|Economics of Farming with Horses
by Chet Kendell
I have resisted the temptation to conduct this analysis in the
conventional terms of debt financing and the time value of money for a number of
the time value of money as part of the analysis would alter the results.
- Debt financing is not generally accessible to small farmers.
- Debt financing is poor medicine for the small farmer. It may keep the farm
alive for a year, but in 10 years it may kill the farm and any chance of
intergenerational residency and sustainability. As farmers we can be more
innovative. If we don't, who will?
- Using the time value of money would create an even greater disparity
between the two options. The tractor as a cost function would be paying
interest, and the horses as a revenue function would be earning interest. Using
a cash basis for this analysis is more conservative.
The horse powered
farm with farmer at age 65 would have net revenues of $42,984. The same farm, if
tractor powered, would have net costs of $91,150. The difference between the two
options is $134,134 in favor of using horses for farm traction and tillage.
- No inflation or deflation.
- Debt financing is used only on expenses over $1,000, at a rate of 6% per
year for a period of 10 years.
- Any net revenue is invested once each year, earning interest at a rate of
3% until age 65.
- Investment tax credits will not apply.
Career Cost of Horses versus Tractor
Operational Cost for Horses
Chet Kendell is on the Economics faculty at Brigham Young University -
Idaho in Rexburg and a PhD candidate on the Viability of the Sustainable
Agricultural Enterprise with emphasis on animal traction tillage from Michigan
State University. This article appeared in the
2005 issue of
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26 April 2012 last revision