Installing a new land drainage system involves labour and investment but is it worth the money? Here’s a useful guide to help you understand your return on investment.
How to calculate your return on investment from land drainage?
To calculate your potential return on investment (ROI) from land drainage, you first need to understand what impact it will have on your crop sales as well as the efficiency of your business and your assets.
Next, you need to understand how much it will cost you to install it, this includes the cost of materials and the labour as well as machinery to install it.
Once you understand both of these figures, you are then in a good position to get an indicative calculation of your potential return.
What are the cost gains and savings from land drainage?
To understand how much more money it will generate for your business, here’s some of the things to consider:
1. Increase yields by 25-35%
You can spend a fortune on the latest farming technologies but it’s pointless if your soil structure isn’t right to start. By improving your drainage, you have the potential to increase your yields by up to an average of 25-35%.
If you use this calculation against your previous crop outputs, this should give you an indication of how much more money you would earn by improving your drainage. It’s also worth applying this figure over a 5, 10, 20 and 30 year period to understand how quickly your investment will pay for itself.
To give you an indicative figure, we’ve pulled together a worst-case scenario of poorly drained land and compared it to a best-case to show you just what a difference land drainage can make.
Worse case scenario of poorly drained land
- Yields: 2.5 tonnes per acre of feed wheat at £100/tonne
- Gross revenue: £250/acre without CAP support.
Best case scenario of well drained and structured land
- Yields: 5 tonnes of milling quality wheat at £120/tonne (£20 premium for quality)
- Gross revenue: £600/acre without CAP support.
This is an extreme example and shows a difference of £350/acre. If we multiply this up to a 1000 acre farm over 30 years, it equates to a gross revenue difference of £10,500,000. Admittedly though, the 2.5 ton yield at £100/tonne scenario would not sustain the 30-year life span of the comparison before going out of business but it gives you an idea.
So if we also consider an input cost increase for the high yielding milling wheat, we think a more realistic and conservative figure would be a £100/acre profit difference, equating to £3,000,000 over the same time frame.
2. Improve land value
The increase in land values over the last 15 years has widened the relationship between drainage capital cost and land value to around 1:12. If your land is unfarmable due to poor drainage, the cost of draining it will work out at a twelfth of the cost of replacing it with more land.
If you are considering selling your land at any point, it is worth remembering that well drained land is worth much more than poorly drained land.
3. Reduce fuel bills
Your machinery has to work significantly harder in wet soil and this is compounded further in the summer when it dries out and sets. The soil then becomes much more difficult and harder to cultivate. You can reduce your fuel bills and the wear and tear of your machinery by simply improving your drainage. Installing land drainage will help improve the structure of your soil and thereby improve the traction of your machinery.
How much will it cost you to install land drainage?
There are a number of things to consider when understanding the cost of installing a land drainage scheme from deciding who to use to install the scheme to where to get your materials. It requires specialist machinery and skills to install land drainage so we recommend using a contractor who specialises in this area. To get a better understanding of what is involved in this process, please read our blog by clicking here.
How can we help?
Our background is in farming so we understand your needs – our MD’s family have been farming for generations. We are also specialists in land drainage and supply a wide range of products at cost-competitive prices, including land drainage coil, twinwall pipe and large diameter structured pipe.
Our team of specialists can provide you with expert advice. Call us today on 0121 351 3230.