MSU Extension Irrigation

Corner Arm System Example

Estimating Annual Irrigation Operation Costs 3-10

A 160 acre system with corner arm actual irrigated area of 150.3 acres installed at a cost of $88,000 with a power and water source and connecting equipment cost of $32,000.

A standard procedure is outlined on page 7 of MSU Extension Bulletin E-2131, “Custom Work Rates in Michigan”. The following would be modification of the DIRTI #5 pricing system.

Ownership Cost

Depreciation: (original cost - salvage value)/years of use

(pivot with corner arm cost + installation cost - salvage value)/10 years=

($88,000 - 24,000)/10 = $6,400

(well cost - salvage value)/20 years =

($32,000 - 12,000)/20 = $1,000

Interest: interest rate * average investment value

6.5% * (original cost + salvage value/2) =

6.5% * ($120,000 + $36,000/2) =

6.5% * $ 78,000 = $5,070

Repair: estimated to between 2 to 5% of original cost

well cost * 2% =

$32,000 * 2% = $ 640

pivot cost * 5% =

$88,000 * 5% = $4,400

Taxes: no personal property tax in Michigan

the addition irrigation equipment should not increase property taxes

Insurance: estimated at 0.5% * average investment value

0.5% * (original cost + salvage value)/2 =

0.5% * ($120,000 + $36,000)/2 =

0.5% * ($ 78,000) = $390

Total Ownership Cost $7,400 + $5,070 + $ 5,040 + $390 = $ 17,900

$17,900/150.3 acres = $119.10/irrigated acre/year

Operating Cost (per acre) or total actual annual cost

These costs are best handled annually calculated using actual costs at the end of season.

Power: use actual fuel or power bill is recommended estimated power cost:

$3.50/ acre in. * 6 in.* 150.3 acres = $3,156 annually

$3 to $5.50/acre in. range

Labor cost: recommend use of actual labor bills

Range of $1 to $3.50/acre in.

$1 * 6 acre in. * 150.3 acres = $ 902 annually

Total Operating cost annually $ 3,156 + $ 902 = $ 4,058

Grand Total Estimated Annual Cost $ 17,900 + $ 4,058 = $ 21,958

$ 21,958/150.3 acres = $ 146.09 / acre at 6"