Machinery Cost Per Acre

[Hillplanter]

What is a good benchmark figure for machinery cost per acre?
In tillage a lot of inputs are directly proportional to acreage.
Machinery cost is one of the few figures that can be reduced!!
Interested to know how people approach reducing the figure.

For us its running around £60/acre

 

[fudge]

What is a good benchmark figure for machinery cost per acer?
In tillage a lot of inputs are directly proportional to acreage.
Machinery cost is one of the few figures that can be reduced!!
Interested to know how people approach reducing the figure.

For us its running around £60/acer

Just carry on! Many spread thier machinery costs buy bidding £200/ac for Fbts

 

[Brisel]

Depreciation + spares/repairs + fuel + oil + insurance? £60/acre would only cover depreciation on a typical arable farm, whatever one of those looks like!

I see it expressed as labour & machinery as they are related. Nix Pocketbook 2015 suggests a rough average of £175/acre for power, labour & machinery but this will vary with cropping, scale, family labour etc. A part time farmer with 200 acres of no till will be very different to one with 500 acres of potatoes, 3500 acres of arable & salaried managers. Mixed farms further complicate matters, as does using contractors for some or all operations.

 

[franklin]

£40 for the tin,
£40 for the juice,
£40 for the nugget on the seat.

Winter arable crops.

 

[Neddy flanders]

How can you work out machinery costs when you don know how much a machine will be worth when you come to sell it?

 

[yellow belly]

it is not too difficult to value every machine every year and get an average figure over 5 years
then compare this with actual purchase less sale price

I have never sold a machine for less than it written down value in the farm accounts even though is write down by less than 20% per year

some machines have been worth 40%of their cost price after 12years 5000 hours

as a rule of thumb divide the machine by 15 is it depreciation averaged over all the machines the overall per acre is not far out from the actual annual cost of the last 20 years

 

[franklin]

How can you work out machinery costs when you don know how much a machine will be worth when you come to sell it?

Mine is sol old most is now appreciating.

 

[Cab-over Pete]

No bad thing.

 

[Brisel]

How can you work out machinery costs when you don know how much a machine will be worth when you come to sell it?

You have to start somewhere, using current second hand values, unless you are happy sailing along with no idea of what your costs are. Many do.

 

[Clive]

total fixed costs need to be sub £75/ac IMO everything from stubble to stubble ex rent, admin/office and finance

 

[Clive]

How can you work out machinery costs when you don know how much a machine will be worth when you come to sell it?

you look at a similar machine of the age you intend to sell at and use that value, you will be on the right side as by that time there will normally have been some loss offset by inflation

if you want certainty you contract hire or negotiate buy back prices when your getting new machines

 

[fudge]

total fixed costs need to be sub £75/ac IMO everything from stubble to stubble ex rent, admin/office and finance

Why exclude rent and finance? So often land is taken on to "spread fixed costs" and interest is generated by borrowing to enable a business to grow. To me it seems all part of the same equation.

 

[Brisel]

You exclude rent & finance to give a comparable figure to other farms. Rent or mortgage payments are unique to each business.

 

[franklin]

On a 2yr fbt, I dont consider rent to be a fixed cost.

The equation needs to be "am I happy with the dosh I make and lifestyle it affords; or that I am happy to chance it that I will be happy with the dosh, lifestyle etc..."

I was that we couldnt have a new car this week costing £9k. But then was when I realised I had just paid off a tractor which is probably worth the fat end of £50k. Just misplaced priorities which should eventually even themselves out.

 

[Clive]

Why exclude rent and finance? So often land is taken on to "spread fixed costs" and interest is generated by borrowing to enable a business to grow. To me it seems all part of the same equation.

I dont ignore those costs, just separate them as its the best way to benchmark vs others

 

[fudge]

You exclude rent & finance to give a comparable figure to other farms. Rent or mortgage payments are unique to each business.

? but benchmarking then becomes pointless unless you put in some kind of context,i.e. farm profitability. The opening post asked the forum about reducing a machinery cost of £60/ac. I suppose my point is if that cost is generated on a farm with no paid labour,rent and zero borrowings it does not need reducing!

 

[Brisel]

Benchmarking is about comparing like with like. Comparing machinery costs is one headline. Comparing overall profit is another. How summary figures are compared relies on a degree of standardisation. Take labour for example. A farm with no paid labour is one that is rented out unless no benefit is derived from it, including domestic fuel, car, phone, persoanl drawings yet no official "labour." Too many farmers think their labour bill is minimal yet they & their partner have a standing order each month, plus all the perks listed above. I'm a salaried farm manager so everything is in the farm accounts.

A good gross margin may hide that fact that no P & K was applied. Another farm with the same yield, price, N, seed & sprays yet building up soil indices with organic matter will look worse yet be more sustainable. You always need to look deeper than the headline figures.

One farm may have declared a big profit yet another will have a sharper accountant who will make sure that the farm doesn't make too much taxable surplus. My farm business has a few costs that ensure that we don't make much taxable profit either. I still have a "farming profit" sub total on which I am judged.

 

[Clive]

? but benchmarking then becomes pointless unless you put in some kind of context,i.e. farm profitability. The opening post asked the forum about reducing a machinery cost of £60/ac. I suppose my point is if that cost is generated on a farm with no paid labour,rent and zero borrowings it does not need reducing!

its pointless including rent / finance in benchmarking as it depends so much upon circumstance - 3 generation bought and paid for 2000ac unit vs a tenant farmer geared to the max to sweat assets as much as he can are going to look very different but both units maybe equally efficient

rent / finance is a number to know and have in mind when looking at farm profitability I agree, its just best split out and added back in when you need to do so IMO

 

[fudge]

Mmmmm I guess I'm not the benchmarking type. In terms of making the best of your own resources these "standardised" figures seem pretty meaningless to me. Do many others actually use benchmarking as a management aid?

 

[Clive]

Mmmmm I guess I'm not the benchmarking type. In terms of making the best of your own resources these "standardised" figures seem pretty meaningless to me. Do many others actually use benchmarking as a management aid?

its meaningless to me to compare my costs with those of a owner occupier whose land was paid for at least a generation ago

i don't use benchmarking in any structured way but I know my costs and find forums like this useful to compare them, in this case we were comparing machinery costs and on another head we are comparing fungicide costs, I'm sure the results are a revelation to some who may choose to have rather frank discussions with agronomists as a result of that judging by the variation !

even this machine thread is useful benchmarking, its nice to know if your about right or spending too much or even not enough and making life to hard even maybe !