Economic Analysis of Pesticide Application Equipment
Farm Business Management Update, October 2001
By Bill Whittle
An economic analysis of pesticide application equipment assists producers in determining the feasibility of equipment ownership versus hiring a commercial applicator. Numerous application systems are available including pull-type units, 3-point hitch units, pickup truck units, and even self- propelled Hy-Boy spray rigs. However, in the Shenandoah Valley, the systems are often limited by size of fields and total acres owned. In this analysis two systems were reviewed. Both were pull-type units with one a 300-gallon basic model and the other a 500-gallon deluxe model. The 500-gallon rig requires a heavier duty frame, pump, etc. with the anticipation that it will be covering more acreage each year.
Table 1: Description of pull-type spray units
|Items||300 Gallon Basic||500 Gallon Deluxe|
|Trailer Frame||Single Axle||Single Axle - Heavy duty|
|Tires||11 x 15||Big wheel tires|
|Pump||Belt Drive Pump||Diaphragm Pump with Constant Velocity|
|Boom||30 feet||50 feet|
|Nozzle Tips (Yearly Replacement)||19 Nozzles||31 Nozzles|
The assumptions used for the typical tractor selected to pull these units were
Costs include the variable and fixed costs of operating the pesticide application equipment. Variable costs included fuel, oil and filter, repairs, maintenance, labor for the actual spraying operation, and nozzles. Fixed costs included depreciation, interest, housing, and insurance. Tables 2 and 3 for a 300-Gallon Basic Spray Rig and a 500-Gallon Deluxe Spray Rig, respectively, show the variable and fixed costs over different acreage.
Nozzles for the initial factory setup were valued at $7.00 per nozzle. Nozzles in subsequent years were priced at $4.00 per nozzle. One set of nozzles was used on the first 600 acres per year and a second set was installed for operations over 600 acres.
Though an integral part of proper maintenance and operation of spray equipment, the labor for yearly calibration and end of the season clean up was not included in variable costs. One can assume that on an efficient operation, the 65% efficiency value used in the calculation of the spraying operations variable costs would account for these necessary tasks. On inefficient operations the extra labor required would increase the variable cost per acre above what is stated in the tables.
Table 2: Estimated Cost per Acre with a 300-Gallon Basic Spray Rig and Tractor
|200 Acres||300 Acres||400 Acres||500 Acres||600 Acres|
|Spray Rig Variable Cost||$ 0.44||$ 0.32||$ 0.27||$ 0.23||$ 0.22|
|Spray Rig Fixed Cost||$ 9.66||$ 6.44||$ 4.83||$ 3.87||$ 3.22|
|Total Cost of Spray Rig||$10.10||$ 6.76||$ 5.10||$ 4.10||$ 3.44|
|Tractor Variable Cost||$ 1.53||$ 1.53||$ 1.53||$ 1.53||$ 1.53|
|Tractor Fixed Cost||$ 0.21||$ 0.21||$ 0.21||$ 0.21||$ 0.21|
|Total Cost of Tractor||$ 1.74||$ 1.74||$ 1.74||$ 1.74||$ 1.74|
|Total All Variable Costs||$ 1.97||$ 1.85||$ 1.80||$ 1.76||$ 1.75|
|Total All Fixed Costs||$ 9.87||$ 6.66||$ 5.04||$ 4.08||$ 3.43|
|Total Operation Costs||$11.84||$ 8.51||$ 6.84||$ 5.84||$ 5.18|
Table 3: Estimated Cost per Acre with a 500-Gallon Deluxe Spray Rig and Tractor
|200 Acres||300 Acres||400 Acres||500 Acres||600 Acres||800 Acres||1000 Acres|
|Spray Rig Variable Cost||$ 0.69||$ 0.49||$ 0.40||$ 0.34||$ 0.31||$ 0.42||$ 0.37|
|Spray Rig Fixed Cost||$20.63||$13.80||$10.34||$ 8.27||$ 6.89||$ 5.16||$ 4.13|
|Total Cost of Spray Rig||$21.32||$14.29||$10.74||$ 8.61||$ 7.20||$ 5.58||$ 4.50|
|Tractor Variable Cost||$ 0.92||$ 0.92||$ 0.92||$ 0.92||$ 0.92||$ 0.92||$ 0.92|
|Tractor Fixed Cost||$ 0.13||$ 0.13||$ 0.13||$ 0.13||$ 0.13||$ 0.13||$ 0.13|
|Total Cost of Tractor||$ 1.05||$ 1.05||$ 1.05||$ 1.05||$ 1.05||$ 1.05||$ 1.05|
|Total Operation Variable Costs||$ 1.61||$ 1.41||$ 1.32||$ 1.26||$ 1.23||$ 1.34||$ 1.29|
|Total Operation Fixed Costs||$20.76||$13.92||$10.47||$ 8.40||$ 7.02||$ 5.29||$ 4.26|
|Total Operation Costs||$22.37||$15.33||$11.79||$ 9.66||$ 8.25||$ 6.63||$ 5.55|
As you evaluate the ownership decision based on the estimates in these tables, you would need to spray 500-600 acres with the 300-gallon rig or 1,000+ acres with the 500-gallon rig to be competitive with current custom spraying charges. This acreage could be a combination of multiple sprays on the same acreage as is customary in peanut country or one trip over more acreage. The need to cover more acreage could be accomplished by two or more farms purchasing and maintaining the equipment together. Another method to reduce the high fixed cost of spray rig ownership is to purchase used equipment with a lower purchase price. However, the tradeoff is that the variable cost of repairs and maintenance are often increased dramatically.
The following are other decision considerations for ownership versus custom application:
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