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Senior Contributor

Machinery Cost

Question for those smarter than I. Last year my equipment cost were around 30 dollars an acre. That includes payments, insurance, depreciation, fuel and any other thing related. Is that high, seems really high to me.

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12 Replies
Veteran Advisor

Re: Machinery Cost

COW is that your cost figured across all your ground including hay?  If it is than your hay costs should be averaged over your cuttings not just raw acres. I don't think it is high tho.  BUt than again using pmts. can be decieving I have no machinery debt but I would think that you would stil want to figure in a replacement figure in there. 

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Veteran Advisor

Re: Machinery Cost

Maybe not so high when fuel is done

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Senior Advisor

Re: Machinery Cost

Good comment. I always wondered what is the proper way to calculate depreciation. 15 years ago you bought a new tractor for $100K  Today it is worth $40K or $50 K with a depreciation of $50k to $60k for the 15 years.

 

Yet replacement cost of that tractor with the same specs may well cost you $150 K or more. So what is the true appreciation? The $50 or $60 k in lost value or the $100k that it takes to trade you back to where you were 15 years ago?

 

food for thought.

 

Of course depreciation is not the only factor in that you must consider the value of the hours of work produced by those units. I always had difficulty in figuring that out and how to allocate that depreciation and expense between the crop farming and the live stock enterprises. It is kind of helpful to know where you are making money and where you are not.

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Veteran Advisor

Re: Machinery Cost

Moe Russel says to look at combined machinery and labor costs per acre.  Makes sense, some guys spend more on bigger machinery, so should have less labor per acre.  Some take the other approach of more labor and smaller/older machinery.  I Don't remember what his target for combined costs is,runs in my mind around $65/acre, but I'm not sure on that. 

Krafty, you brought up a good pont on how to figure depreciation cost. 

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Advisor

Re: Machinery Cost

In coming up with machinery costs related to each enterprise, one needs to separate the hours a machine is used each year for each enterprise.  For instance, a tractor may be used primarily for feeding livestock and moving hay, but may also double as a planting tractor.  One can estimate but that may not be very accurate.  Perception is not always reality.

 

So, one needs to keep records for at least one year to get a good handle on it.  In the scenario mentioned, the field/hay operation or planting may represent the smallest number of hours for that tractor.  One can keep track of these hours and delegate the other hours to feeding.  Then those hours can be segregated and quantified by percentage and used to separate the capital cost by enterprise.

 

The challenge is that most farmers are impatient and unwilling to keep records, citing the hassle and wasted time.  However, what's a half minute of your time worth each time you get in the tractor and another half minute when you exit?   But the record keeping part can be simplified enough. 

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Senior Advisor

Re: Machinery Cost

Pretty low rates. I wonder how you do that. Do you include repair bills and how much machinery cost do you attribute to the livestock enterprise?  Not questioning your numbers but wonder what is your method to acheive that degree of efficiency.

 

Are you a no tiller? It take about $30 an acre to get my corn harvesed alone. Of course I hire it all done by my custom operator.

Of course, you may run beaucoup acres and gain the efficiency of scale or you may run low cost well maintained equipment to achieve efficiency.  More detail may be helpful to those younger and starting out. There may be lessons to learn here. Thanks. Don

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Senior Contributor

Re: Machinery Cost

I only have payment on a baler all other equip is owned. 850 acre row crop,  120 cow-calf pairs, 500 feeders brought in at 400 taken to 800. I guess the reason it is low is the newest tractor I own is a 7120 MFWD magnum. I still feed with an old 856 and 1086. I use every hay cutting individually when figuring cost. I don't hire any custom . Have a 2144 CIH combine that has been payed for, for a while. I guess I do spend a lot on repairs every year. My advice to young kids, I farmed over 1000 acres with a 706 and 7000 6 row planter, put your money in land or cows not paint. I guess I'm way out of touch 30 dollars an acre seems high. My nephew told me that most guys probably have more. But that kid is too smart for his own good.

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Senior Contributor

Re: Machinery Cost Kraft t

I might add I send combine, 7120 tractor and planter through inspection every year. I put them away working perfectly, take them to the dealerhsip and they find $10,000 worth of repairs how does that happen. Does this happen to you. LOL

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Honored Advisor

Yes and no

While I would agree that keeping detailed records to a point is essential, I think you can overdo the analysis of some costs.  We look for the best buy in whatever offers us a choice in the marketplace of supplies, for example, but bargains aren't always available, so some issues are just the price of doing business.

Further, I am always a good deal leery of the cost analyses I see out of the the research systems in place today, for a couple of reasons:

  1.   Application of any new technology or practice is generally very site-specific in farming, so can vary quite drastically in outcome on my place, compared to on test plots and such.   
  2. I've watched and listened to researchers close up for long enough to know that some variables just get set at a certain point, which is arbitrary, and others get ignored.  That makes findings statistically suspect,  if not totally invalid. 

Any time you get to a point where you lose sight of the total cost picture, from focusing too narrowly on one or two components in it, you are going to get a skewed view.  How many of you break out the marine insurance coverage on each piece of equipment, or apportion a part of your overall liability premium against it?  Do you account for the property taxes levied against each machine, and adjust it annually after the tax office re-assesses it?  Do you break out  the oil changes and every filter as costs? 

Also, and probably more significantly, whenever I am asked to quantify a given cost, I require a clear definition of all its component parts...as most seem to be saying here, this one cost may mean one thing to you, and something totally different to the next guy, and a third thing to me. 

I wonder how any farm census could be accurate, given so many different concepts of the same aspect of operations.  Then, you have to consider that you are comparing your own costs to those that may be defined in a totally different manner by others, and judging yourself too badly or too well...it is all in how the cost  is defined. 

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