Monday, May 9, 2016

What does manure application cost?

What's it going to cost me? This seems to be a popular question these days, whether it be someone looking to compare different application systems (like tanks to umbilical systems) or just trying to figure out the value manure might have in their farming operation, determining costs are critical to developing the best manure plan for your farm. I won’t pretend to have all the answers, but what I do have is some data from 41 commercial manure application business provided us in the Fall of 2013 in response to a survey (three long years ago already so it might be time to start thinking about updating that) and a quick and dirty cost estimation technique.

So a few years back we asked commercial manure applicators in Iowa what they were charging to apply liquid manure (it could have been with an umbilical system, it could be with tanks I didn't ask what method they were using) and how that price varied with some different hauling distance. We have 41 business reply with responses (my best guess is there are around 550 commercial manure application businesses in Iowa, at least that is how many are currently certified). Fewer companies did give responses for the further distances - our response rate was: 1 mile, 41 responses; 1-3 miles, 38 responses; 3-5 miles, 25 responses; 5-10 miles, 11 responses, and greater than 10 miles, 4 responses). Within each distance category I calculated the average application price and standard deviation of the price.

The results indicated that at one mile the average price was $0.013 per gallon of manure applied. A regression equation fit the data well indicating that the manure application cost was about $0.01 per gallon and indicate that there would be a cost of about $0.0035 per gallon per mile the manure is hauled. Although this pattern generally held true there was greater variability in price at greater transport distances. A few comments, remember, these are approximate prices, actual price is also dependent on farm characteristics (application rate, travel path to the field, etc.), as well as the hauling equipment used.

Figure 1. Estimated manure application cost as a function of transport distance. Error bars represent the standard deviation in reported price.

An important question we can ask is what should we expect the relationship between hauling distance and cost look like? Another way of answering this question is to perform a 1st order estimate of costs. I take a bit of time and came up with some of my best estimates of what it would cost. Scouring on-line I found a 5250-gallon manure tank for sale for $40,000 that I estimated I could get 5-years of use from, giving an annual investment (assuming 4% interest) of $8985. Assuming I’m applying about 1.5 million gallons a year (right around 300 spreader loads) this would be somewhere around $0.006 per gallon of manure in capital expense. The next step is to estimate some operating expenses. In this case I’m going to estimate about $50 an hour for fuel and lubricant costs for the tractor and $15 an hour in labor costs. The better you can estimate these numbers, the more accurate your price estimate will be.

I then went about figuring out how different hauling distances would change my productivity, i.e., the flow rate I could achieve with this tanker at different hauling distances. To get an estimate of operating costs I assumed it would be 4 minutes to position the spreader at the loading platform, 8 minutes for loading, and 8 minutes to unload in the field. Travel time to and from the field accounts for the remaining time; to calculate travel time I assumed a speed of 8 minutes per mile. If you use these assumptions and plot the cost of manure application as a function of transport distance you get a roughly the cost function that we found empirically from our survey. Again note, that these estimates of loading, travel, and emptying time can have a big input on cost; the number I chose are a good first estimate but should be tailored to your equipment for a better estimate.

Figure 2. Calculated manure application cost as a function of transport distance based on the above example.