Key Questions About Farm
Machinery --Chapter 22
1. What are the alternatives for acquiring machinery
2. What are the advantages of new versus used?
3. What factors influence the best size of machinery?

Machinery Costs per Acre (Iowa Farm Business Association)
$100
$90
$80
$70
$60
$50
$40
$30
$20
$10
$-
< 320 a.
320-479 a.
480-719 a.
720-1299 a.
1300 + a.
Interest
Depreciation
Hire
Repairs
Fuel & lube

Machinery Costs per Acre
High 1/3 Mid 1/3 Low 1/3
 Total cost / acre $89 $100 $106
 Investment /acre $289 $294 $346

 Ownership
 Rental (short-term)
 Leasing
 Rollover
 Custom Hire
 Joint Ownership
 Trade Labor

 More control over use
 More convenient
 Less expensive for high use or long life machines
 Tax benefits from depreciation and interest
 Build up equity value

 Pay only for time machine is actually used
 Pay by the hour or day
 No investment
 Cheaper for low use or specialized machines

 Make annual lease payments
(20-25% of new price)
 First payment when lease begins
 Leases usually run 3-5 years
 Option to purchase at end of lease
 Operator pays for repairs, insurance, etc.
 Example on page 433

Advantages
 Lower initial investment
 Can trade frequently
 Payments usually lower than loan payments
 Know machine before purchasing
 Payments tax deductible
Disadvantages
 More expensive if you plan to own it
 Do not build equity
 Locked into lease period
 No tax depreciation deduction

 No long term investment
 No repairs or maintenance
 Cheaper for low use items
 Get operator labor
 Pay only for acres actually farmed

$70
$60
$50
$40
$30
$20
$10
$-
$90
Own vs. Custom Hire
$ per acre
$80
Own
Custom Hire
300 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500 1600 1700 1800 2000
Acres per year

 New machine is purchased , usually by company credit plan
 Used one season, then traded for a new model
 Difference paid depends on hours of use on old unit

Joint Machinery
Ownership
 Spread ownership costs over more acres
 Increase labor supply
 Owner/operators can specialize
 Less investment for each owner
 Must be able to schedule use
 Must adjust costs if use is not proportional to ownership
 Some farmers form machinery co-ops.

 No investment or debt
 No cash costs
 Use excess labor
 Takes about 5-8 acres of labor to equal the value of one acre of machinery use

 Lower investment and ownership costs
 Higher repair costs
 Lower reliability
 Must trade more often
 Requires more mechanical skills

Machinery Costs Decrease
$35,000
$30,000
$25,000
$20,000
Repairs
Fuel & lube
Interest
Deprec.
$15,000
$10,000
$5,000
$0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Age
Figure 1. Annual costs for a 180-hp tractor

 Small machinery causes timeliness losses
 Large machinery has excess ownership costs
 Bottleneck is suitable field days
 Least-cost machinery set can complete:
 tillage and planting in 20-25 days
 harvesting in 25-30 days

$160
Least-cost Machinery Set
$140
$120
$100
Total costs
$80
$60
Minimum cost point
Ownership costs
Timeliness costs
$40
$20
Operating costs
Labor costs
$0
Machinery size
Least-cost size
Figure 1. Effect of increasing machinery size on machinery costs

% of maximum yield
100%
Effect of planting date on corn yields
90%
80%
70%
60%
50%
28
-A pr
5-
M ay
12
-M ay
19
-M ay
26
-M ay
2-
Ju n
9-
Ju n
16
-J u n
23
-J u n
% of maximum yield
Effect of planting date on soybean yields
Source: ISU Extension publication PM 1885
95%
85%
75%
65%
55%
45%
35%
25%
Northern Iowa
Central Iowa
Southern Iowa
Source: ISU Extension publication PM 1851 .

Some days you just can’t farm!

Machinery Capacity
(Acres covered per hour)
Acres per hour = width (ft.) x speed x field efficiency %
8 .
25
Field efficiency allows for time to turn around, make adjustments, and overlap.
30-ft. field cultivator x 5 mph x 85% = 15 a/hr
8.25

Matching Tractor and Implement
 Horsepower needed depends on:
 Width of implement
 Draft requirement—pounds of force)
 Type of soil (firm or tilled)
 Speed
 HP = width x speed x draft x soil factor
375

Example: Chisel Plow
Width: 20 feet
Draft: 500 lb/foot
Soil factor (corn stalks): 1.5
Speed: 5 mph
HP = 20 ft . X 500 lb/ft x 5 mph x 1.5 / 375
= 200 hp

 Repair costs are high
 Machine is unreliable
 Machine is obsolete
 Need more capacity
 Cash flow is favorable
 Need tax deductions