By Blake Jackson
Major equipment investments often carry greater long-term expenses than producers initially expect. Whether machinery is purchased outright or financed, ownership costs extend well beyond the initial payment.
Ongoing expenses such as fuel, labor, and routine maintenance are commonly used to estimate total machinery costs when determining a crop’s breakeven price.
However, these visible expenses may account for only 60% or less of the total cost over a machine’s lifespan.
Less obvious costs—referred to as the “DIRTI 5”—include depreciation, interest, repairs, taxes, and insurance. These components are more difficult to calculate and assign on a per-acre or annual basis, yet they play a significant role in overall machinery expenses.
To address this, MU Extension senior agribusiness research analyst Drew Kientzy helped develop Managing Farm Equipment Ownership Costs, a free publication outlining methods to calculate these factors and strategies to manage them effectively.
“The two universal factors in the per-acre, per-bale, per-bushel or any other unit cost of machinery are the value of your equipment and how much it is used,” Kientzy said. He emphasizes two key approaches to reducing fixed machinery costs. “Minimizing the total value of machinery without having a significant impact on productivity and sizing your equipment to fully utilize its capabilities throughout the working season.”
Farmers must also decide whether to own, lease, or outsource machinery operations. No single strategy fits every situation. For example, farms often choose to own trucks, tillage, planting, and harvesting equipment, as these allow greater control and timely operations.
Meanwhile, tractors and sprayers are frequently leased due to their high usage and rapid technological advancements.
Custom hiring services, such as spraying and fertilizer application, are another option. Some farms invest in this equipment and offset costs by offering services to others, while others prefer paying per acre to avoid underutilization. Benchmarking these decisions can be aided by resources like MU Extension’s Custom Rates for Farm Services in Missouri.
Photo Credit: pixabay-franck-barske
Categories: Missouri, Equipment & Machinery, General