December 3, 2012
If you considered irrigation three or four years ago and decided you couldn’t afford it, now might be a good time to take another look.
Not only is irrigation a way to add profit to your operation, but it’s also one of the best methods for reducing the inherent risks of farming, says Max Runge, Auburn University Extension economist.
“There has been more interest in irrigation in the past couple of years because commodity prices are higher, but on the flip side of that, the costs of production also have gone up, meaning that risks have increased,” says Runge.
Not only can producers reduce their risks, but agricultural lenders can do the same, and that’s why bankers are just as interested in irrigation as growers, he says.
“If producers considered irrigation in the past and decided they couldn’t afford it, they might want to look again,” advises Runge.
“Commodity prices have a lot to do with whether or not a farmer can afford irrigation, and they also must consider how much of a loss they could stand if they didn’t have irrigation.”
Increased commodity prices necessitate more intensive management on the part of farmers, he adds.
“Back when soybeans were $6 and corn was $2, you might put out seed and spray one time, and there wasn’t a lot of room for management because it just didn’t pay.
“But current commodity prices make it more worthwhile to manage a crop. It’s been said before — making a profit is neither easy nor cheap, but it’s well worth it,” says Runge.
Things to consider
A farmer who is considering installing irrigation needs to take stock of his or her current situation, he says.
“A 65-year-old farmer who is thinking of retiring in two years probably won’t consider irrigation unless he’s passing the farm down to an heir.
“Producers also need to factor in the shapes and sizes of fields, what they’re currently growing, and their water resources. That last factor is extremely important because if there’s no source for water, then there’s no reason to be looking at irrigation.”
Utilities are another important consideration, says Runge. “Irrigation has to be powered by something — either electricity or diesel. If fields are three or four miles from a power line, then it’s not feasible to think about an electric-powered system.”
As for installing irrigation, a grower should expect to spend roughly $1,000 per acre, he says. “That equates to about $100 per year per acre in fixed costs, and there also will be some variable costs to consider.
“We usually talk in terms of 10 to 12 years for payback, but some producers are seeing that they can pay it off sooner, in five to seven years. The payback will be fairly quick with most systems, especially with good commodity prices.”
It’s difficult, says Runge, to put an exact number on how much more yield can be expected from irrigation.
“However, with corn, you probably should expect 100 to 150 bushels more per acre, 25 to 40 bushels per acre from soybeans, and 300 to 450 pounds more from irrigated cotton.
“So if you look at those averages — 125 extra bushels of corn, 32 bushels of soybeans, and 375 extra pounds of cotton, you can more than pay for your irrigation.”
At today’s prices, adding an extra 33 bushels of corn would pay for irrigation, says Runge.
“You would have no problem paying that $100 fixed cost and the variable costs that go with it. Soybeans would need to net you only an extra 14 bushels, and with cotton, if your gain was about 250 pounds, you could pay for irrigation.”
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