California meets the Cornbelt

Sep 21, 2012
by DTN

Even before the 2012 drought, irrigation was infiltrating the Eastern Corn Belt—and not just in established $10,000/acre regions like the seed corn and vegetable farms of northern Indiana.

Rick Murdock, a farmer in Murray, KY, was so convinced irrigation was the wave of the future, he signed up to be an irrigation equipment dealer. He sold his first pivot in February and has since sold two more systems. In August, his phone didn’t stop ringing. “We have 30 quotes out for irrigation systems right now,” he said recently.

In a year like this, irrigation systems have returned 30 percent to 100 percent of their cost in one year. Murdock’s yield difference between irrigated and nonirrigated is at least 160 bushels per acre (bpa). “And who knew we’d have $8 corn at harvest time?” Murdock asked.

Irrigation isn’t a foolproof investment. In northern Indiana, the difference between irrigated and nonirrigated fields was the difference between zero yield and a loss from planting costs compared to a near average return on irrigated ground. “It’s not a bumper year, even with irrigation, because it was too hot during pollination,” explained Howard Halderman of Halderman Farm Management, headquartered in Wabash, IN.

Still, extreme weather is a wake-up call for America’s farmers who are scrambling to take advantage of the highest commodity prices in 40 years. If growers can’t afford to buy or rent new ground, they’re fixing up what they have. Many see this as a part of a personal quest to hit 300 bpa corn.

Bernard Peterson of Loretto, KY, is just getting his toe wet, installing his second pivot this year. Mike Hayes of Hamlet, IN, has steadily been adding irrigation to his operation in northern Indiana for the past nine years and is now running more than 20 pivots. Farmer Darren Grogan of Arlington, KY, just jumped into an irrigation dealership and expects to sell $4 million to $5 million of equipment this year.

According to the latest USDA Census, irrigated acres in Indiana have increased 29 percent from 2002 to 2008, about a 5 percent increase per year. “And irrigation suppliers I’ve talked to in Michigan and Indiana say sales have doubled since 2007,” reported Lyndon Kelley, irrigation specialist with Michigan State University and Purdue University.

Dale Tuholski of La Porte, IN, an irrigation equipment installer, said business has been brisk the past four or five years with irrigated acres increasing about 10 percent per year in northern Indiana. It’s not about to let up after this year.

Substitute for insurance

“Generally, we get plenty of rain, but even in wet years, it doesn’t always come at the right time,” explained Peterson, who farms with his two brothers and nephew on 13,000 acres in central Kentucky.

Consistent yields are what sell irrigation in the Eastern Corn Belt. On average, corn yields in northern Indiana can easily increase 40 to 60 bpa with irrigation, said Hayes. “In some years, such as 2012, the difference can be an increase of 100 bpa. I view irrigation as one more risk factor you’re eliminating,” he noted.

Irrigation specialist Kelley noted the sandy soils in Michigan and Indiana have a hard time yielding above 135 bpa as dryland even in good years. “But those yields can increase over 200 bpa with irrigation in most years and with the right management, 225-250 bpa are not uncommon,” reported Kelley.

You won’t always see the sharp contrast between irrigated and non-irrigated fields; it all depends on the year. “The first year we put in a pivot, our irrigated corn was about 10 to 20 bpa better than dryland, but 2009 was the best corn crop ever in Kentucky,” said Peterson. In soybeans following wheat, Peterson saw soybean yields climb 10 bpa with the extra water in 2010.

“Last year, we saw about a 40 to 50 bpa yield increase in irrigated corn yields compared to non-irrigated,” said Peterson. This year, the pivot more than paid for itself, he said.

Longer leases

A second factor in adding irrigation is you may be able to ensure a long-term relationship with your landlord.

Some of the farms Hayes rents are because other people have shied away from them due to their drought history.

This “fixer-upper” strategy has worked well for Hayes. He installs an irrigation system on some of his rented land in exchange for a 10-year lease. After 10 years, the landowner owns the well and Hayes owns the equipment above ground.

“I’m able to pay them more in rent,” said Hayes, who uses a base rent plus bonus, “because I’m getting a 10-year lease and I can count on a consistent yield.

“The older landlords are happy to see a good crop on their farm and they help me out by checking pivots throughout the irrigation season because they feel it’s their system. That’s a big help to me,” explained Hayes.

More crop choices

The main reason northern Indiana and southern Michigan embraced irrigation is because seed corn companies now insist on it if you want to raise seed corn. In addition, profits from raising seed corn compared to commercial corn can hit $200 to $300 more per acre, said Larry Smith, Halderman’s farm manager in La Porte, IN. “Irrigation also allows you to raise tomatoes or potatoes or other specialty crops,” Smith added.

The sandy loam soils in this area drain quickly. “After an inch of rain in the morning, you can plant in the afternoon,” said Smith. It also avoids delays in other field work and in harvest.

“That’s why we’ve seen more seed companies shifting this way. Also, our tomato growers compete with California and our water is cheaper,” explained Smith.

Twelve-inch wells in the area go down about 80 feet (some are 100 to 120 feet) and can pump 1,000 to 1,200 gallons per minute. “We have plenty of water and relatively cheap fuel. It costs about $25/acre for an electric engine and $50/acre for diesel,” said Smith.

Irrigation also opens up crop choices in the Delta. Installing irrigation can change a farm from producing 30 bpa soybeans in which you might make $100 per acre to raising rice which will return $234 per acre, explained Halderman. “Also, on sandy soil around central Arkansas, irrigation allows corn to be raised close to Tyson’s poultry market.”

There’s a cost

On the downside, you have the initial expense of installation. “Just the cost of equipment could be $1,000 per acre (you can get that down to $500 per acre on a bigger field) plus the well and the energy source (diesel or electric). Your total cost may range from $500 per acre to $2,500 per acre,” said Murdock. “But for a 30-year investment, it could pay for itself in just a couple years, especially with a dry year like 2012.”

Another consideration is irrigation takes more management. “In the south, a person has to convert from being a ‘rescue’ irrigator to a ‘crop needs’ irrigator,” said Murdock. “By that I mean, let’s say it’s 97 degrees on Monday and rain is forecasted for Saturday. A ‘rescue’ irrigator won’t do anything because it’s cheaper not to irrigate. But then he misses the rain, the soil moisture is depleted, he tries to ‘rescue’ his crop and then something breaks down.

“Out west, they manage pivots like fine-tuned pianos, making sure they have the right nozzle tips, everything is calibrated just so and the crop is watered as it is needed. We need to have that mind-set.”

Peterson thinks the effort is worth it. “You can spread your risk by farming more ground. Or, you can improve the quality of land you’re now farming. Our goal is to find ways to improve our productivity. Controlling our risk factors makes us better managers.” — Elizabeth Williams, DTN