Unleashing Broadband on Rural America Leads to Nearly $65 Billion in Economic Benefits Annually
Market Intel / June 17, 2019
According to USDA’s “A Case for Rural Broadband,” if access to broadband and adoption of digital agricultural technologies matched producer demand, U.S. agriculture would realize benefits amounting to nearly 18% of total U.S. market production, or $64.5 billion annually, based on 2017 levels. The report, published by the American Broadband Initiative, analyzes the possible economic benefits of bringing e-connectivity to the heartland and, more importantly, what needs to be done to make it happen.
From the way producers store and ship commodities to the way consumers purchase their food, the introduction and widespread usage of the household refrigerator has irrevocably changed the food supply chain system. A similar shift is upon us with the advent of digital technology and next generation precision agriculture, resulting in ever-increasing productivity with fewer inputs, better market access and healthier rural communities. Just as electricity allowed for refrigeration, to realize the benefits of this new digital technology, high-speed broadband service must be available everywhere.
The highest rate of adoption for precision technology used to improve yields and reduce costs is in the already highly mechanized row crop sector. USDA estimates connected technologies in row crops could result in a $13.1 billion gross benefit annually from next generation precision ag. Technology for improved planning, such as microclimate modeling, yield monitoring and precision seeding, is estimated to have a combined potential annual gross benefit of $4.2 billion, with $1.1 billion attributable to access to broadband services. On the production side of new technologies, the potential is even greater at $6.7 billion in possible benefits derived from precision agriculture, with $2.5 billion attributable to broadband. With an average dependence of 34% on broadband services to utilize these new technologies, the key to unlocking these significant gains is full deployment and adoption of broadband infrastructure. Figure 1 outlines the potential benefits for row crop production and planning technology compared to the potential attributable to broadband with the percent of technology dependent on broadband.
Like row crop growers, specialty crop farmers could also see major gains with the adoption of new production and planning technology. Total annual benefits for next generation precision ag for specialty crops is estimated at $13.3 billion. With a possible increase of $8.5 billion, market coordination efforts will likely get the biggest boost from the adoption of digital technologies. Of the new opportunities in market coordination, direct-to-consumer sales are estimated to post a potential annual gross benefit of $6.4 billion, with $3.2 billion in potential attributable to broadband. Specialty crop producers can shorten the supply chain by utilizing digital platforms. USDA estimates a revenue increase of 50% per unit of apples, 649% per unit of salad mix and 183% per unit of blueberries. Figure 2 illustrates the breakdown of potential financial benefits from next generation precision ag and the amount attributable to access to broadband services.
Livestock and Dairy
According to the USDA's estimates, the livestock and dairy sectors are poised to benefit the most from next generation precision ag, with annual potential gross benefits totaling $20.6 billion. The majority of estimated benefits come from the production side and are focused on increased efficiency of animal care. Utilizing Bluetooth technology, animal wearables transmit general health data directly to the producer, resulting in a 15% reduction in medication per animal, as well as a shortening of the cattle finishing process by four to six weeks. Technological advances in general health monitoring alone are estimated to generate $8.8 billion in annual gross benefits. Unsurprisingly, as poised as producers in the livestock and dairy sectors are to reap enormous benefits from next generation precision ag, they are also the most dependent on reliable high-speed broadband to enable new technological advancements. Figure 3 outlines the potential benefits for livestock and dairy compared to the potential attributable to broadband along with the percent of technology dependent on broadband.
Strategies for Action
As with electricity, the dawn of digital technology has brought an unimaginable amount of change to every aspect of our lives. Precision agriculture has led to 7.5% fewer people at risk of going hungry in developing countries and an up to 80% reduction in the application of crop protection tools. However, while new technology is able to inform and improve business decision making, without widespread adoption of next generation precision agriculture tools and access to broadband infrastructure, these benefits cannot be realized.
USDA has outlined key priorities for strategic action planning involving improved broadband deployment, incentivizing innovative technologies and creating environments for innovation, strategic funding and communication. To bring broadband services to even the most remote areas, public and private entities must work closely with communities to determine specific needs and challenges. Reducing barriers in federal processes to access government assets is one of the cornerstones of the American Broadband Initiative and continues to be a focus at the federal level. The task of actualizing broadband infrastructure relies on funding for deployment as well as for new innovations that can lead to long-term successes for the entire sector.
USDA’s report puts the hypothesized potential benefits that broadband technology and infrastructure could bring to rural areas at $64.5 billion annually. Increasing the availability of broadband to all of rural America, coupled with increased precision agriculture adoption are estimated to increase the gross economic benefits to row crop agriculture by 4%, adding up to $5.9 billion, increasing 19% for specialty crops, or up to $8.6 billion, and 7%, or up to $23 billion, for livestock.
One limitation of the report is it does not incorporate the implementation costs, which will inevitably be incurred by rural residents, service providers and/or state and federal governments. As such, this report should be seen as a tool to illustrate the potential of broadband technology, rather than the only source for future investment-related decision-making.
USDA leaves us with this call to action - spread the word. For the full economic benefits of high-speed broadband to be realized throughout rural areas, adoption rates of precision agriculture tools and next generation technology must be much higher. All potential benefits are estimations based on rigorous research; however, producers must perform their own cost-benefit analysis to see where these emerging technologies fit in their operations.