PER UNIT COSTS TO OWN AND OPERATE FARM MACHINERY

Introduction

Farm machinery is a vital part of most farming operations, from the physical work it
performs in the production process to the enjoyment provided from its operation. As
technological advancements in machinery and the crop production process evolve, farm sizes
increase and profit margins often decrease. Therefore, efficient use of machinery and its
contribution to a producer’s relative cost of production is increasingly important.

Machinery costs can be determined from farm records or cost estimators; however, these
methods often result in generalized whole farm or per machine costs, rather than per unit (e.g.,
acre, ton, bale, etc.) machinery costs. One alternative to calculating the myriad of machinery
costs is to use custom farming rates. Custom farming rates are rates paid for an operator to
perform an operation, such as harvesting, planting, tillage, etc., and are usually based on a per
unit charge (i.e. acre, ton, bales, etc.). However, with the large amount of neighbor-to-neighbor
work, and family custom farming done, whether published custom rates truly represent full
machinery ownership and operating costs is often questioned. If the full cost to perform these
operations is known, it will allow an individual farm to evaluate its relative machinery costs and
allow its crop machinery costs to be benchmarked against an expected cost.

Background

Langemeier and Taylor concluded that over time machinery has been substituted for
labor, thus increasing machinery costs, but utilizing labor more efficiently. They found that
machinery costs (including gas, oil, repair, depreciation, interest on investment, and insurance)
account for 35.5% to 46.6% of crop production costs on Kansas farms. Machinery costs ranged
from $29.33 per acre on non-irrigated farms in northwest Kansas to $67.79 per acre on irrigated
farms in southwest Kansas.

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