Equipment is a major cost for farm businesses. Making smart decisions about how to acquire machinery, when to trade and how much capacity to invest in can reduce machinery costs by as much as $25 per acre, says William Edwards, Iowa State University economist. All of these decisions require accurate estimates of the costs of owning and operating machinery.
Machinery costs can be divided into two categories: annual ownership costs and operating costs. "The true value of these costs is not known until the machine is sold or worn out," Edwards says. "But the costs can be estimated by making a few assumptions about machine life, annual use, and fuel and labor prices."
Figuring costs for used machinery is trickier because usually fixed costs will be lower, while repair costs will be higher. The secret is balancing higher hourly repair costs with lower hourly fixed costs.
A great resource to help you figure out equipment values is our Farm Journal Media Used Equipment Expert, Greg Peterson, known to most of the world as Machinery Pete. Since 1999, he has compiled more than 500,000 auction prices, which he updates at www.machinerypete.com. Peterson’s recent articles in Top Producer focus on analysis and information from his used equipment value index, which highlights the overall market for farm equipment.
In this issue, Peterson focuses on the new cycle for agriculture and what that means for used equipment values on page 58. You can hear Peterson at our Top Producer Seminar Jan. 29-31, where he will host a session on equipment values and help you discern costs per acre. To see our agenda and register for the seminar, visit www.topproducerseminar.com.
Executive Women in Chicago. Speaking of seminars, I’d like to encourage all of our female readers to attend the third annual Executive Women in Agriculture (EWA) conference Dec. 5-6 in Chicago, Ill.
Designed for farm owners and operators and those in agribusiness, the conference will help you hone your business skills. Our speakers range from financial and market experts to our keynote, Karen McCollough, an author and motivational speaker who will address new generations and thinking in the workplace. Her tips for managing people, along with her humor, are sure to inspire. Visit www.execwomeninag.com for more information and to register.
I wish you all a safe and bountiful harvest and look forward to seeing many of you at our winter events.
Editor of Top Producer
- November 2013