Farm level economic analysis of subsurface drip irrigation in Ontario corn production

Abstract

This paper examines the economic feasibility of a subsurface irrigation system for a representative corn producer in Norfolk County, Ontario, Canada. We use stochastic capital budgeting to generate a distribution of net present values for this investment. Future corn yields and corn prices were treated as distributions. Under our base assumptions, the subsurface drip irrigation system has a negative expected net present value, meaning that it would not be a worthwhile investment for a corn farmer at the present time. The system's ability to increase yields has the largest effect on its expected net present value. Attempts to improve the system's economic value should focus on increasing its effect on yields in years with typical agronomic conditions. With reasonable assumptions for other system parameters, the initial cost of a 40.5 ha system would have to be reduced to $165,000 to have a positive net present value 50% of the time or the system would have to increase corn yields by 33% in years with typical growing conditions to achieve the same net present value outcome.