Texas A&M economist advises analyze costs, returns of going no-till John Robinson, associate professor and Extension economist at Texas Agricultural Extension Service in Weslaco, knows that farmers will convert to a new system only if it will be profitable for them.
To make it easier for farmers to decide whether changing to conservation tillage is economically justified, Robinson has developed an equipment cost calculator they can use to analyze their own figures.
In an example, Robinson uses middle-of-the-road equipment options to convert two eight-row planters to a reduced tillage system on a 1,000-acre farm.
For trash cleaners, he chooses Martin Residue Fingers, at $225 per row, for a total of $3,600. He uses two Yetter Wheels per row at $65 per row for a total of $1,040 and a $5,800 hooded sprayer for herbicide application.
The total of all new equipment is $10,440, from which he subtracts the money made on selling the surplus tillage equipment, using the figure $1,500.
If a producer generates $2,358 in savings each year for five years across the whole 1,000 acres, he can justify spending $10,440 as an up-front investment. If the money is borrowed, he must add additional cash flow effects related to interest, depreciation and taxes.
Robertson demonstrates how converting to reduced tillage can result in an annual savings of at least $2,358 per year. He also considers "a 10 percent discount rate for future savings," explaining that farmers would use it to "discount" the $2,358 annual savings over the next five years into a single "present value" of $8,940 ($10,440 less $1,500), which offsets the up-front investment cost (the break-even point).
Put another way, having $8,940 today and investing it at 10 percent would provide the same amount of money as getting $2,358 per year for the next five years.
The answer for an individual farmer comes down to how much the savings in equipment, fixed costs, diesel, labor and repairs with conventional tillage outweigh the increased herbicide costs necessary with a reduced tillage system.
Robinson encourages farmers who are considering converting to a minimum tillage operation to contact him to get a spreadsheet version of the graph at no cost where they can put in their own numbers. He can be reached by e-mail at [email protected], by writing him at Texas A & M Research and Extension Center, 2401 East Highway 83, Weslaco, TX, 78596, or calling him at 956-968-5581.