New world farming and the impact for accountants

Since the dawn of agriculture, farmers have relied on their senses to help them cultivate the land, from examining crops for signs of blight to grabbing a handful of soil to assess moisture levels.

But, as technology becomes more sophisticated, human senses are being replaced by sensors. The Internet of Things (IoT) – a new class of web-connected devices – is increasingly making its way into the fields.

Equipment manufacturer John Deere has been working on connected farming for more than two decades. In the mid-1990s, it became one of the first firms to use GPS to steer a tractor automatically.

Precision agriculture

Today, agricultural technologies, or “agri-tech” is a booming industry. It’s quickly becoming normal for machines to be equipped with sensors that can improve the efficiency of farm operations, from seeding to spraying. John Deere, for example, now sells devices capable of providing information on soil moisture levels and the type of crop being harvested. It also offers a suite of apps and tools to allow farmers to view the data they gather and evaluate performance.

“Historically, agriculture has been seen as a relatively low-tech sector,” says Brian Harvey, a partner in the Agricultural Services team at chartered accountancy firm Francis Clark. “But over the last few years, there has been a huge amount of technology introduced in the spreading of seed and fertiliser. Effectively, some of the larger tractors and combine harvesters are now very sophisticated pieces of computer equipment.”

The revolution in agricultural technology is also taking place inside barns and milking sheds. A number of firms, including Afimilk and Dairymaster, produce collars for cows which gather data on animal health and reproductive cycles. The devices then transmit the information to a farmer’s computer or mobile device so that optimum breeding patterns can be calculated.

Another technology the dairy industry is embracing is robotic milking systems. These machines identify animals by their ear tags and automatically milk them as they move along a queue. If a cow has been processed too recently, an electronic gate will herd it away. In 2015, the BBC reported that robotic milkers already accounted for roughly 30 percent of new systems being purchased.

The integration of cutting-edge technologies comes as farmers worldwide look to optimise their crop yields through a practice known as ‘precision agriculture’. The United Nations Food and Agriculture Organisation estimates that global food production must increase by 70 percent by 2050 to keep pace with population growth. To achieve this goal, farmers need better data to ensure efficiency in planting, managing and harvesting crops.

Forecasting farm incomes

CEMA, the European trade association for agricultural machinery developers, estimates that 70 to 80 percent of new equipment sold today includes precision farming components. However, UK farmers contemplating an investment in high-tech machinery should ensure their purchase is viable, especially as farm incomes are forecast to fall further across the EU this year.

“The last few years have been tough for farmers with most commodity prices being below where you would want them to be,” Harvey explains. “That’s had a big impact on turnover, margins and bottom line profits. Therefore, investment in such expensive equipment needs to be carefully considered and generate significant return on investment.”

Robotic milking units and combine harvesters equipped with soil sensors don’t come cheap. Fortunately, the value of machinery can be deducted from a farm’s profits before tax. “Any of these pieces of heavy equipment would qualify for your standard annual investment allowance,” Harvey explains. “It can be an efficient way of mitigating tax if the timing is right.”

Despite the potential for automation, agri-tech isn’t about making farmers’ knowledge obsolete. Instead it’s about improving the efficiency and profitability of their businesses. Accountants can’t tell their clients what equipment they ought to buy, but they can advise them on when purchases make sense financially.

“As long as they are generating a return on investment, whether that is saving time, money or both, then these type of technologies will prevail,” Harvey says. “Those farmers who continue to use old techniques and do not embrace new technology may be left behind.”

Agricultural businesses should also make use of cloud-based accounting software to keep track of their farm’s income and expenditure. Having a real-time insight into their finances makes it easier for their accountants to advise them.

“We’re a strong advocate of using the best technology available in terms of bookkeeping and management accounting,” Harvey says. “That allows us to be much more of an adviser to the business so that we can see what their accounts are looking like on a monthly basis.”

Accountants can help but it’s down to farmers to determine when investing in cutting-edge agri-tech equipment makes sense for their bottom line. A sensor-enabled combine harvester might be gathering the crops sown by a self-driving tractor, but in the end, it’s the farmer who reaps the benefits.

Jesse Onslow Norton is a writer, editor and communications consultant at Flibl. A former coder, his editorial work focuses on fintech, digital transformation, policy and regulation. His clients include corporations, governments, startups and SMEs from across the world. Follow him on Twitter @JesseOnslow.

Related articles