Farmers are no strangers to the constant influx of new technology tools and services promising to revolutionize crop production. From startups to established giants, tech companies large and small compete for farmers’ attention and investment, joining traditional machinery and agronomic service providers in the agricultural landscape. The allure is clear: new technology can significantly enhance input efficiency, crop yield, and quality. However, when crop revenues dip and budgets tighten, innovation often becomes a casualty, as seen in the expected slowdown of technology investment in 2025.
The USDA’s 2023 data reveals that only about 25% of farmers have fully embraced precision agriculture technology. While specific technologies have seen double-digit growth over the past two decades, the overall adoption rate remains modest. Illinois farmers, known for their leadership in precision ag technology, exemplify this trend. Larger farms, benefiting from economies of scale and better credit terms, are more likely to invest in and reap the benefits of advanced technology. This trend underscores the financial pragmatism driving technology purchases and their potential slowdown in challenging economic conditions.
Michael Langemeier, Associate Director of the Purdue University Center for Commercial Agriculture and Professor of Agricultural Economics, emphasizes that the slowdown in technology adoption during tough economic periods is not due to a lack of interest but rather a careful evaluation of return on investment (ROI). During the grain market slump from 2014 to 2019, capital purchases significantly decreased, and 2025 is expected to follow a similar pattern. Langemeier advises farmers to preserve working capital during such periods.
Identifying the ROI of ag technology involves considering various economic and operational factors. Key variables include farm expansion plans, cash flow availability, interest rates, and the technological advantages of new tools or services. Farmers must assess how new technology will impact their crop yield, quality, and overall financial standing. Additionally, they should consider the broader context of machinery costs, which have risen from $550 per acre in 2020 to $700 in 2023, driven by both new purchases and rising repair costs.
Langemeier suggests a multi-year, ROI-focused strategy for technology investments, considering the functional lifespan of technology and regular intervals for replacing machinery. Maintaining financial flexibility and staying informed about technological advancements are crucial, especially during down years for grain prices. For those accustomed to buying new machinery, the shift to used equipment to cut costs may present challenges in maintaining the latest technology. Retrofitting older machinery with new technology can be cost-prohibitive, so farmers must balance their technology needs with their budget constraints.
In summary, while the adoption of ag technology is generally on the rise, economic downturns can slow this trend. Farmers must carefully evaluate the ROI of new technology, considering various economic and operational factors. By adopting a well-grounded, multi-year strategy and maintaining financial flexibility, farmers can ensure they get the most from their technology spending while preserving liquidity and cash flow.
