, though.

In agronomy and farming, there is the often cited statement that logistics trumps agronomics, suggesting efficiency gets prioritized over proper agronomics. But with autonomy and automation, it decouples the labor constraints from operational needs, allowing for optimization of agronomic outcomes— and as stated above, optimizing agronomic outcomes often means more crop input products used.

Note: Business models and true costs will be dependent on how frequently various assets will run through a field. Just because labor is eliminated doesn’t mean an additional pass has no cost— depreciation, fuel, trample, compaction and more all contribute to the marginal expense of a field pass.

Given the realities of crop production, the nuance of biology and other emerging trends (autonomy) there is potential for crop protection volumes to increase, not decrease thanks to precision application, while delivering enhanced outcomes to farmers— better herbicide control, enhanced ability to manage pesticide resistance, and ultimately higher yields. That is a great thing for farmers, and the entire input value chain.

But what are the second order implications of precision application and Jevons Paradox?

Commoditization of Crop Protection Products

The Jobs-to-be-Done Lens Behind Crop Input Decision Making

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