Does the farm need to re-purchase more farm machinery?

Are farmers in American farms buying new machines to avoid paying taxes? Can you make your farm function with fewer tractors? Is your combine harvester necessarily that big? Due to low crop prices and tight budgets, economist Gary Schnitkey believes these questions are worth asking and answering. Now is a good time to re - evaluate the machinery strategy for the next 10 years.

Schnitkey, an economist in the Extension Department of the University of Illinois, said, "Now is a good time to re - evaluate the machinery strategy for the next 10 years." He cooperates with the American Farm Doctor Program and the Illinois Farm Business Farm Management Record - Keeping Program.

Why reconsider the machinery strategy now? Schnitkey and others expect that current crop prices will remain stable in the next 10 years, with corn averaging around $4.40 per bushel and soybeans averaging around $10.60 per bushel.

He said, "There will be periods of price increases, but we can't predict when they will occur."

Push - in Method

When Schnitkey studies the basic economics affecting machinery costs, three factors stand out:

Farm size. The value of machinery per acre on Illinois' FBFM farms is nearly $750 for a 500 - acre farm, around $550 for a 3,000 - acre farm, and around $450 for a 500 - acre operation.

In terms of machinery costs, according to Schnitkey's data, depreciation ranks first, maintenance is second, and fuel and labor, which compete with each other, are the next highest costs. Larger farms tend to have more machinery and higher costs, but they also spread the costs over more acres.

The number of agricultural machinery. Schnitkey said, "There can be huge differences in the total cost per acre and costs in farm operations." "We're talking about newer, modern tractors, not old ones."

Three factors resonate throughout the machinery economics. According to Farm Doc data, the listed price of an average 155 - horsepower tractor today is slightly over $200,000, the listed price of a 310 - horsepower tractor is close to $450,000, and the listed price of a 640 - horsepower tractor is over $590,000.

If you can have two 310 - horsepower tractors, that's a price of $900,000. If you need three, it's about $1,350,000, and if you need a 640 - HP one, it increases to nearly $1,500,000.

The size of the equipment. Seeders and Heilongjiang combine harvesters are usually two agricultural machines that play an important role in the size of other equipment. The size of the planter determines how big a tractor the farm needs to pull.

Since combine harvesters are the most expensive, their size plays a key role in determining the machinery cost per acre. Schnitkey said, "The more land you cover, the lower the cost per acre of the combine harvester."

Agricultural Machinery Strategy

Schnitkey said, "When we re - evaluate the future machinery strategy, when the next price increase and income increase occur, we should consider the issue of purchasing capital in a different way." "Buying newer equipment or more equipment just to save money may not be the wisest long - term strategy.

"Think carefully about how many large tractors you need. There is a big difference in machinery costs between farming with two tractors and three tractors.

"Finally, if you own a small farm, consider cooperating with other farms of your size to share a combine harvester. This is not a popular suggestion, but since combine harvesters are so expensive, spreading the cost of the combine harvester over more land is significant."

Source: Agricultural Machinery News Network