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Economics, timing drive pesticide application decisions

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Posted Mar. 31, 2013

Spring is the season when most begin thinking about controlling weeds and other pests. Producers who choose to control pests (weeds, insects or diseases) with chemicals are faced with deciding whether to hire a commercial custom applicator or to self-apply pesticides to their own property or crops (i.e., be a private applicator). The right choice depends on each producer's individual circumstances. This article will discuss the advantages and disadvantages of each system, including an investment analysis of purchasing the sprayer.

First, determine if a reliable custom applicator is available for hire at a reasonable price. Custom applicators provide advantages of efficiency and convenience. Due to dedicated equipment and specialized personnel, they can treat more acres per day than most private applicators. A reliable custom applicator will apply the requested products, at the requested rate, to the requested pastures or fields in a timely manner. Their equipment should be calibrated and able to apply pesticides without streaking or excessive overspray. They should only spray under acceptable environmental conditions and do everything reasonable to avoid off-target spray drift. Many, if not most, custom applicators can supply the pesticides, thus eliminating the need for producers to maintain their own chemical inventories and dispose of empty pesticide containers. Custom application is not viable if there are no custom applicators available who meet these criteria.

A common disadvantage of relying on custom applicators is incorrect pesticide application timing. The efficacy of any pesticide depends on applying it at the correct time for the target pest; often, that time frame is very short. The same pest problems can develop for many clients at the same time since custom applicators typically serve a particular geographic region and producers in that region frequently grow the same crops. Having a large number of client requests at the same time, coupled with delays due to weather or equipment problems, can result in even the best custom applicators missing the optimum application timing.

Secondly, producers should evaluate their resources and management style prior to deciding to be a private applicator - especially if a reliable custom applicator is available. A major factor is whether or not a suitable sprayer is already owned or must be purchased. Another, and perhaps more important and often overlooked factor, is whether a producer is willing to commit to spraying in a timely manner. When investigating control failures, producers often say they did not have time to spray when application was needed. Simply put, if other activities are going to preclude spraying at the right time, it is an easy decision to hire a reliable custom applicator.

Step 1.

There are many advantages to being a private applicator if a producer is willing to commit the necessary time. The greatest advantage is usually improved pest management due to timely application. Private applicators can closely monitor pests and treat at the optimum pest stage and under favorable weather conditions. Another benefit of private application is the ability to treat only the areas of the field that have the target pest problem. This is often an option for post-emergence herbicide applications and can significantly save on pesticide costs. Private applicators can continue their financial savings by shopping around for the best pesticide prices.

If the decision to hire a custom applicator or be a private applicator is purely economic, other factors need to be considered. Economies of scale play a large role in determining if owning a sprayer is economically feasible. This means the more acres allocated to the sprayer decreases fixed costs per acre. However, remember to include all operating costs when comparing custom versus private application. These costs include fuel, oil and lube, maintenance and repairs, operating and tendering labor, and interest on operating expenses.

For example, a rancher trying to decide between custom application and private application has the following scenario:

Herbicide needs to be applied to 1,000 acres to control annual broadleaf weeds. Herbicide price is assumed equal for both custom application and private application.

Custom application can be hired for $5.50 per acre.

A pull-behind sprayer equipped with a GPS light bar can be purchased for $6,500 at an annual interest rate of 5 percent. The useful life of the sprayer is estimated to be seven years with a salvage value of $500. The sprayer is estimated to operate at 5 miles per hour with a 30-foot swath and 65 percent operating efficiency.

A suitable tractor to pull the sprayer is already owned. Tractor ownership and usage costs are allocated to spraying activities at a rate of $9 per hour, and it will require 85 hours to spray 1,000 acres.

Step 2. Calculate the net present value (NPV) of purchasing the sprayer. This article will not explain the procedure for calculating NPV. However, given these parameters, the rancher in this scenario is advised to purchase the sprayer because the net present value is positive and gives him a return on his investment greater than 5 percent. Said another way, returns on his investment are greater than the opportunity cost (i.e., interest) associated with purchasing the sprayer. To ensure a minimum rate of return of 5 percent, this rancher must spray at least 620 acres per year.

This rancher should keep in mind that 85 hours are required to complete the task of applying herbicide to 1,000 acres given the speed, spray width and operating efficiency. Using the NPV calculation in our example, custom application and private application would be equally profitable if the cost of custom application was reduced to $4.85 per acre. Yet this is unlikely given recent trends in custom application rates. Oklahoma Cooperative Extension Service reports the average cost of ground-spraying for weeds has increased from $4.94 per acre in 2009 to 20101 to $5.45 per acre in 2011 to 20122. Even if the cost is not reduced, custom application may still be the better option if the rancher is not willing to make the time commitment required to complete spraying activities in a timely manner.

There are advantages and disadvantages to both custom and private application. Producers must make their own decisions about which system is the right choice for their operations. Custom pesticide application is often an easy decision for many small acreage or absentee landowners due to economies of scale or convenience. However, even for small acreage producers or absentee landowners, private application can provide advantages in flexibility of application timing, improved efficacy and reduced pesticide use. Producers should consider the advantages and disadvantages, including economic analyses, of each management system prior to making a decision. We hope this article helps you make a more informed decision about hiring a commercial custom applicator or being a private applicator.

1Oklahoma Farm and Ranch Custom Rates, 2009-2010. Oklahoma Cooperative Extension Service. CR-205. 0310 Rev.
2Oklahoma Farm and Ranch Custom Rates, 2011-2012. Oklahoma Cooperative Extension Service. CR-205. 1111 Rev.

James Locke
Planned Consultation Manager and Senior Soils and Crops Consultant