High Tech & Consolidation in the Industry

agricultural machinery industryBy the turn of the 21st century, the agricultural machinery industry was a highly specialized, highly consolidated global market worth $70 billion a year. Ag equipment manufacturing has become a concentrated industry because the number of farmers worldwide continues to decline, while the value of their commodities and the workload of each individual farmer increases.

Take, for instance, tractors. The number of tractors sold in the U.S. actually peaked in 1951. Since then, far fewer tractors are sold each year, and there are far fewer manufacturers now, as well. Mergers and acquisitions have left only three dominant, worldwide brands – John Deere, CNH (Case New Holland), and AGCO. After these big three there may be 1,000 U.S. companies (according to the U.S. Department of Commerce) who manufacture fewer main-line machines or niche equipment items. Yet, ag equipment remains a vital industry and a large contributor to U.S. exports –

  • The value of all U.S. agricultural equipment manufactured in 2009 totaled $32.7 billion. Most of that equipment was sold in the U.S.
  • The value of ag equipment exported from the U.S. to other countries totaled $9.8 billion, compared to imports of $7.3 billion from other countries to the U.S.
  • The U.S. industry directly employed more than 50,000 people.
  • The ag equipment association claims that the total direct and indirect payroll for the industry totals over $8.5 billion.
  • Research into new agricultural technologies and equipment has increased to $4 billion annually (as of 1996), and most of that increase has come from private companies. According the Dallas branch of the Federal Reserve Bank, government support for agricultural research has remained relatively constant at $1 billion from states and $1.5 billion from the federal government. The rest is now coming from private companies.
  • The innovations in agriculture made it possible for farmers to increase their productivity much more than the rest of the economy. The Dallas Fed documented how farmers, since 1948, have increased their productivity 1.8 percent each year. That compares to a 1.1 percent increase in total, nonfarrm productivity and a 1.3 percent increase in manufacturing productivity growth.

In the first decade of the 21st century innovation continued.

GPS, or Global Positioning Systems, are now being used on everything from tractors to variable rate chemical applicators to combines. GPS uses 24 government satellites orbiting 12,000 miles above the Earth’s surface to calculate the exact position of an object in the field.

Precision agriculture systems use GPS to help draw detailed digital maps of individual fields, plotting slope, soil type, moisture, historical yield, and weed and insect problems. Information is collected on portions of the field as small as 18 inches square. Soil tests can tell the farmer how much moisture or nutrients are already present in that plot. Remote sensing systems can plot pest problems. Then the farmer can program a variable rate applicator to put down the exact amount of the specific chemical or water that’s needed. At harvest, the same system can plot the outcome, almost to the level of bushels per square foot.

Livestock producers are using tiny computer chips to track the growth and production of individual animals, correlating specific inputs with the outcomes at slaughter. Dairy producers have sensors in their milking facilities that track an individual cow’s milk output each morning and evening. Hog packers are beginning to use ultrasound technology to evaluate carcasses before they are processed.

As the agricultural market becomes more global and diverse, agricultural consulting services are expanding. Farmers are utilizing advisors or computerized modeling programs to make decisions on everything from interest rates and borrowing strategies to chemical and irrigation management to the timing of when to sell their crops and where.

Jim Ermer (left) is a CNH dealer in York, Nebraskafilm_ermer_R. That means that, with all the mergers, he handles the Case IH – for International Harvester – as well as New Holland equipment. All of those venerable brands have merged into one, multinational corporation. Jim says with the consolidation, there is less brand loyalty than there used to be. “Most of our customers do have some mix,” Jim says. “There’s more John Deere and Case International dealers than anything else, particularly in our local area. And a lot of machinery is very good. But if you can’t service it or fix it, [as a dealer] you can have a real problem.”

film_kobza_LHank Kobza (right) says the most important change he’s seen in farming in the last 20 to 30 years is the size and power of the equipment. “Huge equipment. Big, big equipment,” Hank marvels. “It used to be if you had a four-row piece of equipment, that’s pretty good. Then it went to six, then you get to eight, then you get to 12. One day this summer, I was driving by, and our neighbor was planting corn. He was on the roadside filling up with fertilizer. And I stopped and I said, ‘Did you land that B-52 yet?’ And he said, ‘What are you talking about?’ I said, ‘That corn planter.’ He had a 24-row corn planter just pulled off to the side and he was filling up his tanks. He said, ‘You know, I’ve noticed it’s a little harder to turn, but,’ he said, ‘I get done a lot faster.’”

film_kaliff_RMark Kaliff (left) says his family is looking into even bigger equipment with more advanced GPS systems to control it. “So it can have within an inch of accuracy, where that tractor is positioned in the field,” Mark says with amazement. “Some people say why do you need that much accuracy in a cornfield? But you want repeatability so that tractor is on the same row and can cultivate and plant in that same spot year after year… That could be great, not only for efficiency but as well as for environmental purposes – to fine tune what we’re putting on and then what we’re harvesting from the field.”
Heather Derr (right) has seen other uses for GPS
. “We were watching the crop dusters the other day, and there used to be a gentleman on the end of the field with a flag in the air,” Heather remembers. “That’s how they used to mark it [the next application]. Well, it’s all GPS now.” But Heather is not sure it’s worth it to get right down to 1-inch accuracy. “You know, just learn to drive straight!”

At one point in his career, Dave Vetter (left) managed a living history museum farm and used antique tools and methods. He thinks something is lost in the modern technology. “I’ve harvested wheat with a hand sickle. I’ve hand-tied the little bundles to do that. I’ve threshed wheat on a threshing floor with a flail,” Dave says. “When you’re working that way, and you’re in the fields by hand, even a small plot, you learn pretty quickly the differences between this corn of the field and this corner of the field over here. And it’s a thing you learn just by walking over it. With today’s technology, we hardly have a chance to get our feet on the ground.”

In this section of the Web site, we’ll explore advances in tractorsplanterstillage machines, and harvesters. We’ll look at how equipment can help with climate change, and how farmers are using computers and the Internet as a tool for research, information sharing, procurement and marketing.

Written by Bill Ganzel, the Ganzel Group. First published in 2009. A partial bibliography of sources is here.

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