Draft Animal Farming






Economics of Farming with Horses
Debt Financing** (part 7 of 7)

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 reasons:

  1. No inflation or deflation.
  2. Debt financing is used only on expenses over $1,000, at a rate of 6% per year for a period of 10 years.
  3. Any net revenue is invested once each year, earning interest at a rate of 3% until age 65.
  4. Investment tax credits will not apply.


Considering the time value of money as part of the analysis would alter the results. Assuming:

  • 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 willnot apply.

Not until long after we made our choice to farm with horses did we begin to understand the economic advantages. What are the costs and benefits associated with using draft horses on the small sustainable farm? Are they an economical option, and why? On what size farm might they make sense?

To begin answering these questions, we must establish costs for each option—tractor power and horse power—then look at the trade-off using some fundamental cost evaluation tools. My analysis is based on just one farm, and since the devil is often hidden in the details, my assumptions are structured so you may substitute your own values and make your own comparisons. rh horse logo

Introduction
Assumptions
Career Cost of Horses versus Tractor
Farm Size
Practicalities
Operational Cost for Horses

**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.
Author

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.


  • Copyright © 1997 − 2017 Rural Heritage
    Rural Heritage  |  PO Box 2067  |  Cedar Rapids, IA 52406
    Telephone (319) 362-3027

    This file last modified: September 21 2015.

    Designed by sbatemandesign.com