Higher cost farms?

[fjlip]

http://www.agweb.com/topproducer/article/myth_busted_on_per_acre_costs/?smartid=000000L710000010000000000&spMailingID=410 20585&spUserID=ODgwMjE3NDk2OQS2&spJobID=178288785& spReportId=MTc4Mjg4Nzg1S0#comments


Do you agree with study?
I say all the "new" iron every year and many hired bodies is a major cost difference to small operations.

[ColevilleH2S]

That's not what I got from it. I think
it surmised that growing a high ratio of
corn on corn was expensive. Smaller
average farms grew more soys, which are
cheaper to grow. My take.

[freewheat]

I do agree with the study. If one
transposed it to western Canada, who has
the higher costs? The guy with 2 000
acres, no hired help, paid for 40 000
dollar combine, 50 000 tractor, 50 000
drill, or the guy with 6 000 acres with
2 400 000 combines, two 500 000 dollar
tractor/drill combos? And 2 or so hired
guys.

I have never been told how the costs per
acre lower with larger farm sizes. It is
always stated as gospel, yet no one can
show me how it truly works.

[fjlip]

Agree Freewheat, especially if that iron is traded every year or two.
Do your own depreciation costs and then estimate the 6000 acres.
We drove the last "used" combine 12 seasons.
Tractor traded after 25 years.
The 4WD is 15 years old.

[grrrr]

This reminds me of a study done a few years ago. The economy of scale only works until you have to start doubling up on equipment. So as long as you only need 1 of everything you are the most efficient. In the southern prairies about 5000 acres, in the parkland,shorter season areas, 3500 acres. This was a few years ago, so the numbers are probably 20% higher now. I mentioned this before on here and was verbally attacked for it. I still think it is right.

[bgmb]

A farm with $1,000,000 invested in seeding equipment to do 6000 acres would be an extreme case. we have $500,000 invested to do quite a bit more than 6000.

Capital investment may be an indicator of cost but they aren't the same thing. If you run older stuff your repairs will be higher.

I don't think size has a whole lot to do with it, i have seen smaller farms (1000ac) that have $500-600/ac of equipment investment which is twice as much as they "need" but i suppose that is their choice.

I do think the overhead is lower on larger farms and that gives them a bit of an advantage but it also takes more work to keep all the little things looked after. No one right way that's for sure but the trend is towards larger so that must tell you something.

[Horse]

BGMP Yes that does tell me something . Very few are using thier own money We could all set with our knees under the table in high stake games if we use someone elses money.
Goberment programs favor those yho dont mind loosing someone elses money.

[cottonpicken]

This is the type of thread everyone should throw
in their 2 cents,really effects the bottom line.

I'm under 200 an acre but could have benefited a
few times by having bigger better stuff to get stuff
done.

What's the math on deprecation and corporate tax
and maintenance ?

Is new stuffs real depreciation rate so great that it
offsets tax right offs?

Corporate tax rates are low low low,so does not
actually benefit guys who run used stuff and not
help the guys buying new stuff?

[freewheat]

Running older stuff may or may not
increase your repair bill. If a guy is
running used, on half the acres though,
he is putting less hours on the
machines, and hence scarce big bills.
And preventative maintenance can make
repair bills diddly. In years where I do
not need large repairs like tires, my
repair bill is 5 or so bucks an acre.
Hardly enough to offset IMO, the cost of
labor, and new machinery.

I do know what you mean though, older
stuff CAN have higher repair costs.

[cottonpicken]

'benefit the guy who runs used'