The R&D Tax Credit Aspects of Precision Farming and Agricultural Robotics
Precision-Farming
America’s farms grow the crops that feed,
clothe, and fuel the country. The agricultural industry has an
undeniable economic and strategic importance and must rely on
innovation to maintain its competitiveness. Precision
agriculture and agricultural robotics are important trends
that promise to revolutionize farming practices. Federal and
state governments offer significant tax incentives designed to
support emerging technologies that optimize yield and
profitability.
The Research &
Development Tax Credit
Enacted in 1981, the federal Research and
Development (R&D) Tax Credit allows a credit of up to 13%
of eligible spending for new and improved products and
processes. Qualified research must meet the following four
criteria:
- New or improved products,
processes, or software
- Technological in nature
- Elimination of uncertainty
- Process of experimentation
Eligible costs include
employee wages, cost of supplies, cost of testing, contract
research expenses, and costs associated with developing a
patent.
On December 18, 2014
President Obama signed the bill extending the R&D Tax
Credit for the 2014 tax year. As of this writing, proposed tax
extender legislation would extend the tax credit through
December 31, 2016.
The Economics of
Agriculture
Over the last century, U.S. agriculture
went through major transformations. In the early 1900s it was
a labor intensive industry, encompassing numerous small and
diversified farms. Due to major technological advances, the
industry has a reduced number of large, specialized
farms.
Despite changes in
configuration, the agricultural sector remains key to the
national economy. So much so that incentivizing young farmers
has been considered a government priority. In an effort to
replace aging operators that prepare to retire, U.S.
Agriculture Secretary Tom Vilsack established the goal of
creating 100,000 new farmers over the next years.
Data from the United
States Department of Agriculture (USDA) shed light on the
economic importance of the agricultural industry. In
2013, U.S. agriculture and agriculture-related industries
generated $789 billion, representing a 4.7 percent share of
the country’s GDP. In the same year, 9.2 percent of U.S.
employment was related to agriculture, a total of 16.9 million
jobs. Farming activities contributed $166.9 billion to
the overall output and generated 2.6 million jobs.
America’s agricultural
exports have gained strength and outpaced imports in 2014,
generating a trade surplus of $38.8 billion. Higher demand
from developing countries, especially China, as well as rising
commodity prices have doubled the value of U.S. agricultural
exports between 2006 and 2014. Wheat, soybeans, cotton, corn,
and their processed products have played a central role in
this recent trend.
Agriculture and Food
Security
In addition to being an important
contributor to output and employment, the agricultural sector
is key to guaranteeing food security, which is defined as
“having access to sufficient, safe, nutritious
food to maintain a healthy and active
life”.
In 2014, 14 percent of
American households were food insecure at some point during
the year. 5.6 percent of them, or 6.9 million households,
experienced very low food security, meaning not only access to
adequate food was limited but there was reduced food intake
and disrupted eating patterns by one or more of its members.
In 2014, 19.2 percent of households with children were food
insecure.
From a global
perspective, the issue of food security is even more critical.
According to the Food and Agriculture Organization, between
2011 and 2013, there were 842 million people, or one in eight
people, who suffered from chronic hunger, regularly not
getting enough food to conduct an active life.
An Industry under
Pressure
According to the United Nations, the world
population is expected to reach 9.6 billion by 2050. In order
to meet this unprecedented demand, global food production will
have to increase by 60 percent, in relation to 2005/07 levels.
Climate change, water scarcity, and workforce and land
availability pose major challenges, putting the agricultural
industry under great pressure.
Additional strain comes
from the growing demand for sustainable practices in the
agricultural sector. Recent data show that agricultural
activities occupy 40 percent of the world’s land surface, use
70 percent of freshwater withdrawals, cause 15 percent of
world greenhouse emissions, and constitute the largest source
of water pollution.
Innovation is the only
way to make sure the agricultural industry will fulfill future
demand while ensuring sustainability and cost-effectiveness.
The Crucial Role of
Innovation
Technological advances have been the main
drivers of U.S. agricultural strength. Innovation has enabled
tremendous gains in productivity – according to Monsanto, an
agrochemical and agricultural biotech company, in order to
match the amount of food grown today, farmers from 50 years
ago would need their fields to cover the entire country.
The most recent trend in
agricultural innovation is precision agriculture. Based on
cutting-edge data collection technologies, it enables farmers
to use predictive analytics to optimize yield and overcome
operating deficiencies. The variable-rate application of
agricultural inputs, such as water, seed, fertilizers, and
pesticides, is an interesting example of how precision
techniques can reduce costs and increase productivity. The use
of sensor and location technologies help farmers determine the
exact needs of each area, allowing them to make smart
decisions that take into consideration field
variability.
A recent report by
Markets and Markets points out that precision farming “cuts
down input costs, fuel usage, and labor, and negate the
environmental impact”. The same report forecasts that the
total precision farming market size will grow at a CAGR of
12.2 percent from 2014 to 2020, reaching $4.55 billion by
2020.
Precision agriculture
goes hand-in-hand with another important trend, namely,
agricultural robotics and automation. The following sections
will cover emerging technologies from both areas of
innovation, all of which can benefit from R&D tax
incentives.
Satellites
With the ability to
provide actionable imagery on every crop acre in the country,
satellites have become strategic tools for optimizing
agricultural management.
Common satellite
applications include 1) creating field-management zones for
site-specific management; 2) monitoring plant health for
in-season, site-specific nutrient prescription maps; 3) crop
scouting for targeted fertilizer and herbicide applications;
4) post-disaster damage assessment; 5) topographic mapping for
site-specific management and drainage assessment; and 6)
database development for field trials and on-farm research.
Satellite Imaging Corporation (SCI)
Based in Tomball, TX,
SCI provides satellite image data at different spatial,
spectral, and temporal resolutions for crop assessment, crop
health, change detection, environmental and soil analysis,
irrigated landscape mapping, yield determination.
The company utilizes
AgroWatch, a suite of value-added information products that
help farmers, growers, consultants, and other decision makers
quantify crop status, soil conditions, and rates of crop
change throughout the field. AgroWatch products can reduce
field time almost in half by identifying problems before they
are visible to the naked eye. The innovative solution
quantitatively compares current images with previous ones in
order to inform both short and long term management
decisions.
New Science Technologies Ltd (NST)
Founded in 2008, NST is
an agriculture-directed company with R&D and processing
centers in U.S. and Eastern Europe. It is the creator of
Cropio, a field management system based on satellite
crop-monitoring technology. Using satellite images with
different spectral ranges, the system provides real-time
updates on crop conditions, including vegetation levels and
problem areas.
In addition to field
monitoring and zoning, it offers a variety of field analytics
capabilities as well the ability to design fertilizer
distribution maps and to compose individual recommendations
regarding the amount of nitrogen needed. With mobile
applications for both iOS and Android, the innovative system
notifies the user as soon as any important changes are
detected.
Sensors
Soil, crop, and weather
sensing technologies have been major drivers of agricultural
efficiency. They give farmers unprecedented access to
information on factors affecting the production. Sensor-based
monitoring is key to creating resistant, highly productive
crops.
Innovative sensor
networks provide real-time feedback on crop and site
variables. Modeling software then use this data to determine
the optimal amounts of agricultural inputs in specific
locations and time, including water pressure, fertilizer and
pesticide dispersal, heating and cooling, as well as sunlight
and shading.
Trimble
Headquartered in
Sunnyvale, CA, Trimble offers an array of precision farming
solutions. When it comes to sensors, the company offers two
different versions of the GreenSeeker. The first one is a crop
vigor mapping system that uses optical sensors and complex
agronomic calculations to perform real-time verifications of
the amount of nitrogen available in the soil. This information
is subsequently used to determine the optimum fertilizer
prescription for each area, incorporating field variability in
order to apply the right amount in the right place, at the
right time.
The second solution is a
handheld version of the GreenSeeker which carries optical
sensors that emit brief bursts of red and infrared light, and
then measures the amount of each type of light that is
reflected back at the sensor. GreenSeeker handheld can be used
in combination with Trimble’s Connected Farm Scout application
far smartphones and tablets, which enables users to
geo-reference the targeted location.
Dawn Equipment Company
Sensors can also be used
to improve the performance of agricultural equipment.
Sycamore, Illinois-based Dawn Equipment is the creator of the
X-Sense Down Pressure Sensor, a direct replacement for the
standard depth-adjustment mechanism on John Deere planters.
Traditional gauge wheel
load sensors often register incorrect down force readings due
to their inability to filter the movement of connecting
components on the planter row unit. Dawn’s innovative sensors,
on the contrary, isolate competing mechanical vibrations and
noise thus allowing for much more accurate adjustments.
According to Dawn
President Joe Basset, the goal of the automatic down pressure
solution is to run the lowest possible gauge wheel load while
never planting shallow.
Drones
In August 2015, the
Federal Aviation Administration announced it had approved more
than 1,000 applications for commercial drones under the
so-called “Section 333 exemptions”. The agency’s current rate
of 50 approvals per week is a major increase, given that only
about a dozen companies were cleared to operate drones in the
beginning of 2015.
A 2013 report by the
Association for Unmanned Vehicle Systems International (AUVSI)
estimates that the first decade of commercial drone
integration in the U.S. will generate around $82 billion in
economic impacts.
The agricultural
industry has a lot to gain from drone technology. Used
as strategic surveillance tools, unmanned aerial vehicles
(UAV) can help increase crop yields while reducing the costs
of scouting the fields. In addition to monitoring for
diseases, drone’s spectral imaging enables a more targeted use
of fertilizers, water, and labor. Some even believe that the
use of drones will make food taste better.
Even though prospects
are very positive, a full integration of drone technology
depends on the progress of federal and state regulations.
Farmers should look for vendors that are both compliant with
existing legislation and capable of upgrading operating
software to meet pending location control applications.
Precision Hawk
Headquartered in
Raleigh, NC, UAV manufacturer Precision Hawk provides
end-to-end solutions for aerial data gathering, processing,
and analysis. In addition to carrying a variety of sensors
(visual, multispectral, thermal, etc.), the company’s vehicles
are equipped with proprietary artificial intelligence that
enables in-the-air flight path calculations.
Precision Hawks’
sophisticated algorithms are at the basis of a variety of
groundbreaking drone applications, such as 3D terrain mapping,
plant height and density measurement, weed detection, crop
health indexes, among others.
The company has recently entered a Cooperative Research and
Development Agreement with the Federal Aviation Administration
to advance the research around UAVs across rural areas.
AgPixel
Based in Johnston, IA,
AgPixel gathers a team of remote sensing and geospatial
analysis experts that assist agricultural producers using UAV.
The company’s crop health assessment products are designed to
interpret and visualize data collected by drones.
AgPixel’s solutions
detect and analyze differential reflectance of visible and
near-infrared light from plant leaves, which becomes the basis
for georectified, actionable maps. Plant density, disease
detection, stand counts, classification, and quantification
are a few examples of custom map products available.
Farming Software
Once considered
completely different worlds, farming and IT have become
inseparable. Farm management and data analytics applications
are now indispensable tools to guaranteeing efficiency and
competitiveness of agricultural operations. The following
companies leverage technology to give farmers the insights
they need to make better business decisions.
Conservis
Based in
Minneapolis, MN, Conservis provides farm management software
to help farmers track field activities, manage inventories,
and analyze yields. Conservis’ platform is
specifically tailored for each farmer’s workflow. It provides
real-time management capabilities and allows users to
integrate different functions of their businesses, aggregating
data, and using analytical functions to support decisions.
The company recently
partnered with Santa Ana, California-based Iteris, Inc. to
incorporate decision support analytics into the Conservis
platform. Iteris’ ClearAg is a groundbreaking solution that
combines global, multi-sensor weather analyses, ensemble-based
weather forecasting, customized soil modeling, and a staff of
expert meteorologists.
FarmLogs
Used on a third of U.S.
farms, Ann Arbor, MI based FarmLogs helps farmers “quantify
the variability on their fields” and make better-informed
management decisions. In addition to monitoring crop health,
the platform features an integrated planning tool and an
inventory management tool with complete transaction history.
Using the FarmLogs
application, farms can receive data that is remotely gathered
by sensor and satellite technology, such as rainfall and heat
accumulation. FarmLogs recently unveiled an innovative device
that facilitates data upload by plugging directly into and
automatically feeding the information gathered into the
platform.
The company also
launched an innovative monitoring system that alerts farmers
the exact part of the field that needs attention by comparing
real-time satellite images with those from the last five
years.
AGCO Corporation
Headquartered in Duluth,
GA, agricultural equipment manufacturer AGCO has created an
innovative solution to help farmers collect and use data.
Their idea is to seamlessly connect the entire crop through
total farm data management. This is made possible by an array
of tools including guidance, telematics, and advanced sensors
that create smart, connected machines that can communicate
with farm managers, third party service providers, and each
other.
According to Matt
Rushing, VP of Product Management for AGCO, the so-called Fuse
Technologies are an open-architecture platform that “enables
growers to seamlessly integrate their AGCO equipment with the
trusted service providers and software partners they use.”
AGCO is partnering with
different vendors of farm management software to make sure
farmers have ample choices. Their partnership with DuPont
Pioneer enables users to wirelessly transfer the information
collected through AGCO’s equipment to Pioneer’s Encirca
software.
Weather Analytics
Agriculture is
undoubtedly one of the sectors in which the impact of weather
conditions is the most evident. In addition to determining how
crops grow, the climate also affects the logistics around
harvesting and transportation. Thus, reliable weather forecast
is key to maximizing yields and enhancing productivity.
IBM
Predictive weather
analytics has recently attracted unprecedented attention and
investments. IBM recently announced the acquisition of the
digital businesses, intellectual property, infrastructure, and
data assets of Weather Co., best known for being the owner of
the Weather Channel. The $2 billion deal focused on the
company’s forecasting group, Weather Services International
(WSI). WSI is said to generate over 10 billion weather
forecasts a day.
IBM is not new to the
world of weather analytics. In 1997, the company launched the
“Deep Thunder” project, which led to the creation of a
hyper-local weather-modeling service that uses big data
analysis. The Deep Thunder system uses temperature and
moisture data from on-site sensors, data from the National
Oceanic and Atmospheric Administration, the national
Aeronautics and Space Administration, and the U.S. Geological
Survey, and processes on a supercomputer to create a weather
model. Deep Thunder's accuracy is within a mile and can
predict weather conditions up to three days in advance.
IBM also intends to
build on its cloud computing, analytics, and artificial
intelligence expertise to diversify its weather forecasting.
The company notes that weather is one of the largest big data
opportunities. “That’s something that impacts one-third of the
world’s GGP and in the U.S. alone, accounts for about half a
trillion dollars in impact.”
The Climate Corporation
Monsanto acquired this
San Francisco, CA based startup in 2013 for $930 million. The
acquisition was a strategic move for the agricultural giant
who considers data science to be the industry’s next major
growth frontier, representing a $20 billion revenue
opportunity.
The Climate Corporation,
now a division of Monsanto, is the creator of the Climate
FieldView Platform, a combination of hyper-local weather
monitoring, agronomic modeling, and high-resolution weather
simulations that deliver online and mobile solutions designed
to help farmers enhance productivity through data-driven
decision making.
Irrigation
By 2025, an estimated
1.8 billion people will live in areas plagued by water
scarcity, with at least half of the world's population living
in “water-stressed” regions.
Responsible for 70
percent of all freshwater withdrawals in the globe, the
agricultural sector is directly affected by the ongoing water
crisis. According to the University of California, Davis, the
drought inflicted $1.5 billion in agricultural losses in 2014
alone.
Precision agriculture
technologies promise to help farmers manage, control, and
optimize water usage as a means to adapt to decreasing water
supply. According to the Environmental Protection Agency
(EPA), potential savings from more efficient irrigation
techniques are substantial; “we could save $435 million in
water costs and 120 billion gallons of water across the
country annually from not overwatering lawns and landscapes”.
John Deere
Data collected through
sensor technology can help farmers better manage their
irrigation. John Deere’s Field Connect sensor system, for
instance, can be used to map how water moves through the soil.
The soil moisture profile shows farmers the exact amount of
water that is deep into the soil.
Though traditional
pivots often place water on the surface, they do not
necessarily get moisture where it needs to be. Sensor systems
allow users to assess the effectiveness of their pivots and
monitor their water use.
Netafim
The use of recycled
water for irrigation is a valuable strategy to help farmers
overcome water shortage. Netafim, an Israeli provider of
smart irrigation solutions, is a leader in treated wastewater
usage for drip irrigation.
The company developed
the Bioline subsurface dripline for wastewater drip dispersal
applications. The innovative system releases recycled water
below the ground, preventing the surfacing of effluents,
restricting potential contaminations, and avoiding unwanted
odors. Netafim also provides the filters, valves, air vents,
and flow meters necessary for wastewater treatment.
The company argues that
using treated wastewater for crop cultivation not only ensures
food security but also brings agronomic and environmental
advantages since recycled water carries nutrients and organic
matter that benefit the soil.
Robotics
According to a 2012
study by the California Farm Bureau, 71 percent of
labor-intensive specialty crops suffered from labor shortage
and 20 percent were unable to finish their harvest. In this
scenario of workforce scarcity, the agricultural industry is
turning towards robotics.
Automated harvesting and
packaging solutions can be the source of major productivity
gains. The ability to harvest at all hours as well as to
cover more ground in less time can be a game changer in
labor-intensive farms, such as those growing fruit and
vegetables. Using robotic automation is particularly important
for farmers struggling with drought as robots can offset the
higher costs of irrigation.
In addition to robotic
pickers and packers, autonomous ground vehicles (AGV) have
gained increasing attention. With a wide variety of
applications, such as fertilizing, seeding, weed removing, and
crop spraying, these robotic systems deliver unprecedented
accuracy. Besides cutting labor costs, higher speeds and
reduced overlaps enable savings in fuel, seed, and chemicals.
Recent developments in
AGV technology include navigation systems for autonomous
tractors. Created by Autonomous Tractor Corporation
(ATC), the AutoDrive is an interesting example which relies on
a proprietary Laser-Radio Navigation System (LRNS) for
sub-inch positioning data and uses artificial intelligence to
allow farmers to “train” the tractor - no programming skills
necessary.
Machine vision systems
are a key element in many of the farming automation solutions
currently available. Generally used for navigation and
targeting, imaging techniques vary, however, according to the
specific task to be performed. In fruit picking, for example,
color is one of the most important aspects to be considered as
it indicates the degree of ripeness. 3D vision is also
necessary to help determine the fruit’s exact size and
position.
Agricultural robotics
has experienced major advances in recent years. The following
table lists some of the innovative solutions currently on the
market:
Conclusion
Equipped with
cutting-edge technology, farmers are reinventing the world’s
oldest industry. Sensors, satellite imagery, drones, and
robots are just a few examples of innovative tools that can
optimize farm operations while reducing costs and
environmental impacts. Federal and state R&D tax credits
are available for those investing in precision farming and
agricultural automation activities.
