Every farmer — or businessperson — knows the importance of measuring their Return On Investment (ROI). How much money are you putting in? How much are you getting back out?
But on the farm, it can be helpful to drill down even more specifically into your ROI. Beyond just monitoring overall profitability of your operation, it’s helpful to measure ROI by acre. Or, you can measure ROI of specific management practices, like a fertigation system.
When you know which metrics to keep an eye on, and how to best monitor practice-specific ROI, you can make even better, data-backed decisions. Maximum profitability is the natural extension from those decisions.
How to measure return on investment in agriculture
At its most basic level, to measure ROI, you’ll need to:
Take your net income from an investment
Divide it by the cost of an investment
Multiply by 100 for ROI percentage
This general principle can be applied in any industry. But on a farm, there are other ways to measure the return you get from an investment. Particularly with fertigation systems, here are a few metrics you should keep an eye on to evaluate your ROI after setting up fertigation equipment:
Nitrogen Use Efficiency
Nitrogen use efficiency, or NUE, is the ratio of nitrogen uptake in a crop, compared to the total nitrogen available to the crop on a given acre. Although other metrics like Nitrogen Nutrition Index have become more common in recent years, NUE is still the predominant benchmark for determining how well a plant is uptaking nitrogen for biomass and grain production.
Put simply, fertigation can optimize your nitrogen usage. A fertigation system applies nutrients when, where, and how crops need them, making them immediately available to crops which maximizes uptake efficiency. This leads to less runoff, leaching, and waste — and a better NUE figure.
And when you can improve your NUE, it can translate to money saved…
Input savings (dollars saved per acre)
Less wasted nitrogen means less nitrogen you’ll have to buy. And with the way nitrogen (and other fertilizer) prices have been over the past couple years, any pound you can save can translate to massive dollar savings.
With a tool like N-Time™, you can also ensure you fertigate at the right time and use the right amount of fertilizer when you fertigate. N-Time™ satellite image-based fertigation scheduling recommendations help you prevent unnecessary applications, which means you can cut back on nitrogen purchases. Even if N-Time™ software could help you avoid one additional pass on your fields, avoiding that unnecessary application could save you hundreds of dollars, depending on acreage.
Profitability (percentage increase or decrease)
Of course, ROI still focuses on profitability. And it’s a metric you should monitor closely after adopting fertigation and installing a fertigation system. As you improve your nitrogen efficiency and save on your input bills, overall profitability will trend upwards too.
Instead of simply measuring ROI each year and forgetting about it, measure the percentage of change in your profitability from growing cycle to growing cycle. This can help you ensure you’re headed in the right direction long-term.
How long until you see ROI on a fertigation system?
A fertigation system is certainly a sizable up-front investment. There are several pieces of equipment you’ll need to buy and install. If you invest in fertigation equipment and get the system running in March, you’re probably not going to see immediate, big-picture ROI in April.
However, it’s an investment that will pay off in the long run. Patience is key. According to Farmers Business Network, reducing fertilizers can lead to up to $50/acre in savings per year over five years.
Data from N-Time™ users tracks with that figure. Those who have optimized their nitrogen applications through N-Time™ software and a fertigation system can save on average $40/acre yearly.
To demonstrate the ROI for fertigation more specifically, we’ve broken down the payback period for a constant-rate fertigation pump. (Spoiler alert, it’s not long!)
One of the main components of a fertigation system is an injection pump. Pumps can seem costly (a few thousand dollars each) but the savings make the hardware worth it.
For example, a constant rate pump costs roughly $3,250. With an N-time™ subscription, a farmer can save 40 pounds of nitrogen per acre – savings of $37.19 per acre (depending on N prices at the time of purchase). Or, just over $5,000 for a quarter section. At those numbers, a farmer who buys a constant-rate pump and saves 40 lbs per acre with N-time™ is $772.81 ahead in the first year.
How fertigation can augment investments you’ve already made
When it comes to capital investments like a fertigation system, it’s also helpful to think about the ripple effect of that investment. Over how many acres is that capital investment distributed? What other capital investments does it save? What capital investments does it amplify?
Having a chemigation or fertigation system in place could keep you from having to invest in a sprayer or high clearance applicator, for example. It could also help amplify the investment you’ve already made in your irrigation system and in higher-yielding hybrids that demand more nitrogen during grain fill.
Beyond profitability: How a fertigation system gives you an ROI on time saved and yield
As someone who spends hours in your fields every day, you know that time is money. That’s why it’s also important to measure your capital investment ROI in terms of labor and time savings: not just dollar amounts. There may not be as clear-cut metrics to keep track of these pieces. But they can be just as meaningful to your operation.
What are the advantages of fertigation? Well, ROI can look like dollars saved, but also hours saved on manually applying fertilizer.
When you can rely on your irrigation system to make applications, you don’t have to use your farm equipment — and crucially, your own labor — to apply fertilizer. While that irrigation system is doing the work for you, you can spend your time on other tasks around the farm, with family, or doing things you love.
Another benefit of fertigation that isn’t as easily calculated into ROI — but should still be considered — is how the practice can positively impact yield. Fertigation helps growers provide crops with the correct amount of nitrogen to produce high yields. For example, if a large rain event pushes applied nitrogen away from the plant’s root zone, fertigation can help the farmer correct a nitrogen deficiency later in the season when other machinery cannot.
Not only can fertigation reduce risk of a poor harvest, but it increases the likelihood of a successful one.
How do you calculate fertilizer for fertigation? With technology like N-Time™, you can even create digital prescriptions to automate fertigation applications through your irrigation controller or digitally-controlled pump.
If you’re curious how N-Time™ can bump up your operation’s ROI, reach out today.
Another real-world example of ROI from fertigation:
Another pump option for growers implementing fertigation is a digitally controlled fertigation pump, which allows them to practice Variable Rate Fertigation (VRF). Digitally controlled pumps are more costly, but they can vary the chemical injection rate to compensate for changes in water flow rate through the irrigation system. For example, this could happen when a corner arm or end gun turns on. The pumps can also be programmed to apply chemicals at higher or lower rates for different parts of the field.
At the time of writing, Nitrogen fertilizer is $595 per ton. If a farmer is able to save 40 lbs/ac of N using Sentinel Fertigation’s N-Time™ platform with a VRF pump, the system will pay itself back in three years and three months.
Here’s how we got there. By saving 40 lbs of N per acre, the farmer saves over $5,000 per year. The up-front cost of the pump (conservatively factored in at $14,000 in this scenario) the first year, plus the subscription cost of N-Time™, is much smaller over a few years compared to the nitrogen savings. This means that by year four, the grower would benefit $3,043.75 by using a digitally controlled fertigation pump paired with N-Time™ over non-sensor based fertigation methods.
The graph below plots the costs of the pump and Sentinel Fertigation’s N-Time™ platform, as well as the nitrogen savings from using the N-Time™ platform. Between year three and four, the total flips from negative to positive, correlating to a payback period of three years and three months.
After five years, the total benefit to the farmer is $7,051.56. Over the course of five years, with $18,050 spent on a digitally controlled fertigation pump and N-Time™ platform, growers could save over $25,000 on N fertilizer. These savings result in a 131.9% ROI and more environmentally friendly use of N fertilizer.
Contact us today to get started with N-Time™ today.