Price Challenges Are Blocking Adoption of Sensors in Agriculture
Sensors for agriculture can raise yields and improve environmental impact,
but new business models and pricing options are needed to reap full benefits, says Lux Research
BOSTON, MA – December 15, 2015 – Even though sensors have many applications in agriculture, innovative pricing and service models will be key to the success of technology developers, according to Lux Research.
With farmers facing price variability and other uncertainties, few are able or willing to risk significant capital on sensing technologies, which can help make more efficient use of soil, water, pesticides, and equipment. Developers need to target the crops best suited for their technologies and create attractive financing or leasing options, or adopt service models that resonate with the growers.
“Low commodity prices have a significant impact on technology adoption in agriculture, and additional uncertainties about the expected impacts of sensing technologies also help deter adoption,” said Sara Olson, Lux Research Analyst and lead author of the report titled, “Sensing in Agriculture: How Can Technology Developers Drive Adoption?”
“Rather than abandon the space, developers will need to become savvier in their approaches, using business models that appeal to growing risk aversion in order to drive wider adoption,” she added.
Lux Researchers evaluated the economics of sensing technologies used in agriculture, besides assessing technology developers. Among their findings:
- Only the largest corn farmers can afford most sensors. With many growers operating near a break-even point of $4 per bushel, only farms over 2,500 acres will find it attractive to purchase new sensor hardware. A services model with creative pricing options could be appealing for a broader range of row crop growers.
- Potato farms are less dependent on scale for affordability. Increasing yields with soil moisture sensing and analytics technologies will appeal to potato growers, who can afford a technology cost of $100 per acre, with little difference in affordability across farm sizes from 50 acres to 500 acres.
- Wine grape growers are open to quality-increasing technologies. Sensors that help growers produce premium quality grapes that fetch ultra-high prices, and can help cut production costs will be most appealing to wine grape growers. Again here, larger vineyards of 50 acres and larger have the greatest tolerance for hardware purchases, while smaller vineyards will gravitate to services.