Step three, estimating expected aggregate crop machinery costs, is the sum of the
estimated expected machinery costs for each operation (step two) across all operations. This
represents the farm’s total expected crop machinery cost.
Step four, estimating the field operation percentages, is the division of the estimated crop
machinery cost per operation (step two) by the estimated aggregate crop machinery costs (step
three), to determine the percentage of estimated costs each operation makes up of the total
estimated crop machinery costs.
Step five, finding actual aggregate crop machinery costs, is where the individual farm’s
management abilities, cost characteristics, and changes in underlying machinery economics over
time, are taken into account. In this step, the farm would sum together the crop portion of
market depreciation, farm automobile expense, opportunity charge on the machinery investment,
machinery insurance, machinery shelter, repairs, fuel, lubrication, labor, machinery rent, and
machinery leasing as well as custom farming performed for the farm. The dollar value of the
custom farming performed for others would then be subtracted from this value to yield the total
crop machinery costs for the farm. All of these costs are relatively easy to determine if a
moderate amount of effort is put into farm financial tracking except for the market depreciation
and opportunity interest on machinery investment. Market depreciation can be estimated by
evaluating the loss in value of similar machinery in classified ads or area auctions. The
opportunity charge on the machinery investment simply represents the revenue foregone for
having capital invested in machinery, rather the next best investment. If the farm has only
cropping enterprises, then 100% of each of these costs should be used. However, if the farm has
livestock, or other enterprises, the expenses will need to be prorated to their respective
enterprises. If the individual producer does not keep track how much time each piece of
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