The little things do add up, and ultimately, the dollar is the most interesting unit of measurement for all these decisions. Farming decisions can be either agronomic (grain production) or economic (grain marketing). Precise marketing decisions can use the same precision to assign cost allocation by unit, making sure decisions are justified and resources are efficiently used.

Let's tie agronomic and economic decisions together in a couple of examples. First: the classic precision ag investment of a planter with a vacuum seed-metering system, pulled by a tractor with an RTK auto-steering system. For the hundreds of thousands of dollars that such a rig would cost, what improvement in production can the farmer expect? More importantly, what improvement in ultimate revenue can he expect?

Researchers in southern Brazil last year released a fresh study* of randomized trials planted and grown in real-world conditions, that confirmed other university findings from the past decade about precision agriculture -- i.e. that more precise (less variable) seed placement improves plant health and ultimate grain yield. Use of precision planting technology reduced the within-row coefficient of variation by approximately 16 percentage points, and increased corn yield 12% to 17% (depending on the weather stress of a particular trial).

Well, a 15% yield improvement on 160 bushels per acre would be an extra 24 bpa. At $3.50 per bushel, those extra bushels would add an extra $84 of revenue per acre. A thousand acres of corn planted with a precision planter instead of a traditional planter, all other things being equal, would in theory provide an extra $84,000 of revenue to that corn farmer, going a pretty good ways toward paying for the equipment.

Or, because a 15% improvement in revenue from better yield is equivalent in dollar terms to a 15% improvement in revenue from better market prices, we could just say that using precision planting technology would be equivalent to getting an extra 50 cents per bushel. Allocating it back down to the most granular units, the individual plants, that's like getting an extra penny from every three corn plants in a field. Anyway, the lesson is that we should treat production decisions as seriously as we treat marketing decisions, and vice versa.

The little things add up, but the big things add up faster. Sweating over 250 pounds of nitrogen per acre versus 247.65 pounds of nitrogen per acre is perhaps possible with today's technology. However, when fertilizer accounts for only 15% of the total cost pool, and the land price or rent agreement accounts for 25 to 30% of the cost pool, then any adjustments you can make to that bigger line item will obviously affect profitability more efficiently. Negotiating rent prices or any other big-ticket input cost down by $10 per acre would be equivalent to getting an extra 535 individual corn plants producing grain on that acre, at equal yields and market prices.

As long as a farmer manages his projections and receipts on a per-unit basis, knowing his per-acre and sure, even his per-seedling costs and expected revenues, then he'll have the "precision" of information necessary to make optimal decisions ... and not just the agronomic decisions. The foundation of most grain marketing plans is knowing each farm's per-bushel breakeven cost, so that it can be compared to the present prices offered by the market. That's the most important Cost Allocation (a.k.a. Precision Marketing) task of all. I'm confident that many farmers could look at December corn futures near $4.00 per bushel and November soybean futures near $10.25 per bushel right now, and precisely pencil out a profitable 2017.

*Horbe, T. A. N., T. J. C. Amado, G. B. Reimche, R. A. Schwalbert, A. L. Santi, and C. Nienow. 2016. Optimization of Within-Row Plant Spacing Increases Nutritional Status and Corn Yield: A Comparative Study. Agron. J. 108:1962-1971.doi:10.2134/agronj2016.03.0156

Elaine Kub is the author of "Mastering the Grain Markets: How Profits Are Really Made" and can be reached at elaine@masteringthegrainmarkets.com or on Twitter @elainekub.

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