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
Tank	Polyethylene	Polyethylene
Trailer Frame	Single Axle	Single Axle - Heavy duty
Tires	11 x 15	Big wheel tires
Pump	Belt Drive Pump	Diaphragm Pump with Constant Velocity
Controls	Manual	Electric
Boom	30 feet	50 feet
Foam Marker	Yes	Yes
Hand Gun	Yes	Yes
Factory Setup	Yes	Yes
Nozzle Tips (Yearly Replacement)	19 Nozzles	31 Nozzles
TYPICAL COST	$5,170	$11,083

The assumptions used for the typical tractor selected to pull these units were

1. 70 horsepower tractor
2. 12 years old
3. Purchased new for $27,100
4. Used 300 hours per year
5. Average Speed for spray application of 4.5 mph.
6. Two eight-hour days at $8.00 per hour for yearly calibration and clean up would add $0.64 per acre for 200 acres and $0.13 per acre for 1000 acres.

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:

1. Availability of a properly sized tractor to pull the spray rig;
2. Availability of management's time and labor for calibration and actual spraying;
3. Type of crops to be sprayed, number of acres of crops, and expected number of applications of pesticide per crop;
4. Availability and cost of Custom Pesticide Applicators;
5. Quality of work and your level of trust in custom applicators;
6. The liability associated with in-house application versus custom application;
7. Availability and cost of pesticides;
8. Adequate storage facilities for leftover pesticide;
9. Possible new regulations that may affect the cost of farmer application such as approved mixing and loading stations and storage facilities.

Contact the author at wwhittle@vt.edu

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