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Put Drain Tiling Under the Financial Microscope
Recently, a county treasurer and farm owner asked me to write about the economics of installing drain tiles. He posed the question, “When does it make sense to make the investment?” I knew that when I drove around central Illinois, I saw tile going into fields frequently, but I rarely saw it in southern Illinois. I figured that the answer must have something to do with soil types, and I learned later that the crux of the problem is to compute the yield benefit and weigh it against the cost of tiles.
Because the benefits from tile drainage are multiple, computing the overall yield benefit isn’t straightforward.
Drain tiles can:
- Keep the soil from becoming saturated with water, allowing for deeper roots and more oxygen in the soil.
- Slow down water runoff, which sends away topsoil, fertilizer, and herbicides.
- Save plants from root damage by lowering the water table within the first 24 to 48 hours.
- Save plants from diseases facilitated by standing water.
- Improve fieldwork timing by getting farmers into their fields days or possibly a week earlier in the spring.
- Allow for harvesting on otherwise muddy days in the fall.
Each of these factors contribute to the positive effect on yield. You will find all kinds of yield response estimates, but even the lowest ones make tile drainage worth considering. A plastic pipe trade association estimates a yield gain of 15% to 42%. Various university studies show yield responses of 10 to 45 bushels per acre for corn and 4 to 15 for beans.
For illustrative purposes, let’s assume you gain 20 bushels an acre at $3.50 per bushel for corn and 7 bushels per acre at $9.50 a bushel for beans. You’re around $68 per acre of average yield benefit, but that whole $68 isn’t necessarily free and clear. There will be marginal increases in costs for more pesticides, fertilizer, hauling, and maintenance of the tile system. Let’s assume $8 an acre covers that. Now you are looking at netting an extra $60 an acre annually. Keep that number in mind. That is the yield benefit side of the equation. The cost of tile is the other side.
Tile drainage systems can be laid out in many configura-tions, such as herringbone for sloped areas or random to hit particular wet spots. However, per a sales manager at a drain pipe supplier, the typical system has a 4-inch pipe in a parallel grid system on 40- or 50-foot centers with 8-inch mains leading to a drainage ditch or creek. The drain tile is buried 3 to 4 feet deep. That sort of system will require around 1,000 feet of pipe per acre.
Per-foot installed tile quotes are hard to come by and certainly vary, depending on the amount of competition in your area and complexity of the system you need. One estimate I found indicates that a contractor would charge around $1 per foot to design and install a system. In that case, you’re looking at around $1,000 an acre. Again, keep that number in mind. However, you might be able to eliminate the labor piece of the total cost.
If you have the ability to assess grades and calculate the required depth of drain pipe, installing the system yourself could be the key to making the investment work. You’ll need to own, lease, or borrow a tile plow. Those who have done it recommend using one with laser guidance. A nice, used tile plow will cost you $10,000 to $20,000, but that investment can work if you are saving 50¢ a foot on at least 40,000 feet of pipe.
Plastic pipe buried 3 to 4 feet underground lasts for decades, but there is some upkeep.
When you own an underground drainage system, you have some inspection and maintenance work to do. You must keep an eye out for sunken areas in the field, which could indicate line breaks. You have to be vigilant with outlet ditches to be sure they don’t fill in with sediment and block up the entire system. On the other hand, you could have erosion at the drainage outlets that will require fill dirt, seed, or sod.
Another potential problem is that tree roots will seek your drain lines from 50 or even 100 feet away, so you must consider that at the time of installation. Digging up lines five years later because they are filled with roots will be annoying.
Don’t forget there is a risk of raccoons, possums, or other critters crawling into your main water outlets and dying.
Two Illinois farmers told me that the compacted clay soils they farm don’t have enough soil permeability for water to leach into a subsurface drainage system fast enough. This is probably why there aren’t a lot of drain tile in southern Illinois.
Another reason could be that a 15% yield benefit on 200-bushel-per-acre soil is a more substantial number than a 15% increase on 100-bushel-per-acre soil. The system materials cost about the same in either situation. To see if your soil is permeable enough for drain tiles, study your soil types in guides issued by your state or the USDA.
Keep in mind that the return on investment you get today may not be static over time. Crop yields have been increasing about 2% annually due to improving seed, fertilizer, and herbicides. Consider the fact that the cost of drainage system materials and labor go up every year due to inflation. If the return on investment starts out acceptable today, it may end up phenomenal over a 30-year period.
If the cost of installed tile is $1,000 an acre and you net an additional $60 per acre, the return on investment is 6% before tax. If you can get it done yourself for $500 an acre, you are looking at a 12% return instead. (Both of these returns assume you don’t have to borrow money to fund the new systems.)
You can realize an income tax benefit on this investment. The entire drain tile installation cost can be written off in as little as one year or as much as 15 years, while the actual life of the system should be 30 years or more. This can make a 6% return look more like a 10% return in the short run, or a 12% return look like a 20% return after considering taxes.