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Farm Management. Chapter 22 Machinery Management. Chapter Outline. Estimating Machinery Costs Examples of Machinery Cost Calculations Factors in Machinery Selection Alternatives for Acquiring Machinery Improving Machinery Efficiency. Chapter Objectives.

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Farm management

Farm Management

Chapter 22

Machinery Management


Chapter outline

Chapter Outline

  • Estimating Machinery Costs

  • Examples of Machinery Cost Calculations

  • Factors in Machinery Selection

  • Alternatives for Acquiring Machinery

  • Improving Machinery Efficiency


Chapter objectives

Chapter Objectives

  • Illustrate the importance of good machinery management

  • Identify the costs associated with machinery

  • Demonstrate procedures for calculating machinery costs

  • Discuss important factors in machinery selection

  • Compare owning, renting, leasing, and custom hiring

  • Present methods for increasing efficiency

  • Introduce factors that influence when machinery should be replaced


Estimating machinery costs

Depreciation

Interest

Taxes

Insurance

Housing

Leasing

Repairs

Fuel and lubrication

Labor

Custom hire or rental

Other operating costs

Estimating Machinery Costs

Operating Costs

Ownership Costs


Capital recovery

Capital Recovery

Capital recovery =

[amortization factor x (beginning value – salvage value)]

(interest rate x salvage value)

+


Table 22 1 estimated salvage value as percentage of new list price

Table 22-1Estimated Salvage Value as Percentage of New List Price

Source: ASAE Standards, 2001


Table 22 2 average repair costs per 100 hours of use percent of new list price

Table 22-2Average Repair Costs per 100 Hours of Use, Percent of New List Price

Source: Hunt, Donnell; see text


Figure 22 1 relations between total and average machinery costs

Figure 22-1Relations between total and average machinery costs


Examples of machinery cost calculations

Examples of Machinery Cost Calculations

  • List the basic data

  • Calculate ownership costs

  • Calculate operating costs

  • Calculate total cost per hour

  • Calculate cost per acre


Table 22 3 calculating machinery costs for a new combine

Table 22-3Calculating Machinery Costs for a New Combine


Table 22 4 combined cost of a tractor and implement

Table 22-4Combined Cost of a Tractor and Implement


Factors in machinery selection

Factors in Machinery Selection

  • Machinery size

  • Timeliness


Machinery size

Machinery Size

Field capacity =

speed (mph) x width (feet) x field efficiency (%)

8.25


Minimum field capacity

Minimum Field Capacity

Minimum field capacity =

acres to cover

hours per day x days available


Field days needed

Field Days Needed

Field days needed =

acres to cover

hours per day x acres completed per hour


Timeliness

Timeliness

Some field operations do not have to

be completed within a fixed time period,

but the later they are performed, the

lower the harvested yield is likely to be.


Figure 22 2 hard red winter wheat yields as a function of planting date at stillwater oklahoma

Figure 22-2Hard red winter wheat yields as a function of planting date at Stillwater, Oklahoma


Figure 22 3 hypothetical effect of timeliness and machine size on cost

Figure 22-3Hypothetical effect of timeliness and machine size on cost


Table 22 5 example of a partial budget for selecting the most profitable machine

Table 22-5Example of a Partial Budget for Selecting the Most Profitable Machine


Alternatives for acquiring machinery

Alternatives for Acquiring Machinery

  • Ownership

  • Rental

  • Leasing

  • Custom hire


Figure 22 4 cost per unit of output for machine ownership versus custom hiring

Figure 22-4Cost per unit of output for machine ownership versus custom hiring


Improving machinery efficiency

Improving Machinery Efficiency

  • Machinery investment per crop acre: current value of all machinery divided by total acres

  • Machinery cost per crop acre: total annual machinery costs divided by total acres


Table 22 6 total machinery costs for kentucky grain producers per crop acre

Table 22-6Total Machinery Costs for Kentucky Grain Producers (per Crop Acre)

Source; Kentucky Farm Business Management Program, 2003 Annual Summary


Techniques to improve efficiency

Techniques to Improve Efficiency

  • Maintenance and operations

  • Machinery use

  • New versus used machines

  • Replacement


Replace

Replace

  • When machine is worn out

  • When machine is obsolete

  • When there are increasing costs

  • When there is insufficient capacity

  • To reduce taxes in high profit year

  • To fit cash flow

  • For pride and prestige (not a good economic reason)


Figure 22 5 estimated annual cost of a 165 horsepower tractor

Figure 22-5Estimated annual cost of a 165-horsepower tractor


Summary

Summary

Annual machinery costs are a large

part of a farm’s total costs. Selection

of optimum machinery size should

consider total costs and the effects on

timeliness. Machinery efficiency can

be improved by proper repairs and

maintenance, by owning equipment

jointly, or by exchanging the use of

individually owned machines.


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