Draft Animal Farming






Economics of Farming with Horses:
Career Cost of Horses vs Tractor** (part 3 of 7)

by Chet Kendell

Given the following values:

Code Item Value
A Farm labor rage $6/hour
C Consumption rate of fule 1 gallon/hour
D Price of diesel fuel $1/gallonn*
F Farm size 25 acres
H Investment, initial for horses $8,000
I Investment, initial for tractor $15,000
J Additional labor, horses 20% (0.2)
K Residual value of PTO cart $500
L Tractor or team hours per acre per year 20 hours
M Manure value $365
N Years in farm career (age 25-65) 40 years
O Operational cost for tractor, tires, oil, filters, etc. $250/year
P Replacement cost for tractor $15,000
Q Operational cost for 2 hourses, feed, vet, etc. $730/year
R Replacement cost for hourses $1600
S

Sales of horse progeny, (4/5x2x1,000)

$1600
T Value at end of useful life, horses $2000
U Useable life of horses and tractor (5,000 hours) 10 years
V Trade in value on tractor $5000
*The argument in favor of draft horses as an oil alternative strengthens as the price of oil goes up. For instance, doubling the price of fuel almost doubles the acreage where a draft horse would be applicable.

The career cost of using a tractor = initial cost + replacements + operating cost - trade in value =

I+(Px(N/U-1))+Nx(O+(DxCxLxF))-(N/UxV)

The career cost of using horses = initial cost + replacements + operating cost and extra labor - value of manure and progeny - value for the horses and PTO cart at the end of their useful life.=

H+(Rx(N/U-1))+Nx(Q+(AxJxLxF))-Nx(S+M)-(N/U xT)-K.

Using this model, a tractor powered sustainable farm over a 40-year career would have total costs of $90,000 and total revenues (trade-in on old tractors every 10 years) of $20,000, for a net cost of $70,000 associated with using the tractor:

A horse powered farm over a 40-year career would have total costs of $61,200 and total revenues of $82,300, for a net revenue of a $21,100 associated with using horses;

A key concept here is that the use of a tractor is a classic cost function, while using draft horses for farm traction resembles a typical livestock revenue function, not a cost function. This relationship is dependent on taking advantage of the regenerative potential of horses. Think about it this way: If you are raising a lamb, calf, or colt crop on several acres, instead raise a draft colt crop on those same acres and the traction power is available to use if your horses are trained to work in harness.

From a cash flow aspect, the difference is even more pronounced and possibly even more relevant, as it is cash flow that is usually problematic.

Total revenue and cost for tractor and horses—The difference between using horses and a tractor is $21,100 plus $70,000 equals $91,100 over a 40-year farming career:

Driving Draft Training
Over a 40-year career a horse-powered farm will generate $61,600 in cash revenue compared to $70,000 of costs for a tractor powered farm. The difference between the two options is $131,600. So we are comparing a cost function to a revenue function, and assets that depreciate to assets that appreciate. Horses as the traction source clearly would be the preferred decision for a farm of this scale and scope. rh horse logo
Introduction
Assumptions
Farm Size
Practicalities
Operational Cost for Horses
Debt Financing

**Because Chet Kendell wrote this economic comparison of tractor versus horse farming in 2005, the figures will need to be adjusted to reflect present values. That said, we believe its fundamental conclusion, that tractor farming incorporates a negative cost function that decreases profits while horse farming includes a livestock production function that boosts its economic outcome.

Chet Kendell was on the Economics faculty at Brigham Young University - Idaho in Rexburg. He currently owns Kendell Innovative Dairy Systems LLC in Idaho and lives, farms and writes with his family in Ashton, Idaho. This article appeared in the Spring 2005 issue of Rural Heritage.


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