Does Center Pivot Irrigation Pay $$$?
Without getting into the numbers on thousands of scenarios, I will provide a general overview and break it down to answer your question… Will Center Pivot Irrigation Pay on My Farm?
Every farm is different including the strengths and weaknesses of the management, the available resources, and the goals. I’ve got a few questions that will probably help to decide if you are in a position to invest and improve crop performance on your farm with irrigation.
Are your typical yields greater than or equal to your state or county averages?
Do you have access to capital that, given a reasonable return you can pay back or replace in 10 years or less?
Does your management team have the capacity to manage another input source on your farm?
Are you setting yield goals for crops by field and providing inputs to match?
Do you have yield losses from lack of moisture over a 5-year period?
Are you willing to consider new crops that could have a greater impact on your bottom line with proper management and markets for those crops?
Do you have at least a portion of your fields that are 40 acres or more and relatively compatible with pivot coverage?
If you can answer yes to 3 or more of these questions, odds are a well-designed irrigation system will benefit your farm and improve your bottom line. The first thing you need to do is determine if you have a water source available and if access will be granted by the powers that control it. In Michigan that is EGLE. (Michigan Valley Irrigation would be happy to handle a water withdrawal request with EGLE in our area on your behalf.)
Crops take water and have specific demands throughout the growing season.
Source: https://www.mississippi-crops.com/2015/07/10/when-is-the-corn-crop-made/
Nearly every season there is a period when the crop demand is greater than what mother nature provides. Often this occurs when the yield set is being determined. If this shortfall occurs when the available soil moisture is inadequate, yield is lost. If your soils are courser with less holding capacity, this can be more severe. Well planned irrigation cycles can prevent this yield loss. Less crop stress from lack of moisture resulting in better yields is one important way irrigation benefits your farm. Growers routinely see a 25 to 50% increase over non-irrigated crops.
If markets are present in your area for specialty crops, pivots can open that door. These crops can generate a higher return per acre, but many contracts are only available with irrigated acres. They often take more management, but good managers can be rewarded. Potatoes and other vegetables along with seed corn markets have provided numerous opportunities for growers in Michigan.
Center pivots can also be used to apply fertilizers, insecticides, and fungicides in a timely fashion throughout the growing season without adding trips through or over the field by tractors, sprayers and airplanes.
Timely water applications, producing higher value crops and more efficient fertilizer and crop protectant applications are three ways a center pivot system can improve your cash flow.
From an investment perspective center pivot systems can add value which is hard to beat over many other farm assets. Well-designed systems will generally add 100% of the cost directly to your property value. Most other structures and equipment are immediately worth less than the cost. They also depreciate over time. Valley center pivots in Michigan typically last 40 years or more. Halfway through, with new equipment costs rising, they are worth what you paid. Because they are depreciable as equipment and they last so long, they make a great estate planning tool helping your next generation with a strong balance sheet and you get the tax benefits. Consider the cost to acquire more land vs growing your yield potential with your owned acres. If you estimated $3000 per acre to add irrigation with a significant yield bump as opposed to acquiring more land at $_____ per acre and more miles and acres to fit, plant, spray and harvest, what is your choice?
Value holding capacity. If the day comes that you decide to slow down and rent your ground, irrigated acres will demand higher rental rates. If the kids don’t take over and you want to sell, your property will be worth more with irrigated acres.
Center pivot irrigation can add value to your farming operation by improving cash flow with predictable better yields. These investments hold their value well and open opportunities for new higher value crops. They are a sound investment alternative both now and if you decide to slow down or exit the industry. They can also be a nice addition to your estate plan. Some additional management is required, are you up to the challenge? In addition to talking to an experienced, well established irrigation dealer, I highly recommend you talk to a neighbor who has been irrigating for several years.
ABOUT THE AUTHOR
Pete is the marketing manager for Michigan Valley Irrigation, having joined the company in 2016. He was raised on a dairy farm in western New York and graduated from Cornell University with a B.S. in agricultural economics. His entire working career of over 37 years has been involved in agriculture. A farmer helping farmers. When away from Michigan Valley he operates, Joyful Noise Farm, a small livestock and produce farm and spends time with his family.
