reasonable machine cost/ac

[dnach]

What is a reasonable machinery cost per acre for a grain farm in Western Canada?
What is the corect way to calculate this ratio?
On our farm the current value of all machinery including everything except tools, in relation to the acres farmed is about $83/ac. Is this in the ball park for a stirctly graim farm or are we too high/low?

[rowbott]

Add $30 for fertilizer, $22 for herbicides, $8 for fuel, $40 for rent/ROI, $15 for crop insurance, $15 for seed (cereals only), ... for utilities,insurance,living expenses. Unless your grossing $300/acre I would say your costs are at least double what would be affordable at our outfit.

[gmj]

On our farm the machinery costs per ac are running slightly higher at about $180/ac. When I graduated from University in the mid eighties we where told a resonable number at that time was $150/ac. We where at that time at about $120/ac.

Iknow of some farms that are running at $300/ac. Mind you everything is shiny and new at those farms.

I don't know how I could get my costs down to $83/ac. We don't have new machinery here. The newest piece(combine) has 1100 hrs. on the seperator, and the next newest tractor has 3500hrs. on it.

I do believe that machinery costs are a big problem in farming today. We have just come off of two very good years on our farm and the dealers where really hounding us this fall to upgrade some of the equipment but I don't do it unless it really makes sense.
We some renovations in our house instead.

My motto is don't buy equipment just because your neighbor has it, buy what you need, not what you want.

[bshaw2]

I think that one of you is asking about machinery costs/ac/year, and the other one is tell him about the total machinery capital investment / acre. If $300 /acre is a per year figure we are in a heap big pile of something. I would suggest checking out a Provincial ag site and see what the experts have to say. I would think though that $83 is pretty close for a completely custom done rate.

[raymondb]

Great question dnach. I have not seen any numbers anywhere that tell me what a reasonable cost of owning machinery/acre is. Alberta agriculture has a machinery cost calculator that is pretty good. This will give you the cost of owning and operating your machines but it does not give you a benchmark to work for or improve when you consider the cost og machinery/acre.

[dnach]

Re: rowbott, this is not an annual cost, just the value of mach/ac farmed. Our opperating costs/ac/yr on this machienery varies from crop to crop but an average of about $15/ac is used less depreciation.
re: gmj, your numders are close to what I have heard from a farer at a seminar in North Battleford recently.
The point here is that how far should we be stretching our equipment to make it feasable to own? None of our equipment is new, and some needs replacement but after three years of drought.... oh well maybe 'next year'

[kaniteo]

Two years ago, I did an analysis of machinery ownership compared to average gross revenue per acre in the province of Alberta. My findings showed that the average grain producer had 1.7 times their gross revenue/acre invested in equipment. The average livestock producer had an investment 1.06 times their gross revenue/ac.

[cris]

My investment per acre is about 137.00 this it's not shiny but mostly new technology. this is a value of about 65c per $ of poduction. I would find the work load a little easier at if I spent more but you have to pay for it too.

[lakenheath]

Here is one way to calculate you cost per acre for machinery.

Simple Example:
Acres Farmed - 2000 acres
Tractor - $100,000
Combine - $125,000
Total - $225,000

I'll use trade in value as a depreciation factor in this example (let's say 20% decline in value each year)

Year 1

Depreciation Cost:

$225,000 x 30% = $67,500 / 3000 acres =

$22.50 per acres machinery cost

You can't say that your machinery cost per acre is $225,000 / 3000 acres = $75 because it is not an input cost like fertilizer and chemical. If you were to quit farming the next year you could potentially get $85,000 on the sale of tractor which represents equity in the equipment assets. Granted a farmer take a huge hit on equity each year in the form of depreciation (especially if you are operating new equipment).

This someone had mentioned before you might want to consider looking at an invesmtent per acres and see what your return on investment is (or return on assets).

It's funny. In our area we laugh at the guy putting in his crop with discers (her's ruining the land, out-dated, get with timing type comments). But I guarantee he has the highest return on invesment then anyone in the area.

[cdmars]

Sorry I didn't see this post earlier. If you are interested in comparing your operations to others similar check out the CFBMC site for a new release "Benchmark for Success". It is a CD that allows you to enter your numbers and the program brings up comparisons from its statistical dbase.

[manager]

Where would I find this cd that you are talking about? Sounds interesting.